<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
EYE CARE CENTERS OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
TEXAS 5995 74-2337775
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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11103 WEST AVENUE
SAN ANTONIO, TEXAS 78213
(210) 340-3531
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
BERNARD W. ANDREWS
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
EYE CARE CENTERS OF AMERICA, INC.
11103 WEST AVENUE
SAN ANTONIO, TEXAS 78213
(210) 340-3531
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF ALL COMMUNICATIONS TO:
FRANCIS J. FEENEY, JR., ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-6600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
=====================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
9 1/8% Senior Subordinated Notes Due
2001................................... $100,000,000 $1,000 $100,000,000 $29,500
- ---------------------------------------------------------------------------------------------------------------------
Guarantee of 9 1/8% Senior Subordinated
Notes
Due 2008............................... $100,000,000 (1) (1) (1)
- ---------------------------------------------------------------------------------------------------------------------
Floating Interest Rate Subordinated Term
Securities Due 2008.................... $50,000,000 $1,000 $50,000,000 $14,750
- ---------------------------------------------------------------------------------------------------------------------
Guarantee of Floating Interest Rate
Subordinated Term Securities Due
2008................................... $50,000,000 (1) (1) (1)
=====================================================================================================================
</TABLE>
(1) No additional consideration will be paid by the purchasers of the Notes for
the Guarantees. Pursuant to Rule 457(n), no separate fee is payable in
respect of the Guarantees.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<S> <C> <C> <C>
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STATE OR OTHER JURISDICTION PRIMARY STANDARD
EXACT NAME OF REGISTRANT OF INCORPORATION CLASSIFICATION CODE I.R.S EMPLOYER
AS SPECIFIED IN ITS CHARTER OR ORGANIZATION IDENTIFICATION NO.
- --------------------------------------------------------------------------------------------------------------------
ECCA Managed Vision Care, Inc.(1) Texas 5995 74-2759084
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Enclave Advancement Group, Inc.(1) Texas 5995 74-2510780
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Eye Care Holdings, Inc.(1) Delaware 6719 74-2849556
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Hour Eyes, Inc.(2) Maryland 5995 54-1517741
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Metropolitan Vision Services, Inc.(2) Virginia 5995 54-1579086
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Skylab Optical, Inc.(2) Virginia 5995 54-1450693
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The Samit Group, Inc.(2) Delaware 5995 54-1702412
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Visionary MSO, Inc.(2) Delaware 8741 74-2849555
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Visionary Properties, Inc.(2) Delaware 6531 74-2849554
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Visionary Retail Management, Inc.(2) Delaware 6531 74-2849552
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Visionworks Holdings, Inc.(1) Florida 6719 59-3226333
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Visionworks, Inc.(1) Florida 5995 59-3226331
- --------------------------------------------------------------------------------------------------------------------
Visionworks Properties, Inc.(1) Florida 6531 59-3226335
====================================================================================================================
</TABLE>
(1) The address, including zip code, and telephone number, including area code,
of the Additional Registrant's principal executive offices is 11103 West
Avenue, San Antonio, Texas 78213, (210) 340-3531.
(2) The address, including zip code, and telephone number, including area code,
of the Additional Registrant's principal executive offices is 5568 General
Washington Drive, Suite A-215, Alexandria, Virginia 22312, (703) 941-8100.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE , 1998
PROSPECTUS
$150,000,000
LOGO
------------------
OFFER TO EXCHANGE $100,000,000 IN PRINCIPAL AMOUNT OF 9 1/8% SENIOR
SUBORDINATED NOTES DUE 2008 FOR $100,000,000 IN PRINCIPAL AMOUNT OF OUTSTANDING
9 1/8% SENIOR SUBORDINATED NOTES DUE 2008, AND $50,000,000 IN PRINCIPAL AMOUNT
OF FLOATING INTEREST RATE SUBORDINATED TERM SECURITIES DUE 2008 (FIRSTS(SM)*)
FOR $50,000,000 IN PRINCIPAL AMOUNT OF OUTSTANDING FLOATING INTEREST RATE
SUBORDINATED TERM SECURITIES DUE 2008 (FIRSTS(SM)*).
Eye Care Centers of America, Inc., a Texas corporation (the "Company" or
"Issuer"), hereby offers to exchange (the "Exchange Offer") up to $150,000,000
aggregate principal amount of its senior subordinated notes due 2008, consisting
of $100,000,000 aggregate principal amount of its 9 1/8% Senior Subordinated
Notes due 2008 (the "Fixed Rate Exchange Notes") for $100,000,000 aggregate
principal amount of its outstanding 9 1/8% Senior Subordinated Notes due 2008
(the "Fixed Rate Notes"), and $50,000,000 aggregate principal amount of its
Floating Interest Rate Subordinated Term Securities due 2008 (the "Floating Rate
Exchange Notes" and, together with the Fixed Rate Exchange Notes, the "Exchange
Notes") for $50,000,000 aggregate principal amount of its outstanding Floating
Interest Rate Subordinated Term Securities due 2008 (the "Floating Rate Notes"
and together with the Fixed Rate Notes, the "Initial Notes" and together with
the Exchange Notes, the "Notes").
The terms of the Exchange Notes are identical in all respects (including
principal amount, interest rate and maturity) to the terms of the Initial Notes
for which they may be exchanged pursuant to this offer, except that the Exchange
Notes are freely transferable by holders thereof (except as provided in the next
paragraph below) and are issued without any covenant upon the Issuer regarding
registration. The Exchange Notes will be issued under the same indenture
governing the Initial Notes. For a complete description of the terms of the
Exchange Notes, see "Description of the Exchange Notes." There will be no cash
proceeds to the Issuer from this offer. The Exchange Notes will be guaranteed on
a senior subordinated basis, jointly and severally (the "Note Guarantees"), by
the Company's domestic subsidiaries (the "Guarantors"). The Exchange Note
Guarantees are an unconditional obligation of the Guarantors.
The Initial Notes were originally issued and sold on April 24, 1998 (the
"Issue Date") in a transaction (the "Initial Offering") not registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
Based upon the interpretations by the Staff of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Issuer believes that
the Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any holder which is an "affiliate" of the Issuer within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal (as defined herein) states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Initial Notes where such Exchange Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Initial Notes and the Exchange Notes constitute issues of securities
with no established trading market. Any Initial Notes not tendered and accepted
in the Exchange Offer will remain outstanding. To the extent that Initial Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Initial Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of the
Initial Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuer will have no further obligation to such holders
to provide for the registration under the Securities Act of the Initial Notes
held by them. No assurance can be given as to the liquidity of the trading
market for either the Initial Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless
extended (the "Expiration Date"). The date of acceptance for exchange for the
Initial Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders are
irrevocable.
------------------
INTEREST ON THE EXCHANGE NOTES SHALL ACCRUE FROM APRIL 24, 1998 OR FROM THE
LAST MAY 1 OR NOVEMBER 1 (EACH AN "INTEREST PAYMENT DATE") ON WHICH INTEREST WAS
PAID ON THE INITIAL NOTES SO SURRENDERED.
SEE "RISK FACTORS," BEGINNING ON PAGE 12, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ---------------
* FIRSTS is a service mark of BT Alex. Brown Incorporated.
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THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 4
AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission and to which reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
For further information with respect to the Issuer and the Notes, reference
is made to such Registration Statement. A copy of the Registration Statement can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such site is http://www.sec.gov.
The Issuer intends, and is required by the terms of the Indenture dated as
of April 24, 1998 (the "Indenture") among the Company, the Guarantors and the
United States Trust Company of New York, as trustee, under which the Notes are
issued, to furnish the holders of the Notes with annual reports containing
financial statements audited by its independent certified public accountants and
with quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.
Upon completion of the Exchange Offer, the Issuer will become subject to
the informational requirements of the Securities Exchange Act of 1934, and in
accordance therewith, will file reports and other information with the
Securities and Exchange Commission.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF.
------------------
Until , all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
i
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
As used herein, unless the context otherwise indicates, references in this
Prospectus to the "Company" or "ECCA" refer to Eye Care Centers of America, Inc.
and its subsidiaries. Unless otherwise indicated, references herein to the
number of stores for the Company are as of June 1, 1998 and include the twelve
Hour Eyes stores located in Virginia which are managed by the Company.
THE COMPANY
Eye Care Centers of America, Inc. ("ECCA" or the "Company") is the third
largest retail optical chain in the United States as measured by net revenues,
operating 243 stores, 214 of which are optical superstores. The Company operates
predominately under the trade name "EyeMasters," and in certain geographical
regions under the trade names "Binyon's," "Visionworks" and "Hour Eyes." The
Company utilizes a strategy of clustering its stores within its targeted markets
in order to build local market leadership and strong consumer brand awareness,
as well as to achieve economies of scale in advertising, management and field
overhead. Management believes that the Company has the number one or two
superstore market share position in fourteen of its top fifteen markets,
including Washington, D.C., Houston, Dallas, Tampa/St. Petersburg, Phoenix,
Miami/Ft. Lauderdale, Portland and San Antonio. Based on a 1997 survey conducted
annually on behalf of the Company in seven of its top markets, the Company has
average total brand awareness of 90% and a reputation for quality service and
value. The Company has achieved positive same store sales growth in each of the
past five years and generated net revenues and EBITDA (as defined) for the
fiscal year ended January 3, 1998, pro forma for the Recapitalization and the
Hour Eyes Acquisition (as defined), of $229.6 million and $37.4 million,
respectively.
The Company's stores, which average approximately 4,600 square feet, carry
a broad selection of branded frames at competitive prices, including designer
eyewear such as Armani, Laura Ashley, Calvin Klein and Polo/Ralph Lauren, as
well as its own proprietary brands. In addition, the Company's superstores offer
customers "one-hour service" on most prescriptions, utilizing on-site processing
laboratories to grind, coat and edge lenses. Moreover, independent optometrists
("ODs"), located inside or adjacent to all of the Company's stores, offer
customers convenient eye exams and provide a consistent source of retail
business. In the Company's experience, over 80% of such ODs' regular eye exam
patients purchase eyewear from the Company.
Since joining the Company as President and Chief Executive Officer in early
1996, Bernard W. Andrews has built a management team with extensive operating,
merchandising and marketing experience in the optical and retail industries.
This management team has focused on improving operating efficiencies and growing
the business through both strategic acquisitions and new store openings. Under
current management, the Company's EBITDA margin has increased from 10.7% in 1995
to 16.3% in 1997 (pro forma for the Recapitalization and the Hour Eyes
Acquisition), while the Company's store base has increased from 152 to 239 over
the same period, primarily as a result of two acquisitions. The Company's senior
management team owns or has the right to acquire approximately 15% of the
Company's common stock on a fully diluted basis, through direct ownership and
incentive option plans.
INDUSTRY
Optical retail sales in the United States totaled $15.4 billion in 1997,
according to industry sources. Since 1987, the optical retail market has grown
each year at an average annual rate of approximately 5%. Management believes
that the industry will continue to grow at a similar rate over the next several
years due to a number of favorable trends discussed below. The optical retail
industry in the United States is highly fragmented and consists of (i) optical
retail chains, (ii) independent practitioners (including opticians, optometrists
and ophthalmologists) and (iii) warehouse clubs and mass merchandisers. In 1997,
optical retail chains accounted for approximately 32.5% of the total market,
while independent practitioners comprised approximately 61.5% and other
distribution channels represented approximately 6.0%. Optical retail chains
1
<PAGE> 6
have begun consolidating the optical retail market at the expense of independent
practitioners. Management believes that growth and consolidation in the optical
retail market is being driven by the following trends:
FAVORABLE DEMOGRAPHICS. Approximately 60% of the U.S. population, or
160 million individuals, and nearly 95% of people over the age of
forty-five, require some form of corrective eyewear. In addition to their
higher utilization of corrective eyewear, the over forty-five segment
spends more per pair of glasses purchased due to their need for premium
priced products like bifocals and progressive lenses and their generally
higher levels of discretionary income. In 1996, the over forty-five segment
represented 58% of retail optical spending despite representing just 33% of
the U.S. population. As the "baby boom" generation ages and life
expectancies increase, management believes that this demographic trend is
likely to increase the number of eyewear customers and the average price
per purchase.
INCREASING ROLE OF MANAGED VISION CARE. Management believes that
optical retail sales through managed vision care programs, which were
approximately $4.1 billion (or approximately 30% of the market) in 1995,
will continue to increase over the next several years. Managed vision care,
including the benefits of routine annual eye examinations and eyewear
discounts, is being utilized by a growing number of managed care
participants. Since regular eye examinations may assist in the
identification and prevention of more serious conditions, managed care
programs encourage members to have their eyes examined more regularly,
which in turn typically results in more frequent eyewear replacement.
Management believes that large optical retail chains are likely to be the
greatest beneficiaries of this trend as payers look to contract with chains
who deliver superior customer service, have strong local brand awareness,
offer competitive prices, provide multiple convenient locations and
flexible hours of operation, and possess sophisticated information
management and billing systems.
CONSOLIDATION. Although the optical retail market in the United
States is highly fragmented, the industry is experiencing increasing
consolidation. In 1997, the top ten and the top one hundred optical retail
chains represented approximately 18% and 28% of the total optical market,
respectively. The remaining approximately 72% of the market includes
independent practitioners, smaller chains, warehouse clubs and mass
merchandisers. Independent practitioners' market share dropped from 63.0%
to 61.5% between 1996 and 1997, while optical retail chains' market share
increased over the same period from 31.3% to 32.5%. Management believes
that several factors are likely to drive further consolidation: (i) the
importance of scale to managed care programs which require providers with
strong local brand awareness, multiple locations and sophisticated
information management and billing systems, (ii) efficiencies of scale in
merchandising, marketing, manufacturing and sourcing product, (iii) the
significant capital required to build lens processing laboratories on
premises and (iv) the desire of small regional chains and independent
practitioners to achieve liquidity by selling to larger optical retail
chains. Management believes that the large optical retail chains are better
positioned than mass merchandisers and warehouse clubs to benefit from this
consolidation trend and that such chains will continue to gain market share
from the independent practitioners over the next several years.
NEW PRODUCT INNOVATIONS. Since the late 1980's, several technological
innovations have led to the introduction of new optical lenses and lens
treatments, including progressive addition lenses (no-line bifocals),
high-index and aspheric lenses (thinner and lighter), polycarbonate lenses
(shatter resistant) and anti-reflective coatings. These innovative products
are popular among consumers, generally command premium prices and yield
higher margins than traditional lenses. The average retail price for all
lenses and lens treatments has increased over 4% per year from $87.94 to
$95.50 between 1995 and 1997, reflecting, in part, the rising popularity of
these products. Similarly, during the same period, the average retail price
for eyeglass frames has increased over 4% per year from $57.03 to $62.20,
due in large part to both technological innovation and an evolving customer
preference for higher priced, branded frames.
GREATER FREQUENCY OF PURCHASE. Since 1983, the frequency of eyewear
purchases has increased over 45%, from an average purchase of new eyewear
every 2.2 years to every 1.5 years. Management believes that managed care
has contributed to this trend and is likely to serve as a continuing
catalyst to further increases in the frequency of eyewear purchases, as
plan participants are encouraged to have their eyes examined more
frequently. In addition, consumers are currently purchasing multiple
eyewear products for
2
<PAGE> 7
distinct occasions (work, casual, fashion, driving, sun, sport, etc.),
driven, in part, by the growing consumer perception of eyewear as a fashion
accessory.
BUSINESS STRATEGY
The Company plans to capitalize on these favorable industry trends by
building local market leadership through the implementation of the following key
elements of its business strategy.
MAXIMIZE STORE PROFITABILITY. Management plans to continue to improve
the Company's operating margins through superior day-to-day store
execution, customer service and inventory asset management. The Company has
implemented various programs focused on (i) increased sales of higher
margin, value-added and proprietary products, (ii) continued store cost
reductions, (iii) extensive productivity-enhancing employee training and
(iv) an upgraded point-of-sale information system. Management believes its
store clustering strategy will enable the Company to continue to leverage
local advertising and field management costs to improve its operating
margins. In addition, management believes that the Company can achieve
further improvement in its operating margins by realizing certain synergies
from its recent acquisitions, particularly from the recent introduction of
its point-of-sale information system to the acquired stores.
EXPAND STORE BASE. In order to continue to build leadership in its
targeted markets, the Company plans to take advantage of significant
"fill-in" opportunities in its existing markets, as well as enter
attractive new markets where it can achieve a number one or two market
share position. Consequently, the Company currently plans to open twenty to
thirty new stores per year over the next three years, with approximately
two-thirds of these new stores currently expected to be opened in existing
markets. Management believes that the Company has in place the systems and
infrastructure to execute its expanded new store opening plan. The Company
uses a sophisticated site selection model utilizing proprietary software
which incorporates industry and internally generated data (such as
competitive market factors, demographics and customer specific information)
to evaluate the attractiveness of new store openings. The Company invests
approximately $500,000 in capital expenditures, inventory and pre-opening
costs per new store, and generally expects its new stores to generate
positive cash flow by the sixth month of operation.
PURSUE ACQUISITION OPPORTUNITIES. The Company has successfully
acquired and integrated two acquisitions over the last two years: (i) in
September 1996, Visionworks Holdings, Inc., a sixty store optical retailer
located along the Atlantic Coast from Florida to Washington, D.C. and (ii)
in September 1997, The Samit Group, Inc. ("TSGI"), with ten Hour Eyes
stores in Maryland and Washington, D.C. Simultaneously with the acquisition
of TSGI, the Company entered into a long-term business management agreement
with a private optometrist to manage an additional twelve Hour Eyes stores
located in Virginia (collectively with the acquisition of TSGI, the "Hour
Eyes Acquisition"). Management believes that it has the experience,
internal resources and information systems to continue to identify and
integrate acquisitions successfully. Acquisition candidates typically would
be independent practitioners and smaller chains, which face increasing
difficulties competing with larger, more efficient chains, particularly in
a managed care environment. In addition, acquisition candidates generally
would have significant market share in a given geographic region and offer
the Company opportunities to increase revenues, generate cost savings and
extend managed care coverage.
CAPITALIZE ON MANAGED VISION CARE. Management has made a strategic
decision to pursue managed care contracts aggressively in order to help
grow the Company's retail business and over the past three years has
devoted significant management resources to the development of its managed
care business. As part of its effort, the Company has: (i) implemented
direct marketing programs and information systems necessary to compete for
managed care contracts with large employers, groups of employers and other
third party payers, (ii) developed significant relationships with certain
HMOs and insurance companies (e.g., Kaiser Permanente and Humana), which
have strengthened the Company's ability to secure managed care contracts,
(iii) entered into a strategic relationship with Vision Twenty-One, Inc.
("VTO") to be the principal optical retail center of its total eye care
delivery systems and (iv) obtained a single service HMO license in Texas to
target additional managed care contracts with
3
<PAGE> 8
large employers and groups of employers. While the average ticket price on
products purchased under managed care reimbursement plans is typically
lower, managed care transactions generally earn comparable operating profit
margins as they require less promotional spending and advertising support.
The Company believes that the increased volume resulting from managed care
contracts more than offsets the lower average ticket price. As of January
3, 1998, the Company participated in managed vision care programs covering
approximately 2.5 million lives, with retail sales from managed care lives
totaling approximately 20% of fiscal 1997 net revenues. Management believes
that the increasing role of managed vision care will continue to benefit
the Company and other large retail optical chains with strong local market
shares, broad geographic coverage and sophisticated information management
and billing systems.
THE RECAPITALIZATION
On March 6, 1998, ECCA Merger Corp. ("Merger Corp."), a Delaware
corporation formed by Thomas H. Lee Company ("THL Co."), and the Company entered
into a recapitalization agreement (the "Recapitalization Agreement") providing
for, among other things, the merger of such corporation with and into the
Company (the "Merger" and, together with the financing of the recapitalization
and related transactions described below, the "Recapitalization"). The
Recapitalization was consummated on April 24, 1998. Thomas H. Lee Equity Fund
IV, L.P. ("THL Fund IV") and other affiliates of THL Co. (collectively with THL
Fund IV and THL Co., "THL") currently own approximately 89.7% of the issued and
outstanding shares of common stock of the Company ("Common Stock"), existing
shareholders (including management) of the Company retained approximately 7.3%
of the issued and outstanding Common Stock and management purchased additional
shares representing approximately 3.0% of the issued and outstanding Common
Stock. The total transaction value of the Recapitalization was approximately
$321.0 million, including related fees and expenses, and the implied total
equity value of the Company following the Recapitalization is approximately
$107.3 million.
In addition to the net proceeds from the sale of the Initial Notes, the
Recapitalization was financed with (a) approximately $55.0 million of borrowings
under the New Credit Facility (see "Description of the New Credit Facility") and
(b) approximately $99.4 million from the sale of capital stock to THL, Bernard
W. Andrews and other members of management (the "Equity Contribution")
consisting of (i) approximately $71.6 million from the sale of Common Stock and
(ii) approximately $27.8 million from the sale of shares of a newly created
series of preferred stock of the Company ("New Preferred Stock"). See
"Description of New Preferred Stock." The Company used the proceeds from such
bank borrowings, the sale of the Initial Notes, and the Equity Contribution
principally to finance the conversion into cash of the shares of Common Stock
which were not retained by existing stockholders, to refinance certain existing
indebtedness of the Company, to redeem certain outstanding preferred stock of
the Company and to pay related fees and expenses of the Recapitalization. In
connection with the Recapitalization, the Company defeased its previously issued
12% Senior Notes due 2003 (the "Senior Notes") by depositing with the trustee
for the Senior Notes (i) an irrevocable notice of redemption of the Senior Notes
on October 1, 1998 and (ii) United States government securities in an amount
necessary to yield on October 1, 1998 $78.4 million, which constitutes the
principal amount, premium and interest payable on the Senior Notes on the
October 1, 1998 redemption date.
4
<PAGE> 9
The following table sets forth the cash sources and uses of funds in
connection with the financing of the Recapitalization, which occurred on April
24, 1998 assuming the Recapitalization were consummated on April 4, 1998:
<TABLE>
<CAPTION>
AMOUNT
--------------
SOURCES: (IN THOUSANDS)
<S> <C>
New Credit Facility(1).................................... $ 55,000
Notes offered hereby(2)................................... 149,511
New equity capital(3)..................................... 99,440
--------
Total............................................. $303,951
========
USES:
Cash merger consideration................................. $153,036
Repayment of existing indebtedness(4)..................... 103,800
Redemption of existing preferred stock.................... 12,337
Excess cash............................................... 7,159
Bond defeasance cost...................................... 6,619
Estimated fees and expenses............................... 21,000
--------
Total............................................. $303,951
========
</TABLE>
----------------------
(1) The New Credit Facility consists of (i) the $55.0 million Term Loan
Facility (as defined); (ii) the $35.0 million Revolving Credit
Facility (as defined); and (iii) the $100.0 million Acquisition
Facility (as defined), of which $50.0 million was committed at
closing. Approximately $10.0 million of the Revolving Credit Facility
is restricted for the repayment of the capital lease obligation due
in February 1999.
(2) Reflects $100.0 million of Fixed Rate Notes, net of discount of $0.5
million, and $50.0 million of Floating Rate Notes.
(3) Does not include Common Stock of $5.6 million retained by existing
shareholders and New Preferred Stock of $2.3 million received by such
shareholders.
(4) Reflects the payment of existing long-term debt of $95.7 million,
(including $70.0 million in connection with the defeasance of the
Senior Notes), payment of existing short-term debt of $7.0 million,
payment of the $2.3 million accrued earn-out provision related to the
Hour Eyes Acquisition discussed elsewhere in the Prospectus and the
payment of $0.6 million of accrued interest payable less the expected
use of existing cash of $1.7 million. After considering the use of
existing cash of $1.7 million to pay existing liabilities and the
excess of $7.2 million, cash and cash equivalents will increase $5.5
million on a pro forma basis. In connection with the
Recapitalization, the Company defeased the previously issued Senior
Notes by depositing with the trustee for the Senior Notes (i) an
irrevocable notice of redemption of the Senior Notes on October 1,
1998 and (ii) United States government securities in an amount
necessary to yield on October 1, 1998 $78.4 million, which
constitutes the principal amount, premium and interest payable on
such Senior Notes on the October 1, 1998 redemption date. The Senior
Notes will continue to be reflected as a liability on the Company's
balance sheet with an offsetting asset representing the deposit of
United States government securities made for defeasance through the
second quarter of fiscal 1998.
5
<PAGE> 10
THE EXCHANGE OFFER
THE EXCHANGE OFFER............ The Issuer is offering to exchange (the
"Exchange Offer") up to $100,000,000 in
principal amount of its 9 1/8% Senior
Subordinated Notes due 2008 and up to
$50,000,000 in principal amount of its Floating
Interest Rate Subordinated Term Securities due
2008 (FIRSTS(SM)) (collectively, the "Exchange
Notes") for $100,000,000 in principal amount of
its outstanding 9 1/8% Senior Subordinated
Notes due 2008, and $50,000,000 in principal
amount of its outstanding Floating Interest
Rate Subordinated Term Securities due 2008
(FIRSTS(SM)), respectively (collectively, the
"Initial Notes" and together with the Exchange
Notes the "Notes"). The terms of the Exchange
Notes are substantially identical in all
respects (including principal amount, interest
rate and maturity) to the terms of the Initial
Notes for which they may be exchanged pursuant
to the Exchange Offer, except that the Exchange
Notes are freely transferable by holders
thereof (except as provided herein see "The
Exchange Offer -- Terms and Conditions of the
Exchange") and are not subject to any covenant
regarding registration under the Securities
Act. The Exchange Notes will be guaranteed on a
senior subordinated basis, jointly and
severally, by the Guarantors (the "Exchange
Note Guarantees").
INTEREST PAYMENTS............. Interest on the Exchange Notes shall accrue
from April 24, 1998 or from the last Interest
Payment Date on which interest was paid on the
Initial Notes so surrendered. Interest on the
Fixed Rate Exchange Notes will accrue at the
rate of 9 1/8% per annum. The Floating Rate
Exchange Notes will bear interest at a rate per
annum, reset semiannually equal to LIBOR (as
defined herein, see "Description of Exchange
Notes -- Principal, Maturity and Interest")
plus 3.98%.
MINIMUM CONDITION............. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of the
Initial Notes being tendered for exchange.
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998 unless
extended.
EXCHANGE DATE................. The date of acceptance for exchange of the
Initial Notes will be the first business day
following the Expiration Date.
CONDITION OF THE EXCHANGE
OFFER......................... The obligation of the Issuer to consummate the
Exchange Offer is subject to certain
conditions. See "The Exchange
Offer -- Conditions to the Exchange Offer." The
Issuer reserves the right to terminate or amend
the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
WITHDRAWAL RIGHTS............. Tenders may be withdrawn at any time prior to
the Exchange Date. Otherwise, all tenders are
irrevocable. Any Initial Notes not accepted for
any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
PROCEDURES FOR TENDERING
INITIAL NOTES................. See "The Exchange Offer -- How to Tender."
6
<PAGE> 11
FEDERAL INCOME TAX
CONSEQUENCES.................. The exchange of Initial Notes for Exchange
Notes should be treated as a "non-event" for
Federal income tax purposes. See "Income Tax
Considerations."
EFFECTS ON HOLDERS OF INITIAL
NOTES......................... As a result of the making of, and upon
acceptance for exchange of all validly tendered
Initial Notes pursuant to the terms of, this
Exchange Offer, the Issuer will have fulfilled
a covenant contained in the terms of the
Initial Notes and the Registration Rights
Agreement (the "Registration Rights
Agreement"), dated as of April 24 1998, by and
among the Company, the Guarantors, BT Alex.
Brown Incorporated and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, (collectively, the
"Initial Purchasers"), and, accordingly, there
will be no increase in the interest rate on the
Initial Notes pursuant to the terms of the
Registration Rights Agreement, the Initial
Notes or the Indenture. The holders of the
Initial Notes will have no further registration
rights under the Registration Rights Agreement
with respect to the Initial Notes. Holders of
the Initial Notes who do not tender their
Initial Notes in the Exchange Offer will
continue to hold such Initial Notes and their
rights under such Initial Notes will not be
altered, except for any such rights under the
Registration Rights Agreement, which by their
terms terminate or cease to have further
effectiveness as a result of the making of, and
the acceptance for exchange of all validly
tendered Initial Notes pursuant to, the
Exchange Offer. All untendered and tendered but
unaccepted Initial Notes will continue to be
subject to the restrictions on transfer
provided for in the Initial Notes and in the
Indenture. To the extent that Initial Notes are
tendered and accepted in the Exchange Offer,
the trading marked for untendered Initial Notes
could be adversely affected.
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $150,000,000 aggregate principal amount of
the Initial Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Initial Notes except as noted above and except that the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Initial Notes and will be entitled to the benefits
of the Indenture. See "Description of the Exchange Notes."
Terms capitalized below have the meanings ascribed to them in "Description
of the Exchange Notes."
NOTES OFFERED................. $100,000,000 in principal amount of Issuer's
9 1/8% Senior Subordinated Notes due 2008 and
$50,000,000 in principal amount of Issuer's
Floating Interest Rate Subordinated Term
Securities due 2008 (FIRSTS(SM)) for
$100,000,000 in principal amount of the
Issuer's outstanding 9 1/8% Senior Subordinated
Notes due 2008, and $50,000,000 in principal
amount of the Issuer's outstanding Floating
Interest Rate Subordinated Term Securities due
2008 (FIRSTS(SM)), respectively.
MATURITY DATE................. May 1, 2008.
INTEREST PAYMENT DATES........ May 1 and November 1 of each year, commencing
November 1, 1998.
CHANGE OF CONTROL............. Upon the occurrence of a Change of Control,
each holder of Exchange Notes will have the
right to require the Issuer to
7
<PAGE> 12
repurchase all or any part of such holder's
Exchange Notes at an offer price in cash equal
to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date
of purchase. See "Description of Exchange
Notes -- Change of Control." There can be no
assurance that, in the event of Change of
Control, the Issuer would have sufficient funds
to purchase all Notes tendered. See "Risk
Factors -- Limitations on Ability to Make
Change of Control Payment."
EXCHANGE NOTE GUARANTEES...... The Exchange Notes will be guaranteed on a
senior subordinated basis, jointly and
severally, (the "Exchange Note Guarantees") by
the domestic subsidiaries of the Issuer (the
"Guarantors"). The Exchange Note Guarantees
will be an unconditional obligation of the
Guarantors.
RANKING....................... The Exchange Notes will be general unsecured
senior subordinated obligations of the Company
and subordinated in right of payment to all
existing and future Senior Indebtedness (as
defined) of the Company, including indebtedness
under the New Credit Facility (as defined). The
Exchange Notes will rank pari passu in right of
payment with any future Senior Subordinated
Indebtedness (as defined) of the Company and
senior in right of payment to all existing and
future Subordinated Obligations (as defined) of
the Company. The Exchange Note Guarantees will
be general unsecured senior subordinated
obligations of the Guarantors and will be
subordinated in right of payment to all
existing and future Guarantor Senior Debt (as
defined), including the guarantees of the
Guarantors under the New Credit Facility. The
Exchange Note Guarantees will rank pari passu
with any future Senior Subordinated
Indebtedness of the Guarantors and will rank
senior in right of payment to all other
Subordinated Obligations of the Guarantors. The
Exchange Notes and the Exchange Note Guarantees
will also be effectively subordinated to all
secured indebtedness of either the Company or
any of its subsidiaries (including indebtedness
under the New Credit Facility) to the extent of
the assets secured by such indebtedness. As of
April 4, 1998, on a pro forma basis after
giving effect to the Offering and the
Recapitalization, the Company would have had
approximately 66.0 million of Senior
Indebtedness outstanding (including a
$1.0 million guarantee by the Company, but
exclusive of unused commitments).
CERTAIN COVENANTS............. The Indenture pursuant to which the Exchange
Notes will be issued (the "Indenture") contains
certain covenants that, among other things,
will limit the ability of the Company and any
Restricted Subsidiary (as defined+ herein) to
(i) incur additional indebtedness; (ii) pay
dividends or make other distributions in
respect of its capital stock, (iii) repurchase
equity interests or subordinated indebtedness,
(iv) create certain liens, (v) enter into
certain transactions with affiliates, (vi)
consummate certain asset sales and (vii) merge
or consolidate. See "Description of Exchange
Notes -- Certain Covenants." In addition, under
certain circumstances, the Company will be
required to offer to purchase the Exchange
Notes, in whole or in part, at a purchase price
equal to
8
<PAGE> 13
100% of the principal amount thereof, plus
accrued and unpaid interest to the date of
purchase, with the proceeds of certain Asset
Sales (as defined). All of such covenants are
subject to significant qualifications and
exceptions. See "Description of Exchange
Notes -- Certain Covenants."
USE OF PROCEEDS............... There will not be any proceeds from the
Exchange Offer. The net proceeds to the Issuer
from the sale of the Initial Notes was
$144.5 million (after deducting discounts,
commissions, fees and expenses thereof) and
were used to fund a portion of the financing
for the Recapitalization and related
transactions, including to finance the
conversion into cash of shares of Common Stock
which were not retained by existing
stockholders, to refinance certain existing
indebtedness of the Company, to redeem certain
outstanding preferred stock of the Company and
to pay related fees and expenses of the
Recapitalization. See "Use of Proceeds."
ABSENCE OF MARKET FOR THE
EXCHANGE NOTES................ The Exchange Notes will be new securities for
which there is currently no trading market.
Although the Issuer has been advised by the
Initial Purchasers that, following the
completion of the Exchange Offer, the Initial
Purchasers presently intend to make a market in
the Exchange Notes, the Initial Purchasers are
under no obligation to do so and may
discontinue any market making activities at any
time without notice. Accordingly, there can be
no assurance as to the development or liquidity
of any market for the Exchange Notes. The
Issuer does not intend to apply for listing of
the Exchange Notes on any securities exchange
or through the National Association of
Securities Dealers Automated Quotation System.
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT IN THE
EXCHANGE NOTES.
9
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary financial data for each of the fiscal years in the five year
period ended January 3, 1998 have been derived from the Company's audited
financial statements. Such information is contained in and should be read in
conjunction with the Consolidated Financial Statements of the Company. The
selected financial data for the thirteen weeks ended March 29, 1997 and April 4,
1998 have been derived from the Company's unaudited interim financial
statements, which in the opinion of management include all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the financial position and results of
operations of the Company for these periods. Operating results for the thirteen
weeks ended April 4, 1998 are not necessarily indicative of the results that may
be expected for the full year. The selected unaudited pro forma financial data
of the Company have been derived from, and should be read in conjunction with,
the Unaudited Pro Forma Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements." The selected unaudited pro forma financial
data are presented for illustrative purposes only and are not necessarily
indicative of the operating results or financial position that would have
occurred if the Recapitalization had been consummated on the dates indicated,
nor are they necessarily indicative of future operating results or financial
position.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
YEAR ENDED ENDED
---------------------------------------------------------------------- --------------------
DECEMBER 31, DECEMBER 31, DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4,
1993(A) 1994 1995 1996 1998 1997 1998
------------ ------------ ------------ ------------ ---------- --------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $118,701 $130,673 $140,198 $158,224 $219,611 $57,879 $62,019
Gross profit...................... 80,025 85,433 92,673 106,340 142,477 37,948 41,520
Selling, general and
administrative expenses(c)...... 73,117 81,434 87,402 91,897 120,319 30,873 33,263
Income (loss) from operations..... 3,286 (6,543) (280) 11,505 19,288 6,373 7,343
Interest expense, net............. 3,106 9,072 8,839 9,899 13,738 3,384 3,394
Net income (loss)................. (2,111) (15,615) (9,119) 1,418 5,215 2,889 3,882
OTHER FINANCIAL DATA:
EBITDA(d)......................... $ 16,672 $ 14,132 $ 14,949 $ 23,954 $ 34,289 $ 9,743 $11,135
Depreciation and
amortization(e)................. 13,386 20,675 15,229 12,449 15,001 3,370 3,745
Capital expenditures.............. 14,449 5,367 6,765 4,233 9,470 2,218 5,503
EBITDA margin..................... 14.0% 10.8% 10.7% 15.1% 15.6% 16.8% 18.0%
Gross margin...................... 67.4 65.4 66.1 67.2 64.9 65.6 67.0
STORE DATA:
End of period stores.............. 146 162 152 218 239 219 242
Comparable store sales
growth(f)....................... 0.3% 1.1% 4.2% 3.5% 3.8% 4.0% 0.6%
Sales per store(g)................ $ 913 $ 878 $ 904 $ 935 $ 995 -- --
Sales per square foot(h).......... 204 202 210 214 214 -- --
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 4, 1998
-----------------------
ACTUAL PRO FORMA(B)
------- ------------
<S> <C> <C>
BALANCE SHEET DATA:(i)
Cash and cash equivalents................................... $ 4,152 $ 9,660
Net working capital......................................... (2,753) 12,555
Total assets................................................ 177,771 189,351
Total debt.................................................. 112,267 214,490
Shareholders' equity (deficit).............................. 11,790 (63,707)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED THIRTEEN WEEKS ENDED
JANUARY 3, 1998 APRIL 4, 1998
--------------- --------------------
<S> <C> <C>
PRO FORMA UNAUDITED FINANCIAL DATA:(b)
EBITDA(d)................................................... $37,357 $11,013
Depreciation and amortization(e)............................ 15,974 3,745
Capital Expenditures........................................ 9,794 5,503
EBITDA margin............................................... 16.3% 17.8%
Gross margin................................................ 65.1 67.0
Ratio of EBITDA to cash interest expense(j)................. 1.86x 2.11x
</TABLE>
(see footnotes on following page)
10
<PAGE> 15
(a) The Company was purchased by Desai Capital Management Incorporated on
October 7, 1993 and fiscal 1993 presented herein represents results of
operations both after and before the acquisition date.
(b) The summary pro forma balance sheet data gives effect to the Exchange
Offering and the Recapitalization as if they occurred on April 4, 1998. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements" for a
description of certain adjustments made to the historical statement of
income of The Samit Organization for the nine-month period January 1, 1997
through September 30, 1997 in connection with the adjustments made to the
Company's summary pro forma statement of operations data relating to the
Hour Eyes Acquisition.
(c) The Company recorded a $664,000 non-cash impairment charge related to its
investment in its subsidiary in Mexico, which is included in selling,
general and administrative expenses for 1996.
(d) EBITDA represents consolidated net income (loss) before interest expense,
income taxes, depreciation and amortization (other than amortization of
store pre-opening costs). The Company has included information concerning
EBITDA because it believes that EBITDA is used by certain investors as one
measure of a company's historical ability to fund operations and meet its
financial obligations. EBITDA should not be considered as an alternative to,
or more meaningful than, operating income (loss) or net income (loss) in
accordance with generally accepted accounting principals as an indicator of
the Company's operating performance or cash flow as a measure of liquidity.
(e) Depreciation and amortization shown here does not include the amortization
of store pre-opening costs, which is included in selling, general and
administrative expenses.
(f) Comparable store sales growth is calculated comparing net revenues for the
period to net revenues of the prior period for all stores open at least
twelve months prior to each such period.
(g) Sales per store is calculated on a monthly basis by dividing total net
revenues by the total number of stores open during the period. Annual sales
per store is the sum of the monthly calculations.
(h) Sales per square foot is calculated on a monthly basis by dividing total net
revenues by total square feet of stores open during the period. Annual sales
per square foot is the sum of the monthly calculations.
(i) The summary pro forma balance sheet data does not reflect either (i) the
liabilities of the Company to pay the previously issued Senior Notes or (ii)
the offsetting asset representing the deposit made to defease the Senior
Notes. In connection with the Recapitalization, the Company defeased the
Senior Notes by depositing with the trustee for the Senior Notes (i) an
irrevocable notice of redemption of the Senior Notes on October 1, 1998 and
(ii) United States government securities in an amount necessary to yield on
October 1, 1998 $78.4 million, which constitutes the principal amount,
premium and interest payable on such Senior Notes on the October 1, 1998
redemption date. The Senior Notes will continue to be reflected as a
liability on the Company's balance sheet with an offsetting asset
representing the deposit of United States government securities made for
defeasance through the third quarter of fiscal 1998.
(j) Cash interest expense represents net interest expense adjusted to exclude
amortization of financing costs related to the New Credit Facility and the
Notes offered hereby.
11
<PAGE> 16
RISK FACTORS
Prospective investors should consider carefully the following factors in
addition to other information included in this Prospectus before making an
investment in the Notes offered hereby.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged, with indebtedness that is substantial in
relation to its shareholders' equity. After giving pro forma effect to the
Initial Notes and the Recapitalization, as of April 4 , 1998, the Company's
aggregate outstanding indebtedness was approximately $214.5 million, net of a
discount of $0.5 million, and the Company's shareholders' equity was a deficit
of $63.7 million. In addition, subject to certain limitations, the New Credit
Facility and the Indenture (defined below) permit the Company to incur or
guarantee certain additional indebtedness. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," and "Description of Exchange Notes -- Certain Covenants."
The Company's high degree of leverage could have important consequences to
holders of Notes, including, but not limited to, the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired in the
future; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness
(including the Notes), thereby reducing the funds available to the Company for
its operations and other purposes; including acquisitions and new store
openings; (iii) the Company may be substantially more leveraged than certain of
its competitors, which may place the Company at a competitive disadvantage; (iv)
the Company may be hindered in its ability to adjust rapidly to changing market
conditions; (v) the Company's high degree of leverage could make it more
vulnerable in the event of a downturn in general economic conditions or its
business or changing market conditions and regulations; and (vi) in addition, to
the extent that the Company's obligations under the Floating Rates Notes and the
New Credit Facility bears interest at floating rates, an increase in interest
rates could adversely affect, among other things, the Company's ability to meet
its financing obligations.
The Company's ability to repay or to refinance its obligations with respect
to its indebtedness (including the Notes) will depend on its future financial
and operating performance, which, in turn, will be subject to prevailing
economic and competitive conditions and to certain financial, business,
legislative, regulatory and other factors, many of which are beyond the
Company's control, as well as the availability of borrowings under the New
Credit Facility. These factors could include operating difficulties,
difficulties in identifying and integrating acquisitions, increased operating
costs, product pricing pressures, the response of competitors, regulatory
developments and delays in implementing strategic projects, including store
openings. The Company's ability to meet its debt service and other obligations
may depend in significant part on the extent to which the Company can implement
successfully its business strategy. There can be no assurance that the Company
will be able to implement its strategy fully or that the anticipated results of
its strategy will be realized.
If the Company is unable to fund its debt service obligations, the Company
may be forced to reduce or delay capital expenditures, sell assets, or seek to
obtain additional debt or equity capital, or to refinance or restructure its
debt (including the Notes). There can be no assurance that any of these remedies
can be effected on satisfactory terms, if at all. Factors which could affect the
Company's or its subsidiaries' access to the capital markets, or the cost of
such capital, include changes in interest rates, general economic conditions and
the perception in the capital markets of the Company's business, results of
operations, leverage, financial condition and business prospects.
SUBORDINATION OF THE NOTES AND GUARANTEES; ASSET ENCUMBRANCES
The Notes and the Guarantees are subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, including indebtedness
of the Company under the New Credit Facility, and to all existing and future
Guarantor Senior Indebtedness of the Guarantors, including the guarantees of the
Guarantors under the New Credit Facility, respectively, and the Notes were also
effectively subordinated to all
12
<PAGE> 17
secured indebtedness of the Company and the Guarantors, respectively, to the
extent of the value of the assets securing such indebtedness. The obligations
under the New Credit Facility are guaranteed by the Guarantors and are secured
by substantially all of the assets of the Company and all direct and indirect
subsidiaries of the Company and a pledge of the capital stock of each such
subsidiary (but not to exceed 65% of the voting stock of foreign subsidiaries).
As of April 4, 1998, after giving pro forma effect to the Offering and the
Recapitalization, the aggregate amount of Senior Indebtedness of the Company was
approximately $66.0 million (including a $1.0 million guarantee by the Company,
but exclusive of unused commitments under the New Credit Facility of
approximately $85.0 million and an additional $50.0 million that may be
available in the future), $65.0 million of which is guaranteed by the Guarantors
under the New Credit Facility.
In the event of bankruptcy, liquidation, reorganization or any similar
proceeding regarding the Company, or any Guarantor, or any default in payment,
the assets of the Company or such Guarantor, as applicable, will be available to
pay obligations on the Notes only after the Senior Indebtedness of the Company
or the Guarantor Senior Indebtedness of such Guarantor, as applicable, has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on all or any of the Notes. Moreover, under certain circumstances, if any
nonpayment default exists with respect to Designated Senior Indebtedness (as
defined) which would permit the holders of such Designated Senior Indebtedness
to accelerate the maturity thereof, the Company may not make any payments on the
Notes for a specific time, unless such default is cured or waived, or such
Designated Senior Indebtedness is paid in full. See "Description of Exchange
Notes -- Subordination" and "Description of the New Credit Facility." The
holders of the Notes will have no direct claim against the Guarantors other than
the claim created by the Guarantees. The rights of holders of the Notes to
participate in any distribution of assets of any Guarantor upon liquidation,
bankruptcy or reorganization may, as is the case with other unsecured creditors
of the Company, be subject to prior claims against such Guarantor. The
Guarantees may themselves be subject to legal challenge in the event of the
bankruptcy or insolvency of a Guarantor, or in certain other circumstances. If
such a challenge were upheld, the Guarantees would be invalidated and
unenforceable. See "-- Fraudulent Conveyance and Preference Considerations."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY INDEBTEDNESS
The Indenture restricts, among other things, the Company's and its
subsidiaries' ability to: incur additional indebtedness; incur liens; pay
dividends or make certain other restricted payments; consummate certain asset
sales; enter into certain transactions with affiliates; incur indebtedness that
is subordinate in right of payment to any Senior Indebtedness and senior in
right of payment to the Notes; create or cause to exist restrictions on the
ability of a subsidiary to pay dividends or make certain payments to the
Company; merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. See "Description of Exchange Notes -- Certain Covenants." In
addition, the New Credit Facility contains other and more restrictive covenants
and prohibits the Company in all circumstances from prepaying certain of its
indebtedness (including the Notes). The New Credit Facility also requires the
Company to maintain specified financial ratios. The Company's ability to meet
those financial ratios can be affected by events beyond its control, and there
can be no assurance that the Company will meet those tests. A breach of any of
these covenants could result in a default under the New Credit Facility and/or
the Indenture. Upon the occurrence of an event of default under the New Credit
Facility, the lenders could also elect to declare all amounts outstanding under
the New Credit Facility, together with accrued interest, to be immediately due
and payable. If the Company was unable to repay those amounts, the lenders could
proceed against the collateral granted to them to secure that indebtedness or
against the guarantees of the Guarantors of the New Credit Facility. If the debt
outstanding under the New Credit Facility were to be accelerated, there can be
no assurance that the assets of the Company and its subsidiaries would be
sufficient to repay the obligations under the New Credit Facility, other Senior
Indebtedness, Guarantor Senior Indebtedness or the Notes. Substantially all the
assets of the Company and its subsidiaries secure the New Credit Facility. See
"Description of the New Credit Facility."
RELIANCE ON SUCCESSFUL EXPANSION; ACQUISITION STRATEGY
The continued growth of the Company's net revenues will depend to a
significant degree upon the successful opening of new stores and the acquisition
of related businesses. Successful expansion depends on
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the Company's ability to (i) locate and obtain favorable store sites, (ii)
attract, train and retain competent personnel and (iii) open new stores on a
timely and cost-efficient basis. The opening of new stores in the Company's
existing markets may result in the diversion of customers from the Company's
existing stores and thus reduce sales in those stores. The Company's operating
results may fluctuate as a result of the timing and amount of revenue
contributed by new stores and the timing of costs associated with the selection,
leasing, construction and operation of new stores. There can be no assurance
that the Company will be able to realize its expansion goals or to manage and
control either the anticipated growth or the expanded operations of the larger
business profitability. The Company's operating results may also be affected by
changes in economic or competitive conditions in markets where its stores are
located. There can be no assurance that the Company's existing stores will
continue to be profitable or that new stores will achieve comparable results.
Although the Company has successfully completed a number of acquisitions,
there can be no assurances that the Company will be able to successfully
identify or integrate additional businesses into the Company's operations
without substantial costs, delays or other problems. Additionally, acquisitions
may expose the Company to particular risks, including, without limitation,
diversion of management's attention, assumption of liabilities and amortization
of goodwill and other acquired intangible assets, some or all of which could
have a material adverse effect on the financial condition or results of
operations of the Company. Depending on the value and nature of the
consideration paid by the Company for acquisitions, such acquisitions may
adversely affect the Company's liquidity. In making acquisitions in the future,
the Company anticipates that it may compete for acquisitions with other
companies, some of which are larger and have greater financial resources than
the Company. There can be no assurance that the Company will be successful in
consummating acquisitions and integrating them into the Company's operations.
The Company anticipates that it will finance future acquisitions, through cash
on hand, the issuance of common stock and borrowings under the New Credit
Facility. The Indenture and the New Credit Facility limit the ability of the
Company and its subsidiaries to incur indebtedness to finance acquisitions. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business," "Description of the
New Credit Facility" and "Description of Exchange Notes -- Certain Covenants."
COMPETITION
The retail optical industry is fragmented and highly competitive. The
Company competes with (i) independent practitioners (including opticians,
optometrists and opthalmologists), (ii) optical retail chains (including
superstores) and (iii) mass merchandisers and warehouse clubs. From time to
time, competitors have launched aggressive promotional programs which have
temporarily impacted the Company's ability to achieve comparable stores sales
growth and maintain gross margin. Some of the Company's competitors are larger,
have longer operating histories, greater financial resources and greater market
recognition than the Company. There can be no assurance that the Company will be
able to compete successfully against such competition.
GOVERNMENT REGULATION
The Company or its landlord leases a portion of each of the Company's
stores or adjacent space to an independent optometrist. The availability of such
professional services in or adjacent to the Company's stores is critical to the
Company's marketing strategy. The delivery of health care, including the
relationships among health care providers such as optometrists and suppliers
(e.g., providers of eyewear), is subject to extensive federal and state
regulation. The laws of many states prohibit business corporations such as the
Company from practicing medicine or exercising control over the medical
judgments or decisions of physicians and from engaging in certain financial
arrangements, such as splitting fees with physicians. These laws and their
interpretations vary from state to state and are enforced by both courts and
regulatory authorities, each with broad discretion. The Company has designed
certain business arrangements with independent optometrists to avoid such
prohibitions by entering into long-term management contracts with such
independent optometrists instead of employing the optometrists directly.
Violations of these laws could result in censure or delicensing of optometrists,
civil or criminal penalties, including large civil monetary penalties, or other
sanctions. In addition, a determination in any state that the Company is engaged
in the corporate practice of medicine or any unlawful fee-splitting arrangement
could render any service agreement between the Company and optometrists located
in such state unenforceable or subject to modification, which could have a
material adverse effect on the Company.
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The fraud and abuse provisions of the Social Security Act and anti-kickback
laws and regulations adopted in many states prohibit the solicitation, payment,
receipt, or offering of any direct or indirect remuneration in return for, or as
an inducement to, certain referrals of patients, items or services. Provisions
of the Social Security Act also impose significant penalties for false or
improper billings to Medicare and Medicaid, and many states have adopted similar
laws applicable to any payor of health care services. In addition, the Stark
Self-Referral Law imposes restrictions on physicians' referrals for designated
health services reimbursable by Medicare or Medicaid to entities with which the
physicians have financial relationships, including the rental of space if
certain requirements have not been satisfied. Many states have adopted similar
self-referral laws which are not limited to Medicare or Medicaid reimbursed
services. Violations of any of these laws may result in substantial civil or
criminal penalties, including double and treble civil monetary penalties, and,
in the case of violations of federal laws, exclusion from participation in the
Medicare and Medicaid programs. Such exclusions and penalties, if applied to the
Company, could have a material adverse effect on the Company.
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS
As an increasing percentage of patients enter into health care coverage
arrangements with managed care payors, the Company believes that its success
will be, in part, dependent upon the Company's ability to negotiate contracts
with health maintenance organizations ("HMOs"), employer groups and other
private third party payors. There is no certainty that the Company will be able
to establish or maintain satisfactory relationships with managed care and other
third party payors, many of which already have existing provider structures in
place and may not be able or willing to change their provider networks. The
inability of the Company to enter into such arrangements in the future could
have a material adverse effect on the Company.
To further the Company's ability to contract with managed care payors, the
Company has begun to establish networks of optometrists and other providers
located in or adjacent to the Company's stores for the purposes of contracting,
in many instances on a capitated or risk basis, with managed care payors for
both the professional and retail eyewear supplies. The Company's contractual
arrangements with managed care companies on the one hand, and the networks of
optometrists and other providers on the other, are subject to federal and state
regulations, including but not limited to the following:
Insurance Licensure. Most states impose strict licensure requirements on
health insurance companies, HMOs and other companies that engage in the business
of insurance. In most states, these laws do not apply to networks paid on a
discounted fee-for-service arrangements or on a capitated basis. In the event
that the Company is required to become licensed under these laws, the licensure
process can be lengthy and time consuming. In addition, many of the licensing
requirements mandate strict financial and other requirements which the Company
may not be able to meet.
Any Willing Provider Laws. Some states have adopted, and others are
considering, legislation that requires managed care payors to include any
provider who is willing to abide by the terms of the managed care payor's
contracts and/or prohibit termination of providers without cause. Such laws
would limit the ability of the Company to develop effective managed care
provider networks in such states.
Antitrust Laws. The Company and its networks of providers are subject to a
range of antitrust laws that prohibit anti-competitive conduct, including
price-fixing, concerted refusals to deal and divisions of markets. There can be
no assurance that there will not be a challenge to the Company's operations on
the basis of an antitrust violation in the future.
UNCERTAINTIES REGARDING HEALTHCARE REFORM
There have been numerous initiatives at the federal and state levels for
comprehensive reforms affecting the payment for and availability of healthcare
services. The Company believes that such initiatives will continue during the
foreseeable future. Aspects of certain of these reforms as proposed in the past
or others that may be introduced could, if adopted, adversely affect the
Company.
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DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
The cost of a significant portion of medical care in the United States is
funded by government and private insurance programs, such as Medicare, Medicaid
and corporate health insurance plans. According to governmental projections, it
is expected that more medical beneficiaries who are significant consumers of eye
care services will enroll in management care organizations. The health care
industry is experiencing a trend toward cost-containment with governmental and
private third party payors seeking to impose lower reimbursement, utilization
restrictions and risk-based compensation arrangements. Private third-party
reimbursement plans are also developing increasingly sophisticated methods of
controlling health care costs through redesign of benefits and explorations of
more cost-effective methods of delivering health care. Accordingly, there can be
no assurance that reimbursement for purchase and use of eye care services will
not be limited or reduced and thereby adversely affect future sales by the
Company.
MEDICAL AND TECHNOLOGICAL CHANGES
Corneal refractive surgery procedures such as radial-keratotomy,
photo-refractive keratectomy and future drug development, may change the demand
for the Company's products. Technological developments such as wafer technology
and lens casting may render the Company's current lens manufacturing method
uncompetitive or obsolete. There can be no assurance that medical advances and
technological developments will not have a material adverse effect on the
Company's operations.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the Company's senior
management and its ability to attract and retain other highly qualified
management personnel. The loss of the services of certain of these executives
could have a material adverse effect on the Company and there can be no
assurance that the Company will be able to find replacements with appropriate
business experience and skills. The Company faces competition for such personnel
from other companies and other organizations. In addition, the success of any
acquisition by the Company may depend, in part, on the ability of the Company to
retain management personnel of the acquired company. There can be no assurance
that the Company will be successful in hiring or retaining key personnel. See
"Management."
LIMITATIONS ON ABILITY TO MAKE CHANGE OF CONTROL PAYMENT
Upon the occurrence of a Change of Control (as defined), subject to certain
conditions, the Company will be required to make an offer to purchase all of the
outstanding Notes at a price equal to 101% of the principal amount thereof at
the date of purchase plus accrued and unpaid interest, if any, to the date of
purchase. If a Change of Control were to occur, there can be no assurance that
the Company would have sufficient funds to pay the repurchase price for all
Notes tendered by the holders thereof; such failure would result in an event of
default under the Indenture. The occurrence of a Change of Control would
constitute a default under the New Credit Facility and might constitute a
default under the other agreements governing indebtedness that the Company or
its subsidiaries may enter into from time to time. In addition, the New Credit
Facility prohibits the purchase of the Notes by the Company in the event of a
Change of Control, unless and until such time as the indebtedness under the New
Credit Facility is repaid in full. The Company's failure to purchase the Notes
in such instance would result in a default under each of the Indenture and the
New Credit Facility. The inability to repay the indebtedness under the New
Credit Facility, if accelerated, could have a material adverse consequences to
the Company and to holders of the Notes. Future indebtedness of the Company may
also contain prohibitions of certain events or transactions that could
constitute a Change of Control or require such indebtedness to be repurchased
upon a Change of Control. See "Description of the New Credit Facility" and
"Description of Exchange Notes -- Change of Control."
FRAUDULENT CONVEYANCE AND PREFERENCE CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent conveyance law, if, among other things, the
Company or the Guarantors, at the time it incurred the
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indebtedness evidence by the Notes or the Guarantees, as the case may be, (i)
(a) was or is insolvent or rendered insolvent by reason of such occurrence of
(b) was or is engaged in a business or transaction of which the assets remaining
with the Company or the Guarantors were unreasonably small or constitute
unreasonably small capital or (c) intended or intends to incur, or believed,
believes or should have believed that it would incur, debts beyond its ability
to repay such debts as they mature and (ii) the Company or the Guarantor
received or receives less than the reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, the Notes and the
Guarantees could be invalidated or subordinated to all other debts of the
Company or the Guarantors, as the case may be. The Notes or Guarantees could
also be invalidated or subordinated if it were found that the Company or the
Guarantor, as the case may be, incurred indebtedness in connection with the
Notes or the Guarantees with the intent of hindering, delaying or defrauding
current or future creditors of the Company or the Guarantors, as the case may
be. In addition, the payment of interest and principal by the Company pursuant
to the Notes or the payment of amounts by the Guarantors pursuant to the
Guarantees could be voided and required to be returned to the person making such
payment, or to a fund for the benefit of the creditors of the Company or the
Guarantors, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or the Guarantors would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the sum of all of its assets at a fair valuation or if the present
fair saleable value of its assets were less than the amount that would be
required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
To the extent the Guarantees were voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of Notes would cease to have any
claim in respect of the Guarantors and would be creditors solely of the Company.
In such event, the claims of holders of Notes against the Guarantors would be
subject to the prior payment of all liabilities and preferred stock claims of
the Guarantors. There can be no assurance that, after providing for all prior
claims and preferred stock interests, if any, there would be sufficient assets
to satisfy the claims of holders of Notes relating to any voided portions of the
Guarantees.
On the basis of its historical financial information and recent operating
history as discussed in "Prospectus Summary," "Unaudited Pro Forma Condensed
Consolidated Financial Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company believes that, after
giving effect to the indebtedness incurred in connection with the
Recapitalization and the Offering, it will not be insolvent, will not have
unreasonably small assets or capital for the businesses in which it is engaged
and will not incur debts beyond its ability to pay such debts as they mature.
There can be no assurance, however, as to what standard a court would apply in
making such determinations.
CONTROL OF THE COMPANY
THL owns approximately 89.7% of the issued and outstanding Common Stock.
Accordingly, THL controls the Company and has elected a majority of its
directors, appointed new management and approved any action requiring the
approval of the holders of Common Stock, including adopting amendments to the
Company's charter and approving mergers or sales of substantially all of the
Company's assets. The directors elected by THL have the authority to make
decisions affecting the capital structure of the Company, including the issuance
of additional capital stock, the implementation of stock repurchase programs and
the declaration of dividends. There can be no assurance that the interests of
THL does or will not conflict with the interests of the holders of the Notes.
See "Management," "Principal Shareholders" and "Certain Transactions."
SYSTEMS CONVERSION; YEAR 2000 ISSUE
The Company faces "Year 2000" issues. Year 2000 issues exist when dates are
recorded using two digits (rather than four) and are then used for arithmetic
operations, comparisons or sorting. A two-digit recording
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may recognize a date using "00" as 1900 rather than 2000, which could cause the
Company's computer systems to perform inaccurate computations. The Company has
undertaken substantial steps to eliminate Year 2000 risk, including determining
which of its systems require replacement or modification, and implementing an
action plan in response thereto, portions of which have been completed to date.
The Company's Year 2000 issues relate not only to its own systems but also to
those of its customers and suppliers. It is anticipated that systems
replacements and modifications will resolve the Year 2000 issue with respect to
the Company's internal system. There is no guarantee, however, that such systems
replacements and modifications will be completed on time. In addition, the
failure of the Company's suppliers and customers to address the Year 2000 issue
could significantly impact the Company.
LACK OF PUBLIC MARKET
There is no existing market for the Exchange Notes and there can be no
assurances as to the liquidity of any markets that may develop for the Exchange
Notes, the ability of holders of the Exchange Notes to sell their Exchange
Notes, or the price at which holders would be able to sell their Exchange Notes.
Future trading prices of the Exchange Notes will depend on many factors,
including among other things, prevailing interest rates, the Company's operating
results and the market for similar securities. The Initial Purchasers have
advised the Issuer that they currently intend to make a market in the Exchange
Notes offered hereby. However, the Initial Purchasers are not obligated to do so
and any market making may be discontinued at any time without notice. The Issuer
does not intend to apply for listing of the Exchange Notes offered hereby on any
securities exchange or through the National Association of Securities Dealers
Automated Quotation System.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes, pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of Initial Notes set forth in the legend thereon as
a consequence of the issuance of the Initial Notes pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. In general, the Initial Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Issuer does not anticipate registering the Initial Notes under the
Securities Act. Holders of the Initial Notes who do not tender their Notes in
the Exchange Offer will continue to hold such Initial Notes and their rights
under such Initial Notes will not be altered, except for any such rights under
the Registration Rights Agreement, which by their terms terminate or cease to
have further effectiveness as a result of the making of, and the acceptance for
exchange of all validly tendered Initial Notes pursuant to, the Exchange Offer.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were originally issued and sold on April 24, 1998. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. In connection with the
sale of the Initial Notes, the Issuer agreed to file with the Commission a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which the Exchange Notes would be offered
in exchange for Initial Notes tendered at the option of the holders thereof or,
if applicable interpretations of the staff of the Commission did not permit the
Issuer to effect such an exchange offer, the Issuer agreed, at its cost, to file
a shelf registration statement covering resales of the Initial Notes (the
"Resale Registration Statement") and to have such Resale Registration Statement
declared effective and kept effective for a period of two years from the
effective date thereof. In the event that (i) the Issuer fails to file the
Exchange Offer Registration Statement, (ii) the Exchange Offer Registration
Statement is not declared effective by the Commission, or (iii) the Exchange
Offer is not consummated or the Resale Registration Statement is not declared
effective by the Commission, in each case within specified time periods, the
interest rate borne by the Initial Notes shall increase, which interest will
accrue and be payable in
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cash until completion of such filing, declaration of effectiveness or completion
of such exchange. See "Exchange Offer; Registration Rights Agreement."
The sole purpose of the Exchange Offer is to fulfill obligations of the
Issuer with respect to the foregoing agreement. Following the consummation of
the Exchange Offer, the Issuer does not currently anticipate registering any
untendered Initial Notes under the Securities Act and will not be obligated to
do so.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Initial
Notes that are exchanged. Therefore no gain or loss will be recorded in the
Company's financial statement as a result of the transaction.
TERMS OF THE EXCHANGE
The Issuer hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus,
$150,000,000 in principal amount of the Exchange Notes for $150,000,000 in
principal amount of the Initial Notes. The terms of the Exchange Notes are
identical in all respects to the terms of the Initial Notes, for which they may
be exchange pursuant to this Exchange Offer, except that the Exchange Notes will
generally be freely transferable by holders thereof and the holders of the
Exchange Notes (as well as remaining holders of any Initial Notes) will not be
entitled to registration rights under the Registration Rights Agreement. See
"Exchange Offer; Registration Rights Agreement." The Exchange Notes will
evidence the same debt as the Initial Notes and will be entitled to the benefits
of the Indenture. See "Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Initial Notes
may be offered for sale, resold and otherwise transferred by any holder of such
Exchange Notes (other than any such holder which is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. Any holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives Exchange Notes for its own account
in exchange for Initial Notes, where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes shall accrue from April 24, 1998 or from the
last Interest Payment Date on which interest was paid on the Initial Notes so
surrendered.
Tendering holders of the Initial Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions on the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m. New York City time, on , 1998,
unless the Issuer is required to extends the period during which the Exchange
Offer is open under applicable law, in which event the term "Expiration Date"
shall mean the latest time and date on which the Exchange Offer, as so extended
by the Issuer, shall expire. During any extension of the Exchange Offer, all
Initial Notes previously tendered pursuant to the Exchange Offer will remain
subject to the Exchange Offer.
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The Exchange Date will be the first business day following the Expiration
Date. The Issuer expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Initial Notes if either of the events set
forth below under "Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Issuer and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to the holders of the Initial Notes, whether before or after any tender of the
Initial Notes. If any such termination or amendment occurs, the Issuer will
notify the Exchange Agent and will either issue a press release or give oral or
written notice to the holders of the Initial Notes as promptly as practicable.
Unless the Issuer terminates the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date, the Issuer will exchange the Exchange Notes
for the Initial Notes on the Exchange Date.
HOW TO TENDER
The tender to the Issuer of Initial Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
A holder of an Initial Note may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Initial Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date, (ii) complying with
the procedure for book entry transfer described below or (iii) complying with
the guaranteed delivery procedures described below.
If tendered Initial Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purpose described herein,
shall include any participant in The Depository Trust Company ("DTC") (also
referred to as a book-entry transfer facility whose name appears on a security
listing as the owner of the Initial Notes), the signature of such signer need
not be guaranteed. In any other case, the tendered Initial Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Issuer and duly executed by the registered holder and the signature on
the endorsement or instrument of transfer must be guaranteed by a commercial
bank or trust company located or having an office or correspondent in the United
States, or by a member firm of a national securities exchange or of the National
Association of Securities Dealers, Inc. (any of the foregoing hereinafter
referred to as an "Eligible Institution"). If the Exchange Notes and/or Initial
Notes not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Initial Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The method of delivery of Initial Notes and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance obtained,
and the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent on or before the Expiration Date.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system (a "Participant") may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender Initial Notes.
The Exchange Agent will request that DTC establish an account with respect
to the Initial Notes for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any Participant may make book-entry delivery
of Initial Notes by causing DTC to transfer such Initial Notes into the Exchange
Agent's account in accordance with DTC's ATOP procedures for transfer. However,
the exchange for the Initial Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of
Initial Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states
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that DTC has received an express acknowledgment from a Participant tendering
Initial Notes which are the subject of such Book-Entry Confirmation that such
Participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Issuer may enforce such agreement against such
Participant.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Initial Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its office listed on the back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the
Initial Notes are registered and, if possible, the certificate numbers of the
Initial Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution together with a properly completed and duly executed Letter
of Transmittal (and any other required documents). Unless Initial Notes being
tendered by the above-described method are deposited with the Exchange Agent
within the time period set forth above (accompanied or preceded by a properly
completed Letter of Transmittal and any other required documents), the Issuer
may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes is received by the Exchange Agent, (ii) a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility is received by the Exchange
Agent, or (iii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible Institution
is received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Initial Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Initial Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of the counsel
of the Issuer, be unlawful. The Issuer also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularity in the
tender of any Initial Notes. None of the Issuer, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Initial Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Initial Notes to the Issuer and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's Agent and
attorney-in-fact to cause the Initial Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Initial Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that, when the same are accepted for exchange, the Issuer will
acquire good and unencumbered title to the tendered Initial Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuer to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Initial Notes or transfer ownership of such Initial Notes on the
account books maintained
21
<PAGE> 26
by a book-entry transfer facility. The Transferor further agrees that acceptance
of any tendered Initial Notes by the Issuer and the issuance of Exchange Notes
in exchange therefor shall constitute performance in full by the Issuer of its
obligations under the Registration Rights Agreement and that the Issuer shall
have no further obligations or liabilities thereunder. All authority conferred
by the Transferor will survive the death or incapacity of the Transferor and
every obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
By tendering Initial Notes, the Transferor certifies that it is not an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act and that it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes.
WITHDRAWAL RIGHTS
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the back cover of this Prospectus.
Any such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Initial Notes to be withdrawn, the certificate
numbers of Initial Notes to be withdrawn, the principal amount of Initial Notes
to be withdrawn, a statement that such holder is withdrawing his election to
have such Initial Notes exchanged, and the name of the registered holder of such
Initial Notes, and must be signed by the holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Issuer
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Initial Notes being withdrawn. The Exchange Agent will return the
properly withdrawn Initial Notes promptly following receipt of notice of
withdrawal. If Initial Notes have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Initial Notes or otherwise comply with the book-entry transfer
facility procedure. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Issuer, and such
determination will be final and binding on all parties.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance of Initial Notes validly tendered and not withdrawn and issuance of
the Exchange Notes will be made on the Exchange Date. For the purpose of the
Exchange Offer, the Issuer shall be deemed to have accepted for exchange validly
tendered Initial Notes when, as and if the Issuer has given oral or written
notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Initial
Notes for the purpose of receiving Exchange Notes from the Issuer and causing
the Initial Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Initial Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Initial Notes. Initial Notes not
accepted for exchange by the Issuer will be returned without expense to the
tendering holders promptly following the Expiration Date or, if the Issuer
terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuer will not be required to issue Exchange Notes
in respect of any properly tendered Initial Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation,
22
<PAGE> 27
by making a release to the Dow Jones News Service) or, at its option, modify or
otherwise amend the Exchange Offer, if (a) any action or proceeding is
instituted or threatened in any court or by or before any governmental agency
with respect to the Exchange Offer which might materially impair the ability of
the Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect to
the Company or any of its subsidiaries; or (b) any law, statute, rule,
regulation or interpretation by the staff of the Commission is proposed, adopted
or enacted, which might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or (c) any governmental approval has not been
obtained, which approval the Company shall deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
In addition, the Issuer will not accept for exchange any Initial Notes
tendered and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part of qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
The Issuer expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Initial Notes upon the occurrence of either of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Issuer of properly tendered Initial Notes). In addition, the
Issuer may amend the Exchange Offer at any time prior to the Expiration Date if
either of the conditions set forth above occur. Moreover, regardless of which
either of such conditions has occurred, the Issuer may amend the Exchange Offer
in any manner which, in its good faith judgment, is advantageous to holders of
the Initial Notes.
The foregoing conditions are for the sole benefit of the Issuer and may be
waived by the Issuer, in whole or in part, if, in its reasonable judgment, such
waiver is not advantageous to holders of the Initial Notes. Any determination
made by the Issuer concerning an event, development or circumstance described or
referred to above will be final and binding on all parties.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via facsimile or telex number other than the ones set forth herein,
will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Issuer has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of this Exchange Offer. The Issuer
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Issuer will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of the Initial Notes and in handling or forwarding
tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuer. Neither the delivery
of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuer since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Initial Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuer may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the
23
<PAGE> 28
Exchange Offer to holders of Initial Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the Exchange
Offer to be made by a licensed broker or dealer, the Exchange Offer is being
made on behalf of the Issuer by one or more registered brokers or dealers which
are licensed under the laws of such jurisdiction.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Initial Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Issuer will have fulfilled a covenant contained in the terms of the Initial
Notes, the Indenture and the Registration Rights Agreement. Holders of the
Initial Notes who do not tender the certificates in the Exchange Offer will
continue to hold such certificates and their rights under such Initial Notes
will not be altered, except for any such rights under the Registration Rights
Agreement, which by their terms terminate or cease to have further effect as a
result of the making of this Exchange Offer. See "Description of the Initial
Notes." All untendered Initial Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Initial
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Initial Notes could be adversely affected.
The Issuer may in the future seek to acquire untendered Initial Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plan to acquire any Initial Notes
which are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Initial Notes which are not tendered pursuant to the
Exchange Offer.
24
<PAGE> 29
THE RECAPITALIZATION
On March 6, 1998, Merger Corp. and the Company entered into the
Recapitalization Agreement providing for, among other things, the Merger as well
as the other elements of the Recapitalization. Upon consummation of the Merger
on April 24, 1998, THL Fund IV and other affiliates of THL Co. currently own
approximately 89.7% of the issued and outstanding shares of Common Stock,
existing shareholders (including management) of the Company retained
approximately 7.3% of the issued and outstanding Common Stock and management
purchased additional shares representing approximately 3.0% of the issued and
outstanding Common Stock. The total transaction value of the Recapitalization
was approximately $321.0 million, including related fees and expenses, and the
implied total equity value of the Company following the Recapitalization was
approximately $107.3 million.
The Company financed the Recapitalization with (a) approximately $55.0
million of borrowings under the New Credit Facility, and (b) approximately $99.4
million Equity Contribution from the sale of capital stock to THL, Bernard W.
Andrews and other members of management consisting of (i) approximately $71.6
million from the sale of Common Stock and (ii) approximately $27.8 million from
the sale of New Preferred Stock. The proceeds from such bank borrowings, the
sale of the Initial Notes, and the Equity Contribution were used principally to
finance the conversion into cash of the shares of Common Stock which were not
retained by existing stockholders, to refinance certain existing indebtedness of
the Company, to redeem certain outstanding preferred stock of the Company and to
pay related fees and expenses of the Recapitalization. In connection with the
Recapitalization, the Company defeased the previously issued Senior Notes by
depositing with the trustee for the Senior Notes (i) an irrevocable notice of
redemption of the Senior Notes on October 1, 1998 and (ii) United States
government securities in an amount necessary to yield on October 1, 1998 $78.4
million, which constituted the principal amount, premium and interest payable on
the Senior Notes on the October 1, 1998 redemption date.
The following table sets forth the cash sources and uses of funds in
connection with the financing of the Recapitalization:
<TABLE>
<CAPTION>
AMOUNT
--------------
SOURCES: (IN THOUSANDS)
<S> <C>
New Credit Facility(1).................................... $ 55,000
Notes offered hereby(2)................................... 149,511
New equity capital(3)..................................... 99,440
--------
Total............................................. $303,951
========
USES:
Cash merger consideration................................. $153,036
Repayment of existing indebtedness(4)..................... 103,800
Redemption of existing preferred stock.................... 12,337
Excess cash............................................... 7,159
Bond defeasance cost...................................... 6,619
Estimated fees and expenses............................... 21,000
--------
Total............................................. $303,951
========
</TABLE>
- ---------------
(1) The New Credit Facility consists of (i) the $55.0 million Term Loan
Facility; (ii) the $35.0 million Revolving Credit Facility and (iii) the
$100.0 million Acquisition Facility, of which $50.0 million was committed at
closing. Approximately $10.0 million of the Revolving Credit Facility is
restricted for the repayment of the capital lease obligation due in February
1999.
(2) Reflects $100.0 million of Fixed Rate Notes, net of discount of $0.5
million, and $50.0 million of Floating Rate Notes.
(3) Does not include Common Stock of $5.6 million retained by existing
shareholders and New Preferred Stock of $2.3 million received by such
shareholders.
(4) Reflects the payment of existing long-term debt of $95.7 million (including
$70.0 million in connection with the defeasance of the Senior Notes),
payment of existing short-term debt of $7.0 million, payment of the $2.3
million accrued earn-out provision related to the Hour Eyes Acquisition
discussed elsewhere in the Prospectus and the payment of $0.6 million of
accrued interest payable less the expected use of existing cash of $1.7
million. After considering the use of existing cash of $1.7 million to pay
existing liabilities and the excess of $7.2 million, cash and cash
equivalents will increase $5.5 million on a pro forma basis. In connection
with the Recapitalization, the Company defeased the previously issued Senior
Notes by depositing with the trustee for the Senior Notes (i) an irrevocable
notice of redemption of the Senior Notes on October 1, 1998 and (ii) United
States government securities in an amount necessary to yield on October 1,
1998 $78.4 million, which constitutes the principal amount, premium and
interest payable on such Senior Notes on the October 1, 1998 redemption
date. The Senior Notes will continue to be reflected as a liability on the
Company's balance sheet with an offsetting asset representing the deposit of
United States government securities made for defeasance through the second
quarter of fiscal 1998.
25
<PAGE> 30
For a description of the New Credit Facility and other indebtedness of the
Company, see "Description of the New Credit Facility" and the notes to the
Consolidated Financial Statements included elsewhere herein.
USE OF PROCEEDS
There will not be any proceeds from the Exchange Offer. The net proceeds to
the Issuer from the sale of the Initial Notes was approximately $144.5 million,
after deducting discounts and commissions and expenses thereof. Such proceeds
were used to fund a portion of the financing for the Recapitalization and
related transactions, including to finance the conversion into cash of shares of
Common Stock which were not retained by existing stockholders, to refinance
certain existing indebtedness of the Company, to redeem certain outstanding
preferred stock of the Company and to pay related fees and expenses of the
Recapitalization. For further discussion of the estimated sources and uses of
funds related to the Recapitalization, see "The Recapitalization."
The existing indebtedness of the Company repaid in connection with the
Recapitalization consisted of certain existing bank facilities, the Senior Notes
of the Company (which were defeased in connection therewith -- see "The
Recapitalization") and other debt of the Company. As of April 4, 1998, the
outstanding balance of such indebtedness amounted to $102.3 million and bore
interest at a weighted average rate of 11.4% per annum.
26
<PAGE> 31
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of April 4, 1998, and on a pro forma basis to give effect to the
Initial Offering and the application of the net proceeds therefrom and the
Recapitalization. This table should be read in conjunction with "Use of
Proceeds," "Unaudited Pro Forma Condensed Consolidated Financial Statements" and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF APRIL 4, 1998
------------------------
ACTUAL PRO FORMA(1)
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................... $ 4,152 $ 9,660
======== ========
Total debt:
Existing indebtedness............................. $112,267 $ 9,979
New Credit Facility(2)............................ -- 55,000
Notes(3).......................................... -- 149,511
-------- --------
Total debt..................................... 112,267 214,490
-------- --------
Mandatorily Redeemable Cumulative Preferred Stock... 12,337 --
Shareholders' equity (deficit):
Preferred stock................................... -- 30,000(4)
Common stock...................................... 10 6(5)
Additional paid-in capital........................ 31,025 66,308(5)
Accumulated deficit............................... (19,245) (160,021)
-------- --------
Total shareholders' equity (deficit)........... 11,790 (63,707)
-------- --------
Total capitalization...................... $136,394 $150,783
======== ========
</TABLE>
- ---------------
(1) Does not reflect either (i) the liabilities of the Company to pay the
previously issued Senior Notes or (ii) the offsetting asset representing the
deposit made to defease the Senior Notes. In connection with the
Recapitalization, the Company defeased the Senior Notes by depositing with
the trustee for the Senior Notes (i) an irrevocable notice of redemption of
the Senior Notes on October 1, 1998 and (ii) United States government
securities in an amount necessary to yield on October 1, 1998 $78.4 million,
which constitutes the principal amount, premium and interest payable on such
Senior Notes on the October 1, 1998 redemption date. Senior Notes will
continue to be reflected as a liability on the Company's balance sheet with
an offsetting asset representing the deposit of United States government
securities made for defeasance through the second quarter of fiscal 1998.
(2) The New Credit Facility consists of (i) the $55.0 million Term Loan
Facility; (ii) the $35.0 million Revolving Credit Facility and (iii) the
$100.0 million Acquisition Facility. Approximately $10.0 million of the
Revolving Credit Facility will be restricted for the repayment of the
capital lease obligation due in February 1999.
(3) Reflects $100.0 million of Fixed Rate Notes, net of discount of $0.5
million, and $50.0 million of Floating Rate Notes.
(4) In connection with the financing of the Recapitalization, the Company issued
New Preferred Stock in the amount of $30.0 million.
(5) Includes Common Stock of $5.6 million retained by existing shareholders.
27
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements have been derived from the Company's historical financial statements.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the
Exchange Offering and the Recapitalization as if it occurred on April 4, 1998.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations give
effect to the Exchange Offering, the Recapitalization and the Hour Eyes
Acquisition as if they occurred on December 29, 1996.
The information in the columns titled "Actual" is summarized from the
historical Consolidated Financial Statements of the Company included elsewhere
in this Prospectus.
The Unaudited Pro Forma Condensed Consolidated Financial Statements have
been prepared by the Company management and are presented for informational
purposes only. The pro forma adjustments are based on available information and
assumptions that Company management believes are reasonable. These Unaudited Pro
Forma Condensed Consolidated Financial Statements may not be indicative of the
results that actually would have occurred if the Exchange Offering, the
Recapitalization and the Hour Eyes Acquisition had been in effect on the dates
indicated or which may be obtained in the future. The Unaudited Pro Forma
Condensed Consolidated Financial Statements should be read in conjunction with
the Company's Consolidated Financial Statements appearing elsewhere in this
Prospectus.
28
<PAGE> 33
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
APRIL 4, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS(a) PRO FORMA
-------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 4,152 $ 5,508(a) $ 9,660
Accounts and notes receivable, net................ 6,255 6,255
Inventory......................................... 26,243 26,243
Prepaid expenses and other........................ 3,555 3,555
-------- --------- ---------
Total current assets......................... 40,205 5,508 45,713
Property and equipment, net....................... 58,662 58,662
Intangibles, net.................................. 74,260 74,260
Other assets...................................... 4,644 6,072(b) 10,716
-------- --------- ---------
$177,771 $ 11,580 $ 189,351
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 21,074 $ 21,074
Current portion of long-term debt................. 6,991 $ (6,991)(c) --
Deferred revenue.................................. 4,092 4,092
Accrued payroll expense........................... 2,135 2,135
Accrued interest.................................. 559 (559)(a) --
Other accrued expenses............................ 8,107 (2,250)(a) 5,857
-------- --------- ---------
Total current liabilities....................... 42,958 (9,800) 33,158
Long-term debt, less current maturities........... 105,630 108,860(c) 214,490
Unamortized discount on debt...................... (354) 354(c) --
Deferred rent..................................... 3,089 3,089
Deferred gain..................................... 2,321 -- 2,321
-------- --------- ---------
Total long-term liabilities..................... 110,686 109,214 219,900
-------- --------- ---------
Total liabilities............................... 153,644 99,414 253,058
Mandatorily Redeemable Cumulative Preferred Stock.... 12,337 (12,337)(d) --
-------- --------- ---------
Shareholders' equity (deficit):
Preferred stock................................... -- 30,000(e) 30,000
Common stock...................................... 10 (4)(e) 6
Additional paid-in capital........................ 31,025 35,283(e) 66,308
Accumulated deficit............................... (19,245) (140,776)(e) (160,021)
-------- --------- ---------
Total stockholders' equity (deficit)............ 11,790 (75,497)(e) (63,707)
-------- --------- ---------
$177,771 $ 11,580 $ 189,351
======== ========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated balance
sheet.
29
<PAGE> 34
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The pro forma financial data has been derived by the application of pro
forma adjustments to the Company's historical financial statements for the
period noted. The Merger has been accounted for as a recapitalization which will
have no impact on the historical basis of assets and liabilities.
(a) The net effect of the Merger, the Exchange Offering and the
Recapitalization, as if it occurred on April 4, 1998, reflects the following
(in thousands):
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES:
New Credit Facility(1).................................... $ 55,000
Notes offered hereby(2)................................... 149,511
New equity capital(3)..................................... 99,440
--------
Total............................................. $303,951
========
USES:
Cash merger consideration................................. $153,036
Repayment of existing indebtedness(4)..................... 103,800
Redemption of existing preferred stock.................... 12,337
Excess cash............................................... 7,159
Bond defeasance cost...................................... 6,619
Estimated fees and expenses............................... 21,000
--------
Total............................................. $303,951
========
</TABLE>
--------------------
(1) The New Credit Facility consists of (i) the $55.0 million Term Loan
Facility; (ii) the $35.0 million Revolving Credit Facility; and (iii) the
$100.0 million Acquisition Facility, of which $50.0 million was committed at
closing. Approximately $10.0 million of the Revolving Credit Facility is
restricted for the repayment of the capital lease obligation due in
February 1999.
(2) Reflects $100.0 million of Fixed Rate Notes, net of discount
of $0.5 million, and $50.0 million of Floating Rate Notes.
(3) Does not include Common Stock of $5.6 million retained by existing
shareholders and New Preferred Stock of $2.3 million received by such
shareholders.
(4) Reflects the payment of existing long-term debt of $95.7 million,
(including $70.0 million in connection with the defeasance of the Senior
Notes), payment of existing short-term debt of $7.0 million, payment of the
$2.3 million accrued earn-out provision related to the Hour Eyes Acquisition
discussed elsewhere in the Prospectus and the payment of $0.6 million of
accrued interest payable less the expected use of existing cash of
$1.7 million. After considering the use of existing cash of $1.7 million to
pay existing liabilities and the excess of $7.2 million, cash and cash
equivalents will increase $5.5 million on a pro forma basis. In connection
with the Recapitalization, the Company defeased the previously issued Senior
Notes by depositing with the trustee for the Senior Notes (i) an irrevocable
notice of redemption of the Senior Notes on October 1, 1998 and (ii) United
States government securities in an amount necessary to yield on October 1,
1998 $78.4 million, which constitutes the principal amount, premium and
interest payable on such Senior Notes on the October 1, 1998 redemption
date. The Senior Notes will continue to be reflected as a liability on the
Company's balance sheet with an offsetting asset representing the deposit of
United States government securities made for defeasance through the second
quarter of fiscal 1998.
(b) The adjustment reflects the following (in thousands):
<TABLE>
<S> <C>
Capitalized financing costs........................... $10,000
Write-off of unamortized financing costs on debt
financed.................................................. (3,928)
-------
$ 6,072
=======
</TABLE>
The $10.0 million reflects the capitalized portion of fees and expenses
anticipated to be paid to effect the Recapitalization. Total estimated fees
and expenses are $21.0 million, the remaining $11.0 million of which will be
charged off against stockholders' equity. Such estimated fees and expenses
are anticipated to consist of (i) fees and expenses related to the
Recapitalization, including bank commitment fees and underwriting discounts
and commissions, (ii) professional and advisory and investment banking fees
and
30
<PAGE> 35
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(CONTINUED)
expenses, and (iii) miscellaneous fees and expenses such as printing and
filing fees. The $3.9 million write-off relates to unamortized financing
costs related to the portion of existing debt refinanced.
(c) The pro forma adjustments to short-term and long-term debt reflect the
following (in thousands):
<TABLE>
<CAPTION>
CASH INFLOW/
(OUTFLOW)
------------
<S> <C>
New Credit Facility...................................... $ 55,000
Notes offered hereby..................................... 149,511
Repayment of existing long-term debt outstanding......... (95,651)
Write-off of unamortized discount on debt................ 354
---------
Pro forma adjustment to long-term debt.............. $ 109,214
=========
Repayment of existing short-term debt outstanding........ $ (6,991)
=========
</TABLE>
In connection with the Recapitalization, the Company defeased the previously
issued Senior Notes by depositing with the trustee for the Senior Notes (i)
an irrevocable notice of redemption of the Senior Notes on October 1, 1998
and (ii) United States government securities in an amount necessary to yield
on October 1, 1998 $78.4 million, which constitutes the principal amount,
premium and interest payable on such Senior Notes on the October 1, 1998
redemption date. It is anticipated that the Senior Notes will continue to be
reflected as a liability on the Company's balance sheet with an offsetting
asset representing the deposit of United States government securities made
for defeasance through the second quarter of fiscal 1998.
(d) The adjustment reflects the redemption of Manditorily Redeemable Cumulative
Preferred Stock.
(e) The pro forma adjustment reflects the following (in thousands):
<TABLE>
<CAPTION>
NEW ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Repurchase of Common Stock and conversions
of options and warrants to cash.......... $ 2,250 $(10) $(25,401) $(129,875) $(153,036)
Equity contribution........................ 27,750 6 69,369 -- 97,125
Estimated equity contributed by
management............................... -- -- 2,315 -- 2,315
Write-off of unamortized financing fees.... -- -- -- (4,282) (4,282)
Fees and expenses related to the
Recapitalization......................... -- -- (11,000) -- (11,000)
Bond defeasance costs...................... -- -- -- (6,619) (6,619)
------- ---- -------- --------- ---------
$30,000 $ (4) $ 35,283 $(140,776) $ (75,497)
======= ==== ======== ========= =========
</TABLE>
No pro forma federal income tax benefit has been included in the pro forma
condensed consolidated financial statements. Under the criteria set forth
under FASB Statement No. 109, uncertainties exist as to the future
utilization of the Company's net operating losses and resulting deferred tax
assets that will be created as a result of the Recapitalization.
Accordingly, the Company has established a valuation allowance to fully
reserve the net deferred tax assets created as a result of this
Recapitalization.
31
<PAGE> 36
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
FOR THE THIRTEEN WEEKS ENDED APRIL 4, 1998
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
ACTUAL RECAPITALIZATION PRO FORMA
------- ---------------- ---------
<S> <C> <C> <C>
Net revenues................................................ $62,019 $ -- $62,019
Operating costs and expenses:
Cost of goods sold........................................ 20,499 -- 20,499
Selling, general and administrative expenses.............. 33,263 75(b) 33,338
Amortization of intangibles:
Goodwill............................................... 806 -- 806
Noncompete and other intangibles....................... 108 -- 108
------- ------- -------
Total operating costs and expenses.......................... 54,676 75 54,751
------- ------- -------
Income from operations...................................... 7,343 (75) 7,268
Interest expense, net....................................... 3,394 1,929(c) 5,323
------- ------- -------
Income (loss) before income taxes........................... 3,949 (2,004) 1,945
Income tax expense (benefit)................................ 67 (67)(d) --
------- ------- -------
Net income (loss)........................................... $ 3,882 $(1,937) $ 1,945
======= ======= =======
</TABLE>
See the accompanying notes to unaudited pro forma consolidated statement of
operations.
32
<PAGE> 37
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED JANUARY 3, 1998
<TABLE>
<CAPTION>
HOUR EYES
ACQUISITION RECAPITALIZATION
ACTUAL ADJUSTMENTS(a) ADJUSTMENTS PRO FORMA
-------- -------------- ---------------- ---------
<S> <C> <C> <C> <C>
Net revenues....................................... $219,611 $10,015 $ -- $229,626
Operating costs and expenses: Cost of goods sold... 77,134 2,897 -- 80,031
Selling, general and administrative expenses..... 120,319 3,933 300(b) 124,552
Amortization of intangibles:
Goodwill....................................... 2,722 504 -- 3,226
Noncompete and other intangibles............... 148 286 -- 434
-------- ------- ------- --------
Total operating costs and expenses................. 200,323 7,620 300 208,243
-------- ------- ------- --------
Income from operations............................. 19,288 2,395 (300) 21,383
Interest expense, net.............................. 13,738 626 6,929(c) 21,293
-------- ------- ------- --------
Income (loss) before income taxes.................. 5,550 1,769 (7,229) (90)
Income tax expense (benefit)....................... 335 -- (335)(d) --
-------- ------- ------- --------
Net income(loss)................................... $ 5,215 $ 1,769 $(6,894) $ (90)
======== ======= ======= ========
</TABLE>
See the accompanying notes to unaudited pro forma consolidated statement of
operations.
33
<PAGE> 38
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
The pro forma financial data has been derived by the application of pro
forma adjustments to the Company's historical financial statements for the
periods noted. The Merger has been accounted for as a recapitalization which
will have no impact on the historical basis of assets and liabilities.
The unaudited pro forma condensed consolidated statement of operations
excludes approximately $23.2 million of non-recurring expenses related to
compensation expense to be recorded in connection with the exercise of employee
stock options and an extraordinary charge of $10.9 million consisting of bond
defeasance costs of $6.6 million and write-off of unamortized financing fees of
$4.3 million. These expenses directly relate to the Offering and are expected to
be incurred within the next twelve months.
(a) The pro forma adjustments give effect to the Hour Eyes Acquisition,
completed on September 30, 1997, as if it occurred on December 29, 1996. The
pro forma adjustments reflect the following adjustments to the consolidated
and combined statement of income of The Samit Organization for the
nine-month period January 1, 1997 through September 30, 1997:
<TABLE>
<CAPTION>
FOR THE NINE-MONTH PERIOD JANUARY 1, 1997
THROUGH SEPTEMBER 30, 1997
----------------------------------------------------------------
ELIMINATION OF PRO FORMA
THE DR. SAMIT'S HOUR FOR THE
SAMIT EYES OPTOMETRIST, P.C. FOUR EYES
ORGANIZATION (VIRGINIA)(1) ADJUSTMENTS ACQUSITION
------------ ---------------------- ------------ ----------
<S> <C> <C> <C> <C>
Net revenues.............................. $19,559 $(12,473) $ 2,929(2) $10,015
Operating costs and expenses:
Cost of goods sold.................... 5,787 (2,890) 2,897
Selling, general and administrative
expenses............................ 11,892 (6,018) (1,941)(3) 3,933
Amortization of intangibles:
Goodwill......................... -- -- 504(4) 504
Noncompete and other
intangibles.................... -- -- 286(4) 286
------- -------- ------- -------
Total operating costs and expenses........ 17,679 (8,908) (1,151) 7,620
------- -------- ------- -------
Income from operations.................... 1,880 (3,565) 4,080 2,395
Interest expense, net..................... 129 -- 497(5) 626
------- -------- ------- -------
Income (loss) before income taxes......... 1,751 (3,565) 3,583 1,769
Income tax expense (benefit).............. 110 -- (110) --
------- -------- ------- -------
Net income (loss) from continuing
operations.............................. $ 1,641 $ (3,565) $ 3,693 $ 1,769
======= ======== ======= =======
</TABLE>
- ---------------
(1) Reflects the exclusion from the consolidated and combined statement of
income of The Samit Organization of the revenues and expenses for the stores
not acquired by the Company in the Hour Eyes Acquisition.
(2) Net revenues reflects the inclusion of management fees related to the
Hour Eyes stores managed by the Company.
(3) Selling, general and administrative expenses reflects the exclusion of
certain non-recurring expenses included in the selling, general and
administrative expenses of the stores acquired in the Hour Eyes Acquisition
related to known events such as the elimination of certain previous owner
costs and costs related to terminated personnel of the stores acquired in
the Hour Eyes Acquisition.
(4) Depreciation and amortization expense reflects the amortization of the
incremental intangible assets created as a result of the Hour Eyes
Acquisition.
(5) Interest expense reflects higher indebtedness related to the Hour Eyes
Acquisition and increased amortization of financing costs related to the
increased indebtedness.
34
<PAGE> 39
(b) The adjustment to selling, general and administrative expenses reflects the
reduction of $144,000 related to a consulting fee paid to Desai Capital
Management Incorporated and $56,000 of consulting fees paid to certain
Directors of the Company and an increase of $500,000 related to an annual
management fee the Company will pay to THL Co. for the period ending January
3, 1998. For the period ending April 4, 1998, the adjustment reflects the
reduction of $50,000 of the aforementioned consulting fees and an increase
of $125,000 related to the annual management fee the Company will pay to THL
Co.
(c) The pro forma adjustment to interest expense reflects the following (in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDING THREE MONTHS
JANUARY 3, ENDING
RATE 1998 APRIL 4, 1998
------ ------------- -------------
<S> <C> <C> <C>
Interest expense on the New Credit Facility.... 8.000% $ 4,400 $ 1,100
Interest expense on the Floating Rate Notes.... 9.700% 4,850 1,213
Interest expense on the Fixed Rate Notes....... 9.125% 9,125 2,281
Amortization of capitalized financing fees..... 1,233 308
Commitment fees on unused available credit..... 425 106
Interest expense on debt refinanced............ (13,746) (3,243)
Exclusion of interest income................... 642 164
-------- -------
Total adjustment..................... $ 6,929 $ 1,929
======== =======
</TABLE>
A 0.125% increase or decrease in the assumed interest rate on the New
Credit Facility and Notes would change the pro forma interest expense by
$256,000 and $64,000 for the periods ending January 3, 1998 and April 4,
1998, respectively.
(d) The adjustment reverses the historical tax expense as the Company will
incur significant tax losses as a result of the Recapitalization. Under the
criteria set forth under FASB Statement No. 109, uncertainties exist as to
the future utilization of the Company's net operating losses and resulting
deferred tax assets, and accordingly, the Company has established and
assumed valuation allowance to fully reserve the net deferred tax asset
existing, and that will be created as a result of the Recapitalization.
35
<PAGE> 40
SELECTED HISTORICAL FINANCIAL DATA
The selected table sets forth selected financial data and other operating
information of the Company. The selected financial data in the table are derived
from the Consolidated Financial Statements of the Company. The following
selected financial data should be read in conjunction with the Consolidated
Financial Statements, the related notes thereto and other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THIRTEEN WEEKS ENDED
---------------------------------------------------------------------- --------------------
DECEMBER 31, DECEMBER 31, DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4,
1993(A) 1994 1995 1996 1998 1997 1998
------------ ------------ ------------ ------------ ---------- --------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $118,701 $130,673 $140,198 $ 158,224 $ 219,611 $ 57,879 $ 62,019
Operating costs and expenses:
Cost of goods sold............. 38,676 45,240 47,525 51,884 77,134 19,931 20,499
Selling, general and
administrative expenses(b)... 73,117 81,434 87,402 91,897 120,319 30,873 33,263
Amortization of intangibles.... 3,622 10,542 5,551 2,938 2,870 702 914
-------- -------- -------- --------- --------- -------- --------
Total operating costs and
expenses....................... 115,415 137,216 140,478 146,719 200,323 51,506 54,676
-------- -------- -------- --------- --------- -------- --------
Income (loss) from operations.... 3,286 (6,543) (280) 11,505 19,288 6,373 7,343
Interest expense, net............ 3,106 9,072 8,839 9,899 13,738 3,384 3,394
-------- -------- -------- --------- --------- -------- --------
Income (loss) before income
taxes.......................... 180 (15,615) (9,119) 1,606 5,550 2,989 3,949
-------- -------- -------- --------- --------- -------- --------
Net income (loss)................ $ (2,111) $(15,615) $ (9,119) $ 1,418 $ 5,215 $ 2,889 $ 3,882
======== ======== ======== ========= ========= ======== ========
OTHER FINANCIAL DATA:
EBITDA(c)........................ $ 16,672 $ 14,132 $ 14,949 $ 23,954 $ 34,289 $ 9,743 $ 11,135
Depreciation and
amortization(d)................ 13,386 20,675 15,229 12,449 15,001 3,370 3,745
Capital expenditures............. 14,449 5,367 6,765 4,233 9,470 2,218 5,503
EBITDA margin.................... 14.0% 10.8% 10.7% 15.1% 15.6% 16.8% 18.0%
Gross margin..................... 67.4 65.4 66.1 67.2 64.9 65.6 67.0
Ratio of EBITDA to cash interest
expense(e)..................... 8.2x 1.6x 1.7x 2.7x 2.5x -- --
Ratio of net debt to EBITDA...... 3.4x 5.0x 4.5x 4.6x 3.4x -- --
Ratio of earnings to fixed
charges(f)..................... 1.0x -- 0.3x 1.1x 1.3x 1.6x 1.8x
STORE DATA:
Beginning of period stores....... 123 146 162 152 218 218 239
Opened......................... 23 17 17 6 6 3 4
Acquired....................... -- 4 -- 60 22 -- --
Closed......................... -- (5) (27) -- (7) (2) (1)
-------- -------- -------- --------- --------- -------- --------
End of period stores............. 146 162 152 218 239 219 242
======== ======== ======== ========= ========= ======== ========
Comparable store sales
growth(g)...................... 0.3% 1.1% 4.2% 3.5% 3.8% 4.0% 0.6%
Sales per store(h)............... $ 913 $ 878 $ 904 $ 935 $ 995 -- --
Sales per square foot(i)......... 204 202 210 214 214 -- --
BALANCE SHEET DATA:
Net working capital.............. $ 7,406 $ 5,315 $ 6,954 $ 8,633 $ 4,100 $ 12,154 $ (2,753)
Total assets..................... 123,970 100,516 94,617 167,980 180,144 175,641 177,771
Total debt....................... 71,206 71,253 71,183 120,610 122,389 119,347 112,267
Shareholders' equity (deficit)... 26,294 10,290 1,331 3,532 8,128 6,342 11,790
</TABLE>
(see footnotes on following page)
36
<PAGE> 41
(a) The Company was purchased by Desai Capital Management Incorporated on
October 7, 1993 and fiscal 1993 presented herein represents results of
operations both after and before the acquisition date.
(b) The Company recorded a $664,000 non-cash impairment charge related to its
investment in its subsidiary in Mexico, which is included in selling,
general and administrative expenses for 1996.
(c) EBITDA represents consolidated net income (loss) before interest
expense, income taxes, depreciation and amortization (other than
amortization of store pre-opening costs). The Company has included
information concerning EBITDA because it believes that EBITDA is used by
certain investors as one measure of a company's historical ability to fund
operations and meet its financial obligations. EBITDA should not be
considered as an alternative to, or more meaningful than, operating income
(loss) or net income (loss) in accordance with generally accepted accounting
principals as an indicator of the Company's operating performance or cash
flow as a measure of liquidity.
(d) Depreciation and amortization shown here does not include the
amortization of store pre-opening costs, which is included in selling,
general and administrative expenses.
(e) Cash interest expense represents net interest expense adjusted to
exclude amortization of financing costs related to the New Credit Facility
and the Notes offered hereby.
(f) In computing the ratio of earnings to fixed charges, "earnings"
represents income (loss) before income tax plus fixed charges. "Fixed
charges" consists of interest, amortization of debt issuance costs and a
portion of rent, which is representative of interest factor (approximately
one-third of rent expense).
(g) Comparable store sales growth increase is calculated comparing net
revenues for the period to net revenues of the prior period for all stores
open at least twelve months prior to each such period.
(h) Sales per store is calculated on a monthly basis by dividing total net
revenues by the total number of stores open during the period. Annual sales
per store is the sum of the monthly calculations.
(i) Sales per square foot is calculated on a monthly basis by dividing
total net revenues by total square feet of stores open during the period.
Annual sales per square foot is the sum of the monthly calculations.
37
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Eye Care Centers of America, Inc. is the third largest retail optical chain
in the United States as measured by net revenues, operating 243 stores, 214 of
which are optical superstores. The Company operates predominately under the
trade name "EyeMasters," and in certain geographical regions under the trade
names "Binyon's," "Visionworks" and "Hour Eyes." The Company operates in the
$5.0 billion retail optical chain sector of the $15.4 billion optical retail
market. Management believes that key drivers of growth for retail optical chains
include (i) the aging of the United States population, (ii) the increased role
of managed vision care, (iii) the consolidation of the industry, (iv) the new
product innovations and (v) the greater frequency of eyewear purchases.
In early 1996, Bernard W. Andrews joined the Company as President and Chief
Executive Officer and has built a management team with extensive operating,
merchandising and marketing experience in the optical and retail industries.
This management team has focused on improving operating efficiencies and growing
the business through both strategic acquisitions and new store openings.
The industry is highly fragmented and is undergoing significant
consolidation. Under the current management team, the Company has successfully
acquired and integrated two acquisitions. On September 27, 1996, the Company
acquired all of the outstanding shares of the capital stock of Visionworks for
$61.5 million (the "Visionworks Acquisition"). At the time of the Visionworks
Acquisition, Visionworks was a sixty store optical retailer located along the
Atlantic Coast from Florida to Washington, D.C. with forty-nine superstores and
eleven optical stores located near Eckerd Corporation stores. On September 30,
1997, the Company acquired TSGI for $22.3 million less acquisition date
liabilities. Simultaneously with the acquisition of TSGI, the Company entered
into a long-term business management agreement with Hour Eyes Doctors of
Optometry, P.C., a Virginia professional corporation, to manage an additional
twelve Hour Eyes optical stores in Virginia. As a result of the long-term
business management agreement with Hour Eyes Doctors of Optometry, P.C., the
Company records a management fee but does not include the results of operations
from the twelve Virginia stores in the Company's consolidated results of
operations.
Historically, the Company has operated on a calendar year basis. Effective
January 1, 1994, the Company began reporting using a fifty-two or fifty-three
week fiscal year ending on the Saturday closest to December 31, with monthly
results on a four-four-five week basis each quarter. Fiscal 1997 was a
fifty-three week fiscal year with monthly results on a four-four-five week basis
for each of the first three quarters and a four-five-five week basis for the
fourth quarter.
38
<PAGE> 43
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
in the Company's income statement to net revenues.
<TABLE>
<CAPTION>
FIRST THIRTEEN
FISCAL YEAR ENDED WEEKS ENDED
----------------------- --------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold....................... 33.9 32.8 35.1 34.4 33.4(a)
Selling, general and administrative
expenses.............................. 62.3 58.1 54.8 53.3 54.2(a)
Amortization of intangibles.............. 4.0 1.9 1.3 1.3 1.5
----- ----- ----- ----- -----
Income (loss) from operations.............. (0.2) 7.3 8.8 11.0 11.8
Interest expense, net...................... 6.3 6.3 6.3 5.8 5.4
----- ----- ----- ----- -----
Income (loss) before income taxes.......... (6.5) 1.0 2.5 5.2 6.4
Income tax expense......................... -- (0.1) (0.2) 0.2 0.1
----- ----- ----- ----- -----
Net income (loss).......................... (6.5)% 0.9% 2.4% 5.0% 6.3%
===== ===== ===== ===== =====
EBITDA margin.............................. 10.7% 15.1% 15.6% 16.8% 18.0%
</TABLE>
- ---------------
(a) Percentages based on optical sales only.
The following is a discussion of certain factors affecting the Company's
results of operations from fiscal 1995 to fiscal 1997 and the thirteen weeks
ended March 29, 1997 and April 4, 1998. This discussion should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included elsewhere in this document.
THIRTEEN WEEKS ENDED APRIL 4, 1998 COMPARED TO THIRTEEN WEEKS ENDED MARCH 29,
1997
Net Revenues. The increase in net revenues to $62.0 million for the
thirteen weeks ended April 4, 1998 from $57.9 million for the thirteen weeks
ended March 29, 1997 was largely the result of the TSGI Acquisition and an
increase in comparable store sales of 0.6%. The TSGI Acquisition resulted in an
increase in net revenues of $3.0 million during the first thirteen weeks of
fiscal 1998.
Gross Profit. Gross profit increased to $40.9 million for the thirteen
weeks ended April 4, 1998 from $37.9 million for the thirteen weeks ended
March 29, 1997. Gross profit as a percentage of optical sales increased to 66.6%
for the thirteen weeks ended April 4, 1998 as compared to 65.6% for the thirteen
weeks ended March 29, 1997. This percentage increase was primarily due to stores
acquired in the TSGI Acquisition ("TSGI Stores") which perform at a higher
margin than the stores owned by the Company prior to the TSGI Acquisition. This
is primarily due to the TSGI Stores having doctor examination revenues and
expenses, which are not at the Company's other locations.
Selling General and Administrative Expenses ("SG&A"). SG&A increased to
$33.3 million for the thirteen weeks ended April 4, 1998 from $30.9 million for
the thirteen weeks ended March 29, 1997. SG&A as a percentage of optical sales
increased to 54.2% for the thirteen weeks ended April 4, 1998 from 53.3% for the
thirteen weeks ended March 29, 1997. This percentage increase was due primarily
to an increase in operating lease expenditures and overhead expenses. In
addition, the Company incurred payroll expenses related to doctors from the TSGI
Stores which are not a component of the cost structure at the Company's other
locations. These increased costs were partially offset by savings realized
through economies of scale achieved in advertising.
Amortization Expense. Amortization expense (excluding the amortization of
store pre-opening costs) increased to $0.9 million for the thirteen weeks ended
April 4, 1998 from $0.7 million for the thirteen weeks ended March 29, 1997.
This increase was due to amortization of the goodwill which was recorded during
the fourth quarter of 1997 related to the TSGI Acquisition.
39
<PAGE> 44
Net Interest Expense. Net interest expense remained at $3.4 million for
the thirteen weeks ended April 4, 1998.
1997 COMPARED TO 1996
Net Revenues. The increase in net revenues of 38.8% to $219.6 million in
1997 from $158.2 million in 1996 was primarily the result of the $52.2 million
in sales attributable to a full year of Visionworks and three months of Hour
Eyes stores in the Company's 1997 results and an increase in comparable store
sales of 3.8% in 1997. In addition, 1997 was a fifty-three week year and 1996
was a fifty-two week year.
Gross Profit. Gross profit as a percentage of net revenues decreased by
3.4% to 64.9% in 1997 as compared to 67.2% in 1996. Gross profit was
$142.5 million in 1997 compared to $106.3 million in 1996. This percentage
decrease was primarily due to the inclusion of a complete year of the
Visionworks stores in the Company's 1997 results. Visionworks stores operate at
a lower gross margin primarily due to the sale of contact lenses, which have
lower gross margins and are not sold at a majority of the Company's other
locations.
Selling, General and Administrative Expenses. SG&A increased by 30.9% to
$120.3 million in 1997 as compared to 1996. SG&A as a percentage of net revenues
decreased by 5.7% to 54.8% in 1997 from 58.1% for the same period of 1996. This
percentage decrease was due primarily to savings realized through more efficient
payroll management and increased leveraging of advertising expenditures due to
the inclusion of a complete year of the Visionworks stores in the Company's 1997
results.
Amortization Expense. Amortization expense (excluding the amortization of
store pre-opening costs) remained at $2.9 million in 1997.
Net Interest Expense. Net interest expense in 1997 increased by 38.4% to
$13.7 million as compared to $9.9 million in 1996. This increase was due to the
interest expense associated with the $49.0 million which the Company borrowed to
purchase Visionworks and Hour Eyes and the interest on the $10.0 million capital
lease which the Company assumed as a result of the Visionworks Acquisition.
1996 COMPARED TO 1995
Net Revenues. The increase in net revenues of 12.8% to $158.2 million in
1996 from $140.2 million in 1995 was largely the result of the $14.1 million in
sales attributable to Visionworks. In addition, comparable store sales increased
by 3.5% in 1996 due to more effective advertising and improved store operations.
Gross Profit. Gross profit as a percentage of net revenues increased to
67.2% in 1996 as compared to 66.1% in 1995. Gross profit was $106.3 million in
1996 compared to $92.7 million in 1995. This increase in gross profit was
primarily due to efficiencies realized in lab operating activities.
Selling, General and Administrative Expenses. SG&A increased by 5.1% to
$91.9 million in 1996 as compared to 1995. SG&A as a percentage of net revenues
decreased by 6.7% to 58.1% in 1996 from 62.3% for the same period of 1995. This
percentage decrease was due primarily to savings realized through more efficient
payroll management and increased efficiency in both advertising expenditures and
overhead support.
Amortization Expense. Amortization expense (excluding the amortization of
store pre-opening costs) decreased by 48.2% to $2.9 million in 1996 from
$5.6 million in 1995. This $2.7 million decrease was due to the accelerated
amortization (60% in year one, 30% in year two and 10% in year three) of the
$18.0 million non-competition agreement and SearsCard Agreement entered into
with Sears in 1993. These agreements were fully amortized during the fourth
quarter of 1996.
Net Interest Expense. Net interest expense in 1996 increased by 12.5% to
$9.9 million as compared to $8.8 million in 1995. This increase was due to the
interest expense associated with the $40.0 million which the Company borrowed to
purchase Visionworks and the interest on the $10.0 million capital lease which
the Company assumed as a result of the Visionworks Acquisition.
40
<PAGE> 45
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has utilized internally generated funds and
borrowings under credit facilities to meet ongoing working capital and capital
expenditure requirements. In connection with the Recapitalization, the Company
incurred new indebtedness aggregating approximately $204.5 million and has total
indebtedness of approximately $214.5 million. Substantially all of the proceeds
of such new indebtedness were used to refinance certain existing indebtedness of
the Company, to finance the conversion into cash of the shares of Common Stock
which are not retained by existing shareholders, to redeem certain preferred
stock of the Company and to pay fees and expenses relating to the
Recapitalization. See "The Recapitalization."
The existing indebtedness of the Company has been refinanced including the
Senior Notes which were defeased as described in "The Recapitalization." The
Senior Notes will be reflected as a liability on the Company's balance sheet
with an offsetting asset representing the deposit made for defeasance in the
Company's financial statements through the second quarter of fiscal 1998.
During 1996, the Company issued 110,000 shares of Series A Cumulative
Mandatorily Redeemable Exchangeable Pay-in-Kind Preferred Stock ("Preferred
Stock"). In conjunction with the Recapitalization, the Company repurchased the
Preferred Stock, canceled it and issued 300,000 shares of a new series of
preferred stock (the "New Preferred Stock"), par value $.01 per share. Dividends
on shares of New Preferred Stock will be cumulative from the date of issue and
will be payable when and as may be declared from time to time by the Board of
Directors of the Company. Such dividends will accrue on a daily basis from the
original date of issue at an annual rate per share equal to 13% of the original
purchase price per share, with such amount to be compounded quarterly. The New
Preferred Stock will be redeemable at the option of the Company, in whole or in
part, at $100 per share plus (i) the per share dividend rate and (ii) all
accumulated and unpaid dividends, if any, to the date of redemption, upon
occurrence of an offering of equity securities, a change of control or certain
sales of assets.
The New Credit Facility consists of (i) the $55.0 million Term Loan
Facility; (ii) the $35.0 million Revolving Credit Facility; and (iii) the
$100.0 million Acquisition Facility, of which $50.0 million is currently
committed. Approximately $10.0 million of the Revolving Credit Facility is
restricted for the repayment of the capital lease obligation due in February
1999. The Term Loan Facility matures five years from the closing date of the New
Credit Facility and will amortize quarterly in aggregate annual principal
amounts of $0.0 million, $4.0 million, $12.0 million, $18.0 million, and
$21.0 million, respectively, for years one through five after the closing of the
New Credit Facility. See "Description of New Credit Facility.
The Company has significantly increased cash requirements for debt service
relating to the Notes and the New Credit Facility. The Company relies on
internally generated funds and, to the extent necessary, on borrowings under the
Revolving Credit Facility to meet its liquidity needs. On a pro forma basis, at
April 4, 1998, the Company would have had long-term debt outstanding of
approximately $214.5 million, net of a discount of $0.5 million, and up to
$35.0 million available under the Revolving Credit Facility (approximately
$10.0 million is restricted for the repayment of the capital lease obligation
due in February 1999) and the $100.0 million Acquisition Facility, of which
$50.0 million is committed initially.
Based upon current operations, anticipated cost savings and future growth,
the Company believes that its cash flow from operations, together with available
borrowings under the Revolving Credit Facility, will be adequate to meet its
anticipated requirements for working capital, capital expenditures and scheduled
principal and interest payments, although the Company believes that its ability
to repay the Notes and amounts outstanding under the Revolving Credit Facility
and the Acquisition Facility at maturity may require additional financing. The
ability of the Company to meet its debt service obligations and reduce its debt
will be dependent on the future performance of the Company, which in turn, will
be subject to general economic conditions and to financial, business, and other
factors, including factors beyond the Company's control. A portion of the
Company's debt bears interest at floating rates; therefore, its financial
condition is and will continue to be affected by changes in prevailing interest
rates.
41
<PAGE> 46
Cash flows from operating activities have provided net cash for the
thirteen weeks ended April 4, 1998 of $11.8 million as compared to $12.5 million
for the thirteen weeks ended March 29, 1997. As of April 4, 1998, the Company
had $4.2 million of cash available to meet the Company's obligations.
Cash flows from operating activities provided net cash for 1997, 1996 and
1995 of $15.5 million, $14.0 million and $8.5 million, respectively. As of
January 3, 1998, the Company had $7.2 million of cash available to meet the
Company's obligations.
Capital expenditures are related to the construction of new stores,
repositioning of existing stores in some markets, new computer systems for the
stores and maintenance of existing facilities. Capital expenditures for the
thirteen weeks ended April 4, 1998 were $5.5 million.
Capital expenditures are related to the construction of new stores,
repositioning of existing stores in some markets, new computer systems for the
stores and maintenance of existing facilities. Capital expenditures for 1997,
1996 and 1995 were $9.5 million, $4.2 million and $6.8 million, respectively. Of
these amounts, capital expenditures associated with new stores for 1997, 1996
and 1995 were $2.5 million, $2.3 million and $5.5 million, respectively. Other
capital expenditures for 1997, 1996 and 1995 were $7.0 million, $1.9 million,
and $1.3 million, respectively. Approximately $3.1 million of 1997 capital
expenditures were related to lab equipment upgrades and the installation of a
new point-of-sale system, which are investment programs that management believes
are non-recurring in nature and should be substantially completed by the end of
fiscal 1998. Capital expenditures for 1998 are anticipated to be approximately
$20 million. Of the 1998 capital expenditures, approximately $12 million are
expected to be related to new stores, approximately $4 million are expected to
be for maintenance of existing facilities and the remaining approximately
$4 million represents the funds necessary to complete the Company's
point-of-sale and equipment upgrade programs, which management believes are
non-recurring in nature.
In connection with the Visionworks Acquisition, the Company assumed an
agreement to sublease land, buildings and equipment at eight operating
locations. Under the terms of the agreement, the Company committed to repay the
capital lease obligation on February 1, 1999 for approximately $10.0 million and
to pay Eckerd Corporation an annual rent of $1.3 million until February 1, 1999
for the subleases. The use of $10.0 million of the Revolving Credit Facility
will be restricted to repayment of such capital lease.
In August 1997, the Company sold, for net proceeds of $4.8 million, the
building in which its corporate headquarters is located. The Company entered
into a fifteen year operating lease with the new owners and will maintain its
current location. As a result of this transaction, the Company recorded a
deferred gain which will be amortized over the life of the lease.
INFLATION
The impact of inflation on the Company's operations has not been
significant to date. While the Company does not believe its business is highly
sensitive to inflation, there can be no assurance that a high rate of inflation
would not have an adverse impact on the Company's operations.
SEASONALITY AND QUARTERLY RESULTS
The Company's sales fluctuate seasonally. Historically, the Company's
highest sales and earnings occur in the first and third quarters. In addition,
quarterly results are affected by the opening of new stores; therefore, the
Company's growth, the Visionworks Acquisition and the TSGI Acquisition may
affect seasonal fluctuations. Hence, quarterly results are not necessarily
indicative of results for the entire year.
42
<PAGE> 47
INDUSTRY
OVERVIEW
Optical retail sales in the United States totaled $15.4 billion in 1997,
according to industry sources. Since 1987, the optical retail market has grown
each year at an average annual rate of approximately 5%. Management believes
that the industry will continue to grow at a similar rate over the next several
years due to a number of favorable trends discussed below.
The following chart sets forth expenditures (based upon products sold) in
the optical retail market over the past seven years according to a leading
industry publication.
U.S. OPTICAL RETAIL SALES BY SECTOR 1991 - 1997
(DOLLARS IN BILLIONS)
<TABLE>
<CAPTION>
1997
1991 1992 1993 1994 1995 1996 1997 SHARE
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lenses/treatments......... $ 5.2 $ 5.6 $ 6.0 $ 6.5 $ 6.8 $ 7.2 $ 7.6 49.5%
Frames.................... 3.9 4.0 4.1 4.1 4.4 4.6 5.0 32.2
Sunglasses(a)............. 0.5 0.5 0.5 0.5 0.7 0.8 0.9 5.8
Contact lenses............ 1.8 1.8 1.7 1.8 1.9 1.9 1.9 12.5
----- ----- ----- ----- ----- ----- ----- -----
$11.5 $11.9 $12.3 $12.9 $13.8 $14.6 $15.4 100.0%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(a) Does not include sales through specialty optical retailers or general retail
channels.
DISTRIBUTION
Eye care services in the United States are delivered by local providers
consisting of approximately 65,000 opticians, 31,000 optometrists and 16,500
ophthalmologists. The optical retail industry in the United States is highly
fragmented and consists of (i) independent practitioners (including opticians,
optometrists and ophthalmologists), (ii) optical retail chains and (iii)
warehouse clubs and mass merchandisers. In 1997, optical retail chains accounted
for approximately 32.5% of the total market, while independent practitioners
comprised approximately 61.5% and other distribution channels represented
approximately 6.0%. Optical retail chains have begun consolidating the optical
retail market at the expense of independent practitioners. Independent
practitioners' market share dropped from 63.0% to 61.5% between 1996 and 1997,
while optical retail chains' market share increased over the same period from
31.3% to 32.5%.
INDEPENDENT PRACTITIONERS
In 1997, independent practitioners represented $9.5 billion of eyewear
retail sales, or 61.5% of the industry's total optical retail sales volume of
$15.4 billion. Independent practitioners typically cannot provide quick
turnaround of eyeglasses because they do not have laboratories on site and
generally charge higher prices than other competitors. Moreover, their eyewear
product assortment is usually narrow, although a growing portion includes some
designer or branded products. Prior to 1974, independent practitioners
benefitted from regulatory and other factors which inhibited commercial
retailing of prescription eyewear. In 1974, the Federal Trade Commission began
requiring doctors to provide their patients with copies of their prescriptions,
enabling sophisticated retailers to implement retail marketing concepts which
gave way to a more competitive marketplace. Independent practitioners' market
share has declined from approximately 100% in 1974 to 61.5% in 1997, dropping
1.5% from 1996. Management believes that independent practitioners will continue
to lose market share over the next several years.
OPTICAL RETAIL CHAINS
Optical retail chains represented 32.5% of the total optical retail market
in 1997. Over the past three years, the top one hundred optical retail chains
(in terms of net revenues) have grown at a rate faster than the overall market.
Optical retail chains include both superstores and conventional optical stores.
Optical retail
43
<PAGE> 48
chains offer quality service provided by on-site optometrists and also carry a
wide product line, emphasizing the fashion element of eyewear, although
lower-priced lenses and frames are also available. In addition, the retail
optical chains, particularly the superstores, are generally able to offer better
value and service through a reduced cost structure, sophisticated merchandising
and display, economies of scale and greater volume. Furthermore, they can
generate greater market awareness than can fragmented independent practitioners
as optical retail chains usually invest more in advertising and promotions.
Management believes that large optical chains are best positioned to benefit
from industry consolidation trends including the growth in managed vision care.
WAREHOUSE CLUBS AND MASS MERCHANDISERS
Warehouse clubs and mass merchandisers usually provide eyewear in a host
environment which is typically a larger general merchandise store. This segment
typically provides some of the service elements of retail optical chains, but
competes primarily on price. As a result, its eyewear selection tends to focus
on lower-priced optical products. Moreover, this segment's "Every Day Low Price"
strategy is generally incompatible with the pricing structure required by the
managed vision care model. Warehouse clubs and mass merchandisers' market share
declined from 4.2% in 1996 to 4.0% in 1997.
OTHER
Other participants in the optical retail market include HMOs and
school-controlled dispensaries. In 1997, other participants represented
approximately 2.0% of the total optical retail market.
TRENDS
Management believes that growth and consolidation in the optical retail
market is being driven by the following trends:
FAVORABLE DEMOGRAPHICS. Approximately 60% of the U.S. population, or
160 million individuals, and nearly 95% of people over the age of
forty-five, require some form of corrective eyewear. In addition to their
higher utilization of corrective eyewear, the over forty-five segment
spends more per pair of glasses purchased due to their need for premium
priced products like bifocals and progressive lenses and their generally
higher levels of discretionary income. In 1996, the over forty-five segment
represented 58% of retail optical spending despite representing just 33% of
the U.S. population. As the "baby boom" generation ages and life
expectancies increase, management believes that this demographic trend is
likely to increase the number of eyewear customers and the average price
per purchase.
INCREASING ROLE OF MANAGED VISION CARE. Management believes that
optical retail sales through managed vision care programs, which were
approximately $4.1 billion (or approximately 30% of the market) in 1995,
will continue to increase over the next several years. Managed vision care,
including the benefits of routine annual eye examinations and eyewear
discounts, is being utilized by a growing number of managed care
participants. Since regular eye examinations may assist in the
identification and prevention of more serious conditions, managed care
programs encourage members to have their eyes examined more regularly,
which in turn typically results in more frequent eyewear replacement.
Management believes that large optical retail chains are likely to be the
greatest beneficiaries of this trend as payers look to contract with chains
who deliver superior customer service, have strong local brand awareness,
offer competitive prices, provide multiple convenient locations and
flexible hours of operation, and possess sophisticated information
management and billing systems.
CONSOLIDATION. Although the optical retail market in the United
States is highly fragmented, the industry is experiencing increasing
consolidation. In 1997, the top ten and the top one hundred optical retail
chains represented approximately 18% and 28% of the total optical market,
respectively. The remaining approximately 72% of the market includes
independent practitioners, smaller chains, warehouse clubs and mass
merchandisers. Independent practitioners' market share dropped from 63.0%
to 61.5% between 1996 and 1997, while optical retail chains' market share
increased over the same period from 31.3% to 32.5%. Management believes
that several factors are likely to drive further consolidation:
44
<PAGE> 49
(i) the importance of scale to managed care programs which require
providers with strong store brand awareness, multiple locations and
sophisticated information management and billing systems, (ii) efficiencies
of scale in merchandising, marketing, manufacturing and sourcing product,
(iii) the significant capital required to build lens processing
laboratories on premises and (iv) the desire of small regional chains and
independent practitioners to achieve liquidity by selling to larger optical
retail chains. Management believes that the large optical retail chains are
better positioned than mass merchandisers and warehouse clubs to benefit
from this consolidation trend and that such chains will continue to gain
market share from the independent practitioners over the next several
years.
NEW PRODUCT INNOVATIONS. Since the late 1980's, several technological
innovations have led to the introduction of new optical lenses and lens
treatments, including progressive addition lenses (no-line bifocals),
high-index and aspheric lenses (thinner and lighter), polycarbonate lenses
(shatter resistant) and anti-reflective coatings. These innovative products
are popular among consumers, generally command premium prices and yield
higher margins than traditional lenses. The average retail price for all
lenses and lens treatments has increased over 4% per year from $87.94 to
$95.50 between 1995 and 1997, reflecting, in part, the rising popularity of
these products. Similarly, during the same period, the average retail price
for eyeglass frames has increased over 4% per year from $57.03 to $62.20,
due in large part to both technological innovation and an evolving customer
preference for higher priced, branded frames.
GREATER FREQUENCY OF PURCHASE. Since 1983, the frequency of eyewear
purchases has increased over 45%, from an average purchase of new eyewear
every 2.2 years to every 1.5 years. Management believes that managed care
has contributed to this trend and is likely to serve as a continuing
catalyst to further increases in the frequency of eyewear purchases, as
plan participants are encouraged to have their eyes examined more
frequently. In addition, consumers are currently purchasing multiple
eyewear products for distinct occasions (work, casual, fashion, driving,
sun, sport, etc.), driven, in part, by the growing consumer perception of
eyewear as a fashion accessory.
45
<PAGE> 50
BUSINESS
GENERAL
Eye Care Centers of America, Inc. is the third largest retail optical chain
in the United States as measured by net revenues, operating 243 stores, 214 of
which are optical superstores. The Company operates predominately under the
trade name "EyeMasters," and in certain geographical regions under the trade
names "Binyon's," "Visionworks" and "Hour Eyes." The Company utilizes a strategy
of clustering its stores within its targeted markets in order to build local
market leadership and strong consumer brand awareness, as well as to achieve
economies of scale in advertising, management and field overhead. Management
believes that the Company has the number one or two superstore market share
position in fourteen of its top fifteen markets, including Washington, D.C.,
Houston, Dallas, Tampa/St. Petersburg, Phoenix, Miami/Ft. Lauderdale, Portland
and San Antonio. Based on a 1997 survey conducted annually on behalf of the
Company in seven of its top markets, the Company has average total brand
awareness of 90% and a reputation for quality service and value. The Company has
achieved positive same store sales growth in each of the past five years and
generated net revenues and EBITDA for the fiscal year ended January 3, 1998, pro
forma for the Recapitalization and the Hour Eyes Acquisition, of $229.6 million
and $37.4 million, respectively.
The Company's stores, which average approximately 4,600 square feet, carry
a broad selection of branded frames at competitive prices, including designer
eyewear such as Armani, Laura Ashley, Calvin Klein and Polo/Ralph Lauren, as
well as its own proprietary brands. In addition, the Company's superstores offer
customers "one-hour service" on most prescriptions, utilizing on-site processing
laboratories to grind, coat and edge lenses. Moreover, independent optometrists,
located inside or adjacent to all of the Company's stores, offer customers
convenient eye exams and provide a consistent source of retail business. In the
Company's experience, over 80% of such ODs' regular eye exam patients purchase
eyewear from the Company.
Since joining the Company as President and Chief Executive Officer in early
1996, Bernard W. Andrews has built a management team with extensive operating,
merchandising and marketing experience in the optical and retail industries.
This management team has focused on improving operating efficiencies and growing
the business through both strategic acquisitions and new store openings. Under
current management, the Company's EBITDA margin has increased from 10.7% in 1995
to 16.3% in 1997 (pro forma for the Recapitalization and the Hour Eyes
Acquisition), while the Company's store base increased from 152 to 239 over the
same period, primarily as a result of two acquisitions. The Company's senior
management team owns or has the right to acquire approximately 15% of the
Company's common stock on a fully diluted basis, through direct ownership and
incentive option plans.
BUSINESS STRATEGY
The Company plans to capitalize on the favorable industry trends discussed
in "Industry" by building local market leadership through the implementation of
the following key elements of its business strategy.
MAXIMIZE STORE PROFITABILITY. Management plans to continue to improve
the Company's operating margins through superior day-to-day store
execution, customer service and inventory asset management. The Company has
implemented various programs focused on (i) increased sales of higher
margin, value-added and proprietary products, (ii) continued store cost
reductions, (iii) extensive productivity-enhancing employee training and
(iv) an upgraded point-of-sale information system. Management believes its
store clustering strategy will enable the Company to continue to leverage
local advertising and field management costs to improve its operating
margins. In addition, management believes that the Company can achieve
further improvement in its operating margins by realizing certain synergies
from its recent acquisitions, particularly from the recent introduction of
its point-of-sale information system to the acquired stores.
EXPAND STORE BASE. In order to continue to build leadership in its
targeted markets, the Company plans to take advantage of significant
"fill-in" opportunities in its existing markets, as well as enter
attractive new markets where it can achieve a number one or two market
share position. Consequently, the Company currently plans to open twenty to
thirty new stores per year over the next three years, with approximately
two-thirds of these new stores currently expected to be opened in existing
markets.
46
<PAGE> 51
Management believes that the Company has in place the systems and
infrastructure to execute its expanded new store opening plan. The Company
uses a sophisticated site selection model utilizing proprietary software
which incorporates industry and internally generated data (such as
competitive market factors, demographics and customer specific information)
to evaluate the attractiveness of new store openings. The Company invests
approximately $500,000 in capital expenditures, inventory and pre-opening
costs per new store, and generally expects its new stores to generate
positive cash flow by the sixth month of operation.
PURSUE ACQUISITION OPPORTUNITIES. The Company has successfully
acquired and integrated two acquisitions over the last two years: (i) in
September 1996, Visionworks Holdings, Inc., a sixty store optical retailer
located along the Atlantic Coast from Florida to Washington, D.C. and (ii)
in September 1997, The Samit Group, Inc., with ten Hour Eyes stores in
Maryland and Washington, D.C. Simultaneously with the acquisition of TSGI,
the Company entered into a long-term business management agreement with a
private optometrist to manage an additional twelve Hour Eyes stores located
in Virginia. Management believes that it has the experience, internal
resources and information systems to continue to identify and integrate
acquisitions successfully. Acquisition candidates typically would be
independent practitioners and smaller chains, which face increasing
difficulties competing with larger, more efficient chains, particularly in
a managed care environment. In addition, acquisition candidates generally
would have significant market share in a given geographic region and offer
the Company opportunities to increase revenues, generate cost savings and
extend managed care coverage.
CAPITALIZE ON MANAGED VISION CARE. Management has made a strategic
decision to pursue managed care contracts aggressively in order to help
grow the Company's retail business and over the past three years has
devoted significant management resources to the development of its managed
care business. As part of its effort, the Company has: (i) implemented
direct marketing programs and information systems necessary to compete for
managed care contracts with large employers, groups of employers and other
third party payers, (ii) developed significant relationships with certain
HMOs and insurance companies (e.g., Kaiser Permanente and Humana), which
have strengthened the Company's ability to secure managed care contracts,
(iii) entered into a strategic relationship with Vision Twenty-One, Inc. to
be the principal optical retail center of its total eye care delivery
systems and (iv) obtained a single service HMO license in Texas to target
additional managed care contracts with large employers and groups of
employers. While the average ticket price on products purchased under
managed care reimbursement plans is typically lower, managed care
transactions generally earn comparable operating profit margins as they
require less promotional spending and advertising support. The Company
believes that the increased volume resulting from managed care contracts
more than offsets the lower average ticket price. As of January 3, 1998,
the Company participated in managed vision care programs covering
approximately 2.5 million lives, with retail sales from managed care lives
totaling approximately 20% of fiscal 1997 net revenues. Management believes
that the increasing role of managed vision care will continue to benefit
the Company and other large retail optical chains with strong local market
shares, broad geographic coverage and sophisticated information management
and billing systems.
ACQUISITION HISTORY
The Company was incorporated in Texas in 1984, acquired by Sears, Roebuck
and Co. in 1987 and by Desai Capital Management Incorporated in 1993. From its
organization through 1988, the Company expanded its business through the
acquisition of:(i) a thirteen store Phoenix-based chain named 20/20 Eye Care in
1986, (ii) a twelve store Texas and Louisiana-based chain named EyeMasters in
1986, (iii) five stores in Phoenix from EyeCo. in 1988 and (iv) a twenty store
Portland-based chain named Binyon's in 1988.
Since the current management team implemented a strategy focused on
improving operating efficiencies and increasing the store base in early 1996,
the Company has successfully acquired and integrated two acquisitions. In
September 1996, the Company acquired Visionworks Holdings Inc., a sixty store
optical retailer located along the Atlantic Coast from Florida to Washington,
D.C., with forty-nine superstores and eleven optical stores located near Eckerd
Corporation stores. In September 1997, the Company acquired The Samit Group
Inc., with ten Hour Eyes stores in Maryland and Washington, D.C. operated under
the trade
47
<PAGE> 52
name of Hour Eyes. Simultaneously with such acquisition, the Company entered
into a long-term business management agreement with a private optometrist to
manage an additional twelve Hour Eyes stores located in Virginia.
The following table sets forth a summary of the Company's stores, as of
June 1, 1998, ranked by number of stores by trade name:
<TABLE>
<CAPTION>
NUMBER OF GEOGRAPHIC AVERAGE STORE
TRADE NAME STORES FOCUS FORMAT BUSINESS MIX
- ---------- --------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
EyeMasters............... 149 Southwest, Superstores Glasses
Midwest, Sq. Ft. 4,200 Managed Care
Southeast Lab
OD Subleases
Visionworks.............. 58 Mid Atlantic, Superstores Glasses
Southeast Sq. Ft. 6,700 Contacts
Lab Managed Care
OD Subleases
Hour Eyes................ 22 Mid Atlantic Conventional Glasses
Sq. Ft. 2,200 Contacts
Lab Managed Care
Binyon's................. 14 Pacific Superstores Glasses
--- Northwest Sq. Ft. 4,200 Managed Care
Lab
OD Subleases
Total.......... 243
===
</TABLE>
STORE OPERATIONS
OVERVIEW. The Company believes that the location of its stores is an
essential element of its strategy to compete effectively in the optical retail
market. The Company emphasizes locations within regional shopping malls, power
centers, strip shopping centers and free-standing locations. The Company
generally targets retail space that is close to high volume retail anchor stores
frequented by middle to high income clientele. In order to generate economies of
scale in advertising, management and field overhead expenses, the Company
attempts to cluster its stores within a direct marketing area.
48
<PAGE> 53
The following table sets forth as of January 3, 1998 the Company's top
fifteen markets and management's estimate of the Company's superstore market
share rank in each of these markets as measured by sales.
<TABLE>
<CAPTION>
NUMBER OF MARKET
DESIGNATED MARKET AREA SUPERSTORES SHARE RANK
---------------------- ----------- ----------
<S> <C> <C>
Washington, D.C................................... 25 1
Houston........................................... 18 1
Dallas............................................ 17 1
Tampa/St. Petersburg.............................. 12 1
Phoenix........................................... 12 1
Portland.......................................... 12 1
Cleveland/Akron................................... 10 2
Miami/Ft. Lauderdale.............................. 9 2
Kansas City....................................... 8 2
San Antonio....................................... 7 1
Charlotte......................................... 5 2
Oklahoma City..................................... 5 1
Austin............................................ 5 2
Waco.............................................. 4 1
Orlando........................................... 4 3
---
Total of Top Fifteen Markets............ 153
===
</TABLE>
LOCATIONS. The Company operates 243 stores, 214 of which are superstores,
located primarily in the Southwest, Midwest, Southeast, along the Gulf Coast and
Atlantic Coast and in the Pacific Northwest regions of the United States. Of the
Company's stores, 137 are located in enclosed regional malls, fifty-two are in
strip shopping centers, forty-seven are freestanding locations and seven are
located near Eckerd Corporation stores.
49
<PAGE> 54
The following table sets forth by location, ranked by number of stores, the
Company's store base as of June 1, 1998.
<TABLE>
<CAPTION>
LOCATION EYEMASTERS VISIONWORKS HOUR EYES BINYON'S TOTAL
-------- ---------- ----------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Texas............... 68 -- -- -- 68
Florida............. 3 37 -- -- 40
Louisiana........... 13 -- -- -- 13
Virginia............ -- 1 12 -- 13
Oregon.............. -- -- -- 13 13
Arizona............. 12 -- -- -- 12
North Carolina...... -- 11 -- -- 11
Ohio................ 10 -- -- -- 10
Maryland............ -- 1 7 -- 8
Oklahoma............ 7 -- -- -- 7
Washington, D.C..... -- 4 3 -- 7
Tennessee........... 7 -- -- -- 7
Missouri............ 5 -- -- -- 5
Kansas.............. 5 -- -- -- 5
Alabama............. 4 -- -- -- 4
South Carolina...... -- 4 -- -- 4
New Mexico.......... 3 -- -- -- 3
Mississippi......... 3 -- -- -- 3
Idaho............... 3 -- -- -- 3
Nebraska............ 3 -- -- -- 3
Washington.......... 1 -- -- 1 2
Iowa................ 1 -- -- -- 1
Mexico.............. 1 -- -- -- 1
--- -- -- -- ---
Total..... 149 58 22 14 243
=== == == == ===
</TABLE>
STORE LAYOUT AND DESIGN. The average size of the Company's stores is
approximately 4,600 square feet. In the last two years, the Company has
developed and implemented a smaller and more efficient new store prototype which
averages approximately 3,500 square feet in size. The Company plans to utilize
its new store prototype as it opens new stores in 1998. This new store prototype
typically has approximately 450 square feet dedicated to the in-house lens
processing area and 1,750 square feet devoted to product display and fitting
areas. The optometrist's office is generally 1,300 square feet and is, depending
on state regulation, either in or adjacent to the store. Each store follows a
uniform merchandise layout plan which is designed to emphasize fashion, invite
customer browsing and enhance the customer's shopping experience. Frames are
displayed in self-serve cases along the walls and on table tops located
throughout the store and are organized by gender suitability and frame style.
The Company believes its self-serve displays are more effective than the less
customer friendly locked glass cases or "under the shelf" trays used by some of
its competitors. Above the display racks are photographs of men and women which
are designed to help customers coordinate frame shape and color with their
facial features. In-store displays and signs are rotated periodically to
emphasize key vendors and new styles.
IN-HOUSE LENS PROCESSING. Most stores have an on-site lens processing
laboratory of approximately 450 square feet in which most prescriptions can be
prepared in one hour or less. Lens processing involves grinding, coating and
edging lenses. Unusual or difficult prescriptions are sent to the Company's main
laboratory in San Antonio, Texas, which has a typical turnaround of two to four
days.
ON-SITE OPTOMETRIST. All stores have an OD located in or adjacent to the
store who performs eye examinations, and in some cases dispenses contact lenses.
The ODs are generally available during the same \hours as the Company's store
hours. The ODs offer customers convenient eye exams and provide a consistent
50
<PAGE> 55
source of retail business. In the Company's experience, over 80% of such ODs'
regular eye exam patients purchase eyewear from the Company. In addition, the
Company believes ODs help to generate repeat customers and reinforce the quality
and professionalism of each store. Due to state regulations, ODs are independent
business persons who lease space inside or adjacent to each store from the
Company or the landlord. Most ODs pay the Company monthly rent consisting of a
percentage of gross receipts, base rental or a combination of both.
STORE MANAGEMENT. Each store has a strategic operating plan which maps out
appropriate staffing levels to maximize store profitability. In addition, each
store is run by a general manager who is responsible for its day-to-day
operations. A retail manager supervises the merchandising area and the eyewear
specialists. A lab manager trains the lab technicians and supervises eyewear
manufacturing. Sales personnel are trained to assist customers effectively in
making purchase decisions. A portion of store managers' and territory directors'
compensation is based on sales, profitability and customer service scores at
their particular stores. The stores are open during normal retail hours,
typically 10 a.m. to 9 p.m., six days a week, and typically 12:00 p.m. to 6:00
p.m. on Sundays.
MERCHANDISING
The Company's merchandising strategy is to offer its customers a wide
selection of high quality and fashionable frames at various price points, with
particular emphasis on offering a broad selection of competitively priced
designer and branded frames. The Company's product offering is supported by
strong customer service and advertising. The key elements of the Company's
merchandising strategy are described below.
BREADTH AND DEPTH OF SELECTION. The Company offers its customers high
quality frames, lenses, accessories and sunglasses, including designer and
private label frames. Frame assortments are tailored to match the demographic
composition of each store's market area. On average, each store contains between
1,500 and 2,000 frame stock keeping units in 350 to 400 different styles of
frames. This represents two to three times the assortment provided by
conventional chains or independent retailers. Approximately 25% of the frames
carry designer names such as Polo, Armani, Gucci, Liz Claiborne, Laura Ashley
and Calvin Klein. In 1997, over 50% of the Company's frames were supplied by
other well-known frame manufacturers and about 14% of the Company's frames were
manufactured specifically for the Company under private labels. The Company
plans to increase its offering of private label products imported directly from
manufacturers in Europe and Asia. The Company believes that a broader selection
of high-quality, lower-priced private label frames will allow it to offer more
value to customers while improving the Company's gross margin. In addition, the
Company also offers customers a wide variety of value-added eyewear features and
services on which it realizes a higher gross margin. These include thinner and
lighter lenses, progressive lenses and custom lens features, such as tinting,
anti-reflecting coatings, scratch-resistant coatings, ultra-violet protection
and edge polishing.
PROMOTIONAL STRATEGY. The Company's frames and lenses are generally
comparably priced or priced lower than its direct superstore competitors, with
prices varying based on geographic region. The Company employs a comprehensive
promotional strategy on a wide selection of frames and/or lenses, offering
discounts and "two for one" promotions. These promotions are highly effective at
attracting customers to shop the Company's stores. While the promotional
strategy is fairly common for optical retail chains, independents tend to offer
fewer promotions in order to guard their margins and mass merchandisers tend to
generally adhere to an "Every Day Low Pricing" strategy.
EFFECTIVE PRODUCT DISPLAY. The Company employs an "easy-to-shop" store
layout. Merchandise in each store is organized by gender suitability, frame
style and brand. Sales personnel are trained to assist customers in selecting
frames which complement an individual's attributes such as facial features, face
shape and skin tone. See "-- Store Layout and Design." In-store displays focus
customer attention on premium priced products, such as designer frames and
thinner and lighter lenses.
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<PAGE> 56
MARKETING
The Company actively supports its stores by aggressive local advertising in
individual geographical markets. Advertising expenditures totalled
$24.6 million, or 11.2% of sales, in 1997. The Company utilizes a variety of
advertising media and promotions in order to establish the Company's image as a
high quality, cost competitive eyewear provider with a broad product offering.
The Company's brand positioning is supported by a new marketing campaign which
features the tagline "See Better, Look Better." Through this campaign, the
Company has recognized an increase in top of mind brand awareness with consumers
in the past year. In addition, the Company's strategy of clustering stores in
each targeted market area allows it to maximize the benefit of its advertising
expenditures. As managed care becomes a larger part of the Company's business in
certain local markets, advertising expenditures as a percentage of sales are
likely to decrease in those markets, since managed care programs tend to reduce
the need for marketing expenditures to attract customers to shop the Company's
stores.
STORE EXPANSION
The Company's business strategy is to continue to grow through the opening
of additional locations through selected store acquisitions. The Company has an
aggressive but disciplined new store expansion strategy. The Company currently
plans to open between twenty to thirty new stores per year over the next three
years, with approximately two-thirds of these new stores currently expected to
be opened in existing markets. The new stores are expected to have an on-site OD
and a lens processing laboratory. The Company uses a sophisticated site
selection model utilizing proprietary software which incorporates industry and
internally generated data (such as competitive market factors, demographics and
customer specific information) to evaluate the attractiveness of new store
openings. The Company has reduced the new store site development costs of
opening a new store from approximately $450,000 in 1993 to $425,000 in 1997, by
utilizing a smaller store format averaging approximately 3,500 square feet and
by equipping each new store with standardized fixtures and equipment. In
addition, pre-opening costs average $18,000 and initial inventory requirements
for new stores average $85,000, of which approximately 40% is typically financed
by vendors. The Company generally expects its new stores to generate positive
cash flow by the sixth month of operation.
EMPLOYEE TRAINING
The Company believes that its dedication to employee training has improved
customer service, increased morale among its employees and contributed to the
Company's increased productivity levels. Each new employee with no prior
experience in the optical industry receives approximately eighty hours of
initial training. New employees with previous optical experience receive
approximately forty hours of initial training. Store managers participate in
approximately fifty hours of annual training. The American Board of Opticianry
("ABO") has certified the Company to offer up to seventy hours of ABO continuing
education credits to maintain opticianary licensing requirements. Employee
training emphasizes customer service, thorough product and service knowledge,
optical knowledge, lab skills, selling techniques and the utilization of store
performance data to better manage day-to-day store operations. Store level
employees may also be cross trained in sales and lab-related skills to promote
increased staffing flexibility. Ongoing training is conducted periodically to
familiarize management and employees with new products and services, to improve
the level of understanding of store operations and productivity and to maintain
the Company's overall high quality standards.
COMPETITION
The retail optical industry is fragmented and highly competitive. The
Company competes with (i) independent practitioners (including opticians,
optometrists and opthalmologists), (ii) optical retail chains (including
superstores) and (iii) mass merchandisers and warehouse clubs. From time to
time, competitors have launched aggressive promotional programs which have
temporarily impacted the Company's ability to achieve comparable stores sales
growth and maintain gross margin. Some of the Company's competitors are larger,
have longer operating histories, greater financial resources and greater market
recognition than the Company. See "Risk Factors -- Competition."
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<PAGE> 57
VENDORS
The Company purchases a majority of its lenses from three principal vendors
and purchases frames from over twenty different vendors. In 1997, three vendors
collectively supplied approximately 40% of the frames purchased by the Company.
Two vendors supplied over 54% of the Company's lens materials during the same
period. While such vendor supplied a significant share of the lenses used by the
Company, lenses are a generic product and can be purchased from a number of
other vendors on comparable terms. The Company therefore does not believe that
it is dependent on such vendor or any other single vendor for frames or lenses.
The Company believes that its relationships with its existing vendors are
satisfactory. The Company believes that significant disruption in the delivery
of merchandise from one or more of its current principal vendors would not have
a material adverse effect on the Company's operations because multiple vendors
exist for all of the Company's products.
MANAGED VISION CARE
In recent years, managed vision care has grown in importance in the eyewear
market as health insurers have sought to gain a competitive advantage by
offering a full range of health insurance options, including coverage of primary
eye care. Managed vision care, including the benefits of routine annual eye
examinations and eyewear discounts, is being utilized by a growing number of
managed care participants. Since regular eye examinations may assist in the
identification and prevention of more serious conditions, managed care programs
encourage members to have their eyes examined more regularly, which in turn
typically results in more frequent eyewear replacement.
While managed vision care encompasses many of the conventional attributes
of managed care, there are significant differences. Since the number of visits
to an OD is limited to annual or bi-annual appointments, exam utilization is
more predictable, so costs to insurers are easier to quantify, generally
resulting in lower capitation risk. Even though managed vision care programs
typically limit coverage to a certain dollar amount or discount for an eyewear
purchase, the member's eyewear benefit generally allows the member to "trade
up." Management believes that the growing consumer perception of eyewear as a
fashion accessory as well as the consumer's historical practice of paying for
eyewear purchases out-of-pocket contributes to the frequency of "trading-up."
The Company has historically found that managed care participants who take
advantage of the eye exam benefit under the managed care program in turn have
typically had their prescriptions filled at adjacent optical stores.
Management has made a strategic decision to pursue managed care contracts
aggressively in order to help grow the Company's retail business and over the
past three years has devoted significant management resources to the development
of this business. As part of its effort, the Company has: (i) implemented direct
marketing programs and information systems necessary to compete for managed care
contracts with large employers, groups of employers and other third party
payers, (ii) developed significant relationships with certain HMOs and insurance
companies (e.g., Kaiser Permanente and Humana), which have strengthened the
Company's ability to secure managed care contracts, (iii) entered into a
strategic relationship with Vision Twenty-One, Inc. to be the principal optical
retail center of its total eye care delivery systems and (iv) obtained a single
service HMO license in Texas to target additional managed care contracts with
large employers and groups of employers.
VTO provides a wide range of management and administrative services to
local area delivery systems ("LADS") which are integrated networks of
optometrists, ophthalmologists, ambulatory surgical centers and retail optical
centers. The integrated networks are designed to offer complete eye care
services to managed care administrators in local markets. The Company's
strategic relationship with VTO means that the Company will be the retail
optical center segment of the LADS as VTO develops LADS in the Company's
existing markets. As a result, the Company expects to gain additional customers
as VTO obtains managed care contracts.
As of January 3, 1998, the Company participated in managed vision care
programs covering approximately 2.5 million lives, with retail sales from
managed care lives totaling approximately 20% of fiscal 1997 sales. Management
believes that the increasing role of managed vision care will continue to
benefit the Company and other large retail optical chains. Managed care is
likely to accelerate industry consolidation as
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<PAGE> 58
payers look to contract with large retail optical chains who deliver superior
customer service, have strong local brand awareness, offer competitive prices,
provide multiple convenient locations and hours of operation, and possess
sophisticated information management and billing systems. Large optical retail
chains are likely to be the greatest beneficiaries of this trend as independents
cannot satisfy the scale requirements of managed care programs and mass
merchandisers' "Every Day Low Price" strategy is generally incompatible with the
price structure required by the managed vision care model.
GOVERNMENT REGULATION
The Company or its landlord leases a portion of each of the Company's
stores or adjacent space to an independent optometrist. The availability of such
professional services in or adjacent to the Company's stores is critical to the
Company's marketing strategy. The delivery of health care, including the
relationships among health care providers such as optometrists and suppliers
(e.g., providers of eyewear), is subject to extensive federal and state
regulation. The laws of many states prohibit business corporations such as the
Company from practicing medicine or exercising control over the medical
judgments or decisions of physicians and from engaging in certain financial
arrangements, such as splitting fees with physicians. The Company has designed
certain business arrangements with independent optometrists to avoid such
prohibitions by entering into long-term management contracts with such
independent optometrists instead of employing the optometrists directly.
The fraud and abuse provisions of the Social Security Act and anti-kickback
laws and regulations adopted in many states prohibit the solicitation, payment,
receipt, or offering of any direct or indirect remuneration in return for, or as
an inducement to, certain referrals of patients, items or services. Provisions
of the Social Security Act also impose significant penalties for false or
improper billings to Medicare and Medicaid, and many states have adopted similar
laws applicable to any payor of health care services. In addition, the Stark
Self-Referral Law imposes restrictions on physicians' referrals for designated
health services reimbursable by Medicare or Medicaid to entities with which the
physicians have financial relationships, including the rental of space if
certain requirements have not been satisfied. Many states have adopted similar
self-referral laws which are not limited to Medicare or Medicaid reimbursed
services. See "Risk Factors -- Government Regulations, Risks Associated with
Managed Care Contracts, and Uncertainties Regarding Healthcare Reform."
TRADEMARK AND TRADE NAMES
The Company's superstores operate under the trade names "EyeMasters,"(R)
"Binyon's,"(R) "Visionworks" and "Hour Eyes". In addition, "SlimLite" is the
Company's trademark for its line of lightweight plastic lenses and "SunMasters"
is the trade name for the sunglass kiosk within the "EyeMasters" superstore.
Other trademarks and trade names used by the Company are "Master Eye
Associates," "Master Eye Exam," "EyeMasters" and the "eyeball" trademark used in
conjunction with the trade name "EyeMasters."
PROPERTIES
As of June 1, 1998, the Company operated 242 retail locations in the United
States and one store in Mexico. The Company believes its properties are adequate
and suitable for its purposes. The Company leases all its retail locations, the
majority of which are under triple net leases that require payment by the
Company of its pro rata share of real estate taxes, utilities, and common area
maintenance charges. These leases range in terms of up to sixteen years. Certain
leases require percentage rent based on gross receipts in excess of a base rent.
The Company subleases a portion of substantially all of the stores, or the
landlord leases an adjacent space, to an independent optometrist or a
corporation controlled by an independent optometrist. The terms of these leases
or subleases range from one to fifteen years, with rentals consisting of a
percentage of gross receipts, a base rent, or a combination of both. In
connection with the Visionworks Acquisition, the Company assumed an agreement to
sublease land, buildings and equipment at eight operating locations. Under the
terms of the agreement, the Company committed to repay the capital lease
obligation on February 1, 1999 for approximately $10.0 million and to pay Eckerd
Corporation annual interest of $1.3 million until February 1,
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<PAGE> 59
1999 for the subleases. The use of $10.0 million of the Revolving Credit
Facility will be restricted to repayment of such capital lease due in February
1999. See "Description of New Credit Facility."
The Company leases combined corporate offices and a retail location in San
Antonio, Texas, pursuant to a fifteen year lease. In addition, the Company
leases a combined distribution center and central laboratory in San Antonio,
pursuant to a seven year lease. The Company believes central distribution
improves efficiency through better inventory management and streamlined
purchasing.
EMPLOYEES
As of June 8, 1998, the Company employed approximately 2,965 employees. The
Company's employees are not covered by any collective bargaining agreements, and
the Company considers its relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is a party to routine litigation in the ordinary course of its
business. Except for the matters set forth below, no such pending matters,
individually or in the aggregate, are deemed to be material to the business or
financial condition of the Company.
The Government of the District of Columbia, Office of Corporate Counsel
(the "OCC") is currently conducting an investigation relating to Medicaid claims
submitted for reimbursement by certain optometrists who provided services from
(i) one Hour Eyes store located in Washington, D.C. which was acquired by the
Company in connection with the Hour Eyes Acquisition and (ii) one other Hour
Eyes store located in Washington, D.C. which was not acquired by the Company but
which was under common control with the corporation which sold certain Hour Eyes
stores to the Company in 1997. The Company is entitled to certain rights of
indemnification with respect to matters arising out of this investigation under
the stock purchase agreement relating to the Hour Eyes Acquisition, and a
limited dollar amount has been set aside in an escrow account to secure the
sellers' indemnification obligations. In light of the early stage of the
government's investigation, the Company at this time is unable to determine
whether the OCC will bring any action or claim against the Company or, if
brought, the precise nature or extent of any such action or claim. No assurance
can be given that the OCC or any other governmental body will not bring an
action, assert one or more claims or seek material damages, interest, fines
and/or penalties, including criminal penalties, against the Company for matters
arising out of this investigation.
Two optometrists asserted claims arising out of the non-renewal of their
subleases of office space with the Company and their trademark license
agreements with Enclave Advancement Group, Inc., a subsidiary of the Company
("Enclave"). Such optometrists contended that the leasing of space from the
Company, coupled with the license from Enclave of certain trademarks,
constituted a franchise, and such optometrists have alleged various claims
arising out of this contention. This claim was settled in May, 1998. While the
Company believes that the structure of the relationships among the Company,
Enclave and the optometrists who operate near the Company's retail stores does
not constitute a franchise, no assurance can be given that a claim, action or
proceeding will not be brought against the Company or Enclave asserting that a
franchise exists.
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<PAGE> 60
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table provides information concerning the directors and
executive officers of the Company. All directors will hold office until the next
annual meeting of shareholders of the Company and until their successors have
been duly elected and qualified. All officers will serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Bernard W. Andrews............ 56 Chairman, President and Chief Executive Officer
Kent M. Keish................. 47 Executive Vice President of Operations
George E. Gebhardt............ 47 Executive Vice President of Merchandising,
Construction and Design
Michele M. Benoit............. 41 Senior Vice President of Human Resources
Gary D. Hahs.................. 49 Senior Vice President, Marketing and Real Estate
William A. Shertzer........... 38 Senior Vice President of Managed Vision Care and
Professional Services
Norman S. Matthews............ 65 Director
Antoine G. Treuille........... 49 Director
Anthony J. DiNovi............. 35 Director
Warren C. Smith, Jr........... 41 Director
Charles A. Brizius............ 29 Director
</TABLE>
Directors of the Company are elected at the annual shareholders' meeting
and hold office until their successors have been elected and qualified. The
officers of the Company are chosen by the Board of Directors and hold office
until they resign or are removed by the Board of Directors.
Bernard W. Andrews has been Chairman since the consummation of the
Recapitalization. Mr. Andrews joined the Company as Director, President and
Chief Executive Officer in March 1996. From January 1994 to April 1995, Mr.
Andrews was President and Chief Operating Officer, as well as a Director, of
Montgomery Ward -- Retail. He was Executive Vice President and a Director of
Circuit City Stores, Inc. from October 1990 to January 1994. Mr. Andrews was
with Montgomery Ward -- Retail from October 1983 to May 1990, serving as
President-Hardlines, Executive Vice President-Marketing and Vice President-Home
Fashions. Prior to that, Mr. Andrews spent twenty years with Sears, Roebuck &
Co. in a number of merchandising, marketing and operating positions.
Kent M. Keish has served as the Company's Executive Vice President of
Operations since September 1996 and has responsibility for Store Operations and
Distribution. From November 1991 until June 1996, Mr. Keish was employed by
Macy's West serving as the Senior Vice President, Store Operations. Prior to
that, Mr. Keish spent over nine years with Foley's Department Stores in a number
of operating positions including Vice President, Store Operations and Customer
Service. From 1975 to 1981, Mr. Keish was with Selber Brothers, Inc., a chain of
specialty stores, in various financial and operating positions.
George E. Gebhardt has served as the Company's Executive Vice President of
Merchandising, Construction and Design since September 1996 when the Company
purchased his former employer, Visionworks. Mr. Gebhardt was with Visionworks
from February 1994 to September 1996 serving in various positions, most recently
Senior Vice President of Merchandising and Marketing. Prior to that, Mr.
Gebhardt spent over thirteen years with Eckerd Corporation in various
operational positions including Senior Vice President, General Manager of Eckerd
Vision Group. Mr. Gebhardt also spent seven years working for Procter & Gamble
serving in various positions including Unit Sales Manager of Procter & Gamble's
Health and Beauty Care Division.
Michele M. Benoit has served as the Company's Senior Vice President of
Human Resources since April 1997. From 1995 until joining ECCA, she was Vice
President, Human Resources for Ben Franklin Retail Stores, Inc. Prior to that,
Ms Benoit was a Vice President and Managing Director with Kennedy and Company, a
retail executive search firm based in Chicago, Illinois. She also spent fourteen
years with Montgomery Ward and Company where she held a variety of human
resources and operational positions.
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Ms. Benoit began her career in 1978 as a financial analyst with NCH Corporation
in Irving, Texas. Ms Benoit has an MBA from the University of Miami in Coral
Gables, Florida.
Gary D. Hahs has served as the Company's Senior Vice President of Marketing
since August 1990 and Real Estate since 1996. From January 1988 until August
1990, Mr. Hahs served as Vice President of Marketing. Mr. Hahs has spent twenty
years in marketing and advertising management for major corporations including
Genesco, Inc., Consolidated Aluminum Corporation, Seattle First National Bank,
and Sears, Roebuck & Co.
William A. Shertzer has served as Senior Vice President of the Company's
Managed Vision Care and Professional Services since January 1995. From June 1994
to January 1995, Mr. Shertzer was Vice President of Managed Care Services,
Merchandising, and Professional Services. From April 1992 to June 1993, he
served as Vice President responsible for various departments including
Merchandising, and Professional and Technical Services. Mr. Shertzer was
involved in operations and served as Vice President in charge of Operations
Services, and Professional and Technical Services from September 1991 to April
1992 and as Regional Director for the Company from November 1989 to September
1991. Prior to joining the Company in November 1989, he was employed by Pearle
Vision Inc. for five years.
Norman S. Matthews has served as a director since October 1993 and served
as Chairman since December 1996. Mr. Matthews is Chairman of the Executive
Committee of the Company's Board of Directors. From 1988 to the present, Mr.
Matthews has been an independent retail consultant and venture capitalist. Mr.
Matthews was President of Federated Department Stores from 1987 to 1988, and
served as Vice Chairman from 1983 to 1987. He is also a director of Finlay Fine
Jewelry Corporation, Toys "R" Us, Inc. The Progressive Corporation, Loehmann's,
Inc. and Lechters, Inc.
Antoine G. Treuille has served as a director since October 1993. In March
1998, Mr. Treuille became managing director of Financo, Inc., an investment
bank. Mr. Treuille has served as President of Charter Pacific Corp. since May
1996. Prior to his current position, Mr. Treuille served as Senior Vice
President of DCMI. From September 1985 to April 1992, he served as Executive
Vice President with the investment firm of Entrecanales, Inc. Mr. Treuille also
serves as a director of Societe BIC S.A. and Special Metals Corp.
Anthony J. DiNovi has served as a Director since the consummation of the
Recapitalization. Mr. DiNovi has been employed by Thomas H. Lee Company since
1988 and currently serves as a Managing Director. Mr. DiNovi is a Managing
Director and Member of THL Equity Advisors IV, LLC, the general partner of
Thomas H. Lee Equity Fund IV, LP and Vice President of Thomas H. Lee Advisors I
and T.H. Lee Mezzanine II, affiliates of ML-Lee Acquisition Fund, L.P., ML-Lee
Acquisition Fund II, L.P. and ML-Lee Acquisition Fund II (Retirement Accounts),
L.P., respectively. Mr. DiNovi also serves as a director of Safelite Glass
Corp., The Learning Company, Inc. and Fisher Scientific International, Inc.
Warren C. Smith, Jr. has served as a Director since the consummation of the
Recapitalization. Mr. Smith has been employed by Thomas H. Lee Company since
1990 and currently serves as a Managing Director. Mr. Smith is a Managing
Director and Member of THL Equity Advisors IV, LLC, the general partner of
Thomas H. Lee Equity Fund IV, LP and Vice President of Thomas H. Lee Advisors I
and T.H. Lee Mezzanine II, affiliates of ML-Lee Acquisition Fund, L.P., ML-Lee
Acquisition Fund II, L.P. and ML-Lee Acquisition Fund II (Retirement Accounts),
L.P., respectively. Mr. Smith also serves as a director of Rayovac Corporation
and Finlay Fine Jewelry Corporation.
Charles A. Brizius has served as a Director since the consummation of the
Recapitalization. Mr. Brizius worked at Thomas H. Lee Company from 1993 to 1995,
rejoined in 1997 and currently serves as an Associate. Mr. Brizius is a Member
of THL Equity Advisors IV, LLC, the general partner of Thomas H. Lee Equity Fund
IV, LP. From 1991 to 1993, Mr. Brizius worked at Morgan Stanley & Co.
Incorporated in the Corporate Finance Department. Mr. Brizius received a B.B.A
in Finance and Accounting from Southern Methodist University and an M.B.A. from
the Harvard Graduate School of Business Administration in 1997.
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COMPENSATION OF EXECUTIVE OFFICERS
The following summary compensation table sets forth the compensation for
the Company's Chief Executive Officer and the other four most highly compensated
executive officers of the Company who earned in excess of $100,000 in salary and
bonus for the fiscal year ended January 3, 1998 (each a "Named Executive
Officer").
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------ LONG-TERM
COMPENSATION
AWARDS/
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(a) ($)(b) ($)(c) OPTIONS(#) ($)(d)
- --------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bernard W. Andrews....................... 1997 398,567 -- -- -- 4,591
President, Chief Executive 1996 289,902 325,000 137,439 75,000 4,200
Officer and Director 1995 -- -- -- -- --
Kent M. Keish............................ 1997 195,385 -- -- -- --
Executive Vice President of 1996 57,692 60,000 29,359 13,000 --
Operations 1995 -- -- -- -- --
George E. Gebhardt....................... 1997 188,231 -- 49,166 -- --
Executive Vice President of 1996 39,846 17,444 -- 13,000 --
Merchandising, Construction 1995 -- -- -- -- --
and Design
Gary D. Hahs............................. 1997 146,813 -- -- -- 57
Senior Vice President of 1996 141,033 59,193 -- 10,000 38
Marketing and Real Estate 1995 136,925 -- -- -- --
Mark T. Pearson(e)....................... 1997 145,192 -- -- -- --
Senior Vice President and Chief 1996 117,769 78,566 -- 10,000 --
Financial Officer 1995 73,030 5,000 42,526 3,292 --
</TABLE>
- ---------------
(a) Represents annual salary, including any compensation deferred by the Named
Executive Officer pursuant to the Company's 401(k) defined contribution
plan or the Company's deferred stock plan.
(b) Represents annual bonus earned by the Named Executive Officer for the
relevant fiscal year.
(c) Except with respect to Mr. George E. Gebhardt for 1997, Mr. Bernard W.
Andrews and Mr. Kent M. Keish for 1996 and Mr. Mark T. Pearson for 1995,
the dollar value of the perquisites and other personal benefits, securities
or property paid to each Named Executive Officer did not exceed the lesser
of $50,000 or 10% of reported annual salary and bonus received by the Named
Executive Officer. Of the total other annual compensation received by Mr.
Gebhardt in 1997, $41,966 related to relocation expenses paid by the
Company on behalf of Mr. Gebhardt. Of the total other annual compensation
received by Mr. Andrews in 1996, $131,861 related to relocation expenses
paid by the Company on behalf of Mr. Andrews. Of the total other annual
compensation received by Mr. Keish in 1996, $27,302 related to relocation
expenses paid by the Company on behalf of Mr. Keish. Of the total other
annual compensation received by Mr. Pearson in 1995, $39,064 related to
relocation expenses paid by the Company on behalf of Mr. Pearson.
(d) During 1997 and 1996, the Company paid $4,591 and $4,200, respectively, for
premiums for term life insurance for Mr. Andrews. The remaining amounts in
this column relate to contributions made by the Company to the Company's
401(k) defined contribution plan on behalf of the respective Named Executive
Officer.
(e) Mr. Pearson resigned his position with the Company effective June 5, 1998.
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<PAGE> 63
OPTION GRANTS AND EXERCISES
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised options held as of April 4, 1998. No
options were granted or exercised during fiscal 1997. The Named Executive
Officers have not been granted any SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END (#) AT FY-END($)
SHARES ------------- ----------------------
ACQUIRED ON VALUED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE()(A)()
- ---- ----------- ----------- ------------- ----------------------
<S> <C> <C> <C> <C>
Bernard W. Andrews............. -- -- 38,333/36,667 $4,599,960/$4,400,040
Kent M. Keish.................. -- -- 1,300/11,700 156,000/1,404,000
George E. Gebhardt............. -- -- 1,300/11,700 156,000/1,404,000
Gary D. Hahs................... -- -- 3,952/9,340 474,240/1,120,800
Mark T. Pearson................ -- -- 3,469/9,823 416,280/1,178,760
</TABLE>
- ---------------
(a) There is currently no active trading market for the Common Stock and thus
fair market value as of January 3, 1998 is estimated to be approximately
$120 per share.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee of which Norman S.
Matthews is chairman and, as of the date hereof, the sole member.
The Board of Directors has a Compensation Committee currently consisting of
Messrs. Matthews, DiNovi and Smith. The Compensation Committee makes
recommendations concerning the salaries and incentive compensation of employees
of and consultants to the Company.
The Board of Directors has an Audit Committee currently consisting of
Messrs. DiNovi, Smith, Treuille and Brizius. The Audit Committee is responsible
for reviewing the results and scope of audits and other services provided by the
Company's independent auditors.
DIRECTOR COMPENSATION
The Company may compensate its directors for services rendered in such
capacity.
The Company entered into a three year consulting agreement (the "Consulting
Agreement"), effective as of the closing of the Recapitalization, with Norman S.
Matthews, which provides for the payment of an annual consulting fee of $50,000.
The Consulting Agreement provides for the grant to Mr. Matthews, concurrently
with the closing of the Recapitalization, of an option to purchase up to 1.5% of
the fully diluted Common Stock as of the closing of the Recapitalization,
subject to a vesting schedule which will be one-half time based and one-half
performance based, at an exercise price equal to the same price paid by THL in
connection with the Recapitalization.
EMPLOYMENT AGREEMENT
Bernard W. Andrews entered into an employment agreement with the Company,
effective as of the closing of the Recapitalization, which provides for his
employment with the Company for an initial term of three years, and will
thereafter be renewed for consecutive one year terms unless terminated by either
party. Mr. Andrews is entitled to a base salary of $500,000 during the first
year following the Recapitalization, $550,000 during the second year and
$600,000 during the third year. Mr. Andrews will be eligible to receive an
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<PAGE> 64
annual performance bonus upon the achievement by the Company of certain EBITDA
targets as determined from year to year by the Board of Directors.
Under the terms of his employment agreement, Mr. Andrews purchased
$1.0 million of Common Stock at the same price that THL paid in connection with
the Recapitalization. Mr. Andrews paid for these shares by delivering a
promissory note with an original purchase amount of $1.0 million, which shall
accrue interest at a fixed rate equal to the Company's initial borrowing rate.
The repayment of such note is secured by Mr. Andrews' shares of Common Stock.
Mr. Andrews is entitled to receive severance of two times his base salary
upon termination by the Company without cause or by Mr. Andrews for good reason.
Severance shall be paid over twelve months. Mr. Andrews also will be subject to
a standard restrictive covenants agreement (including non-competition,
non-solicitation, and non-disclosure covenants) during the term of his
employment and for a period of three years following termination for any reason.
STOCK OPTION PLAN
The Company will offer senior management options to purchase up to an
aggregate of 12% of the fully diluted Common Stock as of the closing of the
Recapitalization at an exercise price equal to the fair market value per share,
which initially shall be equal to the price per share paid by THL in connection
with the Recapitalization. Of the total number of options available for grant,
the Company granted options to purchase 5% of the fully diluted Common Stock as
of the closing of the Recapitalization to Mr. Andrews and the remaining options
will be granted to such other employees and in such amounts (not to exceed the
total cost described above) as determined by Mr. Andrews in his reasonable
discretion from time to time. The options to purchase shares of Common Stock
will be subject to vesting schedules, which may be time or performance based.
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<PAGE> 65
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock concerning each person who is a beneficial owner
of more than 5% of the outstanding Common Stock and beneficial ownership of
Common Stock by each director, Named Executive Officer and all director and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
NAME OF BENEFICIAL OWNER(A) COMMON STOCK OF CLASS
--------------------------- ------------ ----------
<S> <C> <C>
Thomas H. Lee Equity Fund IV, L.P. (and affiliates of
THL Co.)(b)............................................... 6,664,800 89.7%
Equity-Linked Investors-II (c)(d)........................... 383,616 5.2
Indosuez Eye Care Partners (e).............................. 34,464 *
Bernard W. Andrews.......................................... 192,120 2.6
Norman S. Matthews.......................................... 19,692 *
Antoine G. Treuille......................................... 6,528 *
Kent M. Keish............................................... 9,600 *
George E. Gebhardt.......................................... 19,212 *
Gary D. Hahs................................................ 19,212 *
Anthony J. DiNovi (b)....................................... 6,664,800 89.7
Warren C. Smith (b)......................................... 6,664,800 89.7
Charles A. Brizius (b)...................................... 6,664,800 89.7
All directors and executive officers of the Company
as a group (11)(f)........................................ 6,931,164 93.3
</TABLE>
- ---------------
* Less than 1%.
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and reflects general voting power and/or
investment power with respect to securities.
(b) The business address for such person(s) is c/o Thomas H. Lee Company,
75 State Street, Suite 2600, Boston, Massachusetts 02109. All such voting
securities may be deemed to be beneficially owned by THL Equity
Advisors IV, LLC ("Advisors"), the general partner of THL Fund IV, Thomas
H. Lee, Messrs. DiNovi, Smith and the other managing directors and by Mr.
Brizius and the other officers of THL Co., in each case pursuant to the
definition of beneficial ownership provided in footnote (a). Each of such
persons disclaims beneficial ownership of such shares.
(c) Equity-Linked Investors-II is an investment partnership managed by Desai
Capital Management Incorporated.
(d) The business address for such person is c/o Desai Capital Management
Incorporated, 540 Madison Avenue, New York, New York 10022.
(e) The business address for such person is 1211 Avenue of Americas, New York,
New York 10036.
(f) Includes 6,664,800 shares beneficially owned by THL described in
footnote (b).
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<PAGE> 66
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT
The Company and THL Co. entered into a management agreement as of the
closing date of the Recapitalization (the "Management Agreement"), pursuant to
which THL Co. received a financial advisory fee of $6.0 million in connection
with structuring, negotiating and arranging the Recapitalization and
structuring, negotiating and arranging the debt financing. In addition, pursuant
to the Management Agreement, THL Co. initially receives $500,000 per year plus
expenses for management and other consulting services provided to the Company.
After a term of ten years from the closing date, the Management Agreement is
automatically renewable on an annual basis unless either party serves notice of
termination at least ninety days prior to the renewal date. The Company believes
that the terms of the Management Agreement are comparable to those that would
have been obtained from unaffiliated sources.
SHAREHOLDERS' AGREEMENT
The Company entered into a Shareholders' Agreement (the "Shareholders'
Agreement") among THL and the other stockholders of the Company upon the
consummation of the Recapitalization. Pursuant to the Shareholders' Agreement,
the shareholders are required to vote their shares of capital stock of the
Company to elect a Board of Directors of the Company consisting of directors
designated by THL. The Shareholders' Agreement also grants THL the right to
require the Company to effect the registration of shares of Common Stock they
hold for sale to the public, subject to certain conditions and limitations. If
the Company proposes to register any of its securities under the Securities Act
of 1933, as amended, whether for its own account or otherwise, the shareholders
are entitled to notice of such registration and are entitled to include their
shares in such registration, subject to certain conditions and limitations. All
fees, costs and expenses of any registration effected on behalf of such
shareholders under the Shareholders' Agreement (other than underwriting
discounts and commissions) will be paid by the Company.
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<PAGE> 67
DESCRIPTION OF THE NEW CREDIT FACILITY
The New Credit Facility consists of (i) a $55.0 million term loan facility
(the "Term Loan Facility"); (ii) a $35.0 million revolving credit facility (the
"Revolving Credit Facility"); and (iii) a $100.0 million acquisition facility
(the "Acquisition Facility"), of which $50.0 million has been committed.
Approximately $10.0 million of the Revolving Credit Facility is restricted for
the repayment of the capital lease obligation due in February 1999. Bankers
Trust Company acts as administrative agent for the syndicate of lenders
providing the New Credit Facility and Merrill Lynch Capital Corporation will act
as syndication agent for the New Credit Facility. The Revolving Credit Facility
includes a sub-limit for the issuance of letters of credit.
Borrowings made under the New Credit Facility bear interest at a rate equal
to, at the Company's option, LIBOR plus 2.25%, or the Base Rate (as defined in
the New Credit Facility) plus 1.25%.
The LIBOR and Base Rate margins are subject to reductions, based on various
tests of the Company's financial performance. Base Rate interest will be payable
quarterly in arrears. LIBOR interest will be payable in arrears at the earlier
of (i) the end of the applicable interest periods and (ii) every three months.
LIBOR borrowings are available in one, two, three or six month interest periods.
The Revolving Credit Facility expires six years after the closing date of
the New Credit Facility. The Term Loan Facility matures five years from the
closing of the New Credit Facility and will amortize quarterly in aggregate
annual principal amounts of approximately $0.0 million, $4.0 million,
$12.0 million, $18.0 million and $21.0 million, respectively, for years one
through five after the closing of the New Credit Facility. Loans may be borrowed
under the Acquisition Facility for three years after the closing date of the New
Credit Facility; provided that in the fourth year after the closing date of the
New Credit Facility, 50% of any remaining availability under the Acquisition
Facility may be borrowed. Loans outstanding at the end of such periods shall
amortize quarterly with the final such payment due six years after the closing
date of the New Credit Facility. Amounts under the New Credit Facility are also
subject to mandatory prepayments in certain circumstances as provided therein.
The obligations of the Company under the New Credit Facility is secured by
substantially all assets of the Company and each of its direct and indirect
domestic subsidiaries, as well as a pledge of the capital stock of each such
subsidiary of the Company (but not to exceed 65% of the voting stock of foreign
subsidiaries) and is guaranteed by each such domestic subsidiary.
The New Credit Facility agreement contains certain covenants, including,
without limitation, restrictions on (i) indebtedness and liens, (ii) the sale of
assets, (iii) mergers, acquisitions and other business combinations, (iv)
voluntary prepayment of certain debt of the Company (including the Notes), (v)
transactions with affiliates, (vi) capital expenditures and (vii) loans and
investments, as well as prohibitions on the payment of cash dividends to, or the
repurchase of redemption of stock from, shareholders, and various financial
covenants. Pursuant to the terms of the New Credit Facility, and subject to
applicable grace periods, in certain circumstances, the Company would be in
default upon the non-payment of principal or interest when due under such
agreement, or upon the non-fulfillment of the covenants described above, certain
changes in control of the ownership of the Company or various other defaults to
be described therein. If such a default occurs, the lenders under the New Credit
Facility would be entitled to take various actions, including all actions
permitted to be taken by a secured creditor under the Uniform Commercial Code,
the acceleration of amounts due under the New Credit Facility and requiring that
all such amounts to be immediately paid in full.
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<PAGE> 68
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be treated as a single class of securities and will
be issued under a single indenture (the "Indenture"), dated as of April 24,
1998, by and among the Company, the Guarantors and United States Trust Company
of New York, as trustee (the "Trustee"). The following summary of certain
provisions of the Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act of
1939, as amended (the "TIA"), and to all of the provisions of the Indenture,
including the definitions of certain terms therein and those terms made a part
of the Indenture by reference to the TIA as in effect on the date of the
Indenture. A copy of the Indenture may be obtained from the Company or the
Initial Purchasers. The definitions of certain capitalized terms used in the
following summary relating solely to the Floating Rate Exchange Notes are set
forth below under "-- Principal, Maturity and Interest -- Floating Rate Exchange
Notes," and the definitions of certain other capitalized terms used in the
following summary relating to the Exchange Notes are set forth below under "--
Certain Definitions." For purposes of this section, references to the "Company"
include only Eye Care Centers of America, Inc. and not its subsidiaries.
The Exchange Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Indebtedness of the Company to the
extent set forth in the Indenture.
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Exchange Notes. The
Exchange Notes may be presented for registration of transfer and exchange at the
offices of the Registrar, which initially will be the Trustee's corporate trust
office. The Company may change any Paying Agent and Registrar without notice to
holders of the Exchange Notes (the "Holders"). The Company will pay principal
(and premium, if any) on the Exchange Notes at the Trustee's corporate office in
New York, New York. At the Company's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
Holders.
Any Initial Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited to $150,000,000 aggregate principal
amount, consisting of $100,000,000 principal amount of Fixed Rate Exchange Notes
and $50,000,000 principal amount of Floating Rate Exchange Notes. Interest on
the Exchange Notes will be payable semiannually in cash on each May 1 and
November 1, commencing on November 1, 1998, to the Persons who are registered
Holders at the close of business on the April 15 and October 15 immediately
preceding the applicable interest payment date. Interest on the Exchange Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance.
The Exchange Notes will not be entitled to the benefit of any mandatory
sinking fund.
Fixed Rate Exchange Notes
Interest on the Fixed Rate Exchange Notes will accrue at the rate of 9 1/8%
per annum.
Floating Rate Exchange Notes
The Floating Rate Exchange Notes will bear interest at a rate per annum,
reset semiannually, equal to LIBOR (as defined) plus 3.98%, as determined by the
Calculation Agent (the "Calculation Agent"), which shall initially be the
Trustee.
"LIBOR," with respect to an Interest Period, will be the rate (expressed as
a percentage per annum) for deposits in United States dollars for a six-month
period beginning on the second London Banking Day (as defined) after the
Determination Date (as defined) that appears on Telerate Page 3750 (as defined)
as of 11:00 a.m., London time, on the Determination Date. If Telerate Page 3750
does not include such a rate or is
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<PAGE> 69
unavailable on a Determination Date, LIBOR for the Interest Period shall be the
arithmetic mean of the rates (expressed as a percentage per annum) for deposits
in a Representative Amount (as defined) in United States dollars for a six-month
period beginning on the second London Banking Day after the Determination Date
that appears on Reuters Screen LIBO Page (as defined) as of 11:00 a.m., London
time, on the Determination Date. If Reuters Screen LIBO Page does not include
two or more rates or is unavailable on a Determination Date, the Calculation
Agent will request the principal London office of each of four major banks in
the London interbank market, as selected by the Calculation Agent, to provide
such bank's offered quotation (expressed as a percentage per annum), as of
approximately 11:00 a.m., London time, on such Determination Date, to prime
banks in the London interbank market for deposits in a Representative Amount in
United States dollars for a six-month period beginning on the second London
Banking Day after the Determination Date. If at least two such offered
quotations are so provided, LIBOR for the Interest Period will be the arithmetic
mean of such quotations. If fewer than two such quotations are so provided, the
Calculation Agent will request each of three major banks in New York City, as
selected by the Calculation Agent, to provide such bank's rate (expressed as a
percentage per annum), as of approximately 11:00 a.m., New York City time, on
such Determination Date, for loans in a Representative Amount in United States
dollars to leading European banks for a six-month period beginning on the second
London Banking Day after the Determination Date. If at least two such rates are
so provided, LIBOR for the Interest Period will be the arithmetic mean of such
rates. If fewer than two such rates are so provided, then LIBOR for the Interest
Period will be LIBOR in effect with respect to the immediately preceding
Interest Period.
"Interest Period" means the period commencing on and including an interest
payment date and ending on and including the day immediately preceding the next
succeeding interest payment date, with the exception that the first Interest
Period shall commence on and include April 24, 1998 and end on and include
October 31, 1998.
"Determination Date," with respect to an Interest Period, will be the
second London Banking Day preceding the first day of the Interest Period.
"London Banking Day" is any day in which dealings in United States dollars
are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Representative Amount" means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant time.
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
The amount of interest for each day that the Floating Rate Exchange Notes
are outstanding (the "Daily Interest Amount") will be calculated by dividing the
interest rate in effect for such day by 360 and multiplying the result by the
principal amount of the Floating Rate Exchange Notes. The amount of interest to
be paid on the Floating Rate Exchange Notes for each Interest Period will be
calculated by adding the Daily Interest Amounts for each day in the Interest
Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point being rounded upwards
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all
dollar amounts used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on the Floating Rate Exchange Notes will in no event be
higher than the maximum rate permitted by New York law as the same may be
modified by United States law of general application. Under current New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
This limit may not apply to Floating Rate Exchange Notes in which $2,500,000 or
more has been invested.
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<PAGE> 70
The Calculation Agent will, upon the request of the holder of any Floating
Rate Note, provide the interest rate then in effect with respect to the Floating
Rate Exchange Notes. All calculations made by the Calculations Agent in the
absence of manifest error will be conclusive for all purposes and binding on the
Company, the Guarantors and the Holders of the Floating Rate Exchange Notes.
REDEMPTION
Optional Redemption. The Fixed Rate Exchange Notes will be redeemable, at
the Company's option, in whole at any time or in part from time to time, on and
after May 1, 2003, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on May 1 of the
year set forth below, plus, in each case, accrued interest to the date of
redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................ 104.563%
2004........................................................ 103.042%
2005........................................................ 101.521%
2006 and thereafter......................................... 100.000%
</TABLE>
The Floating Rate Exchange Notes will be redeemable, at the Company's
option, in whole or in part from time to time, upon not less than 30 nor more
than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on May 1 of the year set forth below, plus, in each case,
accrued interest to the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998........................................................ 105.000%
1999........................................................ 104.000%
2000........................................................ 103.000%
2001........................................................ 102.000%
2002........................................................ 101.000%
2003 and thereafter......................................... 100.000%
</TABLE>
Optional Redemption of Fixed Rate Exchange Notes upon Equity Offerings. At
any time, or from time to time, on or prior to May 1, 2001, the Company may, at
its option, use the net cash proceeds of one or more Equity Offerings (as
defined below) to redeem up to 35% of the aggregate principal amount of Fixed
Rate Exchange Notes originally issued at a redemption price equal to 109.125% of
the principal amount thereof plus accrued interest to the date of redemption;
provided that at least 65% of the original principal amount of Fixed Rate
Exchange Notes remains outstanding immediately after any such redemption
(excluding any of Fixed Rate Exchange Notes owned by the Company). In order to
effect the foregoing redemption with the proceeds of any Equity Offering, the
Company must mail a notice of redemption no later than 60 days after the related
Equity Offering and must consummate such redemption within 90 days of the
closing of the Equity Offering. "Equity Offering" means a sale of Qualified
Capital Stock of the Company.
SELECTION AND NOTICE
In case of a partial redemption, selection of the Exchange Notes or
portions thereof for redemption shall be made by the Trustee by lot, pro rata or
in such manner as it shall deem appropriate and fair and in such manner as
complies with any applicable legal requirements; provided, however, that if a
partial redemption is made with the proceeds of an Equity Offering, selection of
the Fixed Rate Exchange Notes or portion thereof for redemption shall be made by
the Trustee only on a pro rata basis, unless such method is otherwise
prohibited. Exchange Notes may be redeemed in part in multiples of $1,000
principal amount only. Notice of redemption will be sent, by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to each Holder whose Exchange Notes are to be redeemed at
the last address for
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<PAGE> 71
such Holder then shown on the registry books. If any Exchange Note is to be
redeemed in part only, the notice of redemption that relates to such Exchange
Note shall state the portion of the principal amount thereof to be redeemed. A
new Exchange Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Exchange Note. On and after any redemption date, interest will cease to
accrue on the Exchange Notes or part thereof called for redemption as long as
the Company has deposited with the Paying Agent funds in satisfaction of the
redemption price pursuant to the Indenture.
RANKING OF EXCHANGE NOTES
The indebtedness evidenced by the Exchange Notes will be unsecured Senior
Subordinated Indebtedness of the Company, will be subordinated in right of
payment, as set forth in the Indenture, to all existing and future Senior
Indebtedness of the Company, will rank pari passu in right of payment with all
existing and future Senior Subordinated Indebtedness of the Company and will be
senior in right of payment to all existing and future Subordinated Obligations
of the Company. The Exchange Notes will also be effectively subordinated to any
Secured Indebtedness of the Company to the extent of the value of the assets
securing such Indebtedness. See "Risk Factors -- Subordination of Notes and
Guarantees; Asset Encumbrances." However, payment from the money or the proceeds
of U.S. government obligations held in any defeasance trust described under "--
Legal Defeasance and Covenant Defeasance" below is not subordinated to any
Senior Indebtedness or subject to the restrictions described above if the
deposit to such trust which is used to fund such payment was permitted at the
time of such deposit.
As of April 4, 1998, on a pro forma basis, after giving effect to the
Offering and the Recapitalization, the Company would have had approximately
$66.0 million of Senior Indebtedness outstanding (including a $1.0 million
guarantee by the Company but exclusive of unused commitments), $65.0 million of
which would have been Secured Indebtedness. Although the Indenture contains
limitations on the amount of additional Indebtedness which the Company and its
Restricted Subsidiaries may incur, under certain circumstances the amount of
such Indebtedness could be substantial and, in any case, such Indebtedness may
be Senior Indebtedness, Guarantor Senior Indebtedness or Secured Indebtedness.
See "--Certain Covenants--Limitation on Incurrence of Additional Indebtedness"
below.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior in right of payment to the Exchange Notes in accordance with the
provisions of the Indenture. The Exchange Notes will in all respects rank pari
passu in right of payment with all other Senior Subordinated Indebtedness of the
Company. The Company has agreed in the Indenture that it will not incur,
directly or indirectly, any Indebtedness which is expressly subordinate in right
of payment to Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. Without limiting the foregoing, unsecured
Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness
merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, or
any other amount in respect of, the Exchange Notes or make any deposit pursuant
to the provisions described under "--Legal Defeasance and Covenant Defeasance"
below and may not otherwise purchase, redeem or otherwise retire any Exchange
Notes (collectively, "pay the Exchange Notes") if any amount due in respect of
any Senior Indebtedness (including, without limitation, any amount due as a
result of acceleration of the maturity thereof by reason of default or
otherwise) has not been paid in full in cash or Cash Equivalents unless the
default has been cured or waived and any such acceleration has been rescinded or
such Senior Indebtedness has been paid in full in cash or Cash Equivalents.
However, the Company may pay the Exchange Notes without regard to the foregoing
if the Company and the Trustee receive written notice approving such payment
from the Representative of the holders of the Senior Indebtedness with respect
to which the events set forth in the immediately preceding sentence have
occurred and are continuing.
In addition, during the continuance of any default (other than a payment
default described in the first sentence of the immediately preceding paragraph)
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such
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<PAGE> 72
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, the Company may not pay the Exchange Notes for a
period (a "Payment Blockage Period") commencing upon the receipt by the Trustee
(with a copy to the Company) of written notice (a "Blockage Notice") of such
default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice and all other defaults with respect to such Designated
Senior Indebtedness shall have been cured or shall have ceased to exist or (iii)
because such Designated Senior Indebtedness has been repaid in full in cash or
Cash Equivalents).
Notwithstanding the provisions described in the immediately preceding
paragraph, unless any payment default described in the first sentence of the
second immediately preceding paragraph has occurred and is then continuing, the
Company may resume payments on the Exchange Notes after the end of such Payment
Blockage Period, including any missed payments. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. However, if any Blockage Notice within such 360-day period is given by
or on behalf of any holders of Designated Senior Indebtedness other than the
Bank Indebtedness, a Representative of holders of Bank Indebtedness may give
another Blockage Notice within such period. In no event, however, may the total
number of days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 360 consecutive day period.
Upon any payment or distribution of the assets or securities of the Company
to creditors upon a total or partial liquidation or dissolution or
reorganization or winding up of or similar proceeding relating to the Company or
its property or in a bankruptcy, insolvency, receivership or similar proceeding
relating to the Company or its property, or in an assignment for the benefit of
creditors or any marshalling of the assets and liabilities of the Company,
whether voluntary or involuntary, the holders of Senior Indebtedness will be
entitled to receive payment in full in cash or Cash Equivalents of all amounts
owing with respect to the Senior Indebtedness (including all interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to the Company at the relevant contractual rate provided in the
respective issue of Senior Indebtedness, whether or not a claim for such
post-filing interest is allowed in such proceeding) before the holders of the
Exchange Notes are entitled to receive any payment or distribution of any
character and, until all amounts owing with respect to the Senior Indebtedness
are paid in full in cash or Cash Equivalents, any payment or distribution to
which holders of the Exchange Notes would be entitled but for the subordination
provisions of the Indenture will be made to holders of the Senior Indebtedness
as their interests may appear. If a payment or distribution is made to holders
of the Exchange Notes that due to the subordination provisions should not have
been made to them, such holders of the Exchange Notes are required to hold it in
trust for the holders of Senior Indebtedness and pay it over to them as their
interests may appear.
If the Company fails to make any payment on the Exchange Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Exchange Notes
to accelerate the maturity thereof. See "-- Events of Default" below.
If payment of the Exchange Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of the
Designated Senior Indebtedness or the Representative of such holders of the
acceleration. The Company may not pay the Exchange Notes until the earlier of
five business days after such holders or the Representative of the holders of
Designated Senior Indebtedness receive notice of such acceleration or the date
of acceleration of such Designated Senior Indebtedness and, thereafter, may pay
the Exchange Notes only if the subordination provisions of the Indenture
otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the holders of the Exchange Notes,
and creditors of the Company who are not holders of Senior Indebtedness or of
Senior
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Subordinated Indebtedness (including the Exchange Notes) may recover less,
ratably, than holders of Senior Indebtedness and may recover more than the
holders of Senior Subordinated Indebtedness.
EXCHANGE GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Exchange
Notes, including the payment of principal of and interest on the Exchange Notes.
The Exchange Note Guarantees will be subordinated to Guarantor Senior
Indebtedness on the same basis as the Exchange Notes are subordinated to Senior
Indebtedness. The obligations of each Guarantor are limited to the maximum
amount which, after giving effect to all other contingent and fixed liabilities
of such Guarantor (including without limitation its guarantees of Bank
Indebtedness and any other Senior Indebtedness) and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Exchange Note
Guarantee or pursuant to its contribution obligations under the Indenture, will
result in the obligations of such Guarantor under the Exchange Note Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Exchange
Note Guarantee shall be entitled to a contribution from each other Guarantor in
an amount pro rata, based on the net assets of each Guarantor, determined in
accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company without limitation, or with other Persons upon the terms and conditions
set forth in the Indenture. See "-- Certain Covenants -- Merger, Consolidation
and Sale of Assets." In the event all of the Capital Stock of a Guarantor owed
by the Company and its Restricted Subsidiaries (other than the respective
Guarantor) is sold by the Company and/or such Restricted Subsidiaries and the
sale complies with the provisions set forth in "-- Certain Covenants --
Limitation on Asset Sales," the Guarantor's Exchange Note Guarantee will be
released.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the Exchange Notes, and the aggregate net
assets, earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
CHANGE OF CONTROL
The Indenture will provide that upon the occurrence of a Change of Control
Triggering Event, each Holder will have the right to require that the Company
purchase for cash all or a portion of such Holder's Exchange Notes pursuant to
the offer described below (the "Change of Control Offer"), at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued interest to
the date of purchase.
The Indenture will provide that, prior to the mailing of the notice
referred to below, but in any event within 30 days following the date the
Company obtains actual knowledge of any Change of Control Triggering Event, the
Company covenants to (i) repay in full and terminate all commitments under the
Bank Indebtedness or offer to repay in full and terminate all commitments under
all Bank Indebtedness and to repay the Bank Indebtedness owed to each holder of
Bank Indebtedness which has accepted such offer or (ii) obtain the requisite
consents under the New Credit Facility to permit the repurchase of the Exchange
Notes as provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase
Exchange Notes pursuant to the provisions described below. The Company's failure
to comply with this covenant shall constitute an Event of Default described in
clause (iv) and not in clause (ii) under "--Events of Default" below.
Within 30 days following the date upon which the Company obtains actual
knowledge that a Change of Control Triggering Event has occurred, the Company
must send, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer.
Such notice shall state, among other things, the purchase date, which must be no
earlier than 30 days nor later than 45 days from the date such notice is mailed,
other than as may be required by law (the "Change of Control
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Payment Date"). Holders electing to have an Exchange Note purchased pursuant to
a Change of Control Offer will be required to surrender the Exchange Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Exchange Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third business day prior to the
Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Exchange Notes that might be delivered by Holders
seeking to accept the Change of Control Offer. In the event the Company is
required to purchase outstanding Exchange Notes pursuant to a Change of Control
Offer, the Company expects that it would seek third party financing to the
extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
The definition of Change of Control includes a phrase relating to the sale,
lease, exchange or other transfer of "all or substantially all" of the Company's
assets as such phrase is defined in the Revised Model Business Corporation Act.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise definition of the phrase under
applicable law. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear as to whether a Change of Control has occurred and
whether the Holders have the right to require the Company to repurchase such
Exchange Notes.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control
Triggering Event. Restrictions in the Indenture described herein on the ability
of the Company and its Restricted Subsidiaries to incur additional Indebtedness,
to grant Liens on their properties, to make Restricted Payments and to make
Asset Sales may also make more difficult or discourage a takeover of the
Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Exchange Notes, and there can be no assurance
that the Company or the acquiring party will have sufficient financial resources
to effect such redemption or repurchase. Such restrictions and the restrictions
on transactions with Affiliates may, in certain circumstances, make more
difficult or discourage any leveraged buyout of the Company or any of its
Subsidiaries by the management of the Company. While such restrictions cover a
wide variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Indenture may not afford the Holders of Exchange
Notes protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Exchange Notes pursuant to a Change of Control Offer. To the
extent that the provisions of any securities laws or regulations conflict with
the "Change of Control" provisions of the Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock) on or in respect of shares
of Capital Stock of the Company to holders of such Capital Stock, (b) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the Company
or any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, other than the exchange of such Capital Stock for Qualified
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any
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Indebtedness of the Company that is subordinate or junior in right of payment to
the Exchange Notes, or (d) make any Investment (other than Permitted
Investments) in any other Person (each of the foregoing actions set forth in
clauses (a), (b), (c) and (d) (other than the exceptions thereto) being referred
to as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing, (ii) the Company is not able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant or (iii) the aggregate amount of Restricted Payments made subsequent to
the Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated
Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to the Issue Date and on or prior
to the date the Restricted Payment occurs (the "Reference Date") (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Company (including
Qualified Capital Stock issued upon the conversion of convertible Indebtedness
or in exchange for outstanding Indebtedness but excluding net cash proceeds from
the sale of Qualified Capital Stock to the extent used to repurchase or acquire
shares of Capital Stock of the Company pursuant to clause (2)(ii) of the next
succeeding paragraph); plus (y) without duplication of any amounts included in
clause (iii) (x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock; plus (z) to the extent that any Investment (other than a Permitted
Investment) that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash received with respect
to such sale, liquidation or repayment of such Investment (less the cost of such
sale, liquidation or repayment, if any) and (B) the initial amount of such
Investment, but only to the extent not included in the calculation of
Consolidated Net Income. Any net cash proceeds included in the foregoing clauses
(iii)(x) or (iii)(y) shall not be included in clause (x)(A) or clause (x)(B) of
the definition of "Permitted Investments" to the extent actually utilized to
make a Restricted Payment under this paragraph.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph will not prohibit: (1) the payment of any dividend or the
consummation of any irrevocable redemption within 60 days after the date of
declaration of such dividend or notice of such redemption if the dividend or
payment of the redemption price, as the case may be, would have been permitted
on the date of declaration or notice; (2) if no Default or Event of Default
shall have occurred and be continuing as a consequence thereof, the acquisition
of any shares of Capital Stock of the Company, either (i) solely in exchange for
shares of Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) so long as no Default or Event of Default shall have occurred or be
continuing, payments for the purpose of and in an amount equal to the amount
required to permit the Company to redeem or repurchase shares of its Capital
Stock or options in respect thereof, in each case in connection with the
repurchase provisions under employee stock option or stock purchase agreements
or other agreements to compensate management employees; provided that such
redemptions or repurchases pursuant to this clause (3) shall not exceed $5.0
million in the aggregate since the Issue Date (which amount shall be increased
by the amount of any cash proceeds to the Company from (x) sales of its Capital
Stock to management employees subsequent to the Issue Date and (y) any "key-man"
life insurance policies which are used to make such redemptions or repurchases);
(4) the payment of fees and compensation as permitted under clause (i) of
paragraph (b) of the "Limitation on Transactions with Affiliates" covenant; (5)
repurchases of Capital Stock deemed to occur upon the exercise of stock options
if such Capital Stock represents a portion of the exercise price thereof; (6)
Restricted Payments made pursuant to the Recapitalization Agreement; (7) so long
as no Default or Event of Default shall have occurred or be continuing, payments
in respect of any redemption, repurchase, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or options, stock
appreciation or similar securities, in each case held by then current or former
officers, directors or employees of the Company or any of its Subsidiaries (or
their estates or beneficiaries under their estates) or by an employee benefit
plan, upon death, disability, retirement or termination of employment, not to
exceed $2.5 million in the aggregate in any fiscal year or $10.0 million in the
aggregate since the Issue Date; (8) repurchases of Preferred Stock; provided
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that such repurchases do not exceed $5.0 million in the aggregate since the
Issue Date; (9) purchases of all (but not less than all), excluding directors'
qualifying shares, of the Capital Stock or other ownership interests in a
Subsidiary of the Company which Capital Stock or other ownership interests were
not theretofore owned by the Company or a Subsidiary of the Company, such that
after giving effect to such purchase such Subsidiary becomes a Restricted
Subsidiary of the Company; and (10) so long as no Default or Event of Default
shall have occurred or be continuing, payments not to exceed $100,000 in the
aggregate since the Issue Date to enable the Company to make payments to holders
of its Capital Stock in lieu of issuance of fractional shares of its Capital
Stock. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, (a) amounts expended (to the extent such expenditure is in
the form of cash or other property other than Qualified Capital Stock) pursuant
to clauses (1), (3), (7) and (8) of this paragraph shall be included in such
calculation, provided that such expenditures pursuant to clause (3) or (7) shall
not be included to the extent of cash proceeds received by the Company from any
"key man" life insurance policies, and (b) amounts expended pursuant to clauses
(2), (4), (5), (6), (9) and (10) shall be excluded from such calculation.
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of any such Indebtedness, the Company and its Restricted Subsidiaries
which are Guarantors may incur Indebtedness (including, without limitation,
Acquired Indebtedness) and Restricted Subsidiaries of the Company may incur
Acquired Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
entered into on terms that are no less favorable than those that might be
reasonably obtained in a comparable transaction at such time on an arm's-length
basis from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary; provided, however, that for a transaction or series of related
transactions with an aggregate value of $5.0 million or more, at the Company's
option (i) such determination shall be made in good faith by a majority of the
disinterested members of the Board of the Directors of the Company or (ii) the
Board of Directors of the Company or any such Restricted Subsidiary party to
such Affiliate Transaction shall have received a favorable opinion from an
independent nationally recognized investment banking firm that such Affiliate
Transaction is fair from a financial point of view to the Company or such
Restricted Subsidiary; provided, further, that for a transaction or series of
related transactions with an aggregate value of $10.0 million or more, the Board
of Directors of the Company shall have received a favorable opinion from an
independent nationally recognized investment banking firm that such Affiliate
Transaction is fair from a financial point of view to the Company or such
Restricted Subsidiary.
(b) The foregoing restrictions shall not apply to (i) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary of the Company as
determined in good faith by the Company's Board of Directors; (ii) transactions
exclusively between or among the Company and any of its Restricted Subsidiaries
or exclusively between or among such Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture; (iii) transactions
effected as part of a Qualified Receivables Transaction; (iv) any agreement as
in effect as of the Issue Date or any amendment thereto or any transaction
contemplated thereby (including pursuant to any amendment thereto) in any
replacement agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material respect
than the original agreement as in effect on the Issue Date; (v) Restricted
Payments permitted
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by the Indenture; (vi) any Permitted Investment; (vii) transactions permitted
by, and complying with, the provisions of the covenant described under "Merger,
Consolidation and Sale of Assets"; (viii) any payment, issuance of securities or
other payments, awards or grants, in cash or otherwise, pursuant to, or the
funding of, employment arrangements and Plans approved by the Board of Directors
of the Company; (ix) the grant of stock options or similar rights to employees
and directors of the Company and its Subsidiaries pursuant to Plans and
employment contracts approved by the Board of Directors of the Company; (x)
loans or advances to officers, directors or employees of the Company or its
Restricted Subsidiaries not in excess of $3.0 million at any one time
outstanding; (xi) the granting or performance of registration rights under a
written registration rights agreement approved by the Board of Directors of the
Company; (xii) transactions with Persons solely in their capacity as holders of
Indebtedness or Capital Stock of the Company or any of its Restricted
Subsidiaries, where such Persons are treated no more favorably than holders of
Indebtedness or Capital Stock of the Company or such Restricted Subsidiary
generally; (xiii) any agreement to do any of the foregoing; (xiv) the payment,
on a quarterly basis, of management fees to THL Co. and/or any Affiliate of THL
Co. in accordance with the management arrangements to be entered into in April
1998 between THL Co. and/or any Affiliate of THL Co. and the Company in an
aggregate amount (for all such Persons taken together) not to exceed $125,000 in
any fiscal quarter of the Company; provided, however, the Company or any
Restricted Subsidiary may make any such payment greater than $125,000 but not to
exceed $250,000 in any fiscal quarter if, both before and after giving effect
thereto, the Company could incur $1.00 of additional indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence
Additional Indebtedness" covenant; (xv) reimbursement of THL Co. and/or any
Affiliate of THL Co. for their reasonable out-of-pocket expenses incurred by
them in connection with performing management services for the Company and its
Subsidiaries; (xvi) the payment of one time fees to THL Co. and/or Affiliates of
THL Co. in connection with each acquisition of a company or a line of business
by the Company or its Subsidiaries, such fees to be payable at the time of each
such acquisition and not to exceed 1% of the aggregate consideration paid by the
Company and its Subsidiaries for any such acquisition; (xvii) the payment of
consulting fees to Norman Matthews pursuant to a consulting arrangement entered
into on or prior to the Issue Date in an aggregate amount not to exceed $50,000
in any fiscal year of the Company; and (xviii) transactions entered into on the
Issue Date in connection with the Recapitalization and the financing therefor.
Limitation on Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens
(other than Permitted Liens) of any kind against or upon any of their respective
property or assets, or any proceeds, income or profit therefrom which secure
Senior Subordinated Indebtedness or Subordinated Obligations, unless (i) in the
case of Liens securing Subordinated Obligations, the Exchange Notes are secured
by a Lien on such property, assets, proceeds, income or profit that is senior in
priority to such Liens and (ii) in the case of Liens securing Senior
Subordinated Indebtedness, the Exchange Notes are equally and ratably secured by
a Lien on such property, assets, proceeds, income or profit.
Prohibition on Incurrence of Senior Subordinated Indebtedness. Neither the
Company nor any Guarantor will incur or suffer to exist Indebtedness that is
senior in right of payment to the Exchange Notes or such Guarantor's Exchange
Note Guarantee and subordinate in right of payment to any other Indebtedness of
the Company or such Guarantor, as the case may be.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary of the Company; or (c) transfer any of its property or
assets to the Company or any other Restricted Subsidiary of the Company, except
for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the Indenture; (3) non-assignment provisions of any contract
or any lease entered into in the ordinary course of business; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to the Company or any Restricted Subsidiary of the Company, or the
properties or assets of any such Person, other than the Person or the properties
or assets of the Person so
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acquired; provided, however, that such Acquired Indebtedness was not incurred in
connection with, or in anticipation or contemplation of an acquisition by the
Company or the Restricted Subsidiary; (5) agreements existing on the Issue Date
(including, without limitation, the New Credit Facility and the Recapitalization
Agreement); (6) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture imposed by the holder of such Lien; (7)
restrictions imposed by any agreement to sell assets permitted under the
Indenture to any Person pending the closing of such sale; (8) any agreement or
instrument governing Capital Stock of any Person that is acquired after the
Issue Date; (9) Indebtedness or other contractual requirements of a Receivables
Entity in connection with a Qualified Receivables Transaction; provided that
such restrictions apply only to such Receivables Entity and such Restricted
Subsidiary is engaged in the Qualified Receivables Transaction; (10) an
agreement effecting a refinancing, replacement or substitution of Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause (2),
(4) or (5) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such refinancing, replacement or
substitution agreement are no less favorable to the Company or the Holders in
any material respect as determined by the Board of Directors of the Company in
good faith than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5); or (11) any
agreement evidencing, or relating to, any Indebtedness incurred after the Issue
Date which are not more restrictive than those contained in the New Credit
Facility as in effect on the Issue Date.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Restricted Subsidiary of the Company) or
permit any Person (other than the Company or a Restricted Subsidiary of the
Company) to own any Preferred Stock of any Restricted Subsidiary of the Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or a series of related transactions, consolidate with or
merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, another Person or Persons
unless (i) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person is a corporation existing under the
laws of the United States, any state thereof or the District of Columbia and
such surviving Person shall expressly assume all the obligations of the Company
under the Exchange Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction (on a pro forma basis,
including any Indebtedness incurred or anticipated to be incurred in connection
with such transaction and the other adjustments referred to in the definition of
"Consolidated Fixed Charge Coverage Ratio"), the Company or the surviving Person
is able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; (iii) immediately before and immediately after giving
effect to such transaction (including any Indebtedness incurred or anticipated
to be incurred in connection with the transaction), no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company has
delivered to the Trustee an officers' certificate and opinion of counsel, each
stating that such consolidation, merger or transfer complies with the Indenture,
that the surviving Person agrees to be bound thereby and by the Exchange Notes
and the Registration Rights Agreement, and that all conditions precedent in the
Indenture relating to such transaction have been satisfied. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company, the Capital
Stock of which constitutes all or substantially all of the properties and assets
of the Company, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company. Notwithstanding the foregoing
clauses (ii) and (iii) of the preceding sentence, (a) any Restricted Subsidiary
of the Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (b) the Company may merge with an
Affiliate that is (x) a corporation that has no material assets or liabilities
and which was incorporated solely for the purpose of reincorporating the Company
in another jurisdiction or (y) a Restricted Subsidiary of the Company so long as
all assets of the Company and the Restricted Subsidiaries immediately prior to
such transaction are owned by such Restricted Subsidiary and its Restricted
Subsidiaries immediately after the consummation thereof.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, the surviving entity shall
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succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Exchange Notes with the same effect as
if such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Exchange Note Guarantee is
to be released in accordance with the terms of the Exchange Note Guarantee and
the Indenture in connection with any transaction complying with the provisions
of "--Limitation on Asset Sales") will not, and the Company will not cause or
permit any Guarantor to, consolidate with or merge with or into any Person other
than the Company or any other Guarantor unless: (i) the entity formed by or
surviving any such consolidation or merger (if other than the Guarantor) or to
which such sale, lease, conveyance or other disposition shall have been made is
a corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) such entity (if other than the
Guarantor) assumes by supplemental indenture all of the obligations of the
Guarantor on the Exchange Note Guarantee; (iii) immediately before and
immediately after giving effect to such transaction (including any Indebtedness
incurred or anticipated to be incurred in connection with the transaction), no
Default or Event of Default shall have occurred and be continuing; and (iv)
immediately after giving effect to such transaction on a pro forma basis
(including any Indebtedness incurred or anticipated to be incurred in connection
with the transaction), the Company could satisfy the provisions of clause (ii)
of the first paragraph of this covenant. Any merger or consolidation of a
Guarantor with and into the Company (with the Company being the surviving
entity) or another Guarantor that is a Restricted Subsidiary of the Company need
only comply with clause (iv) of the first paragraph of this covenant.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors); (ii) at least 75% of the consideration
received by the Company or such Restricted Subsidiary, as the case may be, from
such Asset Sale shall be cash or Cash Equivalents and is received at the time of
such disposition; provided that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Exchange Notes) that are
assumed by the transferee of any such assets and from which the Company and its
Restricted Subsidiaries are unconditionally released and (y) any notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are promptly, but in no event more than 60 days after receipt,
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received) shall be
deemed to be cash for purposes of this provision; and (iii) upon the
consummation of an Asset Sale, the Company shall apply, or cause such Restricted
Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within
365 days of receipt thereof either (A) to prepay Senior Indebtedness or
Guarantor Senior Indebtedness and, in the case of any Senior Indebtedness or
Guarantor Senior Indebtedness under any revolving credit facility, effect a
permanent reduction in the availability under such revolving credit facility,
(B) to reinvest in Productive Assets, or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii) (A) and (iii) (B). On the
366th day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses
(iii) (A), (iii) (B) and (iii) (C) of the immediately preceding sentence (each,
a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds
which have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii) (A), (iii) (B) and (iii) (C) of the immediately
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase for cash (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less
than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from all Holders on a pro rata basis at least that amount of
Exchange Notes equal to the Note Offer Amount at a price in cash equal to 100%
of the principal amount of the Exchange Notes to be purchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
that if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any
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such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. Any offer to purchase with
respect to Other Debt shall be made and consummated concurrently with any Net
Proceeds Offer.
"Other Debt" shall mean other Indebtedness of the Company that ranks pari
passu with the Exchange Notes and requires that an offer to purchase such Other
Debt be made upon consummation of an Asset Sale.
"Note Offer Amount" means (i) if an offer to purchase Other Debt is not
being made, the amount of the Net Proceeds Offer Amount and (ii) if an offer to
purchase Other Debt is being made, an amount equal to the product of (x) the Net
Proceeds Offer Amount and (y) a fraction the numerator of which is the aggregate
amount of Exchange Notes tendered pursuant to such offer to purchase and the
denominator of which is the aggregate amount of Exchange Notes and Other Debt
tendered pursuant to such offer to purchase.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$10 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as
such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds
Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating
to such initial Net Proceeds Offer Amount from all Asset Sales by the Company
and its Restricted Subsidiaries aggregates at least $10 million, at which time
the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make a
Net Proceeds Offer (the first date the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $10 million or more shall be deemed to be a
"Net Proceeds Offer Trigger Date").
Notwithstanding the immediately preceding paragraphs of this covenant, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) at least 75% of
the consideration for such Asset Sale constitutes Productive Assets and (ii)
such Asset Sale is for at least fair market value (as determined in good faith
by the Company's Board of Directors); provided that any consideration not
constituting Productive Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall to the extent constituting Net Cash Proceeds, be subject to
the provisions of the immediately preceding paragraphs; provided that at the
time of entering into such transaction or immediately after giving effect
thereto, no Default or Event of Default shall have occurred or be continuing or
would occur as a consequence thereof.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant; provided, however, that this paragraph
shall not apply if, both immediately before and immediately after giving effect
to any such transaction, both the transferor and transferee are obligors under
the Indenture.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Exchange Notes in whole or in part in integral multiples
of $1,000 in exchange for cash. To the extent Holders properly tender Exchange
Notes in an amount exceeding the Exchange Note Offer Amount, Exchange Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law. To the extent that the
aggregate amount of Exchange Notes tendered pursuant to a Net Proceeds Offer is
less than the Net Proceeds Offer Amount, the Company may use any remaining Net
Proceeds Offer Amount for general corporate purposes. Upon completion of any
such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Exchange Notes pursuant to a Net Proceeds Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
"Asset Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Additional Subsidiary Exchange Note Guarantees. The Company will not
permit any of its Restricted Subsidiaries that is not a Guarantor (whether
formed or acquired before or after the Issue Date), directly or indirectly, to
guarantee the payment of any Indebtedness under the New Credit Facility, unless
such Restricted Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted Subsidiary's Exchange Note
Guarantee of the Exchange Notes pursuant to the terms of the Indenture, such
Exchange Note Guarantee to be a senior subordinated unsecured obligation of such
Subsidiary; provided that if any such Guarantor is released from its guarantee
with respect to Indebtedness outstanding under the New Credit Facility, such
Guarantor shall automatically be released from its obligations as a Guarantor.
Nothing in this covenant shall be construed to permit any Restricted Subsidiary
of the Company to incur Indebtedness otherwise prohibited by the "Limitation on
Incurrence of Additional Indebtedness" covenant.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar, related or ancillary
to the businesses in which the Company and its Restricted Subsidiaries are
engaged on the Issue Date.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest (including additional interest, if any, under
the Registration Rights Agreement) on any Exchange Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture); (ii) the failure to pay the principal on any Exchange Notes, when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Exchange Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether
or not such payment shall be prohibited by the subordination provisions of the
Indenture); (iii) a default in the observance or performance of the covenant set
forth under "Certain Covenants--Merger, Consolidation and Sale of Assets" above;
(iv) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period of 30
days after the Company receives written notice specifying the default (and
demanding that such default be remedied) from the Trustee or the Holders of at
least 25% of the outstanding principal amount of the Exchange Notes; (v) the
failure to pay at final maturity (giving effect to any applicable grace periods
and any extensions thereof) the principal amount of any Indebtedness of the
Company or any Restricted Subsidiary (other than a Receivables Entity) of the
Company, or the acceleration of the final stated maturity of any such
Indebtedness if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated, aggregates
$10.0 million or more at any time; (vi) one or more judgments in an aggregate
amount in excess of $10.0 million shall have been rendered against the Company
or any of its Significant Subsidiaries and such judgments remain undischarged,
unpaid and unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable, and in the event such judgment is covered by
insurance, an enforcement proceeding has been commenced by any creditor upon
such judgment, which is not promptly stayed; (vii) certain events of bankruptcy
affecting the Company or any of its Significant Subsidiaries; and (viii) any of
the Exchange Note Guarantees ceases to be in full force and effect or any of the
Exchange Note Guarantees is declared to be null and void and unenforceable or
any of the Exchange Note Guarantees is found to be invalid or any of the
Guarantors denies its liability under its Exchange Note Guarantee (other than by
reason of release of a Guarantor in accordance with the terms of the Indenture).
Upon the happening of any Event of Default specified in the Indenture, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Exchange Notes may declare the principal of and accrued
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interest on all the Exchange Notes to be due and payable by notice in writing to
the Company and the Trustee specifying the respective Event of Default and that
it is a "notice of acceleration," and upon receipt of such notice the same shall
become due and payable upon the first to occur of an acceleration under any
issue of then outstanding Designated Senior Indebtedness or five Business Days
after receipt by the Company and each Representative of holders of Designated
Senior Indebtedness then outstanding of such notice of acceleration, unless all
Events of Default specified in their respective notice of acceleration have been
cured within said five Business Day period. If an Event of Default with respect
to bankruptcy proceedings of the Company occurs and is continuing, then such
amount shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Exchange
Notes.
The Indenture will provide that, at any time after a declaration of
acceleration with respect to the Exchange Notes as described in the preceding
paragraph, the Holders of a majority in principal amount of the Exchange Notes
may rescind and cancel such declaration and its consequences (i) if the
rescission would not conflict with any judgment or decree, (ii) if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (iii) to the
extent the payment of such interest is lawful, interest on overdue installments
of interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) or (vii) of the
description above of Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. The holders of a majority in principal amount of the
Exchange Notes may waive any existing Default or Event of Default under the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any Exchange Notes.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Exchange
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Exchange Notes by
accepting an Exchange Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Exchange Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Exchange Notes ("Legal Defeasance"). Such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Exchange Notes, except for (i) the
rights of holders of the Exchange Notes to receive payments in respect of the
principal of, premium, if any, and interest on the Exchange Notes when such
payments are due, (ii) the Company's obligations with respect to the Exchange
Notes concerning issuing temporary Exchange Notes, registration of Exchange
Notes, mutilated, destroyed, lost or stolen Exchange Notes and the maintenance
of an office or agency for payments, (iii) the rights, powers, trust, duties and
immunities of the Trustee and the Company's obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Exchange Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, reorganization and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the Exchange Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Exchange Notes cash in U.S. dollars,
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non-callable U.S. government obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the Exchange Notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be; (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the Exchange Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the holders of the Exchange Notes 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 times as would have been the
case if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default with respect to the Indenture resulting from
the incurrence of Indebtedness, all or a portion of which will be used to
defease the Exchange Notes concurrently with such incurrence); (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under, the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an officers' certificate stating that the deposit
was not made by the Company with the intent of preferring the holders of the
Exchange Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Company
or others; (vii) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; (viii) the Company shall have delivered to
the Trustee an opinion of counsel to the effect that (A) the trust funds will
not be subject to any rights of holders of Indebtedness of the Company other
than the Exchange Notes and (B) assuming no intervening bankruptcy of the
Company between the date of deposit and the 91st day following the deposit and
that no Holder of the Exchange Notes is an insider of the Company, after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (i) certain other customary
conditions precedent are satisfied. Notwithstanding the foregoing, the opinion
of counsel required by clause (ii) above with respect to a Legal Defeasance need
not be delivered if all Exchange Notes not therefore delivered to the Trustee
for cancellation (x) have become due and payable, or (y) will become due and
payable within one year (whether by redemption or otherwise) under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when (i) either (a) all the Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed
Exchange Notes which have been replaced or paid and Exchange Notes for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation or (b) all
Exchange Notes not theretofore delivered to the Trustee for cancellation have
become due and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Exchange Notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and interest on the
Exchange Notes to the date of deposit together with irrevocable instructions
from the Company directing the
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Trustee to apply such funds to the payment thereof at maturity or redemption, as
the case may be; (ii) the Company has paid all other sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
officers' certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders of the Exchange Notes, may amend the Indenture for
certain specified purposes, including curing ambiguities, defects or
inconsistencies, so long as such change does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled to rely on
such evidence as it deems appropriate, including, without limitation, solely on
an opinion of counsel. Other modifications and amendments of the Indenture may
be made with the consent of the Holders of a majority in principal amount of the
then outstanding Exchange Notes issued under the Indenture, except that, without
the consent of each holder of the Exchange Notes affected thereby, no amendment
may: (i) reduce the amount of Exchange Notes whose holders must consent to an
amendment; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Exchange
Notes; (iii) reduce the principal of or change or have the effect of changing
the fixed maturity of any Exchange Notes, or change the date on which any
Exchange Notes may be subject to redemption or repurchase, or reduce the
redemption or repurchase price therefor; (iv) make any Exchange Notes payable in
money other than that stated in the Exchange Notes; (v) make any change in
provisions of the Indenture protecting the right of each holder of a Note to
receive payment of principal of and interest on such Exchange Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
holders of a majority in principal amount of the Exchange Notes to waive
Defaults or Events of Default (other than Defaults or Events of Default with
respect to the payment of principal of or interest on the Exchange Notes); (vi)
amend, change or modify in any material respect the obligation of the Company to
make and consummate a Change of Control Offer or make and consummate a Net
Proceeds Offer with respect to any Asset Sale that has been consummated or
modify any of the provisions or definitions with respect thereto; (vii) modify
the subordination provisions (including the related definitions) of the
Indenture to adversely affect the holders of Exchange Notes in any material
respect; or (ix) release any Guarantor from any of its obligations under its
Exchange Note Guarantee or the Indenture otherwise than in accordance with the
Indenture. Any amendment or modification of the subordination provisions of the
Indenture shall not be effective as to any holder of the then outstanding Senior
Indebtedness without the written consent of such holder.
ADDITIONAL INFORMATION
The Indenture provides that the Company will deliver to the Trustee within
15 days after the filing of the same with the Commission copies of the quarterly
and annual reports and of the information, documents and other reports, if any,
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. The Indenture further provides that,
notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the Commission, to the extent permitted, and provide the Trustee and
Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of the Trust Indenture Act sec. 314(a).
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the definition of other terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness (i) of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or (ii) assumed in connection with the acquisition of assets from
such Person, in each case whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or
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such acquisition. Acquired Indebtedness shall be deemed to have been incurred,
with respect to clause (i) of the preceding sentence, on the date such Person
becomes a Restricted Subsidiary of the Company and, with respect to clause (ii)
of the preceding sentence, on the date of consummation of such acquisition of
assets.
"Affiliate" means a Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Company. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the foregoing, no Person (other than the Company or
any Subsidiary of the Company) in whom a Receivables Entity makes an Investment
in connection with a Qualified Receivables Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"all or substantially all" shall have the meaning given such phrase in the
Revised Model Business Corporation Act.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company; or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
Asset Sales shall not include (i) any transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $2.0 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets," (iii) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (iv) the factoring of accounts
receivable arising in the ordinary course of business pursuant to arrangements
customary in the industry, (v) the licensing of intellectual property, (vi)
disposals or replacements of obsolete equipment in the ordinary course of
business, (vii) the sale, lease, conveyance, disposition or other transfer by
the Company or any Restricted Subsidiary of assets or property in transactions
constituting Investments that are not prohibited under the "Limitation on
Restricted Payments" covenant, (viii) leases or subleases to third persons not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries, (ix) the sale of properties (in one transaction or
a series of related transactions) to be acquired by the Company on or about
February 1, 1999 related to the Company's acquisition of Visionworks Holdings,
Inc., or the capital lease in respect of such properties prior to the
acquisition thereof, to the extent that the consideration to be received by the
Company or any of its Restricted Subsidiaries in any such transaction or series
of related transactions does not exceed $10.0 million, (x) sales of accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" to a Receivables Entity, or (xi) transfers
of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" (or a fractional undivided
interest therein) by a Receivables Entity in a Qualified Receivables
Transaction.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable under or in respect of the New Credit
Facility and any related notes, collateral documents, letters of credit and
guarantees, including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the relevant contractual rate provided
in the New Credit Facility whether or not a claim for post-filing interest is
allowed in
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such proceedings), fees, charges, expenses, indemnities, reimbursement
obligations, guarantees and all other amounts payable thereunder or in respect
thereof.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated) of corporate stock, including each class of common stock and
preferred stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200 million; (v) certificates of deposit
or bankers' acceptances or similar instruments maturing within one year from the
date of acquisition thereof issued by any foreign bank that is a lender under
the New Credit Facility having at the date of acquisition thereof combined
capital and surplus of not less than $500 million; (vi) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) or clause (v) above; and (vii)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (vi) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons (other than one or more
Permitted Holders) for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of the Indenture); (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than one or more Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing 50% or more of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Change of Control Triggering Event" means the occurrence of a Change of
Control and the failure of the Exchange Notes to have a Minimum Rating on the
30th day after the occurrence of such Change of Control.
"Company" means Eye Care Centers of America, Inc., a Texas corporation.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in
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accordance with GAAP for such period, (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges and (D) (i) cash charges attributable to the
exercise of employee options vesting upon the consummation of the
Recapitalization and (ii) for any four quarter period that includes one or more
fiscal quarters ending within the period from the Issue Date to the first
anniversary of the Issue Date, cash restructuring or nonrecurring charges
incurred in connection with the Recapitalization; provided, however, that the
cash charges in (i) and (ii) shall not exceed $2.0 million in the aggregate
since the Issue Date.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period, (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
pro forma adjustments for cost savings ("Cost Savings Adjustments") that the
Company reasonably believes in good faith could have been achieved during the
Four Quarter Period as a result of such acquisition or disposition (provided
that both (A) such cost savings were identified and quantified in an Officers'
Certificate delivered to the Trustee at the time of the consummation of the
acquisition or disposition and (B) with respect to each acquisition or
disposition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company within 90 days
of such acquisition or disposition to effect such cost savings identified in
such Officers' Certificate and with respect to any other acquisition or
disposition, such Officers' Certificate sets forth the specific steps to be
taken within the 90 days after such acquisition or disposition to accomplish
such cost savings) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Four Quarter Period, and (iii) with respect to any such Four Quarter Period
commencing prior to the Recapitalization, the Recapitalization (including any
Cost Savings Adjustments), which shall be deemed to have taken place on the
first day of such Four Quarter Period, and (iv) any asset sales or asset
acquisitions (including any Consolidated EBITDA (including any Cost Savings
Adjustments) attributable to the assets which are the subject of the asset
acquisition or asset sale during the Four Quarter Period) that have been made by
any Person that has become a Restricted Subsidiary of the Company or has been
merged with or into the Company or any Restricted Subsidiary of the Company
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date that would have
constituted Asset Sales or Asset Acquisitions had such transactions occurred
when such Person was a Restricted Subsidiary of the Company or subsequent to
such Person's merger into the Company, as if such asset sale or asset
acquisition (including the incurrence, assumption or liability for any
Indebtedness or Acquired Indebtedness in connection therewith) occurred on the
first day of the Four Quarter Period; provided that to the extent that clause
(ii) or (iv) of this sentence requires that pro forma effect be given to an
asset sale or asset acquisition, such pro forma calculation shall be based upon
the four full fiscal quarters, immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed of for which financial information is available. If such Person or any
of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of
a third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or
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any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs relating to the
Recapitalization and the financing therefor or relating to retired or existing
Indebtedness and amortization or write-off of customary debt issuance costs
relating to future Indebtedness incurred in the ordinary course of business)
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
Federal, state and local tax rate of such Person expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication, (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $2.0 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b) gains and losses due solely to fluctuations in
currency values and related tax effects according to GAAP, (c) items classified
as extraordinary, unusual or nonrecurring gains and losses, and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (f) the net loss of
any Person other than a Restricted Subsidiary of the Company, (g) the net income
of any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to the Company or a Restricted Subsidiary of the
Company by such Person unless (and to the extent), in the case of a Restricted
Subsidiary of the Company who receives such dividends or distributions, such
Restricted Subsidiary is subject to clause (e) above, (h) one time non-cash
compensation charges, including any arising from existing stock options
resulting from the Recapitalization, and (i) bonus payments to be paid to senior
management of the Company in connection with the Recapitalization within 90 days
of the Issue Date in an aggregate amount not to exceed $1.0 million.
Notwithstanding the foregoing, it is understood that the payment of dividends on
Preferred Stock shall not reduce Consolidated Net Income.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries
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reducing Consolidated Net Income of such Person and its Restricted Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP
(excluding any such charges which require an accrual of or a reserve for cash
charges for any future period).
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date, (ii) was nominated for election or elected to such
Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of a Permitted Holder or was nominated by a
Permitted Holder or any designees of a Permitted Holder on the Board of
Directors.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least
$25 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness or another writing as a
"Designated Senior Indebtedness" for purposes of the Indenture.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than an
event which would constitute a Change of Control Triggering Event), matures
(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof (except, in
each case, upon the occurrence of a Change of Control Triggering Event) on or
prior to the final maturity date of the Exchange Notes; provided that Capital
Stock of the Company that is held by a current or former employee of the Company
subject to a put option and/or a call option with the Company triggered by the
termination of such employee's employment with the Company and/or the Company's
performance shall not be deemed to be Disqualified Capital Stock solely by
virtue of such call option and/or put option.
"fair market value" means, unless otherwise specified, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the Issue Date, including, without limitation, those
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 approved by a significant segment of the
accounting profession.
"Guarantor" means (i) each of Enclave Advancement Group, Inc., a Texas
corporation, ECCA Managed Vision Care, Inc., a Texas corporation, Visionworks
Holdings, Inc., a Florida corporation, Visionworks, Inc., a Florida corporation,
Visionworks Properties, Inc., a Florida corporation, Eye Care Holdings, Inc., a
Delaware corporation, Visionary Retail Management, Inc., a Delaware corporation,
Visionary Properties, Inc., a Delaware corporation, Visionary MSO, Inc., a
Delaware corporation, The Samit Group, Inc., a Delaware corporation, Hour Eyes,
Inc., a Maryland corporation, Skylab Optical, Inc., a Virginia corporation, and
Metropolitan Vision Services, Inc., a Virginia corporation and (ii) each of the
Company's Restricted Subsidiaries that in the future executes a supplemental
indenture in which such Restricted Subsidiary agrees to be bound by the terms of
the Indenture as a Guarantor; provided that any
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Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Exchange Note Guarantee is released in accordance
with the terms of the Indenture.
"Guarantor Senior Indebtedness" means with respect to a Guarantor, (i) the
Bank Indebtedness and (ii) all Indebtedness of such Guarantor including interest
thereon (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Guarantor at the relevant
contractual rate provided in the documentation relating thereto whether or not a
claim for post-filing interest is allowed in such proceedings), whether
outstanding on the Issue Date or thereafter incurred, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is expressly provided that such obligations are not superior in right of payment
to the Exchange Note Guarantee of such Guarantor; provided, however, that
Guarantor Senior Indebtedness shall not include (1) any obligation of such
Guarantor to any Subsidiary of such Guarantor, (2) any liability for Federal,
state, local or other taxes owed or owing by such Guarantor, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Guarantor which is expressly
subordinate in right of payment to any other Indebtedness of such Guarantor,
including any Senior Subordinated Indebtedness and any Subordinated Obligations,
(5) any obligations to repurchase, redeem or make payments owing with respect to
any Capital Stock or (6) that portion of any Indebtedness incurred in violation
of the Indenture provisions set forth under "Limitation on Incurrence of
Additional Indebtedness" (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (6) if the holder(s) of
such obligation or their representative and the Trustee shall have received an
Officers' Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture).
"Indebtedness" means with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (v) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person but
which obligations are not assumed by such Person, the amount of such obligation
being deemed to be the lesser of the fair market value of such property or asset
or the amount of the obligation so secured, (viii) all obligations under
currency swap agreements and interest swap agreements of such Person and (ix)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital Stock
and (y) any transfer of accounts receivable or other assets which constitute a
sale for purposes of GAAP shall not constitute Indebtedness hereunder.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount.
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"Investment" by any Person in any other Person means, with respect to any
Person, any direct or indirect loan or other extension of credit (including,
without limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, such other Person. "Investment" shall
exclude extensions of trade credit by the Company and its Restricted
Subsidiaries on commercially reasonable terms in accordance with normal trade
practices of the Company or such Restricted Subsidiary, as the case may be. For
the purposes of the "Limitation on Restricted Payments" covenant, (i) the
Company shall be deemed to have made an "Investment" equal to the fair market
value of the net assets of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary and the aggregate
amount of Investments made on the Issue Date shall exclude (to the extent the
designation as an Unrestricted Subsidiary was included as a Restricted Payment)
the fair market value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary,
not to exceed the amount of the Investment deemed made at the date of
designation thereof as an Unrestricted Subsidiary, and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
writedowns or write-offs with respect to such Investment, reduced by the payment
of dividends or distributions (including tax sharing payments) in connection
with such Investment or any other amounts received in respect of such
Investment, provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% (or 80% in the case of clause (ix) of the definition of
"Permitted Investments") of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Initial Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Minimum Rating" means (i) a rating of at least BBB- (or equivalent
successor rating) by S&P and (ii) a rating of at least Baa3 (or equivalent
successor rating) by Moody's.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) out-of-pocket expenses and fees relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Senior Indebtedness that is required
to be repaid in connection with such Asset Sale, (d) any portion of cash
proceeds which the Company determines in good faith should be reserved for
post-closing adjustments, it being understood and agreed that on the day that
all such post-closing adjustments have been determined, the amount (if any) by
which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Subsidiaries shall
constitute Net Cash Proceeds on such date; provided that, in the case of the
sale by the Company of an asset constituting an Investment made after the Issue
Date (other than a Permitted Investment), the "Net Cash Proceeds" in respect of
such Asset Sale shall not include the lesser of (x) the cash received with
respect to such Asset Sale and (y) the initial amount of such Investment, less,
in the case of clause (y), all amounts (up to an amount not to exceed the
initial
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amount of such Investment) received by the Company with respect to such
Investment, whether by dividend, sale, liquidation or repayment, in each case
prior to the date of such Asset Sale.
"New Credit Facility" means (i) the credit agreement dated as of the Issue
Date, among the Company, the lenders party thereto from time to time and Bankers
Trust Corporation, as administrative agent, and Merrill Lynch Capital
Corporation, as syndication agent, and (ii) the guarantee by the Company of the
Poth Loan, in each case together with the related documents thereto (including,
without limitation, any guarantee agreements, promissory notes and collateral
documents), as such agreements may be amended, supplemented or otherwise
modified from time to time, or refunded, refinanced, restructured, replaced,
renewed, repaid or extended from time to time (whether in whole or in part and
whether with the original agents and lenders or other agents and lenders or
otherwise, and whether provided under the original New Credit Facility or one or
more other credit agreements or otherwise) including, without limitation, to
increase the amount of available borrowings thereunder or to add Restricted
Subsidiaries as additional borrowers or guarantors or otherwise.
"Permitted Holder" means and includes (i) the Principal or any of its
Affiliates, (ii) any corporation the outstanding voting power of the capital
stock of which is beneficially owned, directly or indirectly, by the Principal
or any of its Affiliates in substantially the same proportions as their
ownership of the voting power of the capital stock of the Company, or (iii) any
underwriter during the period engaged in a firm commitment underwriting on
behalf of the Company with respect to the shares of capital stock being
underwritten.
"Permitted Indebtedness" means, without duplication, (i) the Exchange Notes
and the Exchange Note Guarantees, (ii) Indebtedness incurred pursuant to the New
Credit Facility in an aggregate outstanding principal amount at any time not to
exceed the maximum aggregate amount of the commitments in effect on the Issue
Date and permitted in the future pursuant to the New Credit Facility as in
effect on the Issue Date (without giving effect to any reductions of term loan
commitments on the Issue Date), plus $1.0 million in connection with the
guarantee by the Company of the Poth Loan (A) less the amount of all mandatory
principal payments actually made in respect of the Term Loan Facility (excluding
any such repayment to the extent refinanced and replaced at the time of payment)
and (B) reduced by any required permanent repayments actually made (which are
accompanied by a corresponding permanent commitment reduction) in respect of the
Revolving Credit Facility(excluding any such repayment and commitment reductions
to the extent refinanced and replaced at the time of payment) in each case
pursuant to this clause (B), actually effected in satisfaction of the Net Cash
Proceeds requirement described under "Certain Covenants--Limitation on Asset
Sales" (it being recognized that a reduction in any borrowing base thereunder in
and of itself shall not be deemed a required permanent repayment), (iii) other
Indebtedness of the Company and its Restricted Subsidiaries outstanding on the
Issue Date reduced by the amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent reductions thereon, (iv)
Interest Swap Obligations of the Company or any of its Restricted Subsidiaries
covering Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that any Indebtedness to which any such Interest Swap Obligations
correspond is otherwise permitted to be incurred under the Indenture; provided,
further, that such Interest Swap Obligations are entered into, in the judgment
of the Company, to protect the Company and its Restricted Subsidiaries from
fluctuation in interest rates on their respective outstanding Indebtedness, (v)
Indebtedness of the Company or any of its Restricted Subsidiaries under Currency
Agreements entered into, in the judgment of the Company, to protect the Company
or such Restricted Subsidiary from foreign currency exchange rates, (vi)
intercompany Indebtedness owed by any Restricted Subsidiary of the Company to
the Company or any Restricted Subsidiary of the Company or by the Company to any
Restricted Subsidiary, (vii) Acquired Indebtedness of the Company or any
Restricted Subsidiary of the Company to the extent the Company could have
incurred such Indebtedness in accordance with the "Limitation on Incurrence of
Additional Indebtedness" covenant (without giving effect to the exception for
Permitted Indebtedness) on the date such Indebtedness became Acquired
Indebtedness; provided that, in the case of Acquired Indebtedness of a
Restricted Subsidiary of the Company, such Acquired Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company, (viii) Indebtedness arising
from the honoring by a bank or other financial institution of a check, draft or
other similar instrument inadvertently drawn against insufficient funds in the
ordinary course of business; provided that such Indebtedness is extinguished
within five business days of its incurrence, (ix) any refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension, substitution,
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supplement, reissuance or resale of existing or future Indebtedness, including
any additional Indebtedness incurred to pay interest or premiums required by the
instruments governing such existing or future Indebtedness as in effect at the
time of issuance thereof ("Required Premiums") and fees in connection therewith;
provided that any such event shall not (1) result in an increase in the
aggregate principal amount of Permitted Indebtedness (except to the extent such
increase is a result of a simultaneous incurrence of additional Indebtedness (A)
to pay Required Premiums and related fees or (B) otherwise permitted to be
incurred under the Indenture) of the Company and its Restricted Subsidiaries and
(2) create Indebtedness with a Weighted Average Life to Maturity at the time
such Indebtedness is incurred that is less than the Weighted Average Life to
Maturity at such time of the Indebtedness being refinanced, modified, replaced,
renewed, restated, refunded, deferred, extended, substituted, supplemented,
reissued or resold (except that this subclause (2) will not apply in the event
the Indebtedness being refinanced, modified, replaced, renewed, restated,
refunded, deferred, extended, substituted, supplemented, reissued or resold was
originally incurred in reliance upon clauses (vi) or (xv) of this definition);
provided that no Restricted Subsidiary of the Company may refinance any
Indebtedness pursuant to this clause (ix) other than its own Indebtedness, (x)
Indebtedness (including Capitalized Lease Obligations) incurred by the Company
or any Restricted Subsidiary to finance the purchase, lease or improvement of
property (real or personal) or equipment (whether through the direct purchase of
assets or the Capital Stock of any Person owning such assets) in an aggregate
principal amount outstanding not to exceed $10.0 million at the time of any
incurrence thereof (which amount may, but shall not be required to be incurred
pursuant to the New Credit Facility, but shall be deemed not to include any such
Indebtedness incurred in whole or in part under the New Credit Facility to the
extent permitted by clause (ii) above or clause (xvi) below or pursuant to the
proviso to the "Limitation on Incurrence of Additional Indebtedness" covenant),
(xi) Indebtedness incurred by the Company or any of its Restricted Subsidiaries
constituting reimbursement obligations with respect to letters of credit issued
in the ordinary course of business, including, without limitation, letters of
credit in respect of workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding workers'
compensation claims, (xii) Indebtedness arising from agreements of the Company
or a Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition, provided that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition, (xiii) the incurrence by a Receivables Entity of Indebtedness in a
Qualified Receivables Transaction that is not recourse to the Company or any
Restricted Subsidiary of the Company (except for Standard Securitization
Undertakings), (xiv) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course of business, (xv) Indebtedness consisting of
guarantees (x) by the Company of Indebtedness, leases and any other obligation
or liability permitted to be incurred under the Indenture by Restricted
Subsidiaries of the Company, and (y) by Restricted Subsidiaries of the Company
that are Guarantors of Indebtedness, leases and any other obligation or
liability permitted to be incurred under the Indenture by the Company or other
Restricted Subsidiaries of the Company, and (xvi) additional Indebtedness of the
Company or any Restricted Subsidiary of the Company that is a Guarantor in an
aggregate principal amount not to exceed $10.0 million at any one time
outstanding (which amount may, but shall not be required to, be incurred
pursuant to the New Credit Facility, but shall not be deemed to include any such
Indebtedness incurred in whole or in part under the New Credit Facility to the
extent permitted by clause (ii) or clause (x) above or pursuant to the proviso
to the "Limitation on Incurrence of Additional Indebtedness" covenant).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Restricted Subsidiary of the Company
(whether existing on the Issue Date or created thereafter) and Investments in
the Company by any Restricted Subsidiary of the Company; (ii) cash and Cash
Equivalents; (iii) Investments existing on the Issue Date and Investments made
on the Issue Date pursuant to the Recapitalization Agreement; (iv) loans and
advances to employees, officers and directors of the Company and its Restricted
Subsidiaries not in excess of $3.0 million at any one time outstanding; (v)
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accounts receivable owing to the Company or any Restricted Subsidiary created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however that such trade terms
may include such concessionary trade terms as the Company or such Restricted
Subsidiary deems reasonable under the circumstances; (vi) Currency Agreements
and Interest Swap Obligations entered into by the Company or any of its
Restricted Subsidiaries for bona fide business reasons and not for speculative
purposes, and otherwise in compliance with the Indenture; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) guarantees by the Company or any of its
Restricted Subsidiaries of Indebtedness otherwise permitted to be incurred by
the Company or any of its Restricted Subsidiaries under the Indenture; (ix)
Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (A) such Person becomes a Restricted
Subsidiary of the Company or (B) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or a Restricted Subsidiary of
the Company; (x) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (x) that
are at the time outstanding, not exceeding $5.0 million at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value), plus an
amount equal to (A) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date of Qualified Capital Stock of the
Company (including Qualified Capital Stock issued upon the conversion of
convertible Indebtedness or in exchange for outstanding Indebtedness or as
capital contributions to the Company (other than from a Subsidiary) ) and (B)
without duplication of any amounts included in clause (x) (A) above, 100% of the
aggregate net cash proceeds of any equity contribution received by the Company
from a holder of the Company's Capital Stock, that in the case of amounts
described in clause (x) (A) or (x) (B) are applied by the Company within 180
days after receipt, to make additional Permitted Investments under this clause
(x) (such additional Permitted Investments being referred to collectively as
"Stock Permitted Investments"); (xi) any Investment by the Company or a
Restricted Subsidiary of the Company in a Receivables Entity or any Investment
by a Receivables Entity in any other Person in connection with a Qualified
Receivables Transaction, including investments of funds held in accounts
permitted or required by the arrangements governing such Qualified Receivables
Transaction or any related Indebtedness; provided that any Investment in a
Receivables Entity is in the form of a Purchase Money Note, contribution of
additional Receivables or an equity interest; (xii) Investments received by the
Company or its Restricted Subsidiaries as consideration for asset sales,
including Asset Sales; provided in the case of an Asset Sale, (A) such
Investment does not exceed 25% of the consideration received for such Asset Sale
and (B) such Asset Sale is otherwise effected in compliance with the "Limitation
on Asset Sales" covenant; (xiii) Investments by the Company or its Restricted
Subsidiaries in joint ventures in an aggregate amount not in excess of
$5.0 million at any time outstanding; and (xiv) that portion of any Investment
where the consideration provided by the Company is Capital Stock of the Company
(other than Disqualified Capital Stock). Any net cash proceeds that are used by
the Company or any of its Restricted Subsidiaries to make Stock Permitted
Investments pursuant to clause (x) of this definition shall not be included in
subclauses (x) and (y) of clause (iii) of the first paragraph of the "Limitation
on Restricted Payments" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens securing the Exchange Notes;
(ii) Liens securing Acquired Indebtedness incurred in reliance on
clause (vii) of the definition of Permitted Indebtedness; provided that
such Liens do not extend to or cover any property or assets of the Company
or of any of its Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company;
(iii) Liens existing on the Issue Date, together with any Liens
securing Indebtedness incurred in reliance on clause (ix) of the definition
of Permitted Indebtedness in order to refinance the Indebtedness secured by
Liens existing on the Issue Date; provided that the Liens securing the
refinancing
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Indebtedness shall not extend to property other than that pledged under the
Liens securing the Indebtedness being refinanced;
(iv) Liens in favor of the Company on the property or assets, or any
proceeds, income or profit therefrom, of any Restricted Subsidiary; and
(v) other Liens securing Senior Subordinated Indebtedness of the
Company or any Restricted Subsidiary that is a Guarantor, provided that the
maximum aggregate amount of outstanding obligations secured thereby shall
not at any time exceed $5.0 million.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof or any other entity.
"Poth Loan" shall mean the loan in an initial aggregate principal amount of
$1.0 million to Dr. Daniel Poth in connection with his previous purchase of the
stock of Dr. Samit Hour Eyes Optometrist, P.C., as the same may be amended or
modified from time to time pursuant to the terms thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Principal" means Thomas H. Lee Company and its Affiliates.
"Productive Assets" means assets (including Capital Stock of a Person that
directly or indirectly owns assets) of a kind used or usable in the businesses
of the Company and its Restricted Subsidiaries as, or related to such business,
conducted on the date of the relevant Asset Sale.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables Transaction
to a Receivables Entity, which note (a) shall be repaid from cash available to
the Receivables Entity other than (i) amounts required to be established as
reserves pursuant to agreements, (ii) amounts paid to investors in respect of
interest, (iii) principal and other amounts owing to such investors and (iv)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in (a).
"Qualified Capital Stock" means any stock that is not Disqualified Capital
Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto, including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable. The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"Recapitalization" means the transactions contemplated by the
Recapitalization Agreement, together with the financings therefor.
"Recapitalization Agreement" means the Recapitalization Agreement dated as
of March 6, 1998 by and between ECCA Merger Corp., a Delaware corporation, and
the Company, as in effect on the Issue Date.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable and related assets) which engages in no activities other
than in connection with the financing of accounts receivable, all proceeds
thereof and all rights (contractual or other), collateral and other assets
relating thereto, and any business or activities incidental or
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related to such business, and which is designated by the Board of Directors of
the Company (as provided below) as a Receivables Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms which the Company reasonably
believes to be no less favorable to the Company or such Subsidiary than those
that might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable, and (c) to which neither the
Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results other than through the contribution of
additional Receivables, related security and collections thereto and proceeds of
the foregoing. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Revolving Credit Facility under the
New Credit Facility.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Secured Indebtedness" means any Indebtedness of the Company or any
Guarantor secured by a Lien.
"Senior Indebtedness" means (i) the Bank Indebtedness and (ii) all
Indebtedness of the Company, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the relevant contractual rate provided
in the documentation relating thereto whether or not a claim for post-filing
interest is allowed in such proceedings), whether outstanding on the Issue Date
or thereafter incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is expressly provided that such
obligations are not superior in right of payment to the Exchange Notes;
provided, however, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary of the Company, (2) any liability for Federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company which is expressly subordinate
in right of payment to any other Indebtedness of the Company, including any
Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any
obligations to repurchase, redeem or make payments owing with respect to any
Capital
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Stock or (6) that portion of any Indebtedness incurred in violation of the
Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness" (but, as to any such obligation, no such violation shall be deemed
to exist for purposes of this clause (6) if the holder(s) of such obligation or
their representative and the Trustee shall have received an Officers'
Certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness, that
the incurrence of the entire committed amount thereof at the date on which the
initial borrowing thereunder is made would not) violate such provisions of the
Indenture).
"Senior Subordinated Indebtedness" means, with respect to the Company or
any Guarantor, the Exchange Notes or the Exchange Note Guarantee of such
Guarantor, as applicable, and any other Indebtedness of the Company or such
Guarantor, as applicable, that specifically provides that such Indebtedness is
to rank pari passu with the Exchange Notes or the Exchange Note Guarantee of
such Guarantor, as applicable, and is not by its express terms subordinate in
right of payment to any Indebtedness of the Company or such Guarantor, as
applicable, which is not Senior Indebtedness or Guarantor Senior Indebtedness,
as applicable.
"Significant Subsidiary" means, as of any date of determination, for any
Person, each Restricted Subsidiary of such Person which (i) for the most recent
fiscal year of such Person accounted for more than 10% of consolidated revenues
or consolidated net income of such Person or (ii) as at the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of such Person.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which the Company reasonably believes to be customary in an accounts
receivable transaction.
"Subordinated Obligation" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as applicable
(whether outstanding on the Issue Date or thereafter incurred), which is
expressly subordinate in right of payment to the Exchange Notes or the Exchange
Note Guarantee of such Guarantor, as applicable, pursuant to a written
agreement.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Term Loan Facility" means the Term Loan Facility under the New Credit
Facility.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation and treating all Indebtedness of such Unrestricted Subsidiary
as being incurred on such date, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
the "Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the
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resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (i) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Subsidiary" means any Restricted Subsidiary of the Company
all the outstanding voting securities of which (other than directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned, directly or indirectly, by the Company.
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DESCRIPTION OF INITIAL NOTES
The terms of the Initial Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Exchange Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Initial Notes are not freely transferable by holders thereof and
were issued subject to certain covenants regarding registration as provided
therein and in the Registration Rights Agreement (which covenants will terminate
and be of no further force or effect upon completion of this Exchange Offer).
See "Exchange Offer; Registration Rights Agreement."
DESCRIPTION OF NEW PREFERRED STOCK
In connection with the Recapitalization, the Company issued 300,000 shares
of New Preferred Stock, par value $.01 per share (the "New Preferred Stock").
See "The Recapitalization."
The liquidation preference of the New Preferred Stock is $100 per share
plus accrued but unpaid dividends. Holders of the New Preferred Stock will be
entitled, subject to the rights of creditors, in the event of any voluntary or
involuntary liquidation of the Company, to an amount in cash equal to $100 for
each share outstanding plus all accrued and unpaid dividends. The rights of the
holders of the New Preferred Stock upon liquidation of the Company rank prior to
those of the holders of Common Stock.
Dividends on shares of New Preferred Stock is cumulative from the date of
issue and payable when and as may be declared from time to time by the Board of
Directors of the Company. Such dividends will accrue on a daily basis (whether
or not declared) from the original date of issue at an annual rate per share
equal to 13% of the original purchase price per share, with such amount to be
compounded quarterly.
The New Preferred Stock is redeemable at the option of the Company, in
whole or in part, at $100 per share plus (i) the per share dividend rate and
(ii) all accumulated and unpaid dividends, if any, to the date of redemption,
upon the occurrence of an offering of equity securities, a change of control or
certain sales of assets.
The holders of New Preferred Stock do not have voting rights with respect
to their New Preferred Stock except as may be required by applicable law.
To the extent the holders of the New Preferred Stock transfer their shares
to one or more unaffiliated third parties, the transferees will have the option,
subject to the Company's consent to such transfer which it may withhold in its
sole discretion, to modify the terms of their shares to provide as follows (the
"Modified Preferred Stock"). The Modified Preferred Stock will be mandatorily
redeemable by the Company on the twelfth anniversary of the date of modification
at $100 per share plus all accumulated and unpaid dividends, if any, to the date
of redemption. The Company also will be required to make an offer to purchase
all outstanding shares of Modified Preferred Stock in connection with a Change
of Control Triggering Event (as defined in the Indenture) at a purchase price of
$101 per share plus all accumulated and unpaid dividends, if any, to the date of
purchase. In addition, the Modified Preferred Stock will be redeemable in
certain events at the option of the Company at $100 per share plus certain
redemption premiums and all accumulated and unpaid dividends, if any, to the
date of redemption. Dividends will continue to accrue (whether or not declared)
on the Modified Preferred Stock at the same rate as specified above, provided
that if the Company fails to declare and pay dividends in cash on the Modified
Preferred Stock after the fifth anniversary of the date of modification, then
dividends on the Modified Preferred Stock will accrue at an annual rate equal to
the indicated rate plus 200 basis points, compounded quarterly, until such time
as the Company pays such dividends in cash. The Company also will have the
option at any time, subject to compliance by the Company with its then existing
debt instruments (including the Indenture), to exchange all, but not less than
all, of the outstanding shares of Modified Preferred Stock for subordinated
debentures (the "Exchange Debentures") with an aggregate original principal
amount equal to the aggregate original purchase price of the shares that are
exchanged plus all accumulated and unpaid dividends thereon, if any, to the date
of exchange. The Exchange Debentures will be due and payable in full in one
installment on the twelfth anniversary of the date of modification of the New
Preferred Stock, will be entitled to the benefit of certain additional
restrictive covenants, and will bear interest at an annual rate equal to the
dividend rate applicable to the Modified
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Preferred Stock, with such amount to be compounded quarterly. In all other
material respects, the terms of the Exchange Debentures will be substantially
similar to the terms of the Modified Preferred Stock, and the terms of the
Modified Preferred Stock will be substantially similar to the terms of the New
Preferred Stock.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company, the Guarantors and the Initial Purchasers entered into a
registration rights agreement (the "Registration Rights Agreement"), dated as of
April 24, 1998, pursuant to which each of the Company and the Guarantors agreed
that they would, at their expense, for the benefit of the holders of the Notes
(the "Holders"), (i) within 60 days after the Issue Date (the "Filing Date"),
file a registration statement on an appropriate registration form (the "Exchange
Offer Registration Statement") with respect to a registered offer (the "Exchange
Offer") to exchange the Initial Notes for the Exchange Notes, guaranteed on a
senior subordinated basis by the Guarantors, which Exchange Notes will have
terms substantially identical in all material respects to the Fixed Rate Notes
and Floating Rate Notes, respectively (except that the Exchange Notes will not
contain terms with respect to transfer restrictions) and (ii) cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 135 days after the Issue Date. Upon the Exchange Offer Registration
Statement being declared effective, the Company will offer the Exchange Notes
(and the related guarantees) in exchange for surrender of the Notes. The Company
will keep the Exchange Offer open for not less than 30 days (or longer if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders. For each of the Fixed Rate Notes and the Floating Rate
Notes surrendered to the Company pursuant to the Exchange Offer, the Holder who
surrendered such Notes will receive a Fixed Rate Exchange Note or Floating Rate
Exchange Note, as applicable, having a principal amount equal to that of the
surrendered Notes. Interest on each Exchange Note will accrue (A) from the later
of (i) the last interest payment date on which interest was paid on the Note
surrendered in exchange therefor, or (ii) if the Note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on the Notes, from the Issue Date.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Exchange Notes and the related
Guarantees are freely transferable by holders thereof (other than affiliates of
the Company) after the Exchange Offer without further registration under the
Securities Act; provided, however, that each Holder that wishes to exchange its
Notes for Exchange Notes are required to represent (i) that any Exchange Notes
to be received by it will be acquired in the ordinary course of its business,
(ii) that at the time of the commencement of the Exchange Offer it has no
arrangement or understanding with any person to participate in the distribution
(within the meaning of Securities Act) of the Exchange Notes in violation of the
Securities Act, (iii) that it is not an "affiliate" (as defined in Rule 405
promulgated under Securities Act) of the Company, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of Exchange Notes and (v) if such Holder is a broker-dealer (a
"Participating Broker-Dealer") that will receive Exchange Notes for its own
account in exchange for Notes that were acquired as a result of market-making or
other trading activities, that it will deliver a prospectus in connection with
any resale of such Exchange Notes. The Company agreed to make available, during
the period required by the Securities Act, a prospectus meeting the requirements
of the Securities Act for use by Participating Broker-Dealers and other persons,
if any, with similar prospectus delivery requirements for use in connection with
any resale of Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 165
days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered Exchange Notes so request, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Company or within the meaning of the Securities Act), then
in each case, the Company will (x) promptly deliver to the Holders and the
Trustee written notice thereof and (y) at their sole expense, (a) as promptly as
96
<PAGE> 101
practicable, file a shelf registration statement covering resales of the Notes
(the "Shelf Registration Statement"), (b) use their best efforts to keep
effective the Shelf Registration Statement until the earlier of two years after
its effective date or such time as all of the applicable Notes have been sold
thereunder. The Company will, in the event that a Shelf Registration Statement
is filed, provide to each Holder copies of the prospectus that is a part of the
Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Notes. A Holder
that sells Notes pursuant to the Shelf Registration Statement will be required
to be named as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under Securities Act in connection with such sales and will
be bound by the provisions of the Registration Rights Agreement that are
applicable to such a Holder (including certain indemnification rights and
obligations).
If the Company fails to comply with the above provision or if the Exchange
Offer Registration Statement or the Shelf Registration Statement fails to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable in respect of the Notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement or Shelf
Registration Statement is filed with the Commission on or prior to the
Filing Date or (B) notwithstanding that the Company has consummated or will
consummate an Exchange Offer, the Company is required to file a Shelf
Registration Statement and such Shelf Registration Statement is not filed
on or prior to the date required by the Registration Rights Agreement, then
commencing on the day after either such required filing date, Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.25% per annum for the first 90 days immediately following each such
filing date, such Additional Interest rate increasing by an additional
0.25% per annum at the beginning of each subsequent 90 day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to 135 days after the Issue Date or (B) notwithstanding that the
Company has consummated or will consummate an Exchange Offer, the Company
is required to file a Shelf Registration Statement and such Shelf
Registration Statement is not declared effective by the Commission on or
prior to the date required by the Registration Rights Agreement, then,
commencing on the day after either such required effectiveness date,
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.25% per annum for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional 0.25% per
annum at the beginning of each subsequent 90 day period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to the 30th day after the date on which the Exchange Offer
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of its effective date (other than after such time as all
Notes have been disposed of thereunder), then Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.25% per annum,
for the first 90 days commencing on (x) the 31st the day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above,
such Additional Interest rate increasing by an additional 0.25% per annum
at the beginning of each subsequent 90 day period;
provided, however, that the Additional Interest rate on the Notes may not
exceed in the aggregate 1.0% per annum; provided, further, however, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Notes for all Notes tendered (in the case of clause (iii)
(A) above), or upon the effectiveness of the Shelf Registration Statement which
had ceased to remain effective (in the case of clause (iii) (B) above),
Additional Interest on the Notes as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the same original interest payment dates
as the Notes.
97
<PAGE> 102
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
INCOME TAX CONSIDERATIONS
Holders of the Notes should consult their own tax advisors with respect to
their particular circumstances and with respect to the effects of state, local
or foreign tax laws to which they may be subject.
The Company believes, based upon the opinion of its counsel, Hutchins,
Wheeler & Dittmar, A Professional Corporation, that the following summary fairly
describes the material United States federal income tax consequences expected to
apply to the exchange of Initial Notes for Exchange Notes and the ownership and
disposition of Exchange Notes under currently applicable law. The discussion
does not cover all aspects of federal taxation that may be relevant to, or the
actual tax effect that any of the matters described herein will have on,
particular holders, and does not address state, local, foreign or other tax
laws. Further, the federal income tax treatment of a holder of the Initial Notes
and the Exchange Notes may vary depending on the holder's particular situation.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, taxpayers subject to the alternative
minimum tax and foreign persons) may be subject to special rules not discussed
below. The description assumes that holders of the Initial Notes and the
Exchange Notes will hold the Initial Notes and the Exchange Notes as "capital
assets" (generally, property held for investment purposes) within the meaning of
Section 1221 of the Code.
THE EXCHANGE
An exchange of Initial Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Initial Notes. As
a result, no federal income tax consequences will result to holders exchanging
Initial Notes or Exchange Notes.
THE EXCHANGE NOTES
Interest Payments on the Exchange Notes. The Initial Notes and the
Exchange Notes are debt for Federal income tax purposes. The Initial Notes were
not issued with original issue discount. The stated interest on the Initial
Notes and Exchange Notes should be considered to be "qualified stated interest"
and, therefore, will be includible in a holder's gross income (except to the
extent attributable to accrued interest at the time of purchase) as ordinary
income for federal income tax purposes in accordance with a holder's tax method
of accounting. If liquidated damages are paid (in addition to the accrual of
interest) on the Initial Notes as described above under "Exchange Offer;
Registration Rights" such liquidated damages payments generally should be
included in the Holder's gross income as ordinary income when such payment is
made.
Tax Basis. A holder's adjusted tax basis (determined by taking into
account accrued interest at the time of purchase) in an Exchange Note received
in exchange for an Initial Note will equal the cost of the Initial Note to such
holder, increased by the amounts of market discount previously included in
income by the holder and reduced by any principal payments received by such
holder with respect to the Exchange Notes and by amortized bond premium. A
holder's adjusted tax basis in an Exchange Note purchased by such holder will be
equal to the price paid for such an Exchange Note (determined by taking into
account accrued interest at the time of purchase), increased by market discount
previously included in income by the holder and reduced by any principal
payments received by such holder with respect to an Exchange Note and by
amortized bond premium. See "Market Discount and Bond Premium" below.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of an
Exchange Note, a holder will recognize taxable gain or loss, if any, equal to
the difference between the amount realized on the sale, exchange or retirement
and such holder's adjusted tax basis in such Exchange Note. Such gain or loss
will be a capital gain or loss (except to the extent of any accrued market
discount), and will be a long-term capital gain or loss if the Exchange Note has
been held for more than one year at the time of such sale, exchange or
retirement.
98
<PAGE> 103
Market Discount and Bond Premium. Holders should be aware that the market
discount provisions of the Code may affect the Exchange Notes. These rules
generally provide that a holder who purchases Exchange Notes for an amount which
is less than their principal amount will be considered to have purchased the
Exchange Notes at a "market discount" equal to the amount of such difference.
Such holder will be required to treat any gain realized upon the disposition of
the Exchange Note as interest income to the extent of the market discount that
is treated as having accrued during the period that such holder held such
Exchange Note, unless an election is made to include such market discount in
income on a current basis. A holder of an Exchange Note who acquires the
Exchange Note at a market discount and who does not elect to include market
discount in income on a current basis may also be required to defer the
deduction of a portion of the interest on any indebtedness incurred or continued
to purchase or carry the Exchange Note until the holder disposes of such
Exchange Note in a taxable transaction.
If a holder's tax basis in an Exchange Note immediately after acquisition
exceeds the stated redemption price at maturity of such Exchange Note, such
holder may be eligible to elect to deduct such excess as amortizable bond
premium pursuant to Section 171 of the Code.
Purchasers of the Exchange Notes should consult their own tax advisors as
to the application to such purchasers of the market discount and bond premium
rules.
HOLDERS OF THE INITIAL NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR
DISPOSING OF THE INITIAL NOTES AND THE EXCHANGE NOTES, INCLUDING THE APPLICATION
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN
SUCH FEDERAL TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
issued by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Initial Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Issuer has agreed that
for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1998, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuer will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer and any broker or dealer that participates in a distribution of such
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuer will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuer has agreed to pay all expenses incident to the
Exchange
99
<PAGE> 104
Offer other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
will be passed upon for the Company by Hutchins, Wheeler & Dittmar, A
Professional Corporation, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Eye Care Centers of America, Inc.
and Subsidiaries as of January 3, 1998 and December 28, 1996, and for the fiscal
years ended January 3, 1998, December 28, 1996, and December 30, 1995, appearing
in this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated and combined financial statements of The Samit
Organization as of September 30, 1997 and December 31, 1996 and for the period
January 1, 1997 through September 30, 1997 and the year ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Beers & Cutler PLLC, independent auditors, as set forth in their report thereon
appearing elsewhere herein are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Visionworks Holdings, Inc. as of
August 31, 1996, February 3, 1996, and January 28, 1995, and for the seven month
period ended August 31, 1996 and the fiscal years ended February 3, 1996 and
January 28, 1995, have been included herein and in the Prospectus in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
100
<PAGE> 105
EYE CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Statements:
Eye Care Centers of America, Inc. and Subsidiaries
Consolidated Financial Statements
Condensed Consolidated Balance Sheets at January 3, 1998
and April 4, 1998 (Unaudited).......................... F-2
Condensed Consolidated Statements of Operations for the
Thirteen Weeks Ended March 29, 1997 (Unaudited) and
April 4, 1998 (Unaudited).............................. F-3
Condensed Consolidated Statements of Cash Flows for the
Thirteen Weeks Ended March 29, 1997 (Unaudited) and
April 4, 1998 (Unaudited).............................. F-4
Notes to Condensed Consolidated Financial Statements...... F-5
Report of Independent Auditors............................ F-8
Consolidated Balance Sheets at December 28, 1996 and
January 3, 1998........................................ F-9
Consolidated Statements of Operations for the Years Ended
December 30, 1995, December 28, 1996 and January 3,
1998................................................... F-10
Consolidated Statements of Stockholders' Equity as of
December 30, 1995, December 28, 1996 and January 3,
1998................................................... F-11
Consolidated Statements of Cash Flows as of December 30,
1995, December 28, 1996 and January 3, 1998............ F-12
Notes to Consolidated Financial Statements................ F-14
The Samit Organization
Independent Auditors Report............................... F-29
Consolidated and Combined Balance Sheet................... F-30
Consolidated and Combined Statement of Income............. F-32
Consolidated and Combined Statement of Changes in
Stockholders' Equity................................... F-33
Consolidated and Combined Statement of Cash Flows......... F-34
Notes to the Consolidated and Combined Financial
Statements............................................. F-35
VisionWorks Holdings, Inc.
Report of Independent Auditors............................ F-41
Consolidated Balance Sheets at January 28, 1995, February
3, 1996, and August 31, 1996........................... F-42
Consolidated Statements of Earnings for the Periods Ended
January 28, 1995, February 3, 1996, and August 31,
1996................................................... F-43
Consolidated Statements of Stockholders' Equity as of
January 28, 1995, February 3, 1996, and August 31,
1996................................................... F-44
Consolidated Statements of Cash Flows as of January 28,
1995, February 3, 1996, and August 31, 1996............ F-45
Notes to Consolidated Financial Statements................ F-46
</TABLE>
F-1
<PAGE> 106
EYE CARE CENTERS OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 3, APRIL 4,
1998 1998
---------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 7,172 $ 4,152
Accounts and notes receivable, net............. 5,722 6,255
Inventory...................................... 26,007 26,243
Prepaid expenses and other..................... 3,566 3,555
Deferred income taxes.......................... 386 --
-------- --------
Total current assets................................ 42,853 40,205
Property & equipment, net........................... 57,212 58,662
Intangible assets, net.............................. 75,279 74,260
Other assets........................................ 4,800 4,644
-------- --------
$180,144 $177,771
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................... $ 12,801 $ 21,074
Deferred revenue............................... 3,804 4,092
Current portion of long-term debt.............. 7,003 6,991
Accrued payroll expense........................ 2,969 2,135
Accrued interest............................... 2,976 559
Other accrued expenses......................... 9,200 8,107
-------- --------
Total current liabilities........................... 38,753 42,958
Long-term debt, less current maturities............. 115,386 105,276
Deferred income taxes............................... 384 --
Deferred rent....................................... 3,042 3,089
Deferred gain....................................... 2,334 2,321
-------- --------
Total liabilities................................... 159,899 153,644
-------- --------
Redeemable preferred stock.......................... 12,117 12,337
Stockholders' Equity:
Common stock................................... 10 10
Additional paid-in capital..................... 31,245 31,025
Accumulated deficit............................ (23,127) (19,245)
-------- --------
Total shareholders' equity.......................... 8,128 11,790
-------- --------
$180,144 $177,771
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE> 107
EYE CARE CENTERS OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------
MARCH 29, APRIL 4,
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net revenues:
Optical sales.................................... $57,879 $61,358
Management fee................................... -- 661
------- -------
Total net revenues.................................... 57,879 62,019
Operating costs and expenses:
Cost of goods sold............................... 19,931 20,499
Selling, general and administrative expenses..... 30,873 33,263
Amortization of intangibles:
Goodwill.................................... 666 806
Non-compete and other intangibles........... 36 108
------- -------
Total operating costs and expenses.................... 51,506 54,676
------- -------
Income from operations................................ 6,373 7,343
Interest expense, net................................. 3,384 3,394
------- -------
Income tax expense.................................... 100 67
------- -------
Net income............................................ $ 2,889 $ 3,882
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-3
<PAGE> 108
EYE CARE CENTERS OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MARCH 29, APRIL 4
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 2,889 $ 3,882
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................... 2,668 2,831
Amortization of intangibles....................... 702 914
Other amortization................................ 263 250
Deferred revenue.................................. 286 288
Deferred rent and other........................... 258 (128)
Loss on disposition of property and equipment..... 6 55
Changes in operating assets and liabilities:
Accounts and notes receivable..................... (840) (620)
Inventory......................................... 905 (236)
Prepaid expenses and other........................ (59) (31)
Accounts payable and accrued liabilities.......... 5,446 4,610
-------- --------
Net cash provided by operating activities................... 12,524 11,815
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment.................. (2,218) (5,503)
Proceeds from sale of property and equipment........... 42 763
Collections from notes receivable...................... 112 43
-------- --------
Net cash used for investing activities...................... (2,064) (4,697)
-------- --------
Cash flows from financing activities:
Proceeds from deferred stock compensation plan......... 179 --
Payments on debt....................................... (1,279) (10,138)
Other financing activities............................. (75) --
-------- --------
Net cash provided by (used for) financing activities........ (1,175) (10,138)
-------- --------
Net increase (decrease) in cash............................. 9,285 (3,020)
Cash and cash equivalents, beginning of period.............. 10,644 7,172
-------- --------
Cash and cash equivalents, end of period.................... $ 19,929 $ 4,152
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-4
<PAGE> 109
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Eye Care
Centers of America, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and are of a
normal, recurring nature. Operating results for the thirteen week period ended
April 4, 1998 are not necessarily indicative of the results that may be expected
for the fiscal year ended January 2, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Eye Care
Centers of America, Inc.'s annual report on Form 10-K for the year ended
January 3, 1998. Certain reclassifications have been made to the prior period
statements to conform with the current period presentation.
2. RELATED PARTY TRANSACTIONS
Prior to the Recapitalization (see footnote 5), the Company was party to an
agreement with Desai Capital Management, Inc. ("DCMI"), a majority shareholder,
whereby the Company paid DCMI $144,000 per year as an advisory fee for
consulting and strategic advice and $56,000 per year for the consulting services
of certain Board of Directors members who are also employees and/or officers of
DCMI. For each of the thirteen week periods ended April 4, 1998, and March 29,
1997, the Company has expensed $50,000, respectively, related to these
agreements. As a result of the Recapitalization, the agreement with DCMI has
been canceled, and DCMI is no longer a majority shareholder of the Company (see
footnote 5).
The Company and Thomas H. Lee Company ("THL Co.") entered into a management
agreement as of the closing date of the Recapitalization (the "Management
Agreement"), pursuant to which THL Co. received a financial advisory fee of
$6.0 million in connection with structuring, negotiating and arranging the
Recapitalization and structuring, negotiating and arranging the debt financing.
In addition, pursuant to the Management Agreement, THL Co. will initially
receive $500,000 per year plus expenses for management and other consulting
services provided to the Company. After a term of ten years from the closing
date, the Management Agreement is automatically renewable on an annual basis
unless either party serves notice of termination at least ninety days prior to
the renewal date.
Prior to the Recapitalization, the Company maintained an Amended Credit
Facility (defined herein) with a foreign bank whose affiliate is Indosuez Eye
Care Partners, a shareholder of the Company. The Amended Credit Facility
provided up to $5.0 million in revolving loans and $49.0 million in term loans.
As a result of the Recapitalization, the Company is no longer a party to the
Amended Credit Facility. See "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
3. INCOME TAXES
The Company accounts for income taxes under the liability method required
by the Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." As of April 4, 1998, the Company had a net deferred tax asset,
which was fully reserved by a valuation allowance. The expected tax expense
differs from the actual tax expense due to the change in the valuation
allowance.
F-5
<PAGE> 110
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MARCH 29, APRIL 4,
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash paid for interest........................ $1,576 $5,745
Dividends accrued on redeemable preferred
stock....................................... $ 220 $ 220
</TABLE>
5. SUBSEQUENT EVENT -- THE RECAPITALIZATION
On March 6, 1998, ECCA Merger Corp. ("Merger Corp."), a Delaware
corporation formed by THL Co., and the Company entered into a recapitalization
agreement (the "Recapitalization Agreement") providing for, among other things,
the merger of such corporation with and into the Company (the "Merger" and,
together with the financing of the recapitalization and related transactions
described below, the "Recapitalization"). Upon consummation of the Merger on
April 24, 1998, Thomas H. Lee Equity Fund IV, L.P. ("THL Fund IV") and other
affiliates of THL Co. (collectively with THL Fund IV and THL Co., "THL") owned
approximately 89.7% of the issued and outstanding shares of common stock of the
Company ("Common Stock"), existing shareholders (including management) of the
Company retained approximately 7.3% of the issued and outstanding Common Stock
and management purchased additional shares representing approximately 3.0% of
the issued and outstanding Common Stock.
The Company financed the Recapitalization with (a) the proceeds from the
offering of $150.0 million aggregate principal amount of its senior subordinated
notes due 2008, consisting of $100.0 million aggregate principal amount of its
9 1/8% Senior Subordinated Notes due 2008 (the "Fixed Rate Notes") and
$50.0 million aggregate principal amount of its Floating Interest Rate
Subordinated Term Securities due 2008 (the "Floating Rate Notes" and, together
with the Fixed Rate Notes, the "Notes") (b) approximately $55.0 million of
borrowings under the New Credit Facility (defined herein) and (c) approximately
$99.4 million from the sale of capital stock to THL, Bernard W. Andrews and
other members of management (the "Equity Contribution") consisting of (i)
approximately $71.7 million from the sale of Common Stock and (ii) approximately
$27.8 million from the sale of shares of a newly created series of preferred
stock of the Company ("New Preferred Stock"). Additionally, existing
stockholders rolled over $7.9 million in Common Stock and New Preferred Stock.
The proceeds from such bank borrowings, the sale of the Notes, and the Equity
Contribution was used principally to finance the conversion into cash of the
shares of Common Stock which were not retained by existing stockholders, to
refinance certain existing indebtedness of the Company, to redeem certain
outstanding preferred stock of the Company and to pay related fees and expenses
of the Recapitalization. In connection with the Recapitalization, the Company
defeased its previously issued 12% Senior Notes due 2003 (the "Senior Notes")
and has deposited with the trustee for the Senior Notes (i) an irrevocable
notice of redemption of the Senior Notes on October 1, 1998 and (ii) United
States government securities in an amount necessary to yield on October 1, 1998
$78.4 million, which constitutes the principal amount, premium and interest
payable on the Senior Notes on the October 1, 1998 redemption date.
As a result of the Recapitalization, the Company will incur approximately
$23.2 million on non-recurring expenses related to compensation expense recorded
in connection with the exercise of employee stock options. Additionally, the
Company will incur an extraordinary charge of approximately $10.4 million
consisting of bond defeasance costs of $6.6 million and write-off of unamortized
financing fees of $3.8 million.
Effective April 24, 1998, the Board of Directors of the Company authorized
a twelve-for-one stock split to shareholders of record on that date. The par
value of the Common Stock will remain at $0.01. The stock split had no effect on
the percentage ownership of stockholders.
F-6
<PAGE> 111
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. NEW ACCOUNTING PRONOUNCEMENTS
As of January 4, 1998, the Company adopted Statement of Financial
Accounting Standards 130, Reporting Comprehensive Income ("Statement 130").
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of Statement 130
had no impact on the Company's net income or stockholders' equity. During the
first quarter of 1998 and 1997, total comprehensive income amounted to
$3,882,000 and $2,889,000 as there were no other components of comprehensive
income other than net income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("Statement 131"). This statement establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The provisions of
Statement 131 are effective for financial statements for fiscal years beginning
after December 15, 1997. Adoption in interim financial statements is not
required until the year after initial adoption; however, comparative prior year
information is required. The Company is currently evaluating the impact of this
statement on the disclosures included in its annual and interim period financial
statements.
F-7
<PAGE> 112
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Eye Care Centers of America, Inc.
San Antonio, Texas
We have audited the accompanying consolidated balance sheets of Eye Care
Centers of America, Inc. and Subsidiaries as of January 3, 1998 and December 28,
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the fiscal years ended January 3, 1998, December 28,
1996, and December 30, 1995. 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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Eye Care Centers of America, Inc. and Subsidiaries at January 3, 1998 and
December 28, 1996, and the consolidated results of their operations and their
cash flows for the fiscal years ended January 3, 1998, December 28, 1996, and
December 30, 1995 in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
San Antonio, Texas
March 2, 1998, except for Note 15
as to which the date is March 6, 1998
F-8
<PAGE> 113
EYE CARE CENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 10,644 $ 7,172
Accounts and notes receivable, less allowance for
doubtful accounts of $251 in 1996 and $318 in 1997.... 3,644 5,722
Inventory, less reserves of $561 in 1996 and 1997...... 26,175 26,007
Prepaid expenses and other............................. 1,064 3,566
Deferred income taxes.................................. 823 386
-------- --------
Total current assets........................................ 42,350 42,853
Property and equipment, net of accumulated depreciation and
amortization of $31,061 in 1996 and $41,766 in 1997....... 56,222 57,212
Intangibles, net of accumulated amortization of $21,708 in
1996 and $6,578 in 1997................................... 63,663 75,279
Other assets................................................ 5,745 4,800
-------- --------
$167,980 $180,144
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 12,693 $ 12,801
Current portion of long-term debt...................... 3,864 7,003
Deferred revenue....................................... 3,572 3,804
Accrued payroll expense................................ 3,955 2,969
Accrued interest....................................... 3,017 2,976
Other accrued expenses................................. 6,616 9,200
-------- --------
Total current liabilities................................... 33,717 38,753
Deferred income taxes....................................... 823 384
Long-term debt, less current maturities..................... 116,746 115,386
Deferred rent............................................... 1,942 3,042
Deferred gain............................................... -- 2,334
-------- --------
Total liabilities........................................... 153,228 159,899
-------- --------
Mandatorily Redeemable Cumulative Preferred Stock........... 11,220 12,117
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share; 2,000,000
shares authorized, issued and outstanding 1,008,548 in
1996 and 1,011,548 in 1997............................ 10 10
Additional paid-in capital............................. 31,864 31,245
Accumulated deficit.................................... (28,342) (23,127)
-------- --------
Total stockholders' equity.................................. 3,532 8,128
-------- --------
$167,980 $180,144
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 114
EYE CARE CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Optical Sales........................................... $140,198 $158,224 $218,958
Management Fees......................................... -- -- 653
-------- -------- --------
Net revenues............................................ 140,198 158,224 219,611
Operating costs and expenses:
Cost of goods sold................................. 47,525 51,884 77,134
Selling, general and administrative expenses....... 87,402 91,897 120,319
Amortization of intangibles:
Goodwill...................................... 995 1,424 2,722
Noncompete and other intangibles.............. 4,556 1,514 148
-------- -------- --------
Total operating costs and expenses...................... 140,478 146,719 200,323
-------- -------- --------
Income (loss) from operations........................... (280) 11,505 19,288
Interest expense, net................................... 8,839 9,899 13,738
-------- -------- --------
Income (loss) before income taxes....................... (9,119) 1,606 5,550
Income tax expense...................................... -- 188 335
-------- -------- --------
Net income (loss)....................................... $ (9,119) $ 1,418 $ 5,215
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-10
<PAGE> 115
EYE CARE CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE ACCUMULATED TOTAL
------------------ PAID-IN TRANSLATION (DEFICIT) STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS EQUITY
------ ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994................. 996,774 $10 $31,516 $(595) $(20,641) $10,290
Proceeds from deferred stock compensation
plan................................... -- -- 244 -- -- 244
Cumulative translation adjustment........ -- -- -- (84) -- (84)
Net loss................................. -- -- -- -- (9,119) (9,119)
--------- --- ------- ----- -------- -------
Balance at December 30, 1995................. 996,774 $10 $31,760 $(679) $(29,760) $ 1,331
Proceeds from deferred stock compensation
plan................................... -- -- 158 -- -- 158
Purchase of deferred stock shares........ -- -- (182) -- -- (182)
Purchase of common stock................. (6,452) -- (200) -- -- (200)
Issuance of common stock................. 10,000 -- 310 -- -- 310
Stock options exercised.................. 8,226 -- 238 -- -- 238
Dividends accrued on redeemable preferred
stock.................................. -- -- (220) -- -- (220)
Translation and other.................... -- -- -- 679 -- 679
Net income............................... -- -- -- -- 1,418 1,418
--------- --- ------- ----- -------- -------
Balance at December 28, 1996................. 1,008,548 $10 $31,864 $ -- $(28,342) $ 3,532
========= === ======= ===== ======== =======
Proceeds from deferred stock compensation
plan................................... -- -- 179 -- -- 179
Purchase of deferred stock shares........ -- -- (96) -- -- (96)
Stock options exercised.................. 3,000 -- 195 -- -- 195
Dividends accrued on redeemable preferred
stock.................................. -- -- (897) -- -- (897)
Net income............................... -- -- -- -- 5,215 5,215
--------- --- ------- ----- -------- -------
Balance at January 3, 1998................... 1,011,548 $10 $31,245 $ -- $(23,127) $ 8,128
========= === ======= ===== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE> 116
EYE CARE CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $(9,119) $ 1,418 $ 5,215
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation.................................. 9,678 9,646 12,131
Amortization of intangibles................... 6,000 3,483 3,675
Amortization of pre-opening costs............. 370 126 178
Amortization of deferred gain................. -- -- (53)
Deferred revenue.............................. (168) (378) 232
Deferred rent................................. 495 417 602
Other......................................... (14) 217 (125)
(Gain) loss on disposition of property and
equipment................................... 96 80 (120)
Changes in operating assets and liabilities:
Accounts and notes receivable...................... (1,833) (23) (1,667)
Inventory.......................................... 1,425 325 951
Prepaid expenses and other......................... (136) 194 (2,848)
Accounts payable and accrued liabilities........... 1,690 (1,542) (2,655)
------- -------- --------
Net cash provided by operating activities............... 8,484 13,963 15,516
------- -------- --------
Cash flows from investing activities:
Acquisition of property and equipment.............. (6,765) (4,233) (9,470)
Net outflow for Visionworks Holdings, Inc. common
stock............................................ -- (53,521) --
Proceeds from sale of property and equipment....... 1,698 -- 5,731
Payment received on notes receivable............... 101 17 375
Net outflow for The Samit Group, Inc............... -- -- (17,462)
------- -------- --------
Net cash used in investing activities................... $(4,966) $(57,737) $(20,826)
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 117
EYE CARE CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Payments related to deferred compensation............. $ -- $ (382) $ (96)
Proceeds from issuance of long-term debt.............. -- 40,000 9,000
Proceeds from the stock option exercises.............. -- 238 195
Proceeds from the issuance of common stock............ -- 310 --
Proceeds from issuance of preferred stock............. 11,000 --
Payments related to debt issuance..................... -- (1,350) --
Payments of organization costs........................ (259) -- --
Proceeds from deferred stock compensation plan........ 244 158 179
Payments on debt and capital leases................... (115) (500) (7,440)
------ ------- -------
Net cash (used in) provided by financing activities........ (130) 49,474 1,838
------ ------- -------
Effect of exchange rate changes on cash and cash
equivalents.............................................. 29 577 --
------ ------- -------
Net increase (decrease) in cash and cash equivalents....... 3,417 6,277 (3,472)
Cash and cash equivalents at beginning of period........... 950 4,367 10,644
------ ------- -------
Cash and cash equivalents at end of period................. $4,367 $10,644 $ 7,172
====== ======= =======
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest......................................... $8,603 $ 8,885 $13,580
Taxes............................................ $ -- $ 163 $ 160
Noncash investing and financing activities:
Additions of property and equipment.............. $1,152 $ 214 $ 495
Dividends accrued on redeemable preferred
stock.......................................... $ -- $ 220 $ 897
Adjustment of Visionworks property and equipment
to fair market value........................... $ -- $ -- $ 4,684
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-13
<PAGE> 118
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
1. DESCRIPTION OF BUSINESS AND ORGANIZATION
Description of business. Eye Care Centers of America, Inc. (the "Company")
operates super optical retail stores which sell prescription eyewear, sunglasses
and ancillary optical products, and feature on-site laboratories. The Company's
operations in the United States are located in the Southwest, Midwest,
Southeast, along the Gulf Coast in the Mid-Atlantic states and in the Pacific
Northwest. At the end of fiscal 1995, 1996, and 1997, the Company operated 152,
218 and 239 stores, respectively.
Organization. The Company was incorporated in Texas in 1984 and acquired
by Sears, Roebuck and Co. ("Sears"), effective December, 1987. Sears applied
"push down" accounting to record the acquisition of the Company. Assets and
liabilities were recorded at the historical basis, which approximated their fair
market value. The excess of the purchase price over acquired net assets was
recorded as goodwill. This goodwill was eliminated in recording the purchase
transaction described below.
On August 4, 1993, the Company, Sears and Eye Care Holdings, Inc.
("Holdings") entered into a Stock Purchase Agreement pursuant to which, on
October 7, 1993 (the "Desai Acquisition Date"), Sears sold 100 percent of the
common stock of the Company to Holdings (the "Desai Acquisition"). Holdings was
controlled by investment partnerships managed by Desai Capital Management
Incorporated ("DCMI"), a privately held investment management company. On the
Acquisition Date, Holdings merged into the Company, with the Company being the
surviving entity. Holdings was initially capitalized in 1993 through the
issuance of $70 million of 12 percent senior notes and $31 million of common
stock. The proceeds of this capitalization were used as follows (in millions):
<TABLE>
<S> <C>
Consideration to Sears for the Company's common stock....... $ 72.3
Consideration paid for a Noncompete and SearsCard credit
card agreement............................................ 18.0
Acquisition expenses........................................ 6.9
Working capital............................................. 3.8
------
$101.0
======
</TABLE>
On the Desai Acquisition Date, the purchase method of accounting was used
to record the assets acquired and liabilities assumed by the Company. Under
purchase accounting, a new historical cost basis was established for these
assets and liabilities and for accounting purposes a new entity was created. The
difference between the purchase price and the fair market value of the
identifiable assets acquired and liabilities assumed was recorded as goodwill.
On September 27, 1996 ("Visionworks Acquisition") the Company acquired all
of the outstanding shares of the capital stock of Visionworks Holdings, Inc.
("VHI"). At the time of the acquisition, VHI was a 60 store optical retailer
located along the Atlantic Coast from Florida to Washington, D.C. with 49
superstores and 11 optical centers located near Eckerd Corporation drug stores.
The Visionworks Acquisition price of $61.5 million was financed through (i) the
issuance of $11.0 million in mandatorily redeemable preferred stock plus
nondetachable warrants to purchase 150,000 shares of common stock of the
Company, (ii) borrowing under an amended and restated credit facility agreement
of $40.0 million, (iii) existing cash from the Company and (iv) the assumption
of a capital lease with Eckerd Corporation.
The Visionworks Acquisition was accounted for using the purchase method of
accounting. Accordingly, a portion of the purchase price was allocated to the
identifiable net assets acquired based on their estimated fair values with the
balance of the purchase price, $38.6 million, included in goodwill. The cost in
excess of net assets of the business acquired is being amortized over 25 years.
Results of operations for this acquired entity were included in the Company's
operating results from the date of acquisition.
F-14
<PAGE> 119
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Effective September 30, 1997, the company acquired all of the outstanding
capital stock of The Samit Group, Inc. ("TSGI") (the "Hour Eyes Acquisition").
The acquisition cost to the Company was $22.25 million less TSGI's acquisition
date liabilities. Included in this acquisition cost is an earn-out provision of
$2.25 million payable to the sellers based upon certain 1997 financial
performance criteria, which were achieved. TSGI, through its subsidiaries, has
ten optical retail locations in Maryland and Washington, D.C. In addition,
subsidiaries of the Company entered into a long-term business management
agreement with Hour Eyes Doctors of Optometry, P.C., a Virginia professional
corporation which purchased the Virginia assets (twelve optical retail
locations) of Dr. Samit's Hour Eyes Optometrist, P.C. The Hour Eyes Acquisition
was financed through (i) borrowing under the Amended Credit Facility (defined
herein) of $9.0 million and (ii) existing cash from the Company.
The Hour Eyes Acquisition, which occurred during the fourth quarter of
1997, was accounted for using the purchase method of accounting. Accordingly, a
portion of the purchase price has been preliminarily allocated to the
identifiable net assets acquired based on their estimated fair values with the
balance of the purchase price included in goodwill. The cost in excess of
identifiable net assets of the business acquired will be amortized over 25
years.
Results of operations for this acquired entity were included in the
Company's operating results from the date of acquisition. As a result of the
long-term business management agreement with Hour Eyes Doctor of Optometry,
P.C., the Company records a management fee but does not include the results of
operations from the twelve Virginia stores in the Company's consolidated results
of operations. Assuming the acquisition of TSGI had occurred at the beginning of
fiscal year 1997 the consolidated pro forma results of operations (unaudited)
would have shown the following results:
<TABLE>
<CAPTION>
FISCAL
--------------------
1996 1997
---- ----
<S> <C> <C>
Revenues................................................ $217,029 $229,626
Net income.............................................. $ 953 $ 6,984
</TABLE>
Such pro forma amounts are not necessarily indicative of what actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of such fiscal years nor should such results be
deemed predictive of future results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The financial statements include the accounts of
the Company and its wholly owned subsidiaries, Enclave Advancement Group, Inc.,
Eye Care Centers de Mexico, S.A. De C.V., ECCA Managed Vision Care, Inc.,
Visionworks Holdings, Inc., Visionworks, Inc., Visionworks Properties, Inc. and
Eye Care Holdings, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain reclassifications have been made
to the prior period statements to conform to the current period presentation.
Use of Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions. These estimates and assumptions affect the reported
amount of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Reporting Periods. The Company uses a 52/53-week reporting format. The
fiscal years ended 1995 and 1996 consisted of 52 weeks. The fiscal year ended
1997 consisted of 53 weeks.
F-15
<PAGE> 120
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Foreign Currency Translation. Prior to December 1996, the financial
position and results of operations of the Company's subsidiary in Mexico were
measured using the local currency as the functional currency. Assets and
liabilities denominated in foreign currencies were translated into U.S. dollars
at exchange rates in effect at year-end, while revenues and expenses were
translated at average exchange rates prevailing during the year. During fiscal
year 1995 and through the third quarter of 1996, the resulting translation gains
and losses were charged directly to cumulative translation adjustment, a
component of stockholders' equity. During the fourth quarter of 1996, the
Mexican economy was assessed by management to be highly inflationary based on
the decline of the peso to the U.S. dollar and therefore, impacted the Company's
investment in its subsidiary in Mexico. As such the cumulative translation
adjustment as of December 28, 1996 of $560 was recorded through the results of
operations. During fiscal year 1997, the U.S. dollar represented the functional
currency of the Mexico subsidiary. During fiscal year 1997, translation gains
and losses are included in determining net income and foreign currency
transaction gains and losses are included in net income.
Cash and Cash Equivalents. All short-term investments that mature in less
than 90 days when purchased are considered cash equivalents for purposes of
disclosure in the consolidated balance sheets and consolidated statements of
cash flows. Cash equivalents are stated at cost, which approximates market
value.
Accounts and Notes Receivable. Accounts and notes receivable include
receivables from credit card companies, insurance reimbursements, merchandise,
rent, license fee receivables and notes receivable from certain optometrists
which have purchased optical equipment from the Company. Merchandise receivables
result from product returned to vendors pending credit or exchange for new
product.
Inventory. Inventory consists principally of eyeglass frames, ophthalmic
lenses and contact lenses and is stated at the lower of cost or market. Cost is
determined using the weighted average method which approximates the first-in,
first-out (FIFO) method.
The Company purchases approximately 54% of its lenses from two principal
vendors and while these suppliers provide a significant share of the lenses used
by the Company, lenses are considered a commodity product and can be purchased
from a number of other vendors on comparable terms. The Company believes its
relationships with its existing vendors are satisfactory.
Prepaid Expenses -- Store Preopening Costs. Preopening costs directly
associated with store openings are capitalized and amortized using the
straight-line method over one year following each store's opening. Amortization
expense of store preopening costs for fiscal 1995, 1996 and 1997 was
approximately $370, $126 and $178, respectively. Store preopening costs of $67,
$130 and $156 are included in prepaid expenses and other as of December 30,
1995, December 28, 1996 and January 3, 1998, respectively.
Income Taxes. The Company records income taxes under Financial Accounting
Standards Board Statement ("FASB") No. 109 using the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Property and Equipment. Property and equipment is recorded at cost. On the
Desai Acquisition Date, property and equipment balances were adjusted to reflect
their fair market value, as determined by an independent appraisal. For
financial statement purposes, depreciation of building, furniture and equipment
is calculated using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are amortized on a straight-line method over
the shorter of the life of the lease or the estimated useful lives of the
assets. Depreciation of capital leases is calculated using the straight-line
method over the term of the lease.
F-16
<PAGE> 121
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Estimated useful lives are as follows:
<TABLE>
<S> <C>
Building.................................................... 20 years
Furniture and equipment..................................... 3 to 10 years
Leasehold improvements...................................... 5 to 10 years
</TABLE>
In accordance with purchase accounting, the financial statements for fiscal
1995, 1996 and 1997 reflect depreciation accumulated only since the Desai,
Visionworks and Hour Eyes Acquisition dates and depreciation has been recorded
based on the estimated remaining useful lives of the assets as of the Desai,
Visionworks and Hour Eyes Acquisition dates.
Maintenance and repair costs are charged to expense as incurred.
Expenditures for significant betterments are capitalized.
Intangibles. Intangibles principally consist of the amounts of excess
purchase price over the market value of acquired net assets ("goodwill") and a
noncompete agreement. Goodwill established on the Acquisition Date is being
amortized on a straight-line basis over a period of 25 years. The noncompete
agreement intangible, which is related to the Hour Eyes Acquisition, is being
amortized over three years on a straight-line basis. The 1996 Intangibles
balance included the fully amortized Sears noncompete agreement and SearsCard
credit card agreement. These two agreements were amortized over three years
beginning on the Desai Acquisition Date at a rate of 60 percent, 30 percent and
10 percent, respectively.
Other Assets. Other assets consist primarily of deferred debt financing
costs associated with the Desai, Visionworks and Hour Eyes Acquisitions. These
costs are being amortized into expense using the effective interest method over
the life of the associated debt.
Long-Lived Assets. Periodically, the Company evaluates the realizability
of long-lived assets based upon expectations of nondiscounted cash flows and
operating income. Based upon its most recent analysis, the Company believes that
no impairment of long-lived assets exists at January 3, 1998.
Deferred Revenue -- Replacement Certificates and Warranty Contracts. At
the time of a frame sale, some customers purchase a warranty contract covering
frame defects or damage during the 12-month period subsequent to the date of the
sale. Revenue relating to these contracts is deferred and recognized on a
straight-line basis over the life of the warranty contract (one year). Costs
incurred to fulfill the warranty are expensed when incurred. Certain frame
purchases include a one-year warranty period without requiring the separate
purchase of a warranty contract. Reserves are established for the expected cost
of repair related to these frame sales. At the end of fiscal 1996 and 1997, the
Company has established a reserve of approximately $100 related to these
warranties which is included in other accrued expenses on the accompanying
balance sheet.
Revenue Recognition. Sales and related costs are recognized by the Company
upon the sale of products at company-owned retail locations. Licensing fees
collected from independent optometrists for using the Company's trade name
"Master Eye Associates" are recognized when earned. Historically, the Company's
highest sales occur in the first and third quarters.
Advertising Costs. Advertising costs of the Company include costs related
to broadcast and print media advertising expenses. The Company expenses
production costs and media advertising costs the first time the advertising
takes place. For the fiscal years ended 1995, 1996 and 1997, advertising costs
amounted to approximately $21,865, $21,779 and $24,613 respectively.
F-17
<PAGE> 122
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Interest Expense, net. Interest expense, net consists of the following:
<TABLE>
<CAPTION>
YEAR-ENDED
------------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Interest expense................... $9,046 $10,342 $14,380
Interest income.................... (207) (443) (642)
------ ------- -------
Interest expense, net.............. $8,839 $ 9,899 $13,738
====== ======= =======
</TABLE>
Stock Based Compensation. The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. During the first quarter of 1996, the Company
adopted Financial Accounting Boards Statement ("FASB") No. 123, "Accounting for
Stock-Based Compensation". In accordance with FASB No. 123, the Company has
continued to account for stock option grants in accordance with APB Opinion
No. 25, Accounting for Stock Issues to Employees, and, accordingly, recognized
no compensation expense for the stock option grants.
3. TRANSACTION WITH DCMI AND OTHER RELATED PARTIES
In connection with the Desai Acquisition, the Company paid approximately
$1,322 to DCMI, or partnerships controlled by DMCI, for consulting fees and
expense reimbursements related to the associated debt and equity offerings. The
Company has entered into an agreement with DCMI whereby the Company pays DCMI
$144 per year as an advisory fee for consulting and strategic advice and $56 per
year for the consulting services of three Board of Directors members who are
also employees and/or officers of DCMI. For fiscal 1995, 1996 and 1997, the
Company has expensed $200 each year related to these agreements. During 1996,
the Company paid a fee to DCMI of $615,000 related to consulting services in
conjunction with the acquisition of the capital stock of Visionworks Holdings,
Inc.
The Company maintains an amended credit agreement with a foreign bank that
is also a minority stockholder of the Company. The credit agreement provides up
to $5 million in revolving loans and $49 million in term loans.
4. PREPAID EXPENSES AND OTHER
Prepaid expenses and other consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Prepaid insurance.............................. $ 95 $ 102
Prepaid store supplies......................... 778 927
Prepaid rentals................................ 10 2,282
Other.......................................... 181 255
------ ------
$1,064 $3,566
====== ======
</TABLE>
F-18
<PAGE> 123
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
5. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Land................................................ $ 6,500 $ 6,000
Building............................................ 5,427 3,144
Furniture and equipment............................. 47,776 57,737
Leasehold improvements.............................. 27,580 32,097
-------- --------
87,283 98,978
Less accumulated depreciation and amortization...... (31,061) (41,766)
-------- --------
Property and equipment, net......................... $ 56,222 $ 57,212
======== ========
</TABLE>
6. INTANGIBLE ASSETS
The following is a summary of the components of intangible assets along
with the related accumulated amortization for the fiscal years then ended.
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Goodwill and other.................................. $ 67,371 $ 80,857
Less accumulated amortization....................... (3,708) (6,495)
-------- --------
Net............................................ 63,663 74,362
-------- --------
Noncompetes and SearsCard agreement................. 18,000 1,000
Less accumulated amortization....................... (18,000) (83)
-------- --------
Net............................................ -- 917
-------- --------
Intangibles, net.................................... $ 63,663 $ 75,279
======== ========
</TABLE>
7. OTHER ACCRUED EXPENSES
Other accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Property taxes..................................... $1,002 $1,266
Professional fees.................................. 883 489
Payroll and sales/use taxes........................ 846 573
Store expenses..................................... 807 1,198
Insurance.......................................... 500 354
Construction....................................... 285 495
Acquisition liability.............................. -- 2,250
Other.............................................. 2,293 2,575
------ ------
Other accrued expenses............................. $6,616 $9,200
====== ======
</TABLE>
8. LONG-TERM DEBT
Amended Credit Facility. In September 1997, the Company amended its
existing credit agreement to provide for $49 million in term loans and $5
million in revolving loans (collectively, the "Amended Credit Facility"),
subject to certain customary conditions including a borrowing base condition. In
addition, the
F-19
<PAGE> 124
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Company has agreed to guarantee a $1 million loan that is related to the
long-term business agreement entered into at the time of the Hour Eyes
Acquisition. Any loans outstanding under the Amended Credit Facility are
scheduled to bear interest at (i) a rate which is the higher of the Federal
Funds Rate as published by the Federal Reserve Bank of New York plus 0.5% or the
prime commercial lending rate of the bank, in each case plus an interest margin
of 1.5% or (ii) an adjusted LIBOR, plus an interest margin of three percent.
Upon the occurrence and during the continuance of any payment default or any
breach of negative or financial covenants and after the lapse of any applicable
grace periods, a two percent per annum penalty in excess of the rate otherwise
applicable is due upon demand. Outstanding amounts are secured by substantially
all of the Company's accounts receivable, inventory and other assets (such as
tradenames and subsidiary stock). All loans under the Amended Credit Facility
mature on September 15, 2002. Term loan amounts mature on a scheduled basis that
commenced on December 31, 1996.
Senior Notes. On the Desai Acquisition Date, the Company issued
$70 million 12 percent senior notes with detachable warrants to acquire common
stock (the "Warrants"). The senior notes and the Warrants were offered as Units
(the "Units") consisting of $1,000 principal amount of senior notes and one
Warrant to acquire 0.4522 share of common stock of the Company for no additional
consideration. The senior notes and the Warrants may be traded separately. The
fair value of the Warrants as of the Desai Acquisition Date was $600 and this
value was recorded in stockholders' equity with a corresponding discount from
the face value of the senior notes. This discount is being accreted to interest
expense using the effective interest method over the life of the debt.
In June 1994, the senior notes discussed above were exchanged for
$70 million of publicly registered 12 percent Senior Notes (the "Senior Notes").
The Senior Notes contain substantially the same provisions as the senior notes
issued on the Desai Acquisition Date.
The Senior Notes mature on October 1, 2003. The Senior Notes bear interest
at 12 percent and interest is payable semiannually on April 1 and October 1 of
each year. The Senior Notes are redeemable at the option of the Company in whole
or in part, on or after October 1, 1998, at the redemption prices set forth in
the offering, plus accrued and unpaid interest. The Senior Notes will be
redeemed pursuant to mandatory sinking fund payments of $17.5 million each
October 1 commencing October 1, 2000. Upon a change of control, as defined, each
holder of the Senior Notes will have the right to require the Company to
repurchase such notes at 101 percent of the principal amount thereof, plus
accrued and unpaid interest.
The Senior Notes are senior uncollateralized obligations of the Company and
will rank pari passu with all other indebtedness of the Company that by its
terms other indebtedness is not subordinate to the Senior Notes. In connection
with the issuance of the Senior Notes, the Company incurred approximately $4.6
million in debt issuance costs. These amounts are classified within other assets
in the accompanying balance sheets and are being amortized using the effective
interest method over the life of the Senior Notes. The unamortized amount of
debt issuance costs as of December 28, 1996 and January 3, 1998 related to the
Senior Notes was $3.4 million and $2.9 million, respectively.
The Senior Notes contain various restrictive covenants, including
limitations on additional indebtedness, restriction on dividends and sale of
assets other than in the normal course of business. The Amended Credit Facility
contains additional restrictive covenants including a pledge of any initial
public offering proceeds, a limitation on capital requirements, minimum net
worth and working capital requirements. As of December 28, 1996 and January 3,
1998 the Company was in compliance with the financial reporting covenants.
Capital Lease. In connection with the purchase of the capital stock of
Visionworks Holdings, Inc., the Company assumed an agreement to sublease land,
buildings and equipment at eight operating locations. Under the terms of the
agreement, the Company committed to purchase such properties on February 1, 1999
F-20
<PAGE> 125
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
for $10.0 million and to pay Eckerd Corporation an annual interest amount of
$1.3 million until February 1, 1999 for the subleases. The Company has accounted
for this transaction as a capital lease and has recorded the assets, as shown
below, and the future obligation on the balance sheet at $10.0 million.
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Land.............................................. $6,000 $6,000
Buildings and equipment........................... 3,979 3,979
------ ------
$9,979 $9,979
====== ======
</TABLE>
Long-term debt outstanding, including capital lease obligations, consists
of the following:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Senior Notes payable, face amount of $70,000,
net of unamortized debt discount of $436 and
$370 respectively................................ $ 69,564 $ 69,630
Amended Credit Facility............................ 39,500 42,645
Mortgage Note...................................... 1,567 --
Doctor Notes....................................... -- 135
Capital lease obligations.......................... 9,979 9,979
-------- --------
120,610 122,389
Less current portion............................... (3,864) (7,003)
-------- --------
$116,746 $115,386
======== ========
</TABLE>
Future principal maturities for long-term debt and capital lease
obligations are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 7,003
1999........................................................ 18,872
2000........................................................ 27,413
2001........................................................ 27,840
2002........................................................ 24,131
Beyond 2002................................................. 17,500
--------
Total future principal payments on debt..................... 122,759
Less unamortized discount on Senior Notes................... (370)
--------
Carrying value of long-term debt............................ $122,389
========
</TABLE>
As of the end of fiscal 1996 and 1997 the fair value of the Company's
Senior Notes were approximately $75.6 and $75.6 million, respectively. As of
January 3, 1998 the fair value of the capital lease obligation was approximately
$10.0 million. These fair values were estimated using quoted market prices and
the present value of estimated future cash flows. The carrying amount of the
variable rate Amended Credit Facility approximates its fair value.
9. MANDATORILY REDEEMABLE PREFERRED STOCK
During 1996, the Company issued 110,000 shares of Series A Cumulative
Mandatorily Redeemable Exchangeable Pay-In-Kind Preferred Stock ("Preferred
Stock"). Cumulative dividends of eight percent per annum applied to the amount
of $100 per share are payable quarterly when declared by the Board of Directors.
These dividends are charged to additional paid-in capital. A non-detachable
warrant to purchase 1.3636 shares of Common Stock was attached to each share of
Preferred Stock. On September 30, 2004, each share of Preferred Stock shall be
redeemed at $100 per share together with accumulated and unpaid dividends. The
F-21
<PAGE> 126
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
shares of preferred stock have no voting rights. At the option of the Company
the Preferred Stock may be exchanged for subordinated notes with eight percent
per annum interest, due September 2004.
10. STOCKHOLDERS' EQUITY
Warrants. As discussed in Note 7, the Senior Notes were issued with
detachable warrants entitling the holder to acquire, for no additional
consideration, .4522 shares of common stock. Warrant holders also have a
contractual right to receive their pro rata share of dividends. Prior to their
expiration on October 1, 2003, the Warrants will be exercisable at any time on
or after October 1, 1998, or prior to such date upon the occurrence of certain
triggering events (as defined in the Warrant Agreement). Upon exercise, the
Warrant holders will be entitled, in the aggregate, to 31,654 shares of common
stock.
Senior Officers' Stock Options. On the Desai Acquisition Date, the Company
entered into employment agreements with certain senior officers (the "Senior
Officers"). In connection with these employment agreements, each Senior Officer
also entered into a non-qualified stock option agreement whereby each Senior
Officer was granted stock options to purchase common stock of the Company at
$31.00 per share. Certain of these options vested as of the Desai Acquisition
Date while others vest over time or upon the Company reaching certain
profitability levels for fiscal years 1995 through 1998. If the profitability
levels are not reached for a given year, certain options fail to become
exercisable and are terminated. The other remaining unexercisable options are
carried forward to the next succeeding vesting period. The options expire no
later than ten years after the date of the grant.
Following is a summary of activity in the plan for the fiscal years ended
1995, 1996 and 1997.
<TABLE>
<CAPTION>
AVG. OPTION
PRICE OPTIONS OPTIONS
PER SHARE($) OUTSTANDING EXERCISABLE
------------ ----------- -----------
<S> <C> <C> <C>
Outstanding -- December 31, 1994..... 106,348 27,699
Became exercisable................. -- --
Canceled or expired................ 31.00 (5,540) (5,540)
-------- -------
Outstanding -- December 30, 1995..... 100,808 22,159
Granted............................ 31.00 75,000 --
Became Exercisable................. 31.00 -- 14,748
Canceled or expired................ 31.00 (100,808) (26,907)
-------- -------
Outstanding -- December 28, 1996..... 75,000 10,000
Granted............................ 31.00 -- --
Became Exercisable................. 31.00 -- 28,333
Canceled or expired................ -- --
-------- -------
Outstanding -- January 3, 1998..... 75,000 38,333
======== =======
</TABLE>
1993 Executive Stock Option Plan. On the Desai Acquisition Date the
Company authorized a non-qualified stock option plan whereby key executives
(other than the Senior Officers) may be offered options to purchase the
Company's common stock. Under the plan, the exercise price set by the Board of
Directors of the Company must at least equal the fair market value of the
Company's common stock at the date of grant. The options vest in four equal
annual installments provided the Optionee is an employee of the Company on the
anniversary date and shall expire 10 years after the date of grant. Under
certain specified conditions the vesting schedule may be altered.
F-22
<PAGE> 127
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Following is a summary of activity in the plan for the years 1995, 1996 and
1997.
<TABLE>
<CAPTION>
AVG. OPTION
PRICE OPTIONS OPTIONS
PER SHARE($) OUTSTANDING EXERCISABLE
------------ ----------- -----------
<S> <C> <C> <C>
Outstanding -- December 31, 1994...... 27,414 4,354
Granted.......................... 31.00 13,168 --
Became exercisable............... 31.00 -- 1,750
Canceled or expired.............. 31.00 (8,769) (1,449)
------- ------
Outstanding -- December 30, 1995...... 31,813 4,655
Granted.......................... -- --
Became exercisable............... 31.00 -- 6,461
Canceled or expired.............. 31.00 (13,168) (3,438)
------- ------
Outstanding -- December 28, 1996...... 18,645 7,678
Granted.......................... -- --
Became exercisable............... 31.00 -- 8,584
Canceled or expired.............. -- --
------- ------
Outstanding -- January 3, 1998........ 18,645 16,262
======= ======
</TABLE>
1996 Executive Stock Option Plan. On September 5, 1996, the Company
authorized a non-qualified stock option plan whereby key executives (other than
the Senior Officers) may be offered options to purchase the Company's common
stock. Under the plan, the exercise price set by the Board of Directors of the
Company must at least equal the fair market value of the Company's common stock
at the date of grant. The options begin vesting one year after the date of grant
in four installments of 10%, 15%, 25% and 50% provided the Optionee is an
employee of the Company on the anniversary date and shall expire 10 years after
the date of grant. Under certain specified conditions the vesting schedule may
be altered. During 1996, the Company granted options to purchase 91,000 shares
under this plan at an option price of $31 to $65 per share. During 1997, the
Company granted options to purchase 26,000 shares under this plan.
<TABLE>
<CAPTION>
AVG. OPTION
PRICE OPTIONS OPTIONS
PER SHARE($) OUTSTANDING EXERCISABLE
------------ ----------- -----------
<S> <C> <C> <C>
Outstanding -- December 30, 1995.... -- --
Granted........................ 31.00 to 65.00 91,000 --
Became exercisable............. -- --
Canceled or expired............ -- --
------- -----
Outstanding -- December 28, 1996.... 91,000 --
Granted........................ 70.00 to 105.00 26,000 --
Became exercisable............. 31.00 to 65.00 -- 6,450
Canceled or expired............ 31.00 (7,500) (200)
------- -----
Outstanding -- January 3, 1998...... 109,500 6,250
======= =====
</TABLE>
Other Stock Options and Warrants. In November 1993, the Company granted
stock options to two directors to purchase 3,000 and 6,000 shares, respectively,
of the Company's common stock. Each option is exercisable at $31.00 per share to
be vested in equal installments on December 31, of each of 1994, 1995, and 1996
with such options expiring 10 years from the date of grant. Additionally, in
December 1995 the Company granted stock options to a director to purchase 4,000
shares of the Company's common stock. The option is
F-23
<PAGE> 128
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
exercisable at $31.00 per share to vest upon the date of grant and expire 10
years from the date of grant. In December 1996, the Company granted stock
options to three directors to purchase shares of the Company's common stock.
Each option vests in four equal installments starting on December 5, 1997 and
expires ten years from the date of grant. One director was granted stock options
of 5,000, 4,000 and 4,000 shares exercisable at $70, $90 and $110 per share,
respectively. Another director was granted 1,000 shares at $70 per share. A
third director was granted 1,000 and 3,000 shares at $70 and $65 per share,
respectively. Also, the third director was granted 3,000 shares at $70 per
share.
In November 1993, the Company granted a warrant to a foreign bank to
purchase a total of 3,000 shares of the Company's common stock. The warrant is
vested in full at the earlier of October 1, 1998 or after the occurrence of a
"Triggering Event." The "Triggering Event" shall be either of the following
events: (i) the sale of 51 percent or more of the common stock of the Company to
a third party in one or a series of transactions; or (ii) voluntary or
involuntary bankruptcy or insolvency of the Company or the approval of its
stockholders of its dissolution, liquidation or winding up. The warrant is
exercisable at $31.00 per share with such warrant expiring on October 1, 2003.
In May 1994, the Board of Directors authorized the sale of up to $200 of
common stock of the Company, at $31.00 per common share to two directors ($100
each). As of January 3, 1998, one director has 226 shares of common stock
related to this authorization.
The Company has elected to follow Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123 "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options of privately held companies. Under APB 25, because the exercise
price of the Company's employee stock options equals the estimated fair value of
the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of the
grant using the minimum value method with the following assumptions for 1995,
1996 and 1997, respectively: risk-free interest rates of 6%; no dividend yield;
and a weighted-average expected life of the options ranging from 1 to 4 years.
Option valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. In fiscal 1995
the effect to the Company's pro forma net income would not have been
significant. The Company's pro forma net income for fiscal year 1996 and 1997
are as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL
1996 1997
------ ------
<S> <C> <C>
Pro forma Net Income.................................... $1,218 $4,802
</TABLE>
The pro forma calculations include only the effects of 1995 through 1997 grants.
As such, the impacts are not necessarily indicative of the effects on reported
net income of future years.
F-24
<PAGE> 129
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Deferred Stock Plan. Effective January 1, 1994, the Company adopted a
Deferred Stock Plan whereby certain directors, executives or employees of the
Company (as approved by the Board of Directors) may elect to defer part of their
compensation to be used to purchase common stock of the Company at fair market
value to be determined in advance by the Board of Directors.
The distributions of the stock pursuant to this plan will be deferred until
no earlier than January 1, 1998. Total authorized shares to be issued under this
plan are 38,500. For fiscal 1996 and 1997, the Company recorded $158 and $179
respectively, of additional paid-in capital resulting from the deferred
compensation under this plan. There are 16,849 shares of common stock that are
issuable under this plan at January 3, 1998.
11. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Current............................ -$- $188 $335
Deferred........................... -- -- --
---- ---- ----
-$- $188 $335
==== ==== ====
</TABLE>
There was no net Federal or State income tax expense for the fiscal year
ended December 30, 1995. For the years ended December 28, 1996 and January 3,
1998 there was approximately $188 and $335 of federal income tax expense.
The reconciliation between the federal statutory tax rate at 34% and the
Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Expected tax expense (benefit)....................... $ 546 $ 1,887
Goodwill............................................. 459 872
Deferred Rent........................................ 142 142
Investment in foreign subsidiary..................... 305 45
Nondeductible meals and donations.................... 19 29
Change in valuation allowance........................ (1,350) (2,924)
Other................................................ 67 284
------- -------
$ 188 $ 335
======= =======
</TABLE>
The components of the net deferred tax asset (liability) are as follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Total deferred tax liabilities, current.............. $ (35) $ (55)
Total deferred tax liabilities, long-term............ (788) (329)
Total deferred tax assets, current................... 3,150 2,458
Total deferred tax assets, long-term................. 7,094 4,817
Valuation Allowance.................................. (9,421) (6,889)
------- -------
Net deferred tax assets (liabilities)........... $-- $ 2
======= =======
</TABLE>
F-25
<PAGE> 130
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
The sources of the difference between the financial accounting and tax
basis of the Company's assets and liabilities which give rise to the deferred
tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
------------ ----------
<S> <C> <C>
Deferred tax assets:
Deferred rent................................... $ 660 $ 743
Deferred compensation........................... 62 9
Deferred revenue................................ 983 1,055
Net operating loss and credit carryforwards..... 5,783 2,057
Noncompete and SearsCard Agreements............. 185 31
Inventory basis differences..................... 564 453
Accrued salaries................................ 832 198
Property and equipment.......................... 1,128 2,729
Other........................................... 47 --
------- -------
Total deferred tax assets....................... 10,244 7,275
Valuation allowance............................. (9,421) (6,889)
------- -------
Net deferred tax assets......................... $ 823 $ 386
======= =======
Deferred tax liabilities:
Property and equipment.......................... $ 566 $ --
Store preopening costs.......................... 44 53
Deferred financing costs........................ 91 76
Accounts receivable............................. 86 37
Other........................................... 36 218
------- -------
$ 823 $ 384
======= =======
</TABLE>
At January 3, 1998, the Company had, subject to the limitations discussed
below, $4,513 of net operating loss carryforwards for tax purposes. These loss
carryforwards will expire from 2000 through 2010 if not utilized.
During September 1996, the Company acquired 100% of the common stock of
Visionworks Holdings, Inc. As a result of the limitations imposed by Section
382, the use of net operating loss carryforwards of $6,288 acquired in the
acquisition are limited to approximately $3,567 per year.
In addition to the Section 382 limitations, uncertainties exist as to the
future realization of the deferred tax asset under the criteria set forth under
FASB Statement No. 109. Therefore, the Company has established a valuation
allowance for deferred tax assets of $6,889 at January 3, 1998 and $9,421 at
December 28, 1996.
12. EMPLOYEE BENEFITS
401 (K) Plan. The Company maintains a defined contribution plan whereby
substantially all employees who have been employed for at least six consecutive
months are eligible to participate. Contributions are made by the Company as a
percentage of employee contributions. In addition, discretionary contributions
may be made at the direction of the Company's Board of Directors. Total Company
contributions were approximately $69, $97 and $163 for fiscal 1995, 1996 and
1997 respectively.
F-26
<PAGE> 131
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
13. LEASES
The Company is obligated as lessee under operating leases for substantially
all of the Company's retail facilities as well as certain warehouse space. In
addition to rental payments, the leases generally provide for payment by the
Company of property taxes, insurance, maintenance and its pro rata share of
common area maintenance. These leases range in terms of up to 16 years. Certain
leases also provide for additional rent in excess of the base rentals calculated
as a percentage of sales.
The Company subleases a portion of substantially all of the stores to an
independent optometrist or a corporation controlled by an independent
optometrist. The terms of these leases or subleases are principally one to
fifteen years with rentals consisting of a percentage of gross receipts, base
rentals, or a combination of both. Certain of these leases contain renewal
options.
Certain of the Company's lease agreements contain provisions for scheduled
rent increases or provide for occupancy periods during which no rent payment is
required. For financial statement purposes, rent expense is recorded based on
the total rentals due over the entire lease term and charged to rent expense on
a straight-line basis. The difference between the actual cash rentals paid and
rent expenses recorded for financial statement purposes is recorded as a
deferred rent obligation. At the end of fiscal years 1996 and 1997, deferred
rent obligations aggregated approximately $1.9 million and $3.0 million,
respectively.
In December 1993, the Company purchased its headquarters facilities
location, which was previously leased under an operating lease. During 1997, the
Company sold this location for net proceeds of $4.8 million. The Company entered
into a 15 year operating lease with the new owners and will maintain its
corporate headquarters at its current location. As a result of this transaction,
the Company recorded a deferred gain, which will be amortized over the life of
the lease. In addition, the Company continues to sublease office space on terms
that range from one to four years within the headquarters facility.
Rent expense for all locations, net of lease and sublease income, is as
follows. For the purposes of this table, base rent expense includes common area
maintenance costs. Common area maintenance costs were approximately 23, 25 and
22 percent of base rent expense for fiscal years 1995, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
DECEMBER 30, DECEMBER 28, JANUARY 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Base rent expense.................... $ 15,613 $ 17,547 $24,007
Rent as a percent of sales........... 97 80 186
Lease and sublease income............ (1,792) (2,280) (4,338)
-------- -------- -------
Rent expense, net.................... $ 13,918 $ 15,347 $19,855
======== ======== =======
</TABLE>
F-27
<PAGE> 132
EYE CARE CENTERS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS UNLESS INDICATED OTHERWISE)
Future minimum lease payments, excluding common area maintenance costs, net
of future minimum lease and sublease income under noncancelable operating leases
for the next five years and beyond are as follows:
<TABLE>
<CAPTION>
LEASE AND
RENTAL SUBLEASE
PAYMENTS INCOME NET
-------- --------- --------
<S> <C> <C> <C>
1998........................................... $ 20,241 $ 1,897 $ 18,344
1999........................................... 18,702 1,771 16,931
2000........................................... 17,315 1,644 15,671
2001........................................... 15,015 1,437 13,578
2002........................................... 12,277 1,199 11,078
Beyond 2002.................................... 40,230 2,824 37,406
-------- ------- --------
Rent expense, net.............................. $123,780 $10,772 $113,008
======== ======= ========
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or consolidated results of operations.
15. SIGNIFICANT EVENT
On March 6, 1998, the Company signed a Recapitalization Agreement which may
result in the transfer of significant ownership interest in the Company to
Thomas H. Lee Company. The financial statements presented do not reflect any
effects of this transaction.
16. YEAR 2000 ISSUE-UNAUDITED
The Company has developed a plan to modify its information technology to be
ready for the year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by mid 1999. The estimated internal costs are not expected to be material. The
Company does not expect this project, including costs to upgrade and replace
systems to have a significant effect on operations.
F-28
<PAGE> 133
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
The Samit Organization
Alexandria, Virginia
We have audited the accompanying consolidated and combined balance sheets
of The Samit Organization as of September 30, 1997 and December 31, 1996 and the
related consolidated and combined statements of income, changes in stockholders'
equity and cash flows for the period of January 1, 1997 through September 30,
1997, and the year ended December 31, 1996. These consolidated and combined
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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also 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.
As discussed in Note 10 to these financial statements, during the current
year the Company's management discovered certain errors resulting in the
overstatement of net income and the understatement of occupancy expense as of
and for fiscal periods ending on and prior to December 31, 1995. Accordingly,
the 1995 financial statements have been restated and an adjustment to correct
the error has been made to retained earnings as of January 1, 1996.
In our opinion, the consolidated and combined financial statements referred
to above present fairly, in all material respects, the financial position of The
Samit Organization as of September 30, 1997 and December 31, 1996, and the
results of its operations and its cash flows for the period January 1, 1997
through September 30, 1997, and the year ended December 31, 1996 in conformity
with generally accepted accounting principles.
/S/ BEERS & CUTLER PLLC
Washington, D.C.
November 20, 1997
F-29
<PAGE> 134
THE SAMIT ORGANIZATION
CONSOLIDATED AND COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS ------------- -------------
<S> <C> <C>
Current Assets
Cash and cash equivalents.............................. $ 117,518 $ 198,668
Accounts receivable, net of allowance for doubtful
accounts of $30,207 and $10,825....................... 754,389 656,310
Inventory.............................................. 1,687,657 1,628,872
Prepaid expenses....................................... 72,040 35,833
Notes receivable and advances -- stockholder, current
portion............................................... 561,527 25,227
Refundable income taxes................................ 37,378 --
----------- -----------
Total current assets................................... 3,230,509 2,544,910
----------- -----------
Property and Equipment
Furniture and equipment................................ 2,794,602 2,665,050
Leasehold improvements................................. 2,019,635 1,908,823
----------- -----------
4,814,237 4,573,873
Less accumulated depreciation.......................... (2,134,410) (1,793,309)
----------- -----------
Total property and equipment........................... 2,679,827 2,780,564
----------- -----------
Other Assets
Notes receivable and advances -- stockholder, net of
current portion....................................... 1,001,557 47,454
Deposits............................................... 114,566 104,566
Intangible assets, net of accumulated amortization..... 1,681,553 830,291
Deferred income tax benefit............................ 107,127 107,127
----------- -----------
Total other assets..................................... 2,904,803 1,089,438
----------- -----------
Total assets........................................... $ 8,815,139 $ 6,414,912
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-30
<PAGE> 135
THE SAMIT ORGANIZATION
CONSOLIDATED AND COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY ------------- -------------
<S> <C> <C>
Current Liabilities
Accounts payable....................................... $ 616,495 $1,286,899
Current portion of long-term debt...................... 541,071 684,159
Accrued expenses
Salaries and wages................................... 731,846 369,555
Special bonuses and doctor liabilities............... 2,625,546 --
Other................................................ 67,649 7,177
Income taxes payable................................... -- 139,130
Patient deposits....................................... 37,286 38,723
---------- ----------
Total current liabilities.............................. 4,619,893 2,525,643
---------- ----------
Noncurrent Liabilities
Long-term debt, net of current portion................. 1,636,038 1,838,618
Deferred rent.......................................... 327,520 331,400
Deferred compensation.................................. 97,396 --
---------- ----------
Total noncurrent liabilities........................... 2,060,954 2,170,018
---------- ----------
Total liabilities...................................... 6,680,847 4,695,661
---------- ----------
Stockholders' Equity
Common stock........................................... 210 200
Additional paid-in-capital............................. 681,983 281,993
Retained earnings...................................... 1,452,099 1,437,058
---------- ----------
Total stockholders' equity............................. 2,134,292 1,719,251
---------- ----------
Total liabilities and stockholders' equity............. $8,815,139 $6,414,912
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-31
<PAGE> 136
THE SAMIT ORGANIZATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Gross Revenues.............................................. $19,558,881 $21,848,000
Cost of Goods Sold.......................................... 5,786,956 6,494,912
----------- -----------
Gross Profit................................................ 13,771,925 15,353,088
----------- -----------
Operating Expenses
Salaries and wages..................................... 7,214,792 8,500,846
Payroll benefits....................................... 774,131 806,691
Occupancy.............................................. 1,837,861 2,021,342
General and administrative............................. 1,582,902 2,354,991
Depreciation and amortization.......................... 482,722 554,910
----------- -----------
11,892,408 14,238,780
----------- -----------
Income from Operations...................................... 1,879,517 1,114,308
Other Income and Expense
Interest income........................................ 62,800 --
Interest expense....................................... (191,676) (144,867)
Special bonuses related to sale by stockholders........ (1,625,546) --
----------- -----------
(1,754,422) (144,867)
----------- -----------
Income Before Provision for Income Taxes.................... 125,095 969,441
Provision for Income Taxes.................................. 110,054 409,683
----------- -----------
Net Income.................................................. $ 15,041 $ 559,758
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-32
<PAGE> 137
THE SAMIT ORGANIZATION
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1995....................... 20,000 $200 $281,993 $1,096,300
Prior Period Adjustment.......................... -- -- -- (219,000)
------ ---- -------- ----------
Balance, January 1, 1996, as restated............ 20,000 200 281,993 877,300
Net Income....................................... -- -- -- 559,758
------ ---- -------- ----------
Balance, December 31, 1996....................... 20,000 $200 281,993 $1,437,058
Issuance of common stock......................... 1,040 10 399,990 --
Net Income....................................... -- -- -- 15,041
------ ---- -------- ----------
Balance, September 30, 1997...................... 21,040 $210 $681,983 $1,452,099
====== ==== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-33
<PAGE> 138
THE SAMIT ORGANIZATION
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income............................................. $ 15,041 $ 559,758
Reconciliation adjustments
Depreciation and amortization........................ 482,722 555,666
Loss on retirement and disposal...................... 7,118 5,486
Changes in:
Accounts receivable............................... (98,079) (315,526)
Inventory......................................... (58,785) (124,455)
Prepaid expenses.................................. (36,207) (13,469)
Refundable income taxes........................... (176,508) --
Deferred tax benefit.............................. -- 7,490
Accounts payable.................................. (670,404) 187,061
Accrued expenses.................................. 2,048,309 6,307
Patient deposits.................................. (1,437) (28,333)
Income taxes payable.............................. -- 72,376
Deferred rent..................................... (3,880) --
Deferred compensation............................. 97,396 --
---------- -----------
Net cash provided by operating activities.............. 1,605,286 912,361
---------- -----------
Cash Flows from Investing Activities
Purchases of property and equipment.................... (240,364) (1,103,330)
Payments for intangible assets......................... -- (611,461)
Loans to stockholder................................... (1,490,403) 33,553
Deposits............................................... (10,000) (15,968)
---------- -----------
Net cash used in investing activities.................. (1,740,767) (1,697,206)
---------- -----------
Cash Flows from Financing Activities
Proceeds from long-term debt........................... 2,917,895 1,315,000
Repayment of long-term debt............................ (2,863,564) (570,502)
---------- -----------
Net cash provided by financing activities.............. 54,331 744,498
---------- -----------
Net Decrease in Cash and Cash Equivalents................... (81,150) (40,347)
Cash and Cash Equivalents, beginning of period.............. 198,668 239,015
---------- -----------
Cash and Cash Equivalents, end of period.................... $ 117,518 $ 198,668
========== ===========
Supplementary Cash Flow Information:
Interest paid.......................................... $ 191,676 $ 144,867
========== ===========
Income taxes paid...................................... $ 292,704 $ 329,816
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-34
<PAGE> 139
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated and combined financial statements include the accounts of
the following corporations which are under the common control of Dr. Robert A.
Samit and are related in their operations, which are conducted primarily in the
Washington Metropolitan area:
<TABLE>
<CAPTION>
CORPORATION OPERATIONS
----------- ----------
<S> <C>
- - The Samit Group, Inc. (Parent) Management Holding Company
- - Hour Eyes, Inc. (Subsidiary) Retail Optometry Stores (Maryland and D.C.)
- - Metropolitan Vision Services, Inc. Insurance Marketing Service
(Subsidiary) Processing Lab
- - Skylab, Inc. (Subsidiary) Retail Optometry Stores (Virginia)
- - Dr. Samit's Hour Eyes Optometrist, P.C.
(Identical ownership as The Samit Group,
Inc.)
</TABLE>
Capital stock information is as follows:
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND
SEPTEMBER 30, 1997 AUTHORIZED OUTSTANDING PAR VALUE
------------------ ---------- ----------- ---------
<S> <C> <C> <C>
The Samit Group, Inc. and Subsidiaries.............. 20,000 10,520 $105
Dr. Samit's Hour Eyes Optometrist, P.C.............. 11,000 10,520 105
----
$210
====
</TABLE>
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND
DECEMBER 31, 1996 AUTHORIZED OUTSTANDING PAR VALUE
----------------- ---------- ----------- ---------
<S> <C> <C> <C>
The Samit Group, Inc. and Subsidiaries.............. 20,000 10,000 $100
Dr. Samit's Hour Eyes Optometrist, P.C.............. 11,000 10,000 100
----
$200
====
</TABLE>
Combined financial statements are presented due to the common ownership of
The Samit Group, Inc., Dr. Samit's Hour Eyes Optometrist, P.C. and interrelated
business activities. All material intercompany transactions have been
eliminated.
On September 30, 1997, the stockholders of the Companies sold their
ownership interests to an unrelated third party. These financial statements
present the financial condition of the Companies immediately prior to the sale
and include an accrual for bonuses to employees in connection with the sale. As
a result of the sale, an accrual of $1,000,000 was recorded for amounts due
representing goodwill associated with practices of two doctors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents--The term cash and cash equivalents, as used in
the accompanying financial statements, includes currency on hand, demand
deposits and certificates of deposit with financial institutions.
Inventory--Inventory consists of eyeglass lenses and frames, contact lenses
and accessories. Inventory is stated at the lower of cost or market value using
the first-in, first-out (FIFO) method.
Income Taxes--Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of fixed
assets for financial and income tax reporting. The deferred tax assets and
liabilities represent the
F-35
<PAGE> 140
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled.
Property and Equipment--Assets are stated at cost. Depreciation and
amortization are computed using both accelerated and straight-line methods over
the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and equipment................................ 5 and 7 years
10 and
Leasehold improvements................................. 31 1/2years
</TABLE>
Intangible Assets--Intangible assets represent covenants not-to-compete,
patient records acquired from others, lease acquisition costs, organization
costs and goodwill. Intangible assets are amortized on a straight-line basis
over the following estimated useful lives:
<TABLE>
<S> <C>
Covenants not-to-compete 2 years
Patient records 2 to 6 years
Lease acquisition costs 10 years
Organization costs 5 years
Goodwill 5 to 20 years
</TABLE>
Advertising--The Companies follow the policy of charging the costs of
advertising to expense as incurred. Advertising expense, net of cooperative
advertising reimbursements from vendors, was approximately $188,000 for the
period January 1, 1997 through September 30, 1997 and $300,000 for 1996.
Deferred Rent--Rent concessions under new leases are amortized on a
straight-line basis over the lease term.
Noncash Financing Transaction--During 1997, 1,040 shares of common stock
were transferred to a stockholder in satisfaction of a $400,000 note payable to
such stockholder.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses and the disclosure of contingent assets and
liabilities.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Goodwill...................................... $1,351,613 $ 351,613
Patient records............................... 568,010 592,328
Covenants not-to-compete...................... 205,000 205,000
Lease acquisition costs....................... 125,000 125,000
Organization costs............................ 17,031 17,031
Loan points paid.............................. 15,317 --
Other......................................... 3,451 --
---------- ----------
$2,285,422 1,290,972
Accumulated amortization...................... (603,869) (460,681)
---------- ----------
$1,681,553 $ 830,291
========== ==========
</TABLE>
F-36
<PAGE> 141
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
During 1996, the Companies purchased the assets of two optometry practices
for approximately $675,000. The allocation of the purchase price was as follows.
<TABLE>
<S> <C>
Inventory................................................... $ 40,000
Fixed Assets................................................ 110,000
Covenant Not-to-Compete..................................... 175,000
Patient Records............................................. 175,000
Goodwill.................................................... 175,000
--------
$675,000
========
</TABLE>
One of the practices was acquired through the payment of $200,000 plus a
$300,000 note payable (see Note 5). The other practice was acquired as a
repayment of advances made to the practice. A stockholder of the second practice
is a shareholder of the Companies (see Note 8). The amortization of the various
intangible assets is straight-line over two years for the covenant
not-to-compete, six years for patient records and 20 years for goodwill.
4. LINE OF CREDIT
The Companies have a $350,000 revolving line of credit with Central
Fidelity Bank. The line of credit carries a variable interest rate, and there
were no advances at September 30, 1997.
The Companies had a $250,000 revolving line of credit with Citizens Bank
which was replaced by the Central Fidelity Bank line on April 1, 1997. The line
of credit carried a variable interest rate, and there were no advances at
December 31, 1996.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Note payable to Central Fidelity Bank, requiring monthly
principal payments of $41,632 plus interest at 270 basis
points over the one month LIBOR rate and matures in March
2002. The note is secured by the assets of the Companies and
the stockholders provided additional guarantees............. $1,748,106 $ --
Notes payable to Citizens Bank, requiring monthly principal
payments of $48,000 plus interest at Prime plus 1/4% with
maturities from April 1998 to December 2001. All the notes
were paid in full on April 1, 1997. The notes were secured
by the assets of the Companies and the stockholders provided
additional collateral and guarantees. These amounts were
borrowed under lines of credit discussed below.............. -- 1,629,553
Unsecured note payable, in connection with acquisition of a
practice, maturing in July 2001, requiring monthly payments
of interest at Prime plus 1% with principal due at maturity.
A stockholder of the holder of the note is a stockholder of
the Companies. The note was subordinated to all other bank
financing................................................... -- 400,000
Note payable, in connection with the acquisition of a
practice, maturing in June 2000, monthly payments of $9,000
comprising principal and interest at 4%, commencing July
1997. The note is secured by the property acquired with the
loan proceeds............................................... 276,350 300,000
</TABLE>
F-37
<PAGE> 142
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Guaranteed bonus payments to an employee in connection with
the purchase of a practice. Bonus payments of $4,000 per
month for 60 months with imputed interest at 9%............. 103,903 131,832
Unsecured note payable related to the buyout of an equity
participation interest maturing in October 1999 and bearing
interest at Prime plus 1%. Requires monthly principal and
interest payments of $2,000................................. 48,750 61,392
---------- ----------
2,177,109 2,522,777
Less current portion........................................ (541,071) (684,159)
---------- ----------
$1,636,038 $1,838,618
========== ==========
</TABLE>
The Companies had a line of credit for term loans with Citizens Bank for
future expansion. Amounts drawn on the line of credit were term loans with a
five-year maturity that bear interest at the Prime Rate plus 1/4% or the
five-year Treasury Rate plus 300 basis points. Amounts drawn on the line of
credit are included in long-term debt above. At December 31, 1996 there was no
unused line of credit.
Principal maturities of long-term debt for each year are as follows:
<TABLE>
<S> <C>
Year ending September 30, 1998.............................. $ 541,071
1999........................................................ 548,112
2000........................................................ 468,901
2001........................................................ 396,515
2002........................................................ 222,510
----------
$2,177,109
==========
</TABLE>
All outstanding debt as of September 30, 1997 was extinguished on October
1, 1997 in connection with the sale of The Samit Organization by the
stockholders. See Note 1.
6. COMMITMENTS
The Companies lease retail and office space under the terms of various
operating leases which expire during the years 1998 through 2006. Minimum lease
payments in the aggregate for each year are as follows:
<TABLE>
<S> <C>
Year ending September 30, 1998.............................. $1,564,048
1999........................................................ 1,353,768
2000........................................................ 1,179,029
2001........................................................ 1,001,277
2002........................................................ 601,960
Thereafter.................................................. 1,026,892
----------
$6,726,974
==========
</TABLE>
Rent expense totaled $1,607,810 and $2,021,342 (including percentage rent
of $55,872 and $36,253) for the period from January 1, 1997 through September
30, 1997 and for the year ended December 31, 1996, respectively.
7. INCOME TAXES
The Companies' deferred tax assets and liabilities at September 30, 1997
are summarized below. The deferred tax assets and liabilities reflect the tax
consequence of the differences in the financial reporting and tax basis of
accounts receivable, property and equipment and deferred rent.
F-38
<PAGE> 143
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 31,
1997 1996
--------- --------
<S> <C> <C>
Deferred Tax Assets......................................... $112,400 $116,514
Deferred Tax Liabilities.................................... (5,273) (9,387)
-------- --------
Net Deferred Tax Asset...................................... $107,127 $107,127
======== ========
</TABLE>
The income tax expense consists of the following:
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ----------------
<S> <C> <C>
Federal............................................. $ 91,752 $ 349,020
State............................................... 18,302 60,663
----------------- ----------------
Income Tax Expense.................................. $ 110,054 $ 409,683
================= ================
</TABLE>
The difference between the amount of reported income taxes and the amount
computed by multiplying the applicable statutory income tax rate is primarily
due to expenses which are not deductible for income tax reporting purposes and
charges of $56,000 in the period January 1, 1997 through September 30, 1997, and
$37,405 in 1996 related to a change in estimated tax expense for prior years.
8. RELATED PARTY TRANSACTIONS
During 1995, the Companies received a $106,234 note receivable from a
stockholder for amounts advanced by the Companies on his behalf. The note bears
interest at 6% per annum and matures on December 31, 1999. Annual principal
payments of $25,227 plus accrued interest are required.
During 1997, the Companies loaned $1,000,000 to a stockholder. The note
bears interest at 370 basis points over the one month LIBOR rate and matures in
March 2002. Accrued interest of $46,990 was outstanding as of September 30,
1997.
The Companies provided services to an affiliate whose stockholders include
a stockholder of the Companies. During 1996, the Companies acquired the assets
of the affiliate in exchange for advances totaling $175,000 made to the
affiliate (see Note 3).
During 1997, the Companies made advances of approximately $390,000 to a
stockholder. The advances accrue interest at 9.4% and approximately $14,000 of
interest was outstanding at September 30, 1997.
The notes receivable and advances described above were repaid subsequent to
September 30, 1997.
The Companies purchase from and sell to an affiliate whose stockholders
include a stockholder of the Companies.
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------ ------------
<S> <C> <C>
Sales to affiliate.................................... $ 23,000 $ 115,657
================== ============
Purchases from affiliate.............................. $ -- $ 41,282
================== ============
</TABLE>
F-39
<PAGE> 144
THE SAMIT ORGANIZATION
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
9. 401(k) RETIREMENT PLAN AND PROFIT-SHARING PLAN
During 1994, the Companies established a defined contribution 401(k)
retirement plan. The plan is eligible to all employees with over one year of
service, subject to certain vesting requirements. Employees may contribute up to
the IRS maximum, which during 1997 was $9,500. The Companies currently match up
to 2% of each participant's salary reduction. The Companies incurred
approximately $77,400 and $72,900, respectively, in contributions and expenses
of the plan in the period January 1, 1997 through September 30, 1997 and the
year ended December 31, 1996.
10. PRIOR PERIOD ADJUSTMENT
Certain errors resulting in the omission of deferred rent were discovered
during the current year. Accordingly, an adjustment of $331,400 was made during
1996 to record the deferred rent as of January 1, 1996. A corresponding entry
was made to reduce previously reported retained earnings by $219,000 (net of the
related deferred tax benefit of $112,400) as of the beginning of 1996.
F-40
<PAGE> 145
VISIONWORKS HOLDINGS, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Visionworks Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Visionworks
Holdings, Inc. (the Company) as of January 28, 1995, February 3, 1996 and
August 31, 1996, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the periods then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Visionworks
Holdings, Inc. as of January 28, 1995, February 3, 1996 and August 31, 1996, and
the results of its operations and its cash flows for the periods then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
October 15, 1996
F-41
<PAGE> 146
VISIONWORKS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 28, 1995, FEBRUARY 3, 1996 AND AUGUST 31, 1996
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS (NOTE 3)
Cash........................................................ $ 1,570 $ 1,269 $ 940
Inventory................................................... 7,734 9,555 9,705
Receivables, less allowance for doubtful receivables of $360
at January 28, 1995, $182 at February 3, 1996 and $376 at
August 31, 1996........................................... 441 662 523
Current installments of equipment receivables............... 313 519 482
Current installments of note receivable - officer (note
7)........................................................ 100 -- --
Prepaid expenses and other current assets................... 83 645 246
Deferred tax asset (note 9)................................. 1,221 1,167 1,290
------- ------- -------
Total current assets............................ 11,462 13,817 13,186
Property, plant and equipment, at cost (note 4):
Land.................................................... 6,000 6,000 6,000
Buildings............................................... 3,000 3,129 3,134
Furniture and equipment................................. 11,508 12,056 12,397
Transportation equipment................................ 15 54 54
Leasehold improvements.................................. 4,585 5,294 5,551
------- ------- -------
25,108 26,533 27,136
Less accumulated depreciation....................... 2,332 4,618 5,961
------- ------- -------
Net property, plant and equipment............... 22,776 21,915 21,175
Long-term equipment receivables, excluding current
installments.............................................. 1,257 958 795
Note receivable - officer, excluding current installments
(note 7).................................................. 100 -- --
Goodwill, net of accumulated amortization of $234 at January
28, 1995, $478 at February 3, 1996 and $596 at August 31,
1996...................................................... 5,825 5,581 5,463
Unamortized debt expense, net of accumulated amortization of
$273 at January 28, 1995, $557 at February 3, 1996 and
$724 at August 31, 1996................................... 1,092 863 696
Deferred tax asset (note 9)................................. 953 -- --
Other assets................................................ 23 29 26
------- ------- -------
$43,488 $43,163 $41,341
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 3)......... $ 1,200 2,000 1,825
Accounts payable........................................ 2,409 6,063 6,673
Customer deposits....................................... 314 403 307
Accrued expenses:
Payroll and payroll related......................... 2,147 2,332 1,872
Other............................................... 1,197 1,148 1,559
Protection plan reserve................................. 1,558 800 800
Store closing reserve................................... 700 456 330
------- ------- -------
Total current liabilities....................... 9,525 13,202 13,366
Long-term debt, excluding current installments (note 3)..... 16,280 9,500 5,675
Store purchase obligation (note 4).......................... 10,000 10,000 9,979
Deferred compensation payable (note 8)...................... 355 435 505
Deferred tax liability (note 9)............................. -- 16 801
------- ------- -------
Total liabilities............................... 36,160 33,153 30,326
------- ------- -------
Stockholders' equity (notes 1 and 6):
Common stock and paid-in capital........................ 6,500 7,750 7,750
Retained earnings....................................... 828 2,260 3,265
------- ------- -------
Total stockholders' equity...................... 7,328 10,010 11,015
------- ------- -------
$43,488 $43,163 $41,341
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE> 147
VISIONWORKS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
AND FOR THE SEVEN MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
YEARS ENDED SEVEN
------------------------- MONTHS ENDED
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................................ $60,466 $61,509 $37,759
Cost of goods sold...................................... 17,999 17,232 11,030
------- ------- -------
Gross profit....................................... 42,467 44,277 26,729
Selling, general and administrative expenses............ 35,286 36,212 22,175
Depreciation and amortization expense................... 2,640 2,588 1,505
------- ------- -------
Operating income................................... 4,541 5,477 3,049
Interest expense, including amortization of debt
expenses of $273, $284 and $167....................... 3,205 3,022 1,371
------- ------- -------
Earnings before income taxes....................... 1,336 2,455 1,678
Income taxes (note 9)................................... 508 1,023 673
------- ------- -------
Net earnings....................................... $ 828 $ 1,432 $ 1,005
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE> 148
VISIONWORKS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
AND FOR THE SEVEN MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
COMMON
STOCK AND
PAID-IN RETAINED
CAPITAL EARNINGS TOTAL
--------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Balances at January 29, 1994................................ $ -- $ -- $ --
Common stock issued.................................... 7,000 -- 7,000
Unearned compensation -- restricted stock (note
6(a))................................................ (500) -- (500)
Net earnings........................................... -- 828 828
------ ------ -------
Balances at January 28, 1995................................ 6,500 828 7,328
Earned compensation -- restricted stock (note 6(a)).... 500 -- 500
Conversion of convertible subordinated debenture into
common stock (note 6(a))............................. 750 -- 750
Net earnings........................................... -- 1,432 1,432
------ ------ -------
Balances at February 3, 1996................................ 7,750 2,260 10,010
Net earnings........................................... -- 1,005 1,005
------ ------ -------
Balances at August 31, 1996................................. $7,750 $3,265 $11,015
====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-44
<PAGE> 149
VISIONWORKS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
AND FOR THE SEVEN MONTHS ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
YEARS ENDED SEVEN MONTHS
------------------------- ENDED
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $ 828 $ 1,432 $ 1,005
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization................... 2,640 2,588 1,505
Non-cash compensation........................... 250 500 --
Non-cash interest expense....................... 703 406 167
Deferred income taxes........................... 508 1,023 662
------- -------- -------
4,929 5,949 3,339
------- -------- -------
Changes in operating assets and liabilities:
Receivables..................................... 966 (221) 139
Inventory....................................... 1,805 (1,821) (150)
Equipment receivables........................... 297 93 200
Note receivable -- officer...................... (200) 200 --
Prepaid expense and other assets................ (291) (623) 402
Accounts payable and accruals................... 3,220 2,957 409
------- -------- -------
5,797 585 1,000
------- -------- -------
Net cash provided by operating
activities............................... 10,726 6,534 4,339
------- -------- -------
Cash flows from investing activity --
Capital expenditures, net of minor disposals......... (1,000) (1,483) (647)
------- -------- -------
Net cash used in investing activities...... (1,000) (1,483) (647)
------- -------- -------
Cash flows from financing activities:
Proceeds from long-term debt......................... -- 5,250 --
Principal payments on long-term debt................. (8,700) (10,602) (4,000)
Principal payments on store purchase obligation...... -- -- (21)
------- -------- -------
Net cash used in financing activities...... (8,700) (5,352) (4,021)
------- -------- -------
Net increase (decrease) in cash........................... 1,026 (301) (329)
Cash at beginning of year................................. 544 1,570 1,269
------- -------- -------
Cash at end of year....................................... $ 1,570 $ 1,269 $ 940
======= ======== =======
Supplemental cash flow information --
Cash paid during the year for:
Interest........................................ $ 2,164 $ 2,563 $ 1,244
======= ======== =======
Income taxes.................................... $ -- -- $ 11
======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-45
<PAGE> 150
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 28, 1995, FEBRUARY 3, 1996 AND AUGUST 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(1) ORGANIZATION OF THE BUSINESS
The consolidated financial statements include Visionworks Holdings, Inc. (a
holding company) and its wholly-owned subsidiaries Visionworks, Inc. and
Visionworks Properties, Inc. On March 29, 1994, Visionworks, Inc. closed on an
asset purchase agreement (the Asset Purchase Agreement) entered into with Eckerd
Corporation to purchase certain assets and assume certain liabilities of Eckerd
Corporation's Vision-Group operations.
The purchase, effective for financial statement purposes on January 30,
1994, was made through the payment of cash, issuance of notes payable, and
assumption of liabilities totaling approximately $48,000, and was accounted for
using the purchase method of accounting. The purchase price was allocated to
assets based on their estimated fair market values at January 30, 1994.
The Company operates a chain of stores, primarily in the Southeastern
United States, which sell vision wear and related accessories.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
(b) Definition of Fiscal Year
The fiscal year ends on the Saturday nearest January 31. Fiscal year 1994
ended on January 28, 1995 and consisted of 52 weeks. Fiscal year 1995 ended on
February 3, 1996 and consisted of 53 weeks. The seven months ended August 31,
1996 consisted of 30 weeks.
(c) Merchandise Inventories
Inventories consist principally of merchandise held for resale and are
stated at the lower of cost (first-in, first-out (FIFO)) or market.
(d) Depreciation Policy and Maintenance and Repairs
Plant and equipment is depreciated principally by the straight-line method
over the estimated useful lives of such assets. The principal lives used to
compute depreciation are:
<TABLE>
<S> <C>
Buildings................................................... 30
Furniture and equipment..................................... 1 - 10
Transportation equipment.................................... 1 - 8
Leasehold improvements...................................... 2 - 20
------
</TABLE>
Maintenance and repairs are charged to expense as incurred. The Company's
policy is to capitalize expenditures for renewals and betterments and to reduce
the asset accounts and the related allowance for depreciation for the cost and
accumulated depreciation of items replaced, retired or fully depreciated.
F-46
<PAGE> 151
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(e) Goodwill
The Company amortizes the goodwill which arose from the January 30, 1994
Asset Purchase Agreement over 30 years on a straight-line basis for financial
statement purposes. Goodwill is reviewed for recoverability based on
undiscounted cash flows.
(f) Unamortized Debt Expenses
Unamortized debt expenses represent professional fees and other costs
related to the long-term debt financing (see note 3), which are amortized over
the life of the related debt instruments.
(g) Fair Value of Financial Instruments
The carrying value of financial instruments, including cash, receivables,
and accounts payable approximated fair value because of the relatively short
maturity of these instruments. The carrying value of the long-term debt
approximates fair value based on interest rates currently available to the
Company.
(h) Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. Under the asset and
liability method of Statement 109, deferred income taxes are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be recovered or settled. Under Statement 109, the
effect on deferred taxes of a change in tax rate is recognized in income in the
period that includes the enactment date.
(i) Protection Plan Reserve
The Company offers a protection plan to customers, whereby customers who
select the plan are offered a replacement of their vision wear in the twelve
months following purchase of the item. The Company defers the related revenues
to the applicable period.
(j) Store Closing Reserve
The Company accrues the cost of lease payments expected to be incurred
after the date of a store closing and the remaining net book value of related
property and equipment at the date of the store closing.
(k) Advertising
The cost of advertising is expensed as the related advertising takes place.
Prepaid advertising costs related to direct response advertising amounted to $5
at January 28, 1995, $19 at February 3, 1996, and $143 at August 31, 1996.
Advertising expense was $3,295 in fiscal 1994, $3,289 in fiscal 1995, and $1,986
in fiscal 1996 to date.
(l) Reclassifications
Certain amounts from the prior period financial statements have been
reclassified to conform with the current period presentation.
F-47
<PAGE> 152
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(3) LONG-TERM DEBT
Long-term debt at January 28, 1995, February 3, 1996 and August 31, 1996
was:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ----------
<S> <C> <C> <C>
Term loans, due January 28, 1999...................... $11,442 $11,500 $7,500
Revolving credit...................................... 58 -- --
Senior subordinated note, due March 29, 2001.......... 5,230 -- --
16% junior subordinated note -- due to officer, due
March 28, 1997 (note 6(a)).......................... 750 -- --
------- ------- ------
Total long-term debt............................. 17,480 11,500 7,500
Less current installments........................... 1,200 2,000 1,825
------- ------- ------
Long-term debt, excluding current installments... $16,280 $ 9,500 $5,675
======= ======= ======
</TABLE>
The aggregate minimum annual maturities of long-term debt are: $1,825;
1997, $1,995; 1998, and $3,680, 1999.
On March 29, 1994, the Company entered into a Credit Agreement, which
provided for (i) an $18,000 term loan facility (Term Loans); and (ii)a $5,250
revolving credit facility (Revolving Loans).
On April 5, 1995, the Company amended the Credit Agreement. The amendment
increased the outstanding Term Loans by $5,250, the proceeds of which were used
to pay the outstanding principal and interest on the senior subordinated note.
The fees associated with executing the amendment were capitalized as part of
unamortized debt expenses.
Under the terms of the amendment, the Term Loans have an interest rate
equal to, at the Company's option, the bank prime loan rate plus 1.25% per annum
or the LIBOR rate plus 2.75% per annum. The Revolving Loans have an interest
rate equal to, at the Company's option, the bank prime loan rate plus 1.00% per
annum or the LIBOR rate plus 2.50% per annum. The interest rate on the Term
Loans at January 28, 1995 was approximately 10.5%, at February 3, 1996 was
approximately 8.7%, and at August 31, 1996 was approximately 9.5%.
The Term Loans and Revolving Loans are collateralized by all inventory,
equipment, and both tangible, as well as intangible, property of the Company.
At August 31, 1996, there was a $93 letter of credit outstanding against
the Revolving Loan.
(4) CAPITAL LEASES
In connection with the purchase of certain assets of Vision-Group described
in note 1, the Company agreed to sublease land, buildings and equipment at eight
of the operating locations. Under the terms of the agreement, the Company
committed to purchase such properties on February 1, 1999 for $10,000 and to pay
Eckerd Corporation $1,260 per year annually until February 1, 1999 for the
subleases. The Company has accounted for this transaction in a manner similar to
a capital lease and has recorded the assets and the future obligation on the
balance sheet at $10,000. The annual sublease payments have been reflected as
interest expense in the statement of earnings.
F-48
<PAGE> 153
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
At January 28, 1995, February 3, 1996 and August 31, 1996, the gross amount
of the assets and related accumulated amortization recorded were as follows:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ----------
<S> <C> <C> <C>
Land.................................... $ 6,000 $ 6,000 $ 6,000
Buildings and equipment................. 4,000 4,000 4,000
------- ------- -------
10,000 10,000 10,000
Less accumulated amortization........... (300) (600) (775)
------- ------- -------
$ 9,700 $ 9,400 $ 9,225
======= ======= =======
</TABLE>
(5) COMMITMENTS
The Company conducts the major portion of its retail operations from leased
store premises under leases that will expire over the next twenty years. Such
leases generally contain renewal options exercisable at the option of the
Company. In addition to minimum rental payments, certain leases provide for
payment of taxes, maintenance, and percentage rentals based upon sales in excess
of stipulated amounts. Rental expense was $6,144 in fiscal 1994, $6,324 in
fiscal 1995, and $3,917 in fiscal 1996 to date.
At February 3, 1996 and August 31, 1996, minimum rental commitments for the
next five fiscal years and thereafter under noncancelable leases were as
follows:
<TABLE>
<CAPTION>
FEBRUARY 3, AUGUST 31,
FISCAL YEAR 1996 1996
----------- ----------- ----------
<S> <C> <C>
1996............................................... $ 5,438 $ 5,599
1997............................................... 5,097 5,506
1998............................................... 5,136 5,525
1999............................................... 4,979 5,358
2000............................................... 4,840 5,139
Thereafter......................................... 29,718 27,806
------- -------
$55,208 $54,933
======= =======
</TABLE>
(6) STOCKHOLDERS' EQUITY
(a) Common Stock
The Company's authorized common stock consists of 2,000,000 shares of no
par value common stock. As of January 28, 1995, February 3, 1996 and August 31,
1996, there were 1,000,000 shares of common stock issued and outstanding. A
total of 96,774 of these shares were issued as part of a restricted stock award
to a Company officer in fiscal 1994. At January 28, 1995, 24,186 of these
restricted shares were vested. In fiscal 1995, the remaining 72,588 shares
became vested. In connection with this restricted stock award, the Company
recorded $250,000 of compensation during fiscal 1994 and $500,000 of
compensation during fiscal 1995.
On March 28, 1994, the Company issued a $750 convertible subordinated
debenture to a Company officer. This note was converted into 96,774 shares of
the Company's common stock during fiscal 1995.
(b) Stock Incentive Plan
The Company has a qualified stock incentive plan for the purpose of
granting stock options to officers and key employees of the Company. The number
of shares reserved for this purpose is discretionary and is
F-49
<PAGE> 154
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
determined by the Stock Incentive Plan Committee of the Board of Directors.
Options are granted at prices which are not less than the fair market value at
the date of grant.
Through August 31, 1996, 50,000 stock options were authorized and 49,500
were issued in fiscal 1995 and 500 in fiscal 1996 to date with an exercise price
of $7.75. These options vest 50% after three years and 25% in each of the two
years thereafter. At January 28, 1995, February 3, 1996 and August 31, 1996, no
options were exercisable.
The Company applies the provisions of APB Opinion No. 25 to all employee
stock-based compensation and, accordingly, no compensation expense is recorded
when the exercise price is greater than or equal to fair value at the
measurement date.
(7) NOTE RECEIVABLE -- OFFICER
On April 24, 1994, the Company received a $300 note due from a Company
officer. The note bore interest at 8% and required annual principal payments of
$100 plus interest. The note was repaid on January 20, 1996.
(8) DEFERRED COMPENSATION PLAN
The Company maintains an unfunded deferred compensation plan, initiated as
of December 20, 1994, whereby any eligible executive of the Company may defer a
certain portion of their compensation. The deferred amounts earn interest at a
rate equal to the interest paid by the Company in relation to its senior debt
outstanding. These amounts are payable (over a minimum of 5 years) only on
termination of employment or a change in control of the Company.
F-50
<PAGE> 155
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(9) INCOME TAXES
The tax effects of temporary differences that account for significant
portions of the deferred tax assets and deferred tax liabilities at January 28,
1995, February 3, 1996 and August 31, 1996 are presented below:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ----------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for uncollectible accounts.......... $ 102 35 108
Inventory, principally due to obsolete
inventory..................................... 731 -- --
Accrued expenses, principally due to deferral
for income tax reporting purposes............. 235 338 642
Unamortized debt expense, principally due to
differences in amortization................... 17 17 17
Alternative minimum tax credit carryforward..... -- -- 8
Charitable contribution carryforward............ -- -- 9
Net operating loss carryforwards................ 1,056 1,339 506
------ ------ ------
Total gross deferred tax assets............ 2,141 1,729 1,290
------ ------ ------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation................... 68 (498) (695)
Goodwill, principally due to differences in
amortizable amounts........................... (35) (80) (106)
------ ------ ------
Total gross deferred tax liabilities....... 33 (578) (801)
------ ------ ------
Net deferred tax asset..................... $2,174 1,151 489
====== ====== ======
</TABLE>
The Company considers estimated future taxable income and scheduled
reversals of taxable temporary differences in determining whether it is more
likely than not that deferred tax assets will be realized. Based on these
factors, there was no valuation allowance for deferred tax assets as of January
28, 1995, February 3, 1996 and August 31, 1996.
Income tax expense attributable to continuing operations consists of:
<TABLE>
<CAPTION>
YEARS ENDED SEVEN MONTHS
------------------------- ENDED
JANUARY 28, FEBRUARY 3, AUGUST 31,
1995 1996 1996
----------- ----------- ------------
<S> <C> <C> <C>
Current:
Federal........................................ $ -- -- 8
State.......................................... -- -- 3
---- ----- ---
-- -- 11
---- ----- ---
Deferred:
Federal........................................ 457 861 566
State.......................................... 51 162 96
---- ----- ---
508 1,023 662
---- ----- ---
$508 1,023 673
==== ===== ===
</TABLE>
Total income tax expense differs from the amounts computed by applying a
U.S. federal income tax rate of 34% to income before income taxes principally as
a result of state income taxes and non-tax deductible goodwill.
F-51
<PAGE> 156
VISIONWORKS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
The Company has a net tax operating loss carryforward of approximately
$3,500 at February 3 1996 and $1,320 at August 31, 1996, which will expire
beginning in fiscal year 2010.
(10) CONTINGENCIES
The Company is engaged in certain claims and legal actions. In the opinion
of management, the ultimate outcome of these matters will not have a material
adverse effect on the Company's financial position, results of operation or
liquidity.
(11) SUBSEQUENT EVENT
On September 27, 1996, the Company closed on a stock purchase agreement
entered into with Eye Care Centers of America, Inc., a Texas corporation, to
sell 100% of the outstanding shares of common stock of the Company.
F-52
<PAGE> 157
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF NOR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 12
The Exchange Offer.................... 18
The Recapitalization.................. 25
Use of Proceeds....................... 26
Capitalization........................ 27
Unaudited Pro Forma Condensed
Consolidated Financial Statements... 28
Selected Historical Financial Data.... 36
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Industry.............................. 43
Business.............................. 46
Management............................ 56
Principal Shareholders................ 61
Certain Transactions.................. 62
Description of the New Credit
Facility............................ 63
Description of Exchange Notes......... 64
Description of Initial Notes.......... 95
Description of New Preferred Stock.... 95
Exchange Offer; Registration Rights... 96
Income Tax Considerations............. 98
Plan of Distributions................. 99
Legal Matters......................... 100
Experts............................... 100
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
================================================================================
================================================================================
$150,000,000
[EYE CARE CENTERS OF AMERICA, INC. LOGO]
$100,000,000
9 1/8% SENIOR SUBORDINATED
NOTES DUE 2008
$50,000,000 FLOATING
INTEREST RATE SUBORDINATED
TERM SECURITIES DUE 2008
(FIRSTS(SM))
----------
PROSPECTUS
----------
, 1998
================================================================================
<PAGE> 158
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1(B)-(U) of the Texas Business Corporation Act provides as
follows:
ART. 2.02-1(B)-(U) POWER TO INDEMNIFY AND TO PURCHASE INDEMNITY INSURANCE; DUTY
TO INDEMNIFY.
B. A corporation may indemnify a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding because the person is or
was a director only if it is determined in accordance with Section F of this
article that the person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a director
of the corporation, that his conduct was in the corporation's best
interests; and
(b) in all other cases, that his conduct was at least not opposed
to the corporation's best interest; and
(3) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this article, a director
may not be indemnified under Section B of this article in respect of a
proceeding:
(1) in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted
from an action taken in the person's official capacity; or
(2) in which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order, settlement, or
conviction, or on a plea of nolo contendere or its equivalent is not of itself
determinative that the person did not meet the requirements set forth in Section
B of this article. A person shall be deemed to have been found liable in respect
of any claim, issue or matter only after the person shall have been so adjudged
by a court of competent jurisdiction after exhaustion of all appeals therefrom.
E. A person may be indemnified under Section B of this article against
judgments, penalties (including excise and similar taxes), fines, settlements,
and reasonable expenses actually incurred by the person in connection with the
proceeding; but if the person is found liable to the corporation or is found
liable on the basis that personal benefit was improperly received by the person,
the indemnification (1) is limited to reasonable expenses actually incurred by
the person in connection with the proceeding and (2) shall not be made in
respect of any proceeding in which the person shall have been found liable for
willful or intentional misconduct in the performance of his duty to the
corporation.
F. A determination of indemnification under Section B of this article must
be made:
(1) by a majority vote of a quorum consisting of directors who at the
time of the vote are not named defendants or respondents in the proceeding;
(2) if such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated to act in the matter by a
majority vote of all directors, consisting solely of two or more directors
who at the time of the vote are not named defendants or respondents in the
proceeding;
(3) by special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in Subsection (1) or (2) of
this section, or, if such a quorum cannot be obtained and such a committee
cannot be established, by a majority vote of all directors; or
II-1
<PAGE> 159
(4) by the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the proceeding.
G. Authorization of indemnification and determination as to reasonableness
of expenses must be made in the same manner as the determination that
indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses must be
made in the manner specified by Subsection (3) of Section F of this article for
the selection of special legal counsel. A provision contained in the articles of
incorporation, the bylaws, a resolution of shareholders or directors, or an
agreement that makes mandatory the indemnification permitted under Section B of
this article shall be deemed to constitute authorization of indemnification in
the manner required by this section even though such provision may not have been
adopted or authorized in the same manner as the determination that
indemnification is permissible.
H. A corporation shall indemnify a director against reasonable expenses
incurred by him in connection with a proceeding in which he is a named defendant
or respondent because he is or was a director if he has been wholly successful,
on the merits or otherwise, in the defense of the proceeding.
I. If, in a suit for the indemnification required by Section H of this
article, a court of competent jurisdiction determines that the director is
entitled to indemnification under that section, the court shall order
indemnification and shall award to the director the expenses incurred in
securing the indemnification.
J. If, upon application of a director, a court of competent jurisdiction
determines, after giving any notice the court considers necessary, that the
director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not he has met the requirements set forth in
Section B of this article or has been found liable in the circumstances
described by Section C of this article, the court may order the indemnification
that the court determines is proper and equitable; but if the person is found
liable to the corporation or is found liable on the basis that personal benefit
was improperly received by the person, the indemnification shall be limited to
reasonable expenses actually incurred by the person in connection with the
proceeding.
K. Reasonable expenses incurred by a director who was, is, or is
threatened to be made a named defendant or respondent in a proceeding may be
paid or reimbursed by the corporation, in advance of the final disposition of
the proceeding and without the determination specified in Section F of this
article or the authorization or determination specified in Section Go of this
article, after the corporation receives a written affirmation by the director of
his good faith belief that he has met the standard of conduct necessary for
indemnification under this article and a written undertaking by or on behalf of
the director to repay the amount paid or reimbursed if it is ultimately
determined that he has not met that standard or if it is ultimately determined
that indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section E of this article. A
provision contained in the articles of incorporation, the bylaws, a resolution
of shareholders or directors, or an agreement that makes mandatory the payment
or reimbursement permitted under this section shall be deemed to constitute
authorization of that payment or reimbursement.
L. The written undertaking required by Section K of this article must be
an unlimited general obligation of the director but need not be secured. It may
be accepted without reference to financial ability to make repayment.
M. A provision for a corporation to indemnify or to advance expenses to a
director who was, is, or is threatened to be made a named defendant or
respondent in a proceeding, whether contained in the articles of incorporation,
the bylaws, a resolution of shareholders or directors, an agreement, or
otherwise, except in accordance with Section R of this article, is valid only to
the extent it is consistent with this article as limited by the articles of
incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a corporation may
pay or reimburse expenses incurred by a director in connection with his
appearance as a witness or other participation in a proceeding at a time when he
is not a named defendant or respondent in the proceeding.
II-2
<PAGE> 160
O. An officer of the corporation shall be indemnified as, and to the same
extent, provided by Sections H, I, and J of this article for a director and is
entitled to seek indemnification under those sections to the same extent as a
director. A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may indemnify
and advance expenses to directors under this article.
P. A corporation may indemnify and advance expenses to persons who are not
or were not officers, employees, or agents of the corporation but who are or
were serving at the request of the corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, employee benefit plan, other
enterprise, or other entity to the same extent that it may indemnify and advance
expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an officer,
employee, agent, or person identified in Section P of this article and who is
not a director to such further extent, consistent with law, as may be provided
by its articles of incorporation, bylaws, general or specific action of its
board of directors, or contract or as permitted or required by common law.
R. A corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or who is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, employee benefit plan, other enterprise, or other entity, against
any liability asserted against him and incurred by him in such a capacity or
arising out of his status as such a person, whether or not the corporation would
have the power to indemnify him against that liability under this article. If
the insurance or other arrangement is with a person or entity that is not
regularly engaged in the business of providing insurance coverage, the insurance
or arrangement may provide for payment of a liability with respect to which the
corporation would not have the power to indemnify the person only if including
coverage for the additional liability has been approved by the shareholders of
the corporation. Without limiting the power of the corporation to procure or
maintain any kind of insurance or other arrangement, a corporation may, for the
benefit of persons indemnified by the corporation, (1) create a trust fund; (2)
establish any form of self-insurance; (3) secure its indemnity obligation by
grant of a security interest or other lien on the assets of the corporation; or
(4) establish a letter of credit, guaranty, or surety arrangement. The insurance
or other arrangement may be procured, maintained, or established within the
corporation or with any insurer or other person deemed appropriate by the board
of directors regardless of whether all or part of the stock or other securities
of the insurer or other person are owned in whole or in part by the corporation.
In the absence of fraud, the judgment of the board of directors as to the terms
and conditions of the insurance or other arrangement and the identity of the
insurer or other person participating in an arrangement shall be conclusive and
the insurance or arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in the approval are beneficiaries
of the insurance or arrangement.
S. Any indemnification of or advance of expenses to a director in
accordance with this article shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next shareholders' meeting
or with or before the next submission to shareholders of a consent to action
without a meeting pursuant to Section A, Article 9.10, of this Act and, in any
case, within the 12-month period immediately following the date of the
indemnification or advance.
T. For purposes of this article, the corporation is deemed to have
requested a director to serve as a trustee, employee, agent, or similar
functionary of an employee benefit plan whenever the performance by him of his
duties to the corporation also imposes duties on or otherwise involves services
by him to the plan or participants or beneficiaries of the plan. Excise taxes
assessed on a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by a director with
respect to an employee benefit plan in the performance of his duties for a
purpose reasonably believed by him to be in the interest of the participants and
beneficiaries of the plan is deemed to be for a purpose which is not opposed to
the best interests of the corporation.
II-3
<PAGE> 161
U. The articles of incorporation of a corporation may restrict the
circumstances under which the corporation is required or permitted to indemnify
a person under Sections H, I, J, O, P, or Q of this article.
Article VIII of the By-laws of the Issuer provides as follows:
ARTICLE VIII
INDEMNITY
Section 1. Indemnification. The Corporation shall indemnify its directors
and officers from and against any and all liabilities, costs and expenses
incurred by them in such capacities and shall advance expenses to its directors
and officers, all to the fullest extent permitted by the Act, as presently in
effect and as may able hereafter amended. The Corporation shall also have the
power to purchase and maintain liability insurance coverage for those persons or
make and maintain other arrangements on such persons' behalf as, and to the
fullest extent permitted by the Act, as presently in effect and as may be
hereafter amended. The Corporation shall pay or reimburse, in advance,
reasonable expenses incurred by a director who was, is or is threatened to be
made a named defendant or respondent in a proceeding, without the authorization
or determination specified in the Act, after the corporation receives a written
affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification under the Act and a
written undertaking by or on behalf of the director or officer to repay the
amount paid or reimbursed if it is ultimately determined that indemnification
that he has not met that standard or if it is ultimately determined that
indemnification that he has met that standard or if it is ultimately determined
that indemnification of a director against expenses incurred by him in
connection with that proceeding is prohibited by the Act.
Section 2. Indemnification Not Exclusive. The rights of indemnification
and reimbursement provided for in Section 1 of this Article shall not be deemed
exclusive of any other rights to which such director or officer may be entitled
under the Restated Articles of Incorporation, any by-laws, agreement, vote of
shareholders, or as a matter of law or otherwise.
Article Ten of the Restated Articles of Incorporation of the Issuer
provides in relevant part as follows:
ARTICLE TEN
The Corporation shall indemnify and advance expenses to its directors and
officers to the fullest extent permitted by the Texas Business Corporation Act,
as it now exists and as it may hereafter be amended, and shall have the power to
purchase and maintain liability insurance for those persons as and to the
fullest extent permitted by such Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Stock Purchase Agreement dated August 15, 1996 by and between
Eye Care Centers of America, Inc., Visionworks Holdings, Inc. and
the sellers listed therein.
2.2 Stock Purchase Agreement, dated September 30 1997, by and
among Eye Care Centers of America, Inc., a Texas
corporation, Robert A. Samit, O.D. and Michael Davidson,
O.D.
2.3 Recapitalization Agreement dated as of March 6, 1998 among
ECCA Merger Corp., Eye Care Centers of America, Inc. and the
sellers listed therein.
2.4 Amendment No. 1 to the Recapitalization Agreement dated as
of April 23, 1998 among ECCA Merger Corp., Eye Care Centers
of America, Inc, and the sellers listed therein.
2.5 Amendment No. 2 to the Recapitalization Agreement dated as
of April 24, 1998 among ECCA Merger Corp., Eye Care Centers
of America, Inc. and the sellers listed therein.
2.6 Articles of Merger of ECCA Merger Corp. with and into Eye
Care Centers of America, Inc. dated April 24, 1998.
3.1 Restated Articles of Incorporation of Eye Care Centers of
America Inc.
</TABLE>
II-4
<PAGE> 162
<TABLE>
<C> <S>
3.2 Statement of Resolution of the Board of Directors of Eye Care Centers of America, Inc. designating
a series of Preferred Stock.
3.3 Amended and Restated By-laws of Eye Care Centers of America, Inc.
3.4 Articles of Incorporation of ECCA Managed Vision Care, Inc.
3.5 By-Laws of ECCA Managed Vision Care, Inc.
3.6 Articles of Incorporation of Enclave Advancement Group, Inc.
3.7 By-Laws of Enclave Advancement Group, Inc.
3.8 Articles of Incorporation of Visionworks, Inc.
3.9 By-Laws of Visionworks, Inc.
3.10 Articles of Incorporation of Visionworks Holdings, Inc.
3.11 By-Laws of Visionworks Holdings, Inc.
3.12 Certificate of Incorporation of Eye Care Holdings, Inc.
3.13 By-Laws of Eye Care Holdings, Inc.
3.14 Articles of Incorporation of Visionworks Properties, Inc.
3.15 By-Laws of Visionworks Properties, Inc.
3.16 Certificate of Incorporation of Visionary Retail Management, Inc.
3.17 By-Laws of Visionary Retail Management, Inc.
3.18 Certificate of Incorporation of Visionary Properties, Inc.
3.19 By-Laws of Visionary Properties, Inc.
3.20 Certificate of Incorporation of Visionary MSO, Inc.
3.21 By-Laws of Visionary MSO, Inc.
3.22 Certificate of Incorporation of The Samit Group, Inc.
3.23 By-Laws of The Samit Group, Inc.
3.24 Amended Articles of Incorporation of Skylab Optical, Inc.
3.25 By-Laws of Skylab Optical, Inc.
3.26 Articles of Incorporation of Metropolitan Vision Services, Inc.
3.27 By-Laws of Metropolitan Vision Services, Inc.
3.28 Amended Articles of Incorporation of Hour Eyes, Inc.
3.29 By-Laws of Hour Eyes, Inc.
4.1 Indenture dated as of April 24, 1998 among Eye Care Centers of America, Inc., the Guarantors named
therein and United States Trust Company of New York, as Trustee for the 9 1/8% Senior Subordinated
Notes Due 2008 and Floating Interest Rate Subordinated Term Securities.
4.2 Form of Fixed Rate Exchange Note (included in Exhibit 4.1 hereto).
4.3 Form of Floating Rate Exchange Note (included in Exhibit 4.1 hereto).
4.4 Form of Guarantee (included in Exhibit 4.1 hereto).
4.5 Registration Rights Agreement dated April 24, 1998 between Eye Care Centers of America, Inc., the
subsidiaries of the Company named as guarantors therein, BT Alex. Brown Incorporated and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, regarding legality of
securities being registered.
8.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, regarding tax matters.
10.1 Form of Stockholders Agreement dated as of April 24, 1998 by and among Eye Care of America, Inc.
and the shareholders listed therein.
10.2 1998 Stock Option Plan.
10.3 Amended and Restated Deferred Stock Plan of Eye Care Centers of America, Inc.
10.4 Employment Agreement dated April 24, 1998 by and between Eye Care Centers of America, Inc. and
Bernard W. Andrews.
10.5 Stock Option Agreement dated April 24, 1998 by and between Bernard W. Andrews and Eye Care Centers
of America, Inc.
10.6 Form of Employment Agreement dated January 1, 1998 between Eye Care Centers of America, Inc. and
Mark T. Pearson, William A. Shertzer, Jr., George Gebhardt and Kent M. Keish.
10.7 Employment Agreement dated March 24, 1997 between Eye Care Centers of America, Inc. and Michele
Benoit.
10.8 Management Agreement, dated as of April 24, 1998, by and between Thomas H. Lee Company and Eye Care
Centers of America, Inc.
</TABLE>
II-5
<PAGE> 163
<TABLE>
<C> <S>
10.9 Retail Business Management Agreement, dated September 30, 1997, by and between Dr. Samit's
Hour Eyes Optometrist, P.C., a Virginia professional corporation, and Visionary Retail
Management, Inc., a Delaware corporation.+
10.10 Professional Business Management Agreement dated September 30, 1997, by and between Dr.
Samit's Hour Eyes Optometrists, P.C., a Virginia professional corporation, and Visionary
MSO, Inc., a Delaware corporation.+
10.11 Contract for Purchase and Sale dated May 29, 1997 by and between Eye Care Centers of
America, Inc. and JDB Real Properties, Inc.
10.12 Amendment to Contract for Purchase and Sale dated July 3, 1997 by and between Eye Care
Centers of America, Inc. and JDB Real Properties, Inc.
10.13 Second Amendment to Contract for Purchase and Sale dated July 10, 1997 by and between Eye
Care Centers of America, Inc. and JDB Real Properties, Inc.
10.14 Third Amendment to Contract for Purchase and Sale by and between Eye Care Centers of
America, Inc., John D. Byram, Dallas Mini #262. Ltd. and Dallas Mini #343, Ltd.
10.15 Commercial Lease Agreement dated August 193 1997 by and between John D. Byram, Dallas Mini
#262, Ltd. and Dallas Mini #343, Ltd. and Eye Care Centers of America, Inc.
10.16 1997 Incentive Plan for Key Management.
10.17 1998 Incentive Plan for Key Management.
10.18 Employment Agreement and Noncompetition Agreement, dated December 31, 1996 by and between
Eye Care Centers of America, Inc. and Gary D. Hahs, together with letter, dated November
21, 1997, regarding extension of term.
10.19 Master Lease Agreement, dated August 12, 1997, by and between Pacific Financial Company and
Eye Care Centers of America, Inc., together with all amendments, riders and schedules
thereto.
10.20 Credit Agreement, dated as of April 23, 1998, among Eye Care Centers of America, Inc.,
Various Lenders, Bankers Trust Company, as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent.
10.21 Purchase Agreement, dated as of April 24, 1998, by and among Eye Care Centers of America,
Inc., the subsidiaries of Eye Care Centers of America, Inc. named therein, BT Alex. Brown
Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
10.22 Secured Promissory Note, dated April 24, 1998, issued by Bernard W. Andrews in favor of Eye
Care Centers of America, Inc.
12.1 Statement re Computation of Ratios.
21.1 List of subsidiaries of Eye Care Centers of America, Inc.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Beers & Cutler PLLC.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit
5.1).
24.1 Powers of Attorney (contained on the signature pages to this Registration Statement).
25.1 Statement on Form T-1 of the eligibility of the Trustee.
27.1 Financial Data Schedule.
99.1 Letter of Transmittal.
99.2 Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement by and between Eye Care Centers of America, Inc. and
United States Trust Company of New York.
</TABLE>
- ---------------
+ Portions of this Exhibit have been omitted pursuant to an application for an
order declaring confidential treatment filed with the Securities and Exchange
Commission.
(b) Financial Statement Schedules.
Schedules have been omitted since the information is not applicable, not
required or is included in the financial statements or notes thereto.
II-6
<PAGE> 164
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as express in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject and included
in the registration statement when it became effective.
II-7
<PAGE> 165
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
EYE CARE CENTERS OF AMERICA, INC.
BY: /s/ BERNARD W. ANDREWS
-----------------------------
BERNARD W. ANDREWS
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Bernard W. Andrews Chairman of the Board, President and June 10, 1998
- ------------------------------------------ Chief Executive Officer (Principal
BERNARD W. ANDREWS Executive Officer)
/s/ Douglas C. Shepard Vice President and Controller June 10, 1998
- ------------------------------------------ (Principal Financial and Accounting
DOUGLAS C. SHEPARD Officer)
/s/ Norman S. Matthews Director June 10, 1998
- ------------------------------------------
NORMAN S. MATTHEWS
/s/ Antoine G. Treuille Director June 10, 1998
- ------------------------------------------
ANTOINE G. TREUILLE
/s/ Anthony J. DiNovi Director June 10, 1998
- ------------------------------------------
ANTHONY J. DINOVI
/s/ Warren C. Smith, Jr. Director June 10, 1998
- ------------------------------------------
WARREN C. SMITH, JR.
/s/ Charles A. Brizius Director June 10, 1998
- ------------------------------------------
CHARLES A. BRIZIUS
</TABLE>
II-8
<PAGE> 166
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Ecca Managed Vision Care, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-9
<PAGE> 167
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Enclave Advancement Group, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas Shepard and each
of them, with the power to Act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her or in his or her name, place and stead, in any and all capacities
to sign any and all amendments or post-effective amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every Act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-10
<PAGE> 168
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Eye Care Holdings, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-11
<PAGE> 169
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Hour Eyes, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-12
<PAGE> 170
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Metropolitan Vision Services, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-13
<PAGE> 171
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Skylab Optical, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-14
<PAGE> 172
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
The Samit Group, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-15
<PAGE> 173
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionary MSO, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-16
<PAGE> 174
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionary Properties, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-17
<PAGE> 175
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionary Retail Management, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-18
<PAGE> 176
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionworks, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-19
<PAGE> 177
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionworks Holdings, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-20
<PAGE> 178
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN ANTONIO, STATE OF
TEXAS, ON THE 10TH DAY OF JUNE, 1998.
Visionworks Properties, Inc.
By: /s/ Bernard W. Andrews
------------------------------------
BERNARD W. ANDREWS,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Bernard W. Andrews and Douglas C. Shepard and
each of them, with the power to Act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every Act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Bernard W. Andrews President, Director (Principal June 10, 1998
- --------------------------------------------------- Executive Officer)
BERNARD W. ANDREWS
/s/ Douglas C. Shepard Treasurer, Secretary and Director June 10, 1998
- --------------------------------------------------- (Principal Financial and
DOUGLAS C. SHEPARD Accounting Officer)
/s/ George E. Gebhardt Vice President and Director June 10, 1998
- ---------------------------------------------------
GEORGE E. GEBHARDT
</TABLE>
II-21
<PAGE> 1
Exhibit 2.1
STOCK PURCHASE AGREEMENT
Dated as of August 15, 1996
Among
EYE CARE CENTERS OF AMERICA, INC.,
VISIONWORKS HOLDINGS, INC.
and
THE SELLERS NAMED HEREIN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions ............................................................................ 1
1.1 Defined Terms ................................................................. 1
1.2 Other Definitions ............................................................. 8
ARTICLE II
Sale and Purchase of Shares; Cancellation of Options ................................... 8
2.1 Sale and Purchase of the Shares. .............................................. 8
2.2 Purchase Price ................................................................ 8
2.3 Closing ....................................................................... 9
2.4 Price Adjustment .............................................................. 10
2.5 Option Cancellation ........................................................... 13
2.6 Co-Investment Rights .......................................................... 13
ARTICLE III
Representations and Warranties ......................................................... 13
3.1 Representations and Warranties of the Sellers ................................. 13
3.2 Representations and Warranties of Purchaser ................................... 28
ARTICLE IV
Conditions to Closing .................................................................. 29
4.1 Conditions to the Obligations of Purchaser .................................... 29
4.2 Conditions to the Obligations of the Sellers .................................. 31
ARTICLE V
Covenants .............................................................................. 32
5.1 Maintenance of Business and Preservation of Permits and Services. ............. 32
5.2 Interim Operations of the Company ............................................. 32
5.3 Access by Purchaser ........................................................... 34
5.4 Consents and Best Efforts ..................................................... 34
5.5 Notification of Certain Matters ............................................... 35
5.6 No Mergers, Consolidations, Sale of Stock, Etc ................................ 35
5.7 Publicity ..................................................................... 35
5.8 Filing Tax Return ............................................................. 35
5.9 Severance Payments ............................................................ 35
5.10 Sale-Leaseback Obligation Clarification Letter ................................ 35
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.11 Further Assurances ............................................................ 36
ARTICLE VI
Taxes .................................................................................. 36
6.1 Tax Periods Ending on or Before the Closing Date .............................. 36
6.2 Tax Periods Beginning Before and Ending After the Closing Date ................ 37
6.3 Cooperation on Tax Matters .................................................... 37
6.4 Tax Sharing Agreements ........................................................ 37
6.5 Certain Taxes ................................................................. 38
ARTICLE VII
Survival and Indemnification ........................................................... 38
7.1 Survival of Representations, Warranties and Covenants ......................... 38
7.2 Indemnification by the Sellers ................................................ 38
7.3 Other Limitations on Indemnification .......................................... 39
7.4 Method of Asserting Claims, Etc ............................................... 40
7.5 Other Remedies ................................................................ 41
ARTICLE VIII
Miscellaneous .......................................................................... 42
8.1 Payment of Expenses ........................................................... 42
8.2 Waiver of Conditions .......................................................... 42
8.3 Seller Representatives ........................................................ 42
8.4 Termination ................................................................... 42
8.5 Schedules ..................................................................... 43
8.6 Counterparts .................................................................. 43
8.7 Governing Law ................................................................. 43
8.8 Notices ....................................................................... 43
8.9 Entire Agreement, etc. ........................................................ 44
8.10 Injunctive Relief ............................................................. 45
8.11 Captions ...................................................................... 45
8.12 Termination of Company Shareholders Agreement ................................. 45
</TABLE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
A-1 Form of Heller Release
A-2 Form of Trademark Security Release Agreement
B Form of Escrow Agreement
C Form of Opinion of Counsel to the Company and the Sellers
D Form of Consulting and Non-Competition Agreement with Richard W. Roberson
</TABLE>
<PAGE> 4
Schedules
Schedule 2.1
Schedule 3.1(c)
Schedule 3.1(j)
Schedule 3.1(k)
Schedule 3.1(m)
Schedule 3.1(o)
Schedule 3.1(p)
Schedule 3.1(q)
Schedule 3.1(r)
Schedule 3.1(t)
Schedule 3.1(u)
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August 15,
1996, among Eye Care Centers of America, Inc., a Texas corporation (the
"Purchaser"), Visionworks Holdings, Inc., a Florida corporation (the "Company"),
and the holders of the outstanding shares of common stock, no par value ("Common
Stock"), of the Company identified on Schedule 2.1 under the caption "Sellers"
(the "Sellers").
WHEREAS, the Sellers collectively own all of the issued and outstanding
capital stock of the Company; and
WHEREAS, the Company owns all of the issued and outstanding capital
stock of Visionworks, Inc., a Florida corporation, and Visionworks Properties,
Inc., a Florida corporation; and
WHEREAS, the Sellers desire to sell and transfer to Purchaser and
Purchaser desires to purchase from the Sellers, 100% of the outstanding shares
of Common Stock (the "Shares"), as more specifically provided herein;
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Defined Terms. For purposes of this Agreement, including the
Exhibits and Schedules hereto, the following terms have the meanings assigned to
them:
"Accrued Tax Amount" has the meaning specified in Section 2.3
of the Escrow Agreement.
"Actions" has the meaning specified in Section 3.1(p).
"Adjustment Date" has the meaning specified in Section 2.4(e).
"Adjusted Net Worth" has the meaning specified in Section
2.4(d).
"Affiliate" shall mean a Person that directly or indirectly
through one or more intermediaries controls, is controlled by
or is under common control with the Person specified. For
purposes of this definition and as used elsewhere in this
Agreement, the term "control" (including the terms
"controlling," "controlled
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<PAGE> 6
by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to (i) vote 50%
or more of the voting securities of such Person or (ii) direct
or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
"Agreement" means this Stock Purchase Agreement and includes
the Exhibits and Schedules hereto.
"Applicable Laws" means any federal, state, local or foreign
statute, law or ordinance, or any regulation, rule or order of
any Governmental Authority.
"Asset Purchase Agreement" means the Asset Purchase Agreement
dated February 3, 1994 by and among Visionworks, Inc., Eckerd
Corporation and P.C.V., Inc., as amended by the First
Amendment to Asset Purchase Agreement dated March 29, 1994.
"Business Day" means any day other than a Saturday, Sunday or
day on which banks are required or authorized to close in The
City of New York.
"Claim Notice" has the meaning specified in Section 7.4(a).
"Closing" has the meaning specified in Section 2.3(a).
"Closing Balance Sheet" has the meaning specified in Section
2.4(a).
" Closing Date" has the meaning specified in Section 2.3(a).
"Closing Financial Statements Date" has the meaning specified
in Section 2.4(a).
" Closing Time" means the time the Closing actually occurs on
the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
" Common Stock" means the shares of Common Stock, no par
value, of the Company.
"Company" means Visionworks Holdings, Inc., a Florida
corporation.
"Contract" means any written or unwritten agreement, lease,
contract, note, purchase order, order, mortgage, indenture,
commitment, arrangement or other similar obligation.
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<PAGE> 7
"Credit Agreement" means the Credit Agreement, dated as of
March 29, 1994, between the Company and the Lenders, as it may
have been amended from time to time.
"CGW" means CGW Southeast Partners I, L.P.
"Director" has the meaning specified in Section 3. 1(o).
"Employee" has the meaning specified in Section 3.1(o).
"Encumbrance" means any lien, charge, encumbrance, security
interest, equity, beneficial interest of others, option,
warrant, call, restriction (other than restrictions on resale
without registration arising under federal or state securities
laws) or claim of third party rights of any nature.
"Environmental Law" shall mean any law, regulation, order,
decree, opinion, common law or agency policy or requirement
relating to the protection of the environment, hazardous or
toxic materials, wastes or human health and safety.
"ERISA" has the meaning specified in Section 3.1(o).
"ERISA Affiliate" has the meaning specified in Section 3.1(o).
"ERISA Affiliate Plan" has the meaning specified in Section
3.1(o).
"Ernst & Young" means Ernst & Young LLP, independent
accountants to Purchaser.
"Escrow Agreement" means the Escrow Agreement, to be dated as
of the Closing Date, by and among Purchaser, the Sellers and
NationsBank (the "Escrow Agent").
"Escrowed Indemnification Amount" means $3,000,000.
"Escrowed Indemnification Fund" means the fund controlled by
the Escrow Agent and created pursuant to the Escrow Agreement
into which the Escrowed Indemnification Amount shall be
deposited at the Closing.
"Escrowed Price Adjustment Amount" means $2,000,000.
"Escrowed Price Adjustment Fund" means the fund controlled by
the Escrow Agent and created pursuant to the Escrow Agreement
into which the Escrowed Price Adjustment Amount is deposited
at Closing.
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<PAGE> 8
"Escrowed Severance Amount" means $1,500,000.
"Escrowed Severance Fund" means the fund controlled by the
Escrow Agent and created pursuant to the Escrow Agreement into
which the Escrowed Severance Amount is deposited at Closing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any federal, state, local or
foreign court, tribunal, governmental department, agency,
board or commission, regulatory authority or other
governmental body or instrumentality.
"Hazardous Substance" shall mean any substance that is listed,
classified or regulated pursuant to any Environmental Law
including any petroleum products, asbestos, radon,
polychlorinated biphenyls and any mixture or material
containing such substances.
"Heller" means Heller Financial, Inc.
"Heller Obligation" means, as of the Closing Time, (a) the
principal amount of, and interest accrued on, the indebtedness
of the Company outstanding under the Credit Agreement,
including any modifications, refundings, renewals or
extensions of any such indebtedness and (b) all fees
(including, without limitations all prepayment fees), charges,
expenses, reimbursements and indemnification obligations and
other amounts payable thereunder.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all applicable regulations
promulgated thereunder.
"Indemnified Party" has the meaning specified in Section
7.2(a).
"Indemnifying Party" means the individual Seller or the
Sellers, collectively, from whom indemnification is claimed by
an Indemnified Party pursuant to Section 7.2.
"Independent Firm" has the meaning specified in Section
2.4(c).
"Insurance Policies" has the meaning specified in Section
3.1(t).
"Intellectual Property Rights" has the meaning specified in
Section 3.l(r).
"Interest Rate" means eight percent on an annualized basis.
4
<PAGE> 9
"Interim Balance Sheet" has the meaning specified in Section
3.1(1).
"Interim Financial Statements" has the meaning specified in
Section 3.1(1).
"KPMG" means KPMG Peat Marwick LLP, independent accountants to
the Company.
"Lenders" means Heller and all other lenders, if any, under
the Credit Agreement.
"Losses" has the meaning specified in Section 7.2(a).
"Management Bonus Amount" means up to $1,000,000.
"Material Adverse Effect" means a material adverse effect on
the financial condition, properties, business, prospects or
results of operations of the Company and the Subsidiaries,
taken as a whole, or on the ability of the parties hereto to
consummate the transactions contemplated hereby.
"Material Contract" has the meaning specified in Section
3.1(k).
"NationsBank" means NationsBank, N.A. (South), a national
banking association.
"Net Worth" means, with respect to the Company and the
Subsidiaries, total stockholders' equity as set forth in the
Closing Balance Sheet and determined on a basis consistent
with the Audited Financial Statements or as finally determined
pursuant to Section 2.4.
"Note Purchase Agreement" means the Note Purchase Agreement,
dated as of October 31, 1991, between JEC Facilities Funding
II, Inc. and Teachers Insurance and Annuity Association of
America, as it may have been amended from time to time.
"Notice Period" has the meaning specified in Section 7.4(a).
"Option" means each outstanding option, whether or not vested,
to purchase Common Stock, all of which are listed on Schedule
3.1(c).
"Optionholder" means each person listed on Schedule 3.1(c) as
a holder of Options.
"Option Amount" has the meaning specified in Section 2.5.
5
<PAGE> 10
"Optionholders Amount" means the aggregate Option Amounts.
"PBGC" has the meaning specified in Section 3.1(o).
"Pension Plan" has the meaning specified in Section 3.1(o).
"Permits" means all licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and
filings with and under all federal, state, local or foreign
laws (including Environmental Laws) and governmental or
regulatory bodies and all industry or other non-governmental
self-regulatory organizations.
"Person" means an individual, corporation, partnership, trust,
unincorporated organization, government or any agency or
political subdivision thereof or any other entity that may be
treated as a person under applicable law.
"Plans" has the meaning specified in Section 3.1(o).
"Pro Rata Share" means with respect to any Seller, a fraction
the numerator of which is the number of Shares specified
opposite such Seller's name in Schedule 2.1 and the
denominator of which is 1,000,000.
"Purchaser" means Eye Care Centers of America, Inc., a Texas
corporation.
"Purchaser's Objection" has the meaning specified in Section
2.4(b).
"Related Person" of a Seller means a Person who is a relative
of such Seller, that is controlled by such Seller, in which
such Seller has a material economic interest, or with whom
Seller has arrangements or understandings relating to
transactions between such Person and the Company or any
Subsidiary.
"Releases" has the meaning specified in Section 2.3(b).
"Required Lease Consents" has the meaning specified in Section
3.1(f).
"Sale-Leaseback Lease" means the Lease Agreement dated as of
March 31, 1989, as amended and restated as of October 31, 1991
between JEC Facilities Funding II, Inc., as Lessor, and Jack
Eckerd Corporation, as Lessee, as amended by Amendment No. 1
thereto dated as of June 14, 1993 and as it may have been
further amended from time to time.
"Sale-Leaseback Obligation" means the amount, as of February
1, 1999, of Visionworks, Inc.'s obligation to purchase the
Sale-Leaseback Stores (as defined in
6
<PAGE> 11
the Asset Purchase Agreement) pursuant to Section 1.4(c) of
the Asset Purchase Agreement, which amount is $9,979,302.
"Sale-Leaseback Obligation Clarification Letter" has the
meaning specified in Section 5.10.
"Sale-Leaseback Sublease" means the Sublease dated as of March
29, 1994 between Eckerd Corporation and Visionworks, Inc.
subleasing property leased pursuant to the Sale-Leaseback
Lease, as it may have been amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers Amount" means the Total Consideration less the sum of
the Sale/Leaseback Obligation, the Heller Obligation, the
Escrowed Severance Amount, the Management Bonus Amount and the
Optionholders Amount.
"Seller Representatives" means Richard W. Roberson and Sharon
Brown.
"Shares" has the meaning specified in the recitals to this
Agreement.
"Shortfall" means the dollar amount, if any, by which Trigger
Net Worth is greater than Adjusted Net Worth.
"Subsidiary" means any Person in which the Company directly or
indirectly beneficially owns more than 50% of the outstanding
capital stock or other ownership interest, or has the right to
elect a majority of the board of directors or other body
performing similar functions.
"Target Net Worth" means, if the Closing Financial Statements
Date is (a) August 31, 1996, $11,210,000, (b) September 28,
1996, $11,270,000 or (c) November 2, 1996, $11,6659000.
"Tax Return" means any return, declaration, report, claim for
refund, information return or other statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Taxes" means all federal, state, local or foreign income,
gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise,
employment, withholding or similar taxes, duties, imposts,
fees or other governmental charges imposed on the income,
properties, or operations of the Company or any Subsidiary,
including any additions, penalties and interest in respect
thereof and any interest with respect of such additions or
penalties, whether due or to become due and whether or not
contested.
7
<PAGE> 12
"Third Party Claim Notice" has the meaning specified in
Section 7.4(a).
"Threshold" has the meaning specified in Section 7.2(b).
"Total Consideration" means $61,500,000.
"Trigger Net Worth" means Target Net Worth less $500,000.
"Trust Indenture and Security Agreement" means the Trust
Indenture and Security Agreement, dated as of October 31, 1991
between JEC Facilities Funding II, Inc. and the trustees named
therein, as it may be amended from time to time.
"Year-End Financial Statements" has the meaning specified in
Section 3.1(1).
1.2 Other Definitions. Capitalized terms not otherwise defined in
Section 1.1 hereof shall have the respective meanings assigned to them elsewhere
in this Agreement. The words "he", "him" and "his" as used herein shall be
deemed to refer equally to the female gender.
ARTICLE II
Sale and Purchase of Shares; Cancellation of Options
2.1 Sale and Purchase of the Shares. Subject to the terms and
conditions hereof, and based upon the representations, warranties, covenants and
agreements set forth herein, each Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from each Seller, the number of Shares held by such
Seller (or with respect to which such Seller has the power to sell or cause the
sale) as set forth opposite such Seller's name on Schedule 2.1, in each case
free and clear of all Encumbrances, for the consideration described in Section
2.2.
2.2 Purchase Price.
(a) In consideration of the sale of the Shares Purchaser
shall pay to the Sellers the Sellers Amount, subject to adjustment as provided
in Section 2.4 and subject to the amounts to be paid on the Closing Date to the
Escrow Agent as provided in Section 2.3(b).
(b) A portion of the Total Consideration shall be deemed
allocated and paid as follows:
(i) immediately prior to the Closing Time,
Purchaser shall pay to the Sellers and
Sellers shall contribute to the capital of
the Company for the purpose of repayment in
full of the Heller Obligation, in the manner
contemplated by Section 2.3(b), an amount
equal to the Heller Obligation;
8
<PAGE> 13
(ii) immediately prior to the Closing Time,
Purchaser shall pay to the Sellers and the
Sellers shall contribute to the capital of
the Company for the purpose of providing
consideration to the Optionholders for
cancellation of their Options, an amount
equal to the Optionholders Amount.
2.3 Closing.
(a) Subject to the terms and conditions herein set forth,
the closing of the sale and purchase of the Shares hereunder (the "Closing")
shall take place at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York at 10:00 A.M. on September 15, 1996, or, whether earlier or later
than such date, the first date on which the conditions precedent set forth in
Article IV (other than those conditions designating instruments, opinions,
certificates or other documents to be delivered at the Closing) shall have been
satisfied or waived, or at such other place, time or date as the Purchaser and
the Seller Representatives may agree in writing (the "Closing Date").
(b) On the Closing Date, Purchaser shall pay, by
certified or official bank check or checks payable in New York Clearinghouse
(next day) funds, except in the case of any individual payment in excess of
$500,000, which shall be made by wire transfer of immediately available (same
day) funds, the following amounts in the order specified below:
(i) to Heller, the amount of the Heller
Obligation to such account as Heller may
specify not less than two Business Days
prior to the Closing Date; and Sellers shall
simultaneously deliver to Purchaser (a) a
certificate of the Lenders, in form and
substance satisfactory to Purchaser,
evidencing the satisfaction in full of all
the Company's obligations (for payment or
otherwise) under the Credit Agreement and
the related credit and security documents
and (b) instruments of release, in the form
of Exhibits A-1 and A-2 (the "Releases"),
duly executed by Heller, for itself and as
Agent for the Lenders, of any and all
Encumbrances securing indebtedness under the
Credit Agreement;
(ii) to the appropriate recipients thereof, and
in the individual amounts thereof, all as
indicated in payment instructions delivered
by the Seller Representatives to the
Purchaser at least two Business Days prior
to the Closing Date, the Management Bonus
Amount;
(iii) to the Optionholders, the Optionholders
Amount;
(iv) to the Escrow Agent, the Escrowed Severance
Amount for deposit into the Escrowed
Severance Fund;
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<PAGE> 14
(v) to the Escrow Agent, the Escrowed Price
Adjustment Amount for deposit into the
Escrowed Price Adjustment Fund;
(vi) to the Escrow Agent, the Escrowed
Indemnification Amount for deposit into the
Escrowed Indemnification Fund;
(vii) to each Seller, such Seller's Pro Rata Share
of the Sellers Amount remaining after
subtracting the payments to the Escrow Agent
pursuant to subparagraphs (v) and (vi)
above.
(c) Simultaneously with the transactions contemplated by
Section 2.3(b), the Sellers shall deliver to Purchaser certificates evidencing
all of the Shares, duly endorsed in blank, in proper form for transfer with all
requisite stock transfer stamps attached.
(d) At or prior to the Closing Date, the Purchaser and
each Seller shall sign an Escrow Agreement with NationsBank, substantially in
the form of Exhibit B. The Escrowed Price Adjustment Fund shall secure the
obligation of the Sellers to pay to Purchaser amounts due to Purchaser, if any,
upon any adjustment of the Sellers Amount in accordance with Section 2.4(e) and,
accordingly, shall be used to pay amounts due to Purchaser and to make certain
payments, if any, to the Sellers, all as provided in Section 2.4(e); the
Escrowed Indemnification Fund shall be used to satisfy claims made by Purchaser
or other Indemnified Parties for indemnification hereunder, if any, and to make
certain payments, if any, to the Sellers, all as provided in Article VII; and
the Escrowed Severance Fund shall secure the post-closing obligation of the
Company to make payments in respect of the termination of certain employees of
the Company as contemplated in Section 5.9 and, accordingly, shall be used to
pay amounts due to the Purchaser or the Sellers, as the case may be, in
accordance with Section 5.9 and the Escrow Agreement. Such Escrow Agreement
shall provide that the Escrowed Price Adjustment Amount, the Escrowed
Indemnification Amount and the Escrowed Severance Amount delivered to the Escrow
Agent at Closing shall be invested by the Escrow Agent in (a) a money market
mutual fund investing solely in short term United States Treasury obligations or
(b) such other investment grade interest-bearing obligations (including discount
bills or notes) identified in a joint instruction of the Purchaser and the
Seller Representatives, and earnings on such investments shall become part of
the Escrowed Price Adjustment Fund, the Escrowed Indemnification Fund or the
Escrowed Severance Fund, as the case may be. At any time of determination, the
Escrowed Price Adjustment Fund, the Escrowed Indemnification Fund and the
Escrowed Severance Fund shall be the balances of the respective accounts
maintained by the Escrow Agent for the purposes set forth in this paragraph (d)
in accordance with the Escrow Agreement.
2.4 Price Adjustment.
(a) Within 60 days after the Closing Date, the Sellers shall
deliver or cause to be delivered to Purchaser a consolidated balance sheet (the
"Closing Balance Sheet") of the
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<PAGE> 15
Company and the Subsidiaries as of the close of business on the last day of the
fiscal month end just prior to the Closing Date (the "Closing Financial
Statements Date"), and consolidated statements of earnings, stockholder's equity
and cash flows for the fiscal year to date through the Closing Financial
Statements Date, together with notes thereto (collectively with the Closing
Balance Sheet, the "Closing Financial Statements") which (i) shall set forth the
Net Worth as of the Closing Financial Statements Date (such Net Worth not to be
adjusted for any of the Closing Date transactions referred to in Section 2.2 or
2.3), (ii) be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the principles and practices used
in the preparation of the Year-End Financial Statements, (iii) be prepared in a
manner that does not increase any deferred tax asset set forth in the Interim
Balance Sheet or create any deferred tax asset not set forth in the Interim
Balance Sheet, and (iv) include an unqualified audit opinion thereon by KPMG.
Purchaser accepts, for purposes of the calculation of the Sellers Amount
adjustment provided for in this Section 2.4, the principles, practices and
methodologies used in the preparation of the Year-End Financial Statements.
(b) Purchaser shall cause KPMG to have access to the
records and personnel of the Company reasonably requested by them for purposes
of preparing or auditing the Closing Financial Statements. Ernst & Young shall
have the right to take such reasonable steps as they deem necessary to calculate
the Net Worth of the Company and the Subsidiaries as of the close of business on
the Closing Financial Statements Date and to review the procedures and materials
(including work papers) employed by KPMG in connection therewith. Not later than
30 days after receipt of the Closing Financial Statements, Purchaser shall
deliver to the Seller Representatives a written notice ("Purchaser's
Objection"), setting forth any items with which Purchaser disagrees and a
description of the basis for such disagreement.
(c) In the event that Purchaser delivers a Purchaser's
Objection to the calculation of the Net Worth of the Company and the
Subsidiaries set forth in the Closing Balance Sheet, the Seller Representatives
shall negotiate in good faith with Purchaser, and Purchaser hereby agrees to
negotiate in good faith with the Seller Representatives, for a period of 30 days
after receipt of such Purchaser's Objection, to seek to resolve their
differences with respect to the Closing Balance Sheet. If Purchaser and the
Seller Representatives are unable to resolve all of such disagreements within
such 30-day period, then no later than seven days following such 30-day period
they shall refer their remaining differences to Price Waterhouse LLP or another
internationally recognized firm of independent public accountants having no
material relationship with Purchaser, Company, any Seller or any of their
respective Affiliates, as to which the Seller Representatives and Purchaser
mutually agree (the "Independent Firm") who shall, acting as experts and not as
arbitrators, determine, only with respect to the remaining differences so
submitted, whether and to what extent, if any, the Net Worth, as derived from
the Closing Balance Sheet, requires adjustment. The parties shall instruct the
Independent Firm to deliver its written determination to Purchaser and the
Seller Representatives no later than the twentieth day after the remaining
differences underlying the Purchaser's Objection are referred to the Independent
Firm. The Independent Firm's determination of Net Worth shall be conclusive
11
<PAGE> 16
and binding upon Purchaser and Sellers absent manifest error. The fees and
disbursements of the Independent Firm shall be shared equally by Purchaser and
Sellers. Purchaser and Sellers shall (and Purchaser shall cause the Company to)
make readily available to the Independent Firm all relevant books and records
and any work papers (including those of the parties' respective accountants)
relating to the Closing Balance Sheet and all other items reasonably requested
by the Independent Firm.
(d) The "Adjusted Net Worth" shall be the Net Worth
included in (i) the Closing Balance Sheet as delivered by the Sellers in the
event that (x) no Purchaser's Objection is delivered to the Seller
Representatives during the 30-day period specified above or (y) Seller
Representatives and Purchaser so agree, (ii) the Closing Balance Sheet, as
adjusted in accordance with the Purchaser's Objection, in the event that the
Seller Representatives do not dispute Purchaser's Objection within the 30-day
period following receipt by the Seller Representatives of Purchaser's Objection,
or (iii) the Closing Balance Sheet, as adjusted by either (x) the agreement of
the Seller Representatives and Purchaser or (y) the Independent Firm.
(e) The Sellers Amount shall be adjusted downward and an
adjustment payment required pursuant to this Section 2.4(e) only if Adjusted Net
Worth is less than Trigger Net Worth. Subject to the Escrow Agent's obligation
to pay Accrued Tax Amounts in accordance with Section 2.3 of the Escrow
Agreement, on a date following the Closing Date and not later than five Business
Days following final determination of the Adjusted Net Worth in accordance with
Section 2.4(d) (the "Adjustment Date"), (i) if Adjusted Net Worth equals or
exceeds Trigger Net Worth, the Escrow Agent shall pay to each Seller his Pro
Rata Share of the Escrowed Price Adjustment Fund; or (ii) if Adjusted Net Worth
is less than Trigger Net Worth, then (x) if the Shortfall is less than or equal
to the Escrowed Price Adjustment Amount, the amount of the Shortfall (together
with actual interest, capital gains and other income accrued on such amount
while in escrow) shall be paid by the Escrow Agent to Purchaser and the balance
of the Escrowed Price Adjustment Fund shall be paid by the Escrow Agent to the
Sellers in accordance with their respective Pro Rata Shares or (y) if the amount
of the Shortfall exceeds the Escrowed Price Adjustment Amount, the amount by
which the Shortfall exceeds the Escrowed Price Adjustment Amount (together with
interest thereon at the Interest Rate from the Closing Date to the Adjustment
Date) shall be paid to Purchaser by the Sellers in accordance with their
respective Pro Rata Shares and the Escrowed Price Adjustment Fund shall be paid
by the Escrow Agent to Purchaser. Any amount owing pursuant to this Section
2.4(e) shall be paid on the Adjustment Date to the Sellers or Purchaser, as the
case may be, by certified or official bank check or checks payable in New York
Clearing House (next day) funds. Except with respect to Accrued Tax Amounts
(which shall be paid by the Escrow Agent at the times specified in the Escrow
Agreement without any instruction), Purchaser and the Seller Representatives
shall jointly instruct the Escrow Agent with respect to the disposition of the
Escrowed Price Adjustment Amount. In the absence of agreement on such a joint
instruction, the Escrow Agent shall be authorized to pay such amount as
instructed by the Independent Firm.
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<PAGE> 17
(f) No adjustment or other action taken pursuant to this
Section 2.4 shall affect the rights and obligations of the parties under this
Agreement or with respect to the transactions contemplated hereby other than to
the extent directly related to the determination of the Adjusted Net Worth.
2.5 Option Cancellation. On the Closing Date and immediately
prior to the Closing Time, each Option shall, without any action on the part of
the holder thereof, and whether or not then exercisable, be converted into the
right to receive an amount in cash (the "Option Amount"), if any, equal to the
product of (x) $39.62 minus the current exercise price per Share of such Option
and (y) the number of Shares subject to such Option on the Closing Date, payable
to the holder thereof without interest thereon, and such Option will be canceled
and retired and shall cease to exist; provided, that the Company shall be
entitled to withhold, in accordance with applicable law, from any such cash
payment any amounts required to be withheld under applicable law. The Company
shall use its best efforts to obtain the consent of each Optionholder to the
foregoing treatment of the Options and to take any other action reasonably
necessary to effectuate the foregoing provisions. The $39.62 amount referred to
above was calculated on the assumption that the Heller Obligation will be
$7,500,000 at the Closing Time. To the extent the Heller Obligation at the
Closing Time differs from $7,500,000 such that a recalculation of the option
cash out price would differ from $39.62, Seller Representatives shall so notify
Purchaser at least two Business Days prior to the Closing Date and shall, at
such time, notify Purchaser of the amount of the Heller Obligation and the new
option cash out price.
2.6 Co-Investment Rights. The Purchaser agrees that each Seller
shall have the right, by written notice given to Purchaser at least 20 Business
Days prior to the Closing Date, to purchase, on the same terms and conditions as
any affiliate of Desai Capital Management Incorporated, up to such Seller's Pro
Rata Share of shares, having an aggregate purchase price of $1,500,000, of
common stock of Purchaser to be issued at or prior to the Closing for the
purposes of financing, in part, the purchase of the Shares from Sellers. To the
extent that any Seller shall not give notice of the exercise of any portion of
such co-investment right, each of the other Sellers who has given notice of the
full exercise of his or her co-investment right, in compliance with the terms of
this Section 2.6, may by written notice given at least 10 Business Days prior to
the Closing Date purchase the shares of the Purchaser subject to such
unexercised portion up to its pro rata share determined by dividing its Pro Rata
Share by the aggregate Pro Rata Shares of all Sellers who have fully exercised
such co-investment right.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Sellers. The Sellers
hereby represent and warrant as follows:
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<PAGE> 18
(a) Authority of Sellers. Each Seller has full legal
capacity and, in the case of each Seller who is a trustee or other fiduciary,
has full and appropriate power as a trustee or other fiduciary, to execute,
deliver and perform this Agreement and the Escrow Agreement and to sell and
deliver his or her respective Shares to Purchaser as contemplated hereby.
(b) Organization and Authority. Each of the Company and
the Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the full
power and authority (corporate and other) to carry on its business as it is now
being conducted, to enter into this Agreement and the Escrow Agreement and to
perform its obligations hereunder and thereunder. Each of the Company and the
Subsidiaries is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
licensing or qualification necessary except where the failure to be so qualified
or licensed would not have a Material Adverse Effect. The Company has all
necessary power (corporate or other) to execute and deliver this Agreement and
the Escrow Agreement and to perform its obligations hereunder and thereunder and
all necessary corporate action has been taken by the Company to authorize the
transactions contemplated hereby and thereby.
(c) Authorized Capital. No capital stock of the Company
has been issued subsequent to February 3, 1996. The authorized capital stock of
the Company consists of 2,000,000 shares of Common Stock, of which 1,000,000
shares are issued and outstanding. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed on Schedule 3.1(c), there are no preemptive
rights nor any outstanding subscriptions, options, warrants, rights (including
without limitation, stock appreciation rights), convertible securities or other
agreements or commitments of any character of the Company or any Seller relating
to the issued or unissued capital stock of the Company. The Company has not
repurchased or otherwise acquired any shares of Common Stock since February 3,
1996. Schedule 3.1(c) lists the name of each Optionholder and the number of
options to purchase Common Stock held by each such Optionholder.
(d) The Shares. Each Seller is the record and beneficial
owner of the number of Shares identified to such Seller on Schedule 2.1, free
and clear of any Encumbrances. Upon delivery of the Shares by each Seller
hereunder to Purchaser at the Closing pursuant to this Agreement, good and valid
title to such Shares, free and clear of all Encumbrances, will pass to the
Purchaser.
(e) Agreements. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by the Company and each Seller
and constitutes a valid and binding obligation of the Company and each Seller,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
moratorium and similar laws of general applicability affecting creditors' rights
and to general equity principles. In the case of CGW, the execution, delivery
and
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<PAGE> 19
performance of this Agreement by such Seller have been duly authorized by all
necessary action on the part of such Seller. Each of this Agreement and the
Escrow Agreement will be binding (i) upon the heirs, successors, assigns and
personal representatives, if any, of each Seller and (ii) upon the successors or
distributees, if any, of each Seller which is a trust.
(f) Consents and Approvals. Except for the filing of
premerger notification reports under the HSR Act and the consents of third
parties required pursuant to the terms of the leases listed on Schedule 3.l(k)
(such consents being the "Required Lease Consents"), no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Authority or any other Person, is required to be made or obtained by any Seller,
the Company or any Subsidiary in connection with the execution, delivery and
performance of this Agreement or the Escrow Agreement and the consummation of
the transactions contemplated hereby and thereby. The Required Lease Consents
are indicated on Schedule 3.l(k).
(g) Non-contravention. The execution and delivery of this
Agreement and the Escrow Agreement by the Sellers do not, and the consummation
by the Sellers of the transactions contemplated hereby or thereby on their part
will not, constitute or result in (i) a breach or violation of, or a default
under, the Restated Certificate of Incorporation or By-Laws of the Company or
any Subsidiary or any declaration of trust or any fiduciary duty of any trustee
to any Seller that is a trust or (ii) subject to obtaining the Required Lease
Consents, a requirement for consent pursuant to, a breach or violation of, a
default under, or the acceleration of or the creation of an Encumbrance on
assets of the Company or any Subsidiary (with or without the giving of notice or
the lapse of time) pursuant to, (A) any provision of any Contract, or (B) any
law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental Permit, in either case to which the Company,
any Subsidiary or any Seller, is a party, is otherwise subject or by which any
of them or their respective properties or assets is bound; or (iii) any change
in the rights or obligations of any party under any of such Contracts.
(h) Compliance with Law.
(i) The Company and the Subsidiaries have
operated and are operating in compliance
with all Applicable Laws (including
Environmental Laws), except where the
failure to comply has not had and would not
have, individually or in the aggregate, a
Material Adverse Effect. Neither the Company
nor any Subsidiary has received any written
notice to the effect that, or otherwise been
advised that, it is not operating in
compliance with any Applicable Laws. Each
license, sublease or other agreement between
the Company or any Subsidiary and a doctor
of optometry or a professional corporation
of a doctor of optometry complies with
Applicable Laws and neither the Company nor
any Subsidiary is, nor is any other party
thereto, in default under any such agreement
except where such
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<PAGE> 20
defaults, individually or in the aggregate,
would not have a Material Adverse Effect.
(ii) The Company and the Subsidiaries hold all
Permits necessary for the ownership and
conduct of the respective businesses of the
Company and such Subsidiaries in the manner
now conducted, and such Permits are in full
force and effect except where the failure to
hold any Permits, individually or in the
aggregate, would not have a Material Adverse
Effect. The consummation of the transactions
contemplated by this Agreement will not
result in any revocation, cancellation,
suspension or non-renewal of any such
Permit, and there are no pending or
threatened suits, proceedings or
investigations with respect to revocation,
cancellation, suspension or non-renewal
thereof and there has occurred no event
which (whether with notice or lapse of time
or both) would result in such a revocation,
cancellation, suspension or non-renewal
thereof except where such revocations,
cancellations, suspensions or non-renewals,
individually or in the aggregate, would not
have a Material Adverse Effect.
(i) Title to Properties; Absence of Encumbrances, etc.
Each of the Company and the Subsidiaries has good and, in the case of owned real
property, marketable title to, or a valid and binding leasehold interest in, all
of the properties and assets owned or leased by the Company or any Subsidiary
free and clear of any Encumbrances, except for: (i) any Encumbrances reflected
in the Year-End Financial Statements; (ii) any Encumbrances incurred or created
since February 3, 1996 in the ordinary and usual course of business consistent
with past practice and which, alone or in the aggregate, would not have a
Material Adverse Effect; (iii) any Encumbrances for taxes, assessments and other
governmental charges not yet due and payable or due but not delinquent or being
contested in good faith by appropriate proceedings; and (iv) any mechanics',
workmen's, repairmen's, warehousemen's, carriers' or other like liens and
encumbrances arising in the ordinary and usual course of business consistent
with past practice or being contested in good faith by appropriate proceedings.
(j) Subsidiaries and Affiliates. Schedule 3.1(j) contains
a complete and correct list of each Subsidiary, together with (i) their
respective jurisdictions of incorporation and (ii) the respective authorized and
outstanding capital stock of each. All outstanding shares of capital stock of
the Subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable. The Company owns all of the issued and outstanding
capital stock of each Subsidiary, free and clear of any Encumbrance or agreement
with respect thereto, including, without limitation, any agreement,
understanding or restriction affecting the voting rights or other incidents of
record or beneficial ownership pertaining to such shares. There are no
preemptive rights nor any outstanding subscriptions, options, warrants, rights,
convertible
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<PAGE> 21
securities or other agreements or commitments of any character giving any person
a right to subscribe for or acquire any capital stock or other equity interest
of any Subsidiary.
(k) Contracts and Commitments.
(i) Except as set forth in Schedule 3.1(k),
neither the Company nor any Subsidiary is a
party to or bound by:
(A) any lease of real property for
which the Company or any Subsidiary is
obligated to pay rent;
(B) any agreement for the purchase or
lease of materials, supplies, goods,
services, equipment or other assets that
provides for either (A) annual payments by
the Company and the Subsidiaries of $25,000
($150,000 for inventory purchase agreements)
or more or (B) aggregate payments by the
Company and the Subsidiaries of $100,000
($150,000 for inventory purchase agreements)
or more;
(C) any sales, distribution or other
similar agreement providing for the sale by
the Company or any Subsidiary of materials,
supplies, goods, services, equipment or
other assets that provides for either (A)
payments to the Company and the Subsidiaries
of $25,000 or more in any one year or (B)
aggregate payments to the Company and the
Subsidiaries of $100,000 or more;
(D) any material partnership, joint
venture or other similar agreement;
(E) any agreement relating to (A) the
acquisition of any business or substantially
all of the assets of any business or (B) the
disposition of all or substantially all of
the assets of the Company and/or any of the
Subsidiaries (whether by merger, sale of
stock, sale of assets or otherwise);
(F) any agreement relating to
indebtedness for borrowed money or the
deferred purchase price of property (in
either case, whether incurred, assumed,
guaranteed or secured by any asset);
(G) any material license, franchise or
similar agreement;
(H) any material agency, dealer, sales
representative, marketing or other similar
agreement;
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<PAGE> 22
(I) any agreement that limits the
freedom of the Company or any Subsidiary in
any material respect to compete in any line
of business or with any Person or in any
area or which would so limit the freedom of
the Company or any Subsidiary after the
Closing Date;
(J) any agreement with any director,
officer or employee of the Company or any
Subsidiary; or
(K) any other agreement, commitment,
arrangement or plan not made in the ordinary
course of business that is material to the
Company and the Subsidiaries taken as a
whole.
(ii) Each Contract required to be disclosed in
Schedule 3.1(k) (each, a "Material
Contract") is, except as disclosed in
Schedule 3.1(k), a valid and binding
agreement of the Company or a Subsidiary, as
the case may be, and, assuming due
authorization of parties other than the
Company or such Subsidiary, as the case may
be, is in full force and effect and is a
valid and binding obligation of the Company
or such Subsidiary, enforceable in
accordance with its terms, subject to
bankruptcy, insolvency, moratorium and
similar laws of general applicability
affecting creditors' rights and to general
equity principles. Neither the Company nor
any Subsidiary is, nor is any other party
thereto, in default or breach in any
material respect under the terms of any
Material Contract. True and complete copies
of the Asset Purchase Agreement, the
Sale-Leaseback Lease, the Sale-Leaseback
Sublease, the Note Purchase Agreement and
the Trust Indenture and Security Agreement
have been previously provided to Purchaser
and, to the knowledge of Sellers, the
Sale-Leaseback Lease, the Note Purchase
Agreement and the Trust Indenture and
Security Agreement are in full force and
effect. There are no amendments, waivers or
other modifications to any of such contracts
or to any of the Material Contracts which
have not been provided to Purchaser. At the
time when Visionworks, Inc. is required to
satisfy the Sale Leaseback Obligation in
accordance with the terms of the Asset
Purchase Agreement, there shall be no Early
Termination Rent (as defined in the Asset
Purchase Agreement by reference to the
Sale-Leaseback Lease) due as a result of the
satisfaction of such Sale-Leaseback
Obligations. The Sale-Leaseback Obligation
valued as of the date hereof is $11,259,209.
The Sale-Leaseback obligation as of February
1, 1999 will be $9,979,302. With respect to
the agreements relating to indebtedness for
borrowed money or the
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<PAGE> 23
deferred purchase price of property (in
either case, whether incurred, assumed,
guaranteed or secured by any asset) listed
on Schedule 3.1(k), the true amounts of such
indebtedness outstanding is noted on
Schedule 3.1(k). The Heller Obligation will
be no less than, as of (i) August 31, 1996,
$7,500,000, (ii) September 27, 1996,
$7,000,000 and (iii) November 2, 1996,
$6,500,000.
(l) Financial Information. The Purchaser has received
true and complete copies of the audited consolidated balance sheets of the
Company as at February 3, 1996 and January 28, 1995 and the audited consolidated
statements of earnings, stockholders' equity and cash flows, for the years then
ended, together with the notes thereto (such balance sheets and statements,
collectively, the "Year-End Financial Statements") and the unaudited
consolidated balance sheet (the "Interim Balance Sheet") and statements of
earnings, stockholders' equity and cash flows, as at and for the period ended
June 29, 1996 (collectively, the "Interim Financial Statements"). The Year-End
Financial Statements and Interim Financial Statements fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the respective dates thereof or for the periods then ended, and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, subject, in the case of the
Interim Financial Statements, to normal year-end adjustments. The Closing
Balance Sheet will fairly present the Net Worth of the Company and its
consolidated Subsidiaries as at the Closing Financial Statements Date and will
be prepared in accordance with generally accepted accounting principles applied
on a basis consistent with the balance sheet included in the Year-End Financial
Statements.
(m) Absence of Certain Changes. Except as set forth in
Schedule 3.1(m) or in the Interim Financial Statements, since February 3, 1996,
the Company and each Subsidiary has conducted its business only in, and has not
engaged in any material transaction other than in, the ordinary and usual course
of its business consistent with past practice and there has not been:
(i) any material adverse change in the financial
condition, properties, business, prospects or results
of operations of the Company and the Subsidiaries,
taken as a whole;
(ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to the
capital stock of the Company or any Subsidiary;
(iii) any sale, assignment or transfer of any of the assets
of the Company or any of the Subsidiaries which has
had or would have a Material Adverse Effect;
(iv) any loan, advance or capital contribution to, or
investment in, any Person or any waiver or compromise
by the Company or any Subsidiary of any
19
<PAGE> 24
right or any debt owed to it, in any such case that
is not in the ordinary course of business;
(v) any change by the Company or any Subsidiary in
accounting principles, practices or methods or in
cash management practices;
(vi) any Encumbrance (except contractual landlord's liens
and statutory and other non-consensual liens) on any
assets of the Company or its Subsidiaries which has
had, or if foreclosed would have, a Material Adverse
Effect;
(vii) any increase subsequent to February 3, 1996 in the
compensation of any officer or director of the
Company or any Subsidiary or any employee whose total
compensation in 1995 exceeded $100,000, or any
resignation, retirement or termination of employment
of any such officer, director or employee;
(viii) issuance by the Company or any Subsidiary of, or
commitment of the Company or any Subsidiary to issue,
any shares of capital stock or obligations or
securities convertible into or exchangeable for
shares of capital stock;
(ix) amendment, cancellation or termination of any license
or other instrument material to the Company or any
Subsidiary;
(x) failure to operate the business of the Company and
its Subsidiaries in the ordinary course or to use
reasonable efforts to preserve the business intact,
to keep available to Purchaser the services of the
key employees of the Company and the Subsidiaries,
and to preserve for Purchaser the goodwill of the
Company's and the Subsidiaries' suppliers, customers
and others having business relations with them,
except where such failures, individually or in the
aggregate, would not have a Material Adverse Effect;
(xi) revaluation by the Company of any of its assets,
including without limitation, writing off notes or
accounts receivable other than in the ordinary course
of business;
(xii) damage, destruction or loss adversely affecting the
properties of the Company, except where such damage,
destruction or loss would not have a Material Adverse
Effect after taking into account any insurance
proceeds payable to or actually received by the
Company or any Subsidiary;
20
<PAGE> 25
(xiii) indebtedness incurred by the Company or any
Subsidiary for borrowed money or any commitment to
borrow money entered into by the Company or any
Subsidiary, or any loans made or agreed to be made by
the Company or any Subsidiary, other than in the
ordinary course of business consistent with Past
practices;
(xiv) (a) any event that has given rise to any liability of
the Company or any Subsidiary, whether accrued,
absolute, contingent, determined, determinable or
otherwise, which is reasonably expected to exceed
$100,000 ($150,000 for inventory purchase
obligations), or (b) any increase or decrease in the
amount of or any change in the assumptions
underlying, or methods of calculating, any
contingency or other reserves;
(xv) changes or developments in federal or state laws,
regulations, judicial decisions, or administrative
orders or decisions, affecting the business of the
Company or any Subsidiary as conducted on the date
hereof, other than any such changes that would not
have, individually or in the aggregate, a Material
Adverse Effect;
(xvi) any material agreement, arrangement or understanding
entered into by the Company or any Subsidiary, on the
one hand, with any Seller or Related Person of a
Seller, on the other hand; or
(xvii) any other event or condition (other than events or
conditions in the capital or other markets in which
the Company and the Subsidiaries operate) or action
or omission of the Company or any Subsidiary which
would have a Material Adverse Effect.
(n) Absence of Undisclosed Liabilities. Except as set
forth or provided for in the Year-End Financial Statements or the Interim
Financial Statements, which have heretofore been delivered to the Purchaser,
there are no obligations or liabilities (other than obligations and liabilities
arising in the ordinary course of business subsequent to the date of such
Interim Financial Statements), whether or not accrued, contingent or otherwise,
(i) of the Company or any Subsidiary or (ii) of any of their respective
directors, officers, employees or agents, if such obligations or liabilities
would give rise to indemnification obligations on the part of the Company or any
Subsidiary, in each case including, without limitation, any such obligations or
liabilities relating to any facts or circumstances of which the Sellers are
aware that could result in any claims against or obligations or liabilities of
the Company or any Subsidiary.
(o) Employee Benefits.
(i) Schedule 3.1(o) contains a complete and accurate list
of all existing bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings,
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<PAGE> 26
employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, severance,
welfare and fringe benefit plans, employment or
severance agreements and all similar arrangements in
which any employee or former employee (an "Employee")
or director or former director (a "Director") of the
Company or any Subsidiary participates or to which
any such Employee or Director is a party (the
"Plans"). Except as set forth in Schedule 3.1(o),
neither the Company nor any Subsidiary has any
commitment to create any additional material Plan or
to modify or change any existing Plan in a material
respect.
(ii) Except as set forth in Schedule 3.1(o), each Plan has
been operated and administered in all material
respects in accordance with its terms and with
applicable law, including, but not limited to, the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code and all filings,
disclosures and notices required by ERISA or the Code
(including notices under Section 4980B of the Code)
have been timely made. Each Plan which is an
"employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") and which is
intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter
from the Internal Revenue Service for "TRA" (as
defined in Rev. Proc. 93-39), or will file for such a
determination letter prior to the expiration of the
remedial amendment period for such Plan, and the
Company is not aware of any circumstances likely to
result in revocation of any such favorable
determination letter. There is no material pending
or, to the best knowledge of the Company, threatened
legal action, suit or claim relating to the Plans.
Neither the Company nor any Subsidiary has engaged in
a transaction with respect to any Plan that, assuming
the taxable period of such transaction expired as of
the date hereof, would reasonably be expected to
subject the Company or any Subsidiary to a tax or
penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be
material.
(iii) No material liability under Title IV of ERISA has
been or is expected to be incurred by the Company or
any Subsidiary with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any
single-employer plan of any entity (all "ERISA
Affiliate") which is considered one employer with the
Company under Section 4001(b) of ERISA or Section
414(b) or (c) of the Code (an "ERISA Affiliate
Plan"). None of the Company, the Subsidiaries or any
ERISA Affiliate contributes to, sponsors or
maintains, or have ever contributed to, sponsored or
maintained, a single employer plan, any Pension Plan
subject to Section 412 of the Code or Section 302 of
ERISA, or any ERISA
22
<PAGE> 27
Affiliate Plan, as the case may be. None of the
Company, the Subsidiaries or any ERISA Affiliate
contributes to or have ever contributed to or been
required to contribute to a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA) under
Title IV of ERISA.
(iv) All contributions required to be made under the terms
of any Plan have been timely made or have been
reflected in the Financial Statements.
(v) Except as set forth on Schedule 3.1(o), neither the
Company nor any Subsidiary has any obligations to
provide retiree health and life benefits under any
Plan, other than benefits mandated by Section 4980B
of the Code. To the knowledge of the Company, there
has been no communication to Employees by the Company
that would reasonably be expected to promise or
guarantee such Employees retiree health or life
benefits on a permanent basis.
(vi) Except as set forth on Schedule 3.l(o), the Company
and the Subsidiaries do not maintain any Plans
covering foreign Employees. All Plans covering
foreign Employees comply in all respects with
Applicable Law. The Company and its Subsidiaries have
no material unfunded liabilities with respect to any
Plan which covers foreign Employees.
(vii) With respect to each Plan, the Company has provided
or made available to the Purchaser, if applicable,
true and complete copies of existing: (A) Plan
documents and amendments thereto; (B) trust
instruments and insurance contracts; (C) Forms 5500
filed with the Internal Revenue Service; (D) most
recent actuarial report and financial statement; (E)
most recent summary plan description; (F) forms filed
with the PBGC (other than for premium payments); (G)
most recent determination letter issued by the
Internal Revenue Service; (H) any Form 5310 or Form
5330 filed with the Internal Revenue Service; and (I)
most recent nondiscrimination tests performed under
ERISA and the Code (including 401(k) and 401(m)
tests).
(viii) Except as set forth on Schedule 3.1(o), the
consummation of the transactions contemplated by this
Agreement would not reasonably be expected to (A)
entitle any Employee, or Director to severance pay or
similar compensation, (B) result in the vesting or
acceleration of any benefits under any Plan or (C)
result in any material increase in benefits under any
Plan.
(p) Litigation. Except as disclosed in Schedule 3.1(p) or
the Year-End Financial Statements, there is no action, order, writ, injunction,
judgment or decree outstanding
23
<PAGE> 28
or suit, litigation, proceeding, labor dispute (other than routine grievance
procedures), arbitral action, investigation, lawsuit or reported claim
(collectively, "Actions") pending or threatened against or relating to (i) the
Company or any Subsidiary, (ii) any Benefit Plan or any fiduciary or
administrator thereof or (iii) the transactions contemplated by this Agreement,
except for Actions which, if resolved adversely to the Company or a Subsidiary,
would not have a Material Adverse Effect. Neither the Company nor any Subsidiary
is in default with respect to any judgment, order, writ, injunction or decree of
any court or governmental agency, and there are no unsatisfied judgments against
the Company or any Subsidiary.
(q) Taxes. Except as set forth in Schedule 3.1(q),
(i) (A) All Tax Returns required to be filed by the
Company or any Subsidiary have been timely and
properly filed, (B) all such Tax Returns are correct
and complete, (C) all Taxes shown or required to be
shown to be as due on such Tax Returns have been paid
in full or properly provided for in the books and
financial statements of the Company and its
Subsidiaries, (D) each of the Tax Returns referred to
in clause (A) has been examined by the Internal
Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment
of the Taxes in respect of which such Tax Returns
were required to be filed has expired, (E) all Tax
deficiencies asserted in writing and assessments made
by a federal, state, local or foreign taxing
authority have been paid in full or provided for on
the books and financial statements of the Company or
its Subsidiaries (including, without limitation, any
liability for Taxes arising out of the inclusion of
the Company and the Subsidiaries in any consolidated
U.S. federal Tax Return), (F) no disputes or claims
concerning any Tax liability of the Company or any
Subsidiaries have been (i) raised by any taxing
authority in writing or (ii) otherwise become known
(on the basis of personal contact with any agent of
such taxing authority) to any of the Sellers or the
Directors and officers (or Employees responsible for
Tax matters) of the Company and its Subsidiaries, (G)
no claim has ever been made by an authority in a
jurisdiction where any of the Company and its
Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction, (H)
no settlement has been made or agreed to in a
currently pending examination of any of the Tax
Returns referred to in clause (A), and (I) no waiver
of a statute of limitation has been given or
requested by or with respect to any Taxes of the
Company or any Subsidiary, and neither the Company
nor any Subsidiary has agreed to any extension of
time with respect to a Tax assessment or deficiency
or currently benefits from any extension of time
within which to file any Tax Return. An accurate copy
of each income Tax Return referred to in clause (A)
(as well as any examination reports or
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statements of deficiencies assessed or agreed to with
respect to any Taxes) has been made available to
Purchaser.
(ii) As a result of Purchaser's purchase of the Shares or
any terminations of employment in connection with
such purchase, neither the Company nor any Subsidiary
or the Purchaser will be obligated to make a payment
to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are
defined in Section 28OG of the Code (without regard
to whether such payment is reasonable compensation
for personal services performed or to be performed in
the future).
(iii) The Company and each Subsidiary will have withheld
any Tax required to be withheld under applicable law
and regulations at any time prior to the Closing, and
such withholdings will have either been paid to the
proper Governmental Authority or set aside in
accounts for such purpose.
(iv) There are no Encumbrances relating or attributable to
Taxes with respect to, or connected with, the assets
of the Company or any Subsidiary, other than any
liens for current Taxes not yet due and payable.
(v) Neither the Company nor any Subsidiary has filed a
consent under Code Section 341(f) concerning
collapsible corporations.
(vi) Neither the Company nor any Subsidiary has been a
United States real property holding corporation
within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code
Section 897(c)(1)(A)(ii).
(vii) Neither the Company nor any Subsidiary (a) is a party
to any Tax allocation or sharing agreement, (b) has
been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or
(c) has any liability for the Taxes of any Person
(other than any of the Company and the Subsidiaries)
under Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(viii) The accrued but unpaid Taxes of the Company and the
Subsidiaries (A) do not exceed the amount accrued or
reserved with respect to Tax liabilities (other than
any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set
forth on the face of the Interim Financial
Statements, (B) do not exceed the amount referred to
in clause (A) as adjusted for the passage of time
through the Closing Date in accordance with the past
custom and practice of the Company and the
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Subsidiaries in filing their Tax Returns and (C) will
not, as of the Closing Date, exceed the amount
accrued or reserved with respect to Tax liabilities
set forth on the Closing Balance Sheet (other than
any reserve for deferred Taxes established to reflect
timing differences between book and Tax income).
(r) Intellectual Property. All of the Company's and the
Subsidiaries' registrations of trademarks and of other marks, trade names or
other trade rights, and all pending applications for any such registrations and
all of the Company's and the Subsidiaries' patents and copyrights and all
pending applications therefor; all other trademarks and other marks, trade names
and other trade rights and all other trade secrets, designs, plans,
specifications and other proprietary rights, whether or not registered
(collectively, "Intellectual Property Rights") are listed in Schedule 3.1(r).
The Company and the Subsidiaries have valid and enforceable rights (i) under the
trade name license agreement referred to in item 1 of Schedule 3.1(r), to the
trade name "Eckerd Optical" and (ii) to the servicemark and trade name
"Visionworks" referred to in item 2 of Schedule 3.1(r). The Intellectual
Property Rights listed in Schedule 3.1(r) constitute all material Intellectual
Property Rights used in the business of the Company and the Subsidiaries. No
Person, other than the Company or any Subsidiary, has a right to receive a
royalty or similar payment in respect of any Intellectual Property Rights
pursuant to any contractual arrangements entered into by the Company or any
Subsidiary, and no Person, other than the Company or any Subsidiary, otherwise
has a right to receive a royalty or similar payment in respect of any such
Intellectual Property Rights. Except as disclosed in Schedule 3.1(r), the
Company and the Subsidiaries have no licenses granted by or to them or other
agreements to which they are a party, relating in whole or in part to any of the
Intellectual Property Rights. The Company's and any Subsidiary's use of the
Intellectual Property Rights is not infringing upon or otherwise violating the
rights of any third party in or to such Intellectual Property Rights, and no
proceedings have been instituted against or notices received by the Company or
any Subsidiary that are presently outstanding alleging that the Company's and
such Subsidiary's use of its Intellectual Property Rights infringes upon or
otherwise violates any rights of a third party in or to such Intellectual
Property Rights.
(s) Environmental Matters.
(i) the Company and each Subsidiary has complied at all
times with all applicable Environmental Laws;
(ii) no property (including soils, groundwater, surface
water, buildings or other features) owned or operated
by the Company or any Subsidiary is contaminated
with, or has had any release of, any Hazardous
Substances;
(iii) no property (including soils, groundwater, surface
water, buildings or other features) formerly owned or
operated by the Company or any
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Subsidiary has been contaminated with Hazardous
Substances during such period of ownership or
operation;
(iv) neither the Company nor any Subsidiary is subject to
liability for any Hazardous Substance disposal or
contamination on any third party property;
(v) neither the Company nor any Subsidiary has received
any notice, demand, letter, claim or request for
information indicating that the Company or any
Subsidiary may be in violation of or subject to
liability under any Environmental Law;
(vi) neither the Company nor any Subsidiary is subject to
any order, decree, injunction or other arrangement
with any Governmental Authority or any indemnity or
other agreement with any third party arising under
any Environmental Law or relating to Hazardous
Substances;
(vii) none of the properties owned or operated by the
Company or any Subsidiary contains any underground
storage tanks, asbestos containing material, lead
products, or polychlorinated biphenyls;
(viii) neither the Company nor any Subsidiary has engaged in
any activities involving the generation, use,
handling or disposal of any Hazardous Substances.
(ix) there are no circumstances or conditions involving
the Company or any Subsidiary that could reasonably
be expected to result in any claims, liabilities,
investigations, costs or restrictions on the
ownership, use, or transfer of any property pursuant
to any Environmental Law.
(t) Insurance. The Company and each Subsidiary has
maintained, and at the date hereof has in effect, such policies of motor
vehicle, property, casualty, workers' compensation, general liability and other
insurance, including without limitation group insurance and any other life,
health, disability or other insurance for the benefit of employees or their
dependents or both (the "Insurance Policies"), as are required by law and are
adequate and appropriate with respect to their respective businesses. Neither
the Company nor any Subsidiary has given or received any notices of cancellation
or nonpayment of the premiums for such Insurance Policies and the premiums due
thereon have been fully paid. Schedule 3.1(t) lists all material Insurance
Policies of the Company and the Subsidiaries.
(u) Accounts Receivable and Reserves. Except as set forth
on Schedule 3.1(u), all accounts receivable reflected on the Interim Balance
Sheet and accrued since the date thereof represent bona fide sales actually made
in the ordinary course of business or other
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transactions actually made, and are current and fully collectible net of any
collateral or reserves for doubtful accounts shown on the Interim Balance Sheet
(which reserves are adequate and were determined consistent with past practice).
All notes receivable reflected on the Interim Balance Sheet are current and
fully collectible net of any reserves shown on the Interim Balance Sheet (which
reserves are adequate and were determined consistent with past practice). Except
as set forth in Schedule 3.1(u), all such account and note receivables are
reflected in the Interim Balance Sheet or were accrued since the date thereof in
accordance with generally accepted accounting principles applied on a consistent
basis. Except as set forth on Schedule 3.1(u), no objection, claim or offset has
been made by any Person regarding any such receivables. Except for charges
against and additions to the reserve against doubtful receivables in the
ordinary course of business, there has been no release or write-down of any
reserves carried on the balance sheet included in the Year-End Financial
Statements subsequent to February 3, 1996. Reserves have been established and
utilized subsequent to February 3, 1996 only in the ordinary course on a basis
consistent with past practice.
(v) Severance. All obligations of the Company or any
Subsidiary for severance or other payments, including with respect to accrued
vacation, to any Director or Employee arising out of the transactions
contemplated hereby (whether arising on, before or after the date of this
Agreement) do not exceed in the aggregate $1,500,000.
(w) Brokers and Finders. No Person is or will be entitled
to receive from the Purchaser, the Company or any of its Subsidiaries, or their
respective directors, officers, employees or agents any investment banking,
financing, brokerage, finder's, breakup, termination or similar fee or
commission in connection with the transactions contemplated by this Agreement on
account of services rendered to any Seller or the Company or any Subsidiary.
(x) Disclosure. No representation or warranty of the
Sellers contained in this Agreement (including the Schedules hereto) contains
any untrue statement of a material fact, or omits to state any material fact
which is required to be stated therein or necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
3.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Sellers that:
(a) Corporate Authority. Purchaser has the requisite
power and authority (corporate and other) and has taken all corporate action
necessary in order to execute and deliver this Agreement and the Escrow
Agreement and to consummate the transactions contemplated on its part hereby and
thereby. Each of this Agreement and the Escrow Agreement is a valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
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(b) Corporate Organization. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas.
(c) Consents and Approvals. Other than the filing of
notification reports under the HSR Act, no consent, approval or authorization
of, or declaration, filing or registration with, any Governmental Authority or
any other Person, is required to be made or obtained by Purchaser in connection
with the execution and delivery of this Agreement or the Escrow Agreement by
Purchaser and the consummation by Purchaser of the transactions contemplated
hereby and thereby.
(d) Non-contravention. The execution and delivery of this
Agreement and the Escrow Agreement by Purchaser do not, and the consummation by
Purchaser of the transactions contemplated hereby and thereby on its part will
not, constitute or result in (i) a breach or violation of, or a default under,
the Certificate of Incorporation or By-Laws of Purchaser; (ii) a breach or
violation of, or a default under, any provision of (A) any Contract or (B) any
law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental Permit, in either case to which Purchaser or
its properties or assets is subject.
(e) Securities Act. Purchaser is purchasing the Shares
for its own account and not with a view to any distribution or resale of the
Shares in any manner that would be in violation of the Securities Act.
(f) Brokers and Finders. No Person is or will be entitled
to receive from the Sellers, the Company or any of its Subsidiaries, or their
respective directors, officers, employees or agents any investment banking,
financing, brokerage, finder's, breakup, termination or similar fee or
commission in connection with the transactions contemplated by this Agreement on
account of services rendered to Purchaser.
ARTICLE IV
Conditions to Closing
4.1 Conditions to the Obligations of Purchaser. The obligation of
Purchaser to consummate the purchase of the Shares under this Agreement shall be
subject to the satisfaction or waiver by Purchaser prior to or at the Closing of
each of the following conditions precedent:
(a) Representations, Warranties and Covenants. All
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date;
provided, however, that for purposes of determining the satisfaction of the
condition contained in this Section 4.1(a), no effect shall be given to any
exception or qualification in such representations and warranties relating to
materiality or a Material Adverse Effect, and such representations and
warranties shall be deemed to be true and correct in all
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<PAGE> 34
material respects only if the failure or failures of such representations and
warranties to be so true and correct without regard to materiality and Material
Adverse Effect exceptions or qualifications do not represent in the aggregate a
Material Adverse Effect; and the Company and the Sellers shall have performed
all agreements and covenants required hereby to be performed by the Company and
the Sellers, respectively, prior to or at the Closing Date. There shall be
delivered to Purchaser certificates of the Company and the Sellers to the
foregoing effect.
(b) Consents. All consents (including, without
limitation, all consents relating to leases of real property), approvals and
waivers from Governmental Authorities and other Persons necessary to permit
Purchaser to consummate the transactions contemplated hereby or necessary to
avoid a breach of, default under or termination of any Material Contract or
Permit of the Company or any Subsidiary shall have been obtained.
(c) Tender of All Shares. Notwithstanding the several
nature of the sale obligations of the Sellers, each Seller shall have tendered
to Purchaser at the Closing all of the Shares identified to such Seller in
Schedule 2.1 (it being understood that Purchaser shall not be obligated to
purchase any Shares unless all of the Shares are purchased).
(d) No Injunction. No injunction, temporary restraining
order, judgment or other order or decree of any Governmental Authority shall
have been issued or been entered and be in effect, nor shall any statute, rule
or regulation have been enacted or promulgated and be in effect, which could
prevent, materially delay or materially burden the transactions contemplated by
this Agreement nor shall there be pending or threatened any material litigation
or other proceeding with respect to the sale and purchase of the Shares.
(e) Opinion of Company's and Sellers' Counsel.
Shackleford, Farrior, Stallings & Evans, counsel for the Company and the
Sellers, shall have delivered to Purchaser an opinion, dated the Closing Date,
substantially in the form of Exhibit C.
(f) Certificates. The Company shall furnish Purchaser
with such certificates of its chief executive officer and others and the Sellers
shall furnish Purchaser with such other certificates to evidence compliance with
the conditions set forth in this Article IV as may be reasonably requested by
Purchaser.
(g) HSR Act. The applicable waiting period, including any
extension thereof, under the HSR Act shall have expired or been terminated.
(h) Escrow Agreement. The Escrow Agreement shall have
been executed and delivered by the Escrow Agent, Purchaser and each Seller.
(i) Consulting and Non-Competition Agreement. Richard W.
Roberson shall have entered into a five-year consulting and non-competition
agreement substantially in the form of Exhibit D.
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(j) Repayment of Heller Obligation. To the extent
sufficient funds have been provided by Purchaser, the Heller Obligation shall
have been paid in full; the Lenders shall have released all Encumbrances
securing indebtedness under the Credit Agreement; and the Lenders shall have
delivered to the Company and Purchaser the certificate and the Releases
contemplated by Section 2.3(b).
(k) Financing. Purchaser shall have obtained from one or
more banks or other financial institutions term loans or other debt facilities
in an aggregate amount of not less than $45,000,000 to finance the acquisition
of the Shares hereunder.
(l) Transfer Taxes. The Sellers shall have paid, or
caused to be paid, all stock transfer and other transfer taxes required to be
paid in connection with the sale and delivery to Purchaser of the Shares owned
by Sellers, and shall have caused all appropriate stock transfer tax stamps to
be affixed to the certificate or certificates representing the Shares so sold
and delivered.
(m) FIRPTA Certificates. Either (i) each of the Sellers
shall have delivered to Purchaser a valid certification described in Treas. Reg.
Section 1.1445-2(b)(2) or (ii) the Sellers shall have delivered to Purchaser a
statement, issued by the Company no more than 30 days prior to the Closing Date,
that satisfies the requirements of Treas. Reg. Section 1.1445-2(c)(3).
(n) Optionholder Consents. The Sellers shall furnish the
Purchaser with consents executed by each Optionholder consenting to the payment
of the Optionholders Amount as contemplated hereunder; and all Options shall
have been canceled.
(o) Severance Schedule. The Sellers shall have furnished
to the Purchaser a schedule of severance payments to be made by the Company and
such schedule shall be reasonably satisfactory to Purchaser.
4.2 Conditions to the Obligations of the Sellers. The obligations
of the Sellers to consummate the sale of the Shares under this Agreement shall
be subject to the satisfaction prior to or at the Closing of each of the
following conditions precedent:
(a) Representations, Warranties and Covenants. All
representations and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date and
Purchaser shall have performed all agreements and covenants required hereby to
be performed by Purchaser prior to or at the Closing Date. There shall be
delivered to the Sellers a certificate (signed by the President or a Vice
President of Purchaser) to the foregoing effect.
(b) Consents. All consents, approvals and waivers from
Governmental Authorities and other Persons necessary to permit the Sellers to
consummate the transactions
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contemplated hereby or necessary to avoid a breach of, default under or
termination of any Material Contract or Permit of the Company or any Subsidiary
shall have been obtained.
(c) No Injunction. No injunction, temporary restraining
order, judgment or other order or decree of any Governmental Authority shall
have been issued or been entered and be in effect, nor shall any statute, rule
or regulation have been enacted or promulgated and be in effect, which could
prevent, materially delay or materially burden the transactions contemplated by
this Agreement nor shall there be pending or threatened any material litigation
or other proceeding with respect to the sale and purchase of the Shares.
(d) Certificates. Purchaser shall furnish the Sellers
with such certificates of its chief executive officer and others to evidence
compliance with the conditions set forth in this Article IV as may be reasonably
requested by the Seller Representatives.
(e) HSR Act. The applicable waiting period, including any
extension thereof, under the HSR Act shall have expired or been terminated.
ARTICLE V
Covenants
5.1 Maintenance of Business and Preservation of Permits and
Services. The Sellers shall use their best efforts to cause the Company and the
Subsidiaries, and the Company shall use its best efforts, to diligently carry on
the business of the Company and the Subsidiaries in the ordinary course
consistent with past practice (including, without limitation, past practice
relating to cash management). The Sellers shall use their best efforts to cause
the Company and each Subsidiary and the Company shall use its best efforts, to
(i) preserve, protect and maintain all rights, properties and other assets
necessary to permit the Company and each Subsidiary to conduct its business as
presently conducted, (ii) to preserve their Material Contracts and material
Permits in full force and effect, (iii) keep available the services of their
present officers, employees, consultants and agents, (iv) maintain their present
suppliers and customers and (v) preserve their goodwill. Sellers shall use their
best efforts to prevent the Company and any Subsidiary from, and neither the
Company nor any Subsidiary shall, close any of the retail stores currently in
operation.
5.2 Interim Operations of the Company. Following the date hereof
and prior to the Closing (unless Purchaser shall otherwise agree in writing),
the Company agrees that, and each Seller shall use all of his power, authority
and discretion in respect of the Company and each Subsidiary to ensure that:
(a) the Company shall not (i) sell or pledge or agree to
sell or pledge any stock owned by it in any Subsidiary; (ii) amend its
Certificate of Incorporation or By-Laws; (iii) split, combine or reclassify the
outstanding shares of capital stock of the Company; or (iv) declare, set
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<PAGE> 37
aside or pay any dividend payable in cash, stock or property with respect to any
class of capital stock;
(b) neither the Company nor any Subsidiary shall (i)
issue, sell, pledge, dispose of or encumber any shares of, or securities
convertible or exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of, capital stock of any class of the
Company or any Subsidiary or any other property or assets; (ii) except in the
ordinary course of its business as conducted prior to the date hereof, transfer,
lease, license, guarantee, sell, dispose of or create any Encumbrance with
respect to any assets or incur or modify any indebtedness or other liability;
(iii) acquire directly or indirectly by repurchase or otherwise any shares of
the capital stock of the Company or any Subsidiary; (iv) authorize any capital
expenditures in excess of $50,000 in the aggregate; (v) except with respect to a
sublease agreement with Doctor Porter at the Pembrook Pines, Florida store
proposed to be entered into (if such sublease agreement is on customary terms),
enter into any new sublease or management or consulting agreement with any
Person, including without limitation any doctor of optometry or professional
corporation of a doctor of optometry; (vi) enter into or renew any lease or
other commitment to be performed over a period exceeding one year where the
present value of payments to be made thereunder exceeds, individually or in the
aggregate, $50,000, (vii) make any acquisition of, or investment in, assets or
stock of any other Person except in the ordinary course of business; or (viii)
enter into any other transaction with a third party involving assets or
consideration having a value in excess of $50,000;
(c) neither the Company nor any Subsidiary shall (i)
other than as contemplated in Section 5.9 hereof, grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any Employee or Director or other Person; (ii) increase the compensation payable
by the Company or any Subsidiary to any member of senior management of the
Company or, except for normal periodic increases in the ordinary course of
business, increase the compensation payable by the Company or any Subsidiary to
any other Employee; or (iii) establish, amend, adopt, enter into, or make any
new (or accelerate or otherwise modify any existing) grants or awards under, any
Plan or award any bonus to any Employee or consultant;
(d) neither the Company nor any Subsidiary shall settle
or compromise any material claims or litigation or modify, amend or terminate
any of its Material Contracts or waive, release or assign any material rights or
claims;
(e) neither the Company nor any Subsidiary shall make any
tax election or permit any insurance policy naming it as a beneficiary or a loss
payee to be canceled or terminated;
(f) the Company shall not write down or charge (without
simultaneously reprovisioning) any reserve;
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(g) the Purchaser shall be given reasonable prior notice
of any proposed action or affirmative decision that is material or potentially
material to the Company or any Subsidiary;
(h) no action or omission shall occur, or decision be
made, in each case that is or would be material or potentially material to the
Company or any Subsidiary, as to which Purchaser has objected; and
(i) neither the Company nor any Subsidiary shall
authorize or enter into an agreement to do any of the foregoing.
5.3 Access by Purchaser. Seller shall allow Purchaser during
regular business hours through Purchaser's employees, agents and
representatives, to make such investigation of the business, properties, books
and records of the Company and the Subsidiaries, and to conduct such examination
of their condition, as Purchaser reasonably deems necessary or advisable to
familiarize itself with such business, properties, books, records, condition and
other matters, and to verify the representations and warranties of the Sellers
hereunder. No investigation by Purchaser or other information received by
Purchaser shall operate as a waiver or otherwise affect any representation,
warranty or other agreement given or made by the Sellers hereunder.
5.4 Consents and Best Efforts. As soon as practicable after
execution and delivery of this Agreement (and in no event more than 15 days
after the date hereof), Purchaser and the Sellers shall make all filings
required under the HSR Act. In addition, Purchaser and the Sellers will promptly
furnish all information as may be required by the Federal Trade Commission and
the Department of Justice under the HSR Act in order that the requisite
approvals for the purchase and sale of the Shares pursuant hereto, and the
transactions contemplated hereby, be obtained or to cause any applicable waiting
periods to expire. The Company, the Sellers and Purchaser will, as soon as
practicable (and in no event more than 15 days after the date hereof), commence
to take all other action required to obtain as promptly as practicable all other
necessary consents, approvals, authorizations and agreements of, and to give all
notices and make all other filings with, any third parties, including
Governmental Authorities, necessary to authorize, approve or permit the
consummation of the transactions contemplated hereby, and to obtain, from each
Optionholder a consent to the payment of the Optionholders Amount as
contemplated hereunder, and the Company, Purchaser and the Sellers shall
cooperate with each other with respect thereto. In addition, subject to the
terms and conditions herein provided, each of the parties hereto covenants and
agrees to use its reasonable best efforts to take, or cause to be taken, all
action or do, or cause to be done, all things necessary, proper or appropriate
to consummate and make effective the transactions contemplated hereby and to
cause the fulfillment of the parties' obligations hereunder. Purchaser and the
Sellers further agree that, subject to the terms and conditions of this
Agreement, each of Purchaser and the Sellers shall use reasonable best efforts
to cause the Closing to occur by September 30, 1996 or as promptly thereafter as
practicable.
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5.5 Notification of Certain Matters. The Sellers and the Company
shall C give prompt notice to Purchaser, and Purchaser shall give prompt notice
to the Seller Representatives, of (i) the occurrence, or failure to occur, of
any event which occurrence or failure- would be likely to cause any
representation or warranty contained in this Agreement and required to be made
by the notifying party to be untrue or inaccurate in any material respect any
time from the date hereof to the Closing Date and (ii) any material failure of
the Company, Purchaser or any Seller, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, and each party shall use all reasonable efforts to remedy such
failure.
5.6 No Mergers, Consolidations, Sale of Stock, Etc. Neither the
Company nor any Seller will, directly or indirectly, enter into negotiations
relating to the sale or exchange of any Shares or the capital stock of any
Subsidiary, the merger of the Company or any Subsidiary with, or the direct or
indirect disposition of a significant amount of the Company's or any
Subsidiary's assets or business to any Person other than Purchaser or its
Affiliates or provide any assistance or any information to or otherwise
cooperate with any Person in connection with any such inquiry, proposal or
transaction. In the event that the Company or any Seller receives a solicited or
unsolicited offer for such a transaction or obtains information that such an
offer is likely to be made, the Company or such Seller will provide Purchaser
with notice thereof as soon as practical after receipt thereof, including the
identity of the prospective purchaser or soliciting party.
5.7 Publicity. Between the date hereof and the Closing (or, if
the Closing does not occur, the date this Agreement is terminated), Purchaser,
the Company and the Seller Representatives agree to consult with each other and
to coordinate the issuance of any press release or similar public announcement
or communication, written or oral, in respect of the transactions contemplated
by this Agreement; provided, however, that no party shall be restrained, after
consultation with the others, from making such disclosure as it shall be advised
by counsel is required by Applicable Laws.
5.8 Filing Tax Return. Sellers agree to cause the Company to file
prior to the Closing Date all required Tax Returns for the Company's fiscal year
ended February 3, 1996.
5.9 Severance Payments. Purchaser agrees with Sellers that
Purchaser shall cause the Company, on and after the Closing Date, to make
severance payments, which, when aggregated with any payments by the Purchaser or
the Company for accrued vacation, shall not exceed $1,500,000 in the aggregate,
to certain employees of the Company in accordance with the Term Sheet for
Severance and Accrued Vacation Payments dated the date hereof and delivered by
Sellers to the Purchaser.
5.10 Sale-Leaseback Obligation Clarification Letter. Sellers agree
to provide to Purchaser, at least ten Business Days prior to the Closing Date, a
letter (the "Sale-Leaseback Obligation Clarification Letter") executed by an
executive officer of Eckerd Corporation, in form and substance reasonably
satisfactory to Purchaser, to the effect that the purchase price for
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<PAGE> 40
any Sale-Leaseback Stores (as defined in the Sale Leaseback Lease) subject to
mandatory purchase on February 1, 1999 (or within 10 days thereafter) pursuant
to the terms of Section 1.4(c) of the Asset Purchase Agreement shall equal only
the amount shown ($9,979,302 in the aggregate) on Schedule 1.4(c) attached to
the First Amendment to Asset Purchase Agreement dated March 29, 1994 and shall
not include any Early Termination Rent (as defined in the Sale-Leaseback Lease)
or any other amounts due pursuant to the Sale-Leaseback Lease, the Trust
Indenture and Security Agreement, the notes issued thereunder, or any notes
issued in a refinancing thereof. Should Sellers not timely produce the
Sale-Leaseback Obligation Clarification Letter in accordance with the terms of
the prior sentence, Sellers agree that $275,000 of the Sellers Amount (after
deducting payments to be made by Purchaser to the Escrow Agent for deposit into
the Escrow Funds (as defined in the Escrow Agreement)) shall be deposited by
Purchaser into a separate escrow account to pay for such Early Termination Rent
or any other amounts due (other than the amount shown ($9,979,302 in the
aggregate) on Schedule 1.4(c) of the First Amendment to Asset Purchase Agreement
dated March 29, 1994) under the Sale-Leaseback Lease, the Trust Indenture and
Security Agreement, the notes issued thereunder, or any notes issued in a
refinancing thereof, in connection with the mandatory purchase of the
Sale-Leaseback Stores. Sellers and Purchasers agree that normal transaction
expenses (i.e., real estate transfer taxes, counsel fees, etc.) shall not be
reimbursed by any payments out of the aforementioned escrow account. Such escrow
will terminate and any remaining funds therein will be paid to Sellers on the
last Business Day of March 1999.
5.11 Further Assurances. Subject to the terms and conditions
hereof, the parties hereto agree to use their respective best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper and advisable under Applicable Laws to consummate the purchase
and sale of the Shares on the terms provided hereunder. In case at any time
after the Closing any further action is necessary, proper or advisable to carry
out the purposes of this Agreement, as soon as reasonably practicable the
parties hereto shall take all such action to effectuate such purposes.
ARTICLE VI
Taxes
6.1 Tax Periods Ending on or Before the Closing Date. The
Purchaser shall request that KPMG prepare and file or cause to be filed all Tax
Returns required to be filed after the Closing Date for the Company and the
Subsidiaries in respect of the period beginning on February 4, 1996 and ending
on the Closing Date. The Company and KPMG shall deliver a copy of each such Tax
Return and any schedules, work papers and other documentation then available
that are relevant to the preparation of such Tax Return to Purchaser and to such
accountants as Purchaser may designate for their review and approval, which may
not be unreasonably withheld, not less than 30 days prior to the date on which
such Tax Return is required to be filed. If Purchaser objects to any items
reflected on such Tax Returns, KPMG and Purchaser shall attempt to resolve the
disagreement. If the parties are unable to resolve the
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<PAGE> 41
disagreement, the dispute shall be referred to Price Waterhouse LLP or another
internationally recognized firm of independent public accountants having no
material relationship with Purchaser, Company, any Seller or any of their
respective Affiliates, as to which the Seller Representatives and Purchaser
mutually agree, whose determination shall be binding upon the parties. The fees
and expenses of Price Waterhouse LLP shall be borne equally by the Sellers and
Purchaser.
6.2 Tax Periods Beginning Before and Ending After the Closing
Date. Purchaser shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company and the Subsidiaries for Tax periods which
begin before the Closing Date and end after the Closing Date.
6.3 Cooperation on Tax Matters.
(a) Purchaser, the Company and the Subsidiaries and the
Sellers shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Subsidiaries and the
Sellers agree (A) to retain all books and records with respect to Tax matters
pertinent to the Company and the Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Purchaser or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company and
the Subsidiaries or Sellers, as the case may be, shall allow the other party to
take possession of such books and records.
(b) Purchaser and the Sellers further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(c) Purchaser and the Sellers further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
6.4 Tax Sharing Agreements. Any tax sharing or similar agreements
with respect to or involving the Company and the Subsidiaries shall be
terminated as of the Closing Date and,
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after the Closing Date, the Company and the Subsidiaries shall not be bound
thereby or have any liability thereunder.
6.5 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State and City real property transfer and gains taxes and any similar taxes
imposed in other states or political subdivisions thereof), shall be paid by the
Sellers when due; the Sellers will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees; and, if required by
applicable law, Purchaser will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
ARTICLE VII
Survival and Indemnification
7.1 Survival of Representations, Warranties and Covenants. All
representations and warranties of the parties contained in this Agreement,
including any Schedules made a part hereof, and any covenants or other
agreements the performance of which is specified to occur on or prior to the
Closing or the Closing Date, shall survive the Closing hereunder for a period of
two years following the Closing Date, except for (a) the representations and
warranties set forth in Section 3.1(1) (relating to Financial Information),
which shall survive until the date that is 90 days after the completion of the
annual audit of the Company for the fiscal year ending in January 1997, (b) the
representations and warranties set forth in Section 3.1(q) (relating to Taxes),
which shall survive for a period of three years following the Closing Date,
except to the extent that any inaccuracy in the representations and warranties
set forth in Section 3.1(q) relates, or relate, to (i) a false or fraudulent
return with intent to evade tax (within the meaning of Section 6501(c)(1) of the
Code), (ii) a willful attempt in any manner to defeat or evade tax (within the
meaning of Section 6501(c)(2) of the Code), (iii) the failure to file a return
or (iv) a substantial omission described in Section 6501(e) of the Code, in
which case Section 3.1(q) shall survive until the expiration (with valid
extensions) of the applicable statute(s) of limitations and (c) the
representations and warranties set forth in Sections 3.1(a), 3.1(c), 3.1(d) and
3.1(g), which shall survive indefinitely. Any covenant or other agreement herein
any portion of the performance of which may or is specified to occur after the
Closing shall survive the Closing hereunder indefinitely or for such lesser
period of time as may be specified therein.
7.2 Indemnification by the Sellers.
(a) Indemnification. Each Seller, severally, based on
such Seller's Pro Rata Share, and not jointly, agrees to indemnify and hold
harmless Purchaser and each of its officers, directors, subsidiaries,
affiliates, controlling persons, successors and permitted assigns, and the
Company and the Subsidiaries (each of the foregoing being an "Indemnified
Party"), from and against any and all direct and indirect costs, claims,
judgments, assessments, deficiencies,
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<PAGE> 43
penalties and interest, damages, losses, liabilities, and expenses (including,
without limiting the generality of the foregoing, reasonable attorneys' fees and
disbursements), together with any costs or expenses incurred to investigate the
same or enforce the provisions hereof (collectively, "Losses"), arising out of,
based upon, relating to or resulting from (i) the inaccuracy of any
representation and warranty by the Company or the Sellers set forth herein or in
any closing certificate delivered by the Company or any Seller or (ii) the
failure by the Sellers or the Company to perform any covenant contained in this
Agreement; provided, however, that to the extent that the representations and
warranties contained in Sections 3.1(a), (d), (e), (f) and (g) relate solely
to a Seller in its individual (or fiduciary) capacity, such Seller severally
indemnities and holds harmless the Indemnified Persons for all Losses arising
out of, based upon, relating to or resulting from, the inaccuracy of any such
representation and warranty only insofar as it relates solely to such Seller in
its individual (or fiduciary) capacity.
(b) Limitations on Indemnification. The Sellers shall not
indemnify or hold harmless the Indemnified Parties, and no Indemnified Party
shall seek reimbursement or indemnification from the Sellers for, Losses that
arise out of or result from any of the events or conditions set forth in Section
7.2(a) unless such Losses aggregate more than $300,000 (the "Threshold") (except
in the case of Losses arising out of, based upon, relating to or resulting from
the inaccuracy of any representation and warranty set forth in Section 3.1(q)
(relating to Taxes), in which case the Threshold shall equal $0) but then shall
be entitled to full recovery for all such Losses if such threshold is exceeded.
Subject to Section 7.5, the Sellers shall have no obligation to pay to the
Indemnified Parties more than $3,000,000 for any such Losses. With respect to
any inaccuracy of the representations and warranties set forth in Section 3.1(s)
(relating to Environmental Laws), Purchaser agrees to cause the Company to first
pursue any available remedies under the indemnity provisions of the Asset
Purchase Agreement. Any Loss arising from the inaccuracy of any representations
and warranties set forth in Section 3.1(s) shall be mitigated (on a dollar for
dollar basis) by any payment received from Eckerd Corporation pursuant to such
indemnity with respect to a claim relating to such representations and
warranties.
(c) No Contribution. None of the Sellers shall have any
right to seek contribution from any Indemnified Party with respect to all or any
part of the Sellers' indemnification obligations under this Section 7.2.
7.3 Other Limitations on Indemnification. The parties agree that
(a) no Indemnified Party may recover under Section 7.2(a)
any Losses relating to an event or condition in respect of which an adjustment
to the Share Purchase Price for the fall amount of such Losses shall have been
made pursuant to Section 2.4 of this Agreement;
(b) Losses shall be calculated net of any recoveries from
third parties properly allocable to such Losses and received by the Indemnified
Party; and
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(c) all Losses subject to indemnification hereunder shall
be determined net of any cash tax benefit actually realized by the Indemnified
Party or including any tax liability incurred by the Indemnified Party, as the
case may be, resulting from such Losses.
7.4 Method of Asserting Claims, Etc.
(a) All claims for indemnification by any Indemnified
Party hereunder shall be asserted and resolved as set forth in this Section 7.4.
In the event that any written claim or written demand for which an Indemnifying
Party would be liable to any Indemnified Party hereunder is asserted against or
sought to be collected from any Indemnified Party by a third party, such
Indemnified Party shall promptly, but in no event more than 15 days following
such Indemnified Party's receipt of such claim or demand, notify the
Indemnifying Party of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not in any
manner prejudice the right of the Indemnified Party to indemnification to the
fullest extent provided hereunder) (the "Third Party Claim Notice") and in the
event that an Indemnified Party shall assert a claim for indemnity under this
Article VII not including a third party claim, the Indemnified Party shall
notify the Indemnifying Party promptly following its discovery of the facts or
circumstances giving rise thereto (together, with a Third Party Claim Notice, a
"Claim Notice"); provided, that no such notice need be provided to the
Indemnifying Party if the applicable Threshold has not been exceeded and will
not be exceeded by such claim or demand; and provided, further, that the failure
to notify on the part of the Indemnified Party in the manner set forth herein
shall not foreclose any rights otherwise available to such Indemnified Party
hereunder, except to the extent that the Indemnifying Party is materially
prejudiced by such failure to notify. The Indemnifying Party shall have 30 days
from the personal delivery or mailing of the Third Party Claim Notice (except
that such a period shall be decreased to a time 10 days before a scheduled
appearance date in a litigated matter) (the "Notice Period") to notify the
Indemnified Party (i) whether or not the Indemnifying Party disputes the
liability of the Sellers to the Indemnified Party hereunder with respect to such
claim or demand and (ii) whether or not it desires to defend the Indemnified
Party against such claim or demand, which it shall not be entitled to do until
the Threshold is exceeded. All costs and expenses incurred by the Indemnifying
Party in defending such claim or demand shall be a liability of, and shall be
paid by, the Indemnifying Party; provided, however, that the amount of such
expenses shall be a liability of the Indemnifying Party subject to the
limitations set forth in Section 7.2(b). In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, which it shall not be
entitled to do until the Threshold is exceeded and except as hereinafter
provided, the Indemnifying Party shall have the right to defend the Indemnified
Party by appropriate proceedings and by counsel reasonably acceptable to the
Indemnified Party, provided that the Indemnifying Party proceeds in good faith,
expeditiously and diligently. If any Indemnified Party desires to participate
in, but not control, any such defense or settlement as to which the Indemnifying
Party has assumed the defense in accordance with the foregoing, it may do so at
its sole cost and expense. The Indemnified Party shall not settle a claim or
demand without the consent of the Indemnifying Party. The Indemnifying Party
shall not, without the prior written
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<PAGE> 45
consent of the Indemnified Party, settle, compromise or offer to settle or
compromise any such claim or demand (including, without limitation, in
connection with any audit, adjustment or assessment relating to Taxes) on a
basis that (i) would result in the imposition of a consent order, injunction or
decree which would restrict the future activity or conduct of, or (ii) would
otherwise have a Material Adverse Effect on, the Indemnified Party or any
subsidiary or Affiliate thereof. If the Indemnifying Party elects not to defend
the Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand, or, if the same be contested by the Indemnified
Party, then that portion of any such claim or demand as to which such defense is
unsuccessful (and all reasonable costs and expenses pertaining to such defense)
shall be the liability of the Indemnifying Party hereunder, subject to the
limitations set forth in Section 7.2(b). To the extent the Indemnifying Party
shall control or participate in the defense or settlement of any third party
claim or demand, the Indemnified Party will give to the Indemnifying Party and
its counsel reasonable access to all business records and other documents
relevant to such defense or settlement, and shall permit them upon reasonable
request to consult with the employees and counsel of the Indemnified Party. The
Indemnified Party shall use its best efforts in the defense of all such claims,
and in connection therewith shall be entitled to reimbursement by the
Indemnifying Party of expenses directly related to efforts undertaken at the
specific request of the Indemnifying Party.
(b) In the event that an Indemnified Party shall assert a
claim under Section 7.2(a) for indemnification by the Sellers (or any individual
Seller), whether including a third party claim or otherwise, such claim shall be
governed by the procedures set forth in Section 7.4(a) and subject to the
limitations set forth in Section 7.2(b) and, if made prior to the second
anniversary (third anniversary for claims arising out of, based upon, relating
to or resulting from the inaccuracy of any representation and warranty set forth
in Section 3.1(q) (relating to Taxes)) of the Closing Date, (i) shall be
asserted against the Escrowed Indemnification Fund (in accordance with the terms
of the Escrow Agreement) to the extent of any amounts then remaining and not
then deliverable in respect of or reserved against another claim hereunder, by
the additional delivery of the Claim Notice to the Escrow Agent and (ii) to the
extent such claim otherwise satisfies the terms and conditions for reimbursement
under the Escrow Agreement, shall be paid from such Escrowed Indemnification
Fund then available.
7.5 Other Remedies. The indemnification provisions of this
Article VII shall constitute the exclusive remedy for any post-Closing claims
for the events or conditions set forth in Section 7.2(a) (and such claims shall
be payable solely from the Escrowed Indemnification Fund), except for claims
arising (i) out of any breach of the provisions of this Article VII or the
Escrow Agreement and (ii) under Applicable Law for any act or omission
constituting fraud or fraudulent misrepresentation by any party hereto
(including, without limitation, those acts or omissions referred to in Section
7.1(b)(i), (ii)2(iii) and (iv)).
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ARTICLE VIII
Miscellaneous
8.1 Payment of Expenses. Except as expressly provided in Sections
2.4(c), 4.1(1) and 6.1, whether or not the transactions contemplated by this
Agreement shall be consummated, each party hereto shall pay all of his or its
own out-of-pocket and other expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incident to preparing for, entering into and
carrying out this Agreement; provided, however, that the Company shall pay all
such out-of-pocket and other expenses reasonably incurred by Sellers (including
the reasonable prepaid fees of KPMG relating to KPMG's preparation of Tax
Returns as contemplated in Section 6.1) to the extent that they have been
accrued and paid prior to the Closing Date. Purchaser shall pay the fees and
expenses of KPMG in connection with KPMG's audit of the Closing Financial
Statements to the extent that such fees and expenses do not exceed the lesser of
(a) customary audit fees consistent with KPMG's past practice with the Company
and (b) $38,750.
8.2 Waiver of Conditions. The conditions to each party's
obligations to consummate the transactions contemplated hereby are for the sole
benefit of such party and may be waived by such party in whole or in part to the
extent permitted by Applicable Laws. Any such waiver shall be valid only if set
forth in a written instrument signed on behalf of such party.
8.3 Seller Representatives. The Seller Representatives are hereby
appointed by each Seller to act for the Sellers in connection with the
transactions contemplated by this Agreement, and any action under or in respect
of this Agreement taken by any one or more of the Seller Representatives shall
be binding upon all the Sellers, and any such action taken by one of the Seller
Representatives shall be binding upon the other, and any such action may be
relied on by Purchaser as a duly authorized action taken on behalf of, and
binding upon, all Sellers. Each Seller agrees that any payment due to a Seller
made by the Purchaser or the Escrow Agent to a Seller Representative shall
discharge the obligation of the Purchaser and/or the Escrow Agent to such
Seller.
8.4 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) by the Purchaser, within seven Business Days after
the date of this Agreement, if, during such period, the Purchaser shall have
determined that the Visionworks, Inc. Lease Summary provided to the Purchaser by
the Sellers is inaccurate in any material respect, including, without
limitation, any material inaccuracy as to the terms of any lease described in
such Lease Summary;
(b) by either the Sellers or Purchaser, by written notice
to the other party or parties, if the conditions to such parties' obligations
set forth in Article IV have not been or could not be satisfied on or before
October 31, 1996 (unless waived by the party entitled to the benefit
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<PAGE> 47
thereof) except that, where such failure to so satisfy the conditions set forth
in Article IV results solely from the failure to satisfy the conditions set
forth in Sections 4.1(b) or 4.2(b), such date shall be extended to November 30,
1996; or
(c) by mutual agreement of Purchaser and the Seller
Representatives;
in either case, without liability of any party hereto; provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination and no party shall be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) willful failure of such party to have performed its
obligations hereunder, or (ii) any knowing misrepresentation made by such party
of any matter set forth herein; and provided further that, notwithstanding any
termination of this Agreement, the provisions of Sections 5.7 (Publicity) and
8.1 (Expenses) shall continue in full force and effect. In the event that this
Agreement shall be terminated by Purchaser pursuant to clause (a) above solely
as a result of the failure of the condition set forth in Section 4.1(k) to be
satisfied, Purchaser shall pay to the Sellers $1,000,000, which payment shall be
the sole and exclusive remedy of the Sellers hereunder for the failure of such
condition.
8.5 Schedules. The inclusion of any matter in any Schedule to
this Agreement shall be deemed to be an inclusion for all purposes of this
Agreement, including each representation and warranty to which it may relate.
8.6 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
8.8 Notices. Any notice, request, instruction or other document
to be given hereunder shall be in writing and shall be given by hand delivery,
courier service, facsimile transmission or telex (with confirmation of receipt)
at the following addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to Purchaser:
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
Attention: Mark T. Pearson
Facsimile: (210) 524-6996
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<PAGE> 48
With copies to:
Desai Capital Management Incorporated
540 Madison Avenue
New York, New York 10022
Attention: Timothy R. Kelleher
Facsimile: (212) 838-9807
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Earl D. Weiner, Esq.
Facsimile: (212) 558-3588
If to the Sellers:
Richard W. Roberson
1330 Preservation Way
Oldsmar, Florida 34677
Telephone: (813) 524-6200
With copies to:
Shackleford, Farrior, Stallings & Evans
501 East Kennedy Boulevard, Suite 1400
Tampa, Florida 33601
Attention: John I. Van Voris
Facsimile: (813) 273-5145
and
CGW Southeast Partners 1, L.P.
Twelve Piedmont Center, Suite 210
Atlanta, GA 30305
Attention: Edwin A. Wahlen, Jr.
Facsimile: (404) 816-3258
8.9 Entire Agreement, etc. This Agreement (i) constitutes the
entire agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof; (ii) shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors and
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<PAGE> 49
permitted assigns and, in the case of each Seller which is a trust, upon the
successors or distributees thereof; (iii) is for the benefit only of such
parties and is not intended to create any obligations to, or rights in respect
of, any other persons or entities other than Indemnified Parties; and (iv) shall
not be assignable by operation of law or otherwise, except to any Person or
Persons directly or indirectly controlling, controlled by or under common
control with Purchaser that has or together have a net worth at least equal to
that of Purchaser at the time of such assignment; provided, however, that, after
the Closing Date, Purchaser may assign its interest in this Agreement to any
Person.
8.10 Injunctive Relief. The Sellers and Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement, this being in addition to any
other remedy to which they may be entitled by law or equity.
8.11 Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
8.12 Termination of Company Shareholders Agreement. By execution
hereof, each Seller agrees to the termination, effective as of the Closing Date,
of the Shareholders Agreement, dated as of March 28, 1994, relating to the
ownership by the Sellers of the Shares, in compliance with Section 10.1 thereof
and, notwithstanding anything to the contrary contained in such Shareholder's
Agreement, each Seller hereby consents to the transactions contemplated by this
Agreement.
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<PAGE> 50
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first
hereinabove written.
EYE CARE CENTERS OF AMERICA, INC.
/s/ Bernard W. Andrews
------------------------------------
By: Bernard W. Andrews
Title: President/C.E.O.
VISIONWORKS HOLDINGS, INC.
/s/Richard W. Roberson
------------------------------------
By: Richard W. Roberson
Title: President
SELLERS
CGW SOUTHEAST PARTNERS, I.L.P.
As General Partner
/s/Edwin A. Wahlen, Jr.
------------------------------------
By: Edwin A. Wahlen, Jr.
Title: Managing Director
/s/Richard W. Roberson
------------------------------------
Richard W. Roberson
RICHARD W. ROBERSON
1996 IRREVOCABLE TRUST
/s/ Linda J. Roberson
------------------------------------
By: Linda J. Roberson, as Trustee
for the Richard W. Roberson, 1996
Irrevocable Trust
/s/ Roxanne L. Roberson
------------------------------------
By: Roxanne L. Roberson, as Trustee
for the Richard W. Roberson, 1996
Irrevocable Trust
46
<PAGE> 51
/s/ Samuel G. Wright
------------------------------------
By: Samuel G. Wright, as Trustee
for the Richard W. Roberson, 1996
Irrevocable Trust
SUNBANK/SOUTH FLORIDA N.A. AND BURL
F. GEORGE AS CO-SUCCESSOR TRUSTEES
FOR JOHN G. BULL UNDER AGREEMENT
DATED DECEMBER 17, 1993, IRREVOCABLE
SunBank/South Florida National
Association, as Co-Successor
Trustee:
/s/ Steven L. Tinkler
------------------------------------
By: Steven L. Tinkler
Title: Senior Trust Officer
/s/ Burl F. George
------------------------------------
Burl F. George, Co-Successor Trustee
/s/ Wallace Whitley
------------------------------------
Wallace Whitley
/s/ Larence Park
------------------------------------
Larence Park
/s/ Sharon R. Brown
------------------------------------
Sharon R. Brown
/s/ Susan B. Carroll
------------------------------------
Susan B. Carroll
/s/ George E. Gebhardt
------------------------------------
George E. Gebhardt
/s/ Michael B. Lautenbach
------------------------------------
Michael B. Lautenbach
47
<PAGE> 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of September 30,
1997, by and among Eye Care Centers of America, Inc., a Texas corporation (the
"Purchaser"), Dr. Robert A. Samit ("Samit") and Dr. Michael Davidson ("Davidson"
and, together with Samit, the "Shareholders"), being all of the shareholders of
The Samit Group, Inc., a Delaware corporation ("TSGI").
W I T N E S S E T H:
WHEREAS, each of the Shareholders owns, or will own as of the Closing
Date, the number of the shares of Common Stock (the "Stock") set forth opposite
his name on EXHIBIT A attached hereto;
WHEREAS, the shares of the Stock represent all of the issued and
outstanding capital stock of TSGI;
WHEREAS, the Shareholders desire to sell to the Purchaser, and the
Purchaser desires to purchase from the Shareholders, the shares of the Stock,
subject to the terms and conditions of this Agreement;
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the shares of the Stock pursuant to
this Agreement, the Purchaser will own all of the outstanding shares of capital
stock of TSGI;
WHEREAS, TSGI is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of Hour Eyes, Inc., a Maryland
corporation ("HEI"), Skylab Optical, Inc., a Virginia corporation ("Skylab"),
and Metropolitan Vision Services, Inc., a Virginia corporation ("MVS" and,
together with HEI, Skylab and TSGI, are hereinafter collectively referred to as
the "Acquired Companies");
WHEREAS, in connection with the acquisition of the Stock and as an
inducement to consummate the transactions contemplated hereby, Affiliates of the
Purchaser will enter into management services agreements with the Professional
Corporation to manage the optical dispensary in the stores in Virginia and
provide other management services; and
WHEREAS, the transactions contemplated by this Agreement are in
connection with certain other transactions as more particularly set forth in the
Master Transaction Agreement, such transactions to include the purchase by the
Doctor from the Shareholders of all of the outstanding capital stock of Dr.
Samit Hour Eyes Optometrist, P.C., a professional corporation organized under
the laws of the State of Virginia and wholly-owned by the Shareholders (the
"Professional Corporation");
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements of the parties hereinafter contained and contained in the Master
Transaction Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this ARTICLE 1:
"Acquired Companies" has the meaning set forth in the recitals of this
Agreement.
"Adjustment Amount" has the meaning set forth in SECTION 2.03(a).
"Adjustment Arbitrator" has the meaning set forth in SECTION 2.03(b).
"Affiliate" is used in this Agreement to indicate a relationship with
one or more persons and when used shall mean any corporation or organization of
which such person is an executive officer, director or partner or is directly or
indirectly the beneficial owner of one percent (1%) or more of any class of
equity securities or financial interest therein; any trust or other estate in
which such person has a beneficial interest or as to which such person serves as
trustee or in any similar fiduciary capacity; any relative or spouse of such
person, or any relative of such spouse (such relative being related to the
person in question within the second degree); any director or executive officer
of such person; or any person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
"Assets" has the meaning set forth in SECTION 2.03(a).
"Assignment" has the meaning set forth in SECTION 7.22.
"Balance Sheets" has the meaning set forth in SECTION 3.05.
"Balance Sheet Date" has the meaning set forth in SECTION 3.06.
"Balance Sheet Protest Notice" has the meaning set forth in SECTION
2.03(b).
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially
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<PAGE> 3
adverse change in the benefits to such Person of this Agreement and the
Contemplated Transactions.
"Breach" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Cash Payment" has the meaning set forth in SECTION 2.02(a)(i).
"Closing" has the meaning set forth in SECTION 2.05.
"Closing Date" has the meaning set forth in SECTION 2.05.
"Closing Date Balance Sheet" has the meaning set forth in SECTION
2.03(a).
"COBRA" has the meaning set forth in SECTION 3.23.
"Code" means the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Common Stock" means the common stock, par value $.01 per share, of
TSGI.
"Companies" means the Acquired Companies and the Professional
Corporation, collectively.
"Competing Business" has the meaning set forth in SECTION 3.30.
"Consent" means any approval, consent, ratification, waiver, or other
authorization (including, without limitation, any Governmental Authorization).
"Consulting Agreement" has the meaning set forth in SECTION
2.06(a)(viii).
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, the Master Transaction Agreement and the PC Purchase
Agreement, including without limitation:
(a) the sale of the Stock hereunder;
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<PAGE> 4
(b) the execution, delivery, and performance of the Consulting
Agreement, Employment Agreements, Non-Competition Agreement and the Escrow
Agreement;
(c) the performance by the parties of their respective
covenants and obligations under this Agreement;
(d) the Purchaser's acquisition, ownership and exercise of
control over the Acquired Companies and their operations;
(e) the sale by the Shareholders of all of the capital stock
in the Professional Corporation to the Doctor pursuant to the PC Purchase
Agreement; and
(f) the execution, delivery and performance by (i) Visionary
Retail Management, Inc. and the Professional Corporation of the Retail Business
Management Agreement and (ii) Visionary MSO, Inc. and the Professional
Corporation of the Professional Business Management Agreement, respectively.
"Contract" means any agreement, contract, instrument, obligation,
promise, commitment or undertaking (whether written or oral and whether express
or implied) that is legally binding.
"Corporate Inventory Gain Income" has the meaning set forth in SECTION
2.04(b).
"Damages" has the meaning set forth in SECTION 9.02.
"Designee" has the meaning set forth in SECTION 10.08.
"Doctor" shall mean Dr. Daniel Poth.
"Earn-out Arbitrator" has the meaning set forth in SECTION 2.04(f).
"Earn-out Objection Period" has the meaning set forth in SECTION
2.04(f).
"Earn-out Payment" has the meaning set forth in SECTION 2.04(a).
"Earn-out Payment Notice" has the meaning set forth in SECTION 2.04(f).
"Earn-out Protest Notice" has the meaning set forth in SECTION 2.04(f).
"Earn-out Ratio" has the meaning set forth in SECTION 2.04(a).
"Employee Benefit Plans" has the meaning set forth in SECTION 3.23.
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<PAGE> 5
"Employment Agreement" has the meaning set forth in SECTION 2.06(a)(v).
"Employment and Non-Competition Agreement" has the meaning set forth in
SECTION 2.06(a)(vii).
"Encumbrance" means any charge, claim, community or other property
interest, condition, covenant, equitable interest including any equitable
servitude, lien, option, pledge, security interest, right of first refusal,
marital property interest or restriction or interest of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environmental and Safety Requirements" means all federal, state and
municipal statutes, regulations, common law and similar provisions having force
or effect of law, all orders, pen-nits, licenses and approvals with respect to
environmental, public health and safety, occupational health and safety, product
liability and transportation including, without limitation, all such standards
of conduct or bases of obligations relating to the presence, use, production
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, control or
cleanup of any contaminant, waste, hazardous materials, substances, chemical
substances or mixtures, pesticides, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Escrow Agent" has the meaning set forth in SECTION 2.02(b)(ii).
"Escrow Agreement" has the meaning set forth in SECTION 2.02(b)(ii).
"Escrow Amount" has the meaning set forth in SECTION 2.02(b)(ii).
"Estimated Adjustment Amount" has the meaning set forth in SECTION
2.02(c).
"Estimated Assets" has the meaning set forth in SECTION 2.02(c).
"Estimated Liabilities" has the meaning set forth in SECTION 2.02(c).
"Estimated Cash Payment" has the meaning set forth in SECTION
2.02(b)(i).
"Estimated Closing Date Balance Sheet" has the meaning set forth in
SECTION 2.02(c).
"Excess Gross Income" has the meaning set forth in SECTION 2.04(a).
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<PAGE> 6
"Final Settlement of Medicaid Investigation" has the meaning set forth
in SECTION 9.11(d).
"Financial Statements" has the meaning set forth in SECTION 3.05.
"Fiscal 1996" has the meaning set forth in SECTION 2.04(a).
"Fiscal 1997" has the meaning set forth in SECTION 2.04(a).
"GAAP" means generally accepted United States accounting principles,
consistently applied.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district, or
other Jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"Gross Income" has the meaning set forth in SECTION 2.04(a).
"Gross Retail Income" has the meaning set forth in SECTION 2.04(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1972, as amended.
"Indemnified Persons" has the meaning set forth in SECTION 9.02.
"Insurance Policies" has the meaning set forth in SECTION 3.17.
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<PAGE> 7
"Intellectual Property Rights" has the meaning set forth in SECTION
3.18.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter after a reasonably comprehensive investigation concerning
the existence of such fact or other matter.
The Shareholders will be deemed to have "Knowledge" if either of the
Shareholders or Robert Brodney, Greg Barford, Sue Healy or Daniel Poth, O.D.
has, or at any time had, Knowledge of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"Landlord Estoppel Certificate" has the meaning set forth in SECTION
7.22.
"Leases" has the meaning set forth in SECTION 3.10(b).
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Liabilities" has the meaning set forth in SECTION 2.03(a).
"Management Fee Income" has the meaning set forth in SECTION 2.04(a).
"Management Services Agreements" shall mean the Retail Business
Management Agreement to be entered into between Visionary Retail Management,
Inc. and the Professional Corporation in substantially the form of Exhibit B
attached hereto, and the Professional Business Management Agreement to be
entered into between Visionary MSO, Inc. and the Professional Corporation, in
substantially the form of Exhibit C attached hereto, respectively.
"Master Transaction Agreement" means that Master Transaction Agreement,
of even date herewith, by and among the Purchaser, TSGI, the Professional
Corporation, the Shareholders and the Doctor.
"Material Adverse Effect" means, with respect to any company or entity,
any event, condition or change which materially and adversely affects or may
materially and adversely affect the business, financial condition, prospects,
assets or results of operations of such company.
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<PAGE> 8
"MVS Net Income" has the meaning set forth in SECTION 2.04(b).
"Medicaid Investigation" shall mean the investigation by the Office of
Corporate Counsel (the "OCC") of Washington D.C. with respect to the matters
which are the subject of the Search Warrant, dated July 9, 1997 to search the
premises known as Samits' Hour Eyes Optometric Center located at N.E. Comer,
1341 G Street, N.W., First Floor, Washington D.C. 20005 and all other
investigations or Proceedings by the OCC or any other Governmental Body arising
out of or relating to such investigation and the subject matter thereof
"Non-Competition Agreement" has the meaning set forth in SECTION
2.06(a)(iv).
"Option Agreement" has the meaning set forth in SECTION 7.24.
"Optometric Director Agreement" means that Optometric Director
Agreement to be entered into between HEI, the Doctor and an entity owned by the
Doctor, in substantially the form of Exhibit D hereto, pursuant to which the
Doctor (through such entity) will provide director services with respect to the
optometrists at HEI's stores in Maryland and Washington, D.C.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in
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<PAGE> 9
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PC Purchase Agreement" shall mean that Stock Purchase Agreement, of
even date herewith , by and among the Shareholders and the Doctor pursuant to
which the Doctor will purchase all of the outstanding capital stock of the
Professional Corporation.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal, at law or in equity) commenced, brought, conducted.
or heard by or before, or otherwise involving, any Governmental Body or
arbitrator.
"Professional Corporation" has the meaning set forth in the recitals.
"Proprietary Rights Agreement" has the meaning set forth in SECTION
3.21.
"Purchase Price" has the meaning set forth in SECTION 2.02(a).
"Purchaser" has the meaning set forth in the introduction.
"Related Person" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
Related Person also means, with respect to a specified Person
other than an individual:
(e) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
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<PAGE> 10
(f) any Person that holds a Material Interest in such
specified Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and
(j) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule l3d-3 promulgated under the
Securities Exchange Act of 1934, as amended) of voting securities or other
voting interests representing at least 10% of the outstanding voting power of a
Person or equity securities or other equity interests representing at least 10%
of the outstanding equity securities or equity interests in a Person.
"Release" has the meaning set forth in SECTION 2.06(a)(x).
"Representative" means, with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Shareholders" has the meaning set forth in the introduction.
"Skylab Net Income" has the meaning set forth in SECTION 2.04(b)
hereof.
"Stock" means all of the shares of Common Stock owned by the
Shareholders.
"Subsidiary" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of TSGI.
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"Tax" means any tax (including, without limitation, any tax on gross
income, net income, franchise, gross receipts, royalty, capital gains, value
added, sales, property, ad valorem, transfer, license, use, profits, windfall
profits, withholding on amounts paid to or by any of the Companies, payroll,
employment, excise, severance, stamp, occupation, premium, gift, or estate),
levy, assessment, tariff, duty (including customs duty), deficiency, or other
fee, and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any tax-sharing agreement or any
other Contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Termination and Release Agreements" has the meaning set forth in
SECTION 2.06(a)(vi).
"TSGI" has the meaning set forth in the introduction.
"Unadjusted Cash Payment" has the meaning set forth in SECTION
2.02(a)(i).
ARTICLE II
SALE OF STOCK
2.01 Sale of Stock. On the Closing Date, and subject to the terms and
conditions herein stated and stated in the Master Transaction Agreement, each of
the Shareholders agrees to sell, assign, transfer and deliver to the Purchaser
or its Designee, and the Purchaser agrees to purchase or to cause its Designee
to purchase from such Shareholder, the number of the shares of the Stock shown
opposite such Shareholder's name on Exhibit A attached hereto. At the Closing,
the respective certificates representing the shares of the Stock shall be duly
endorsed in blank, or accompanied by stock powers duly executed in blank, by the
Shareholder transferring the same.
2.02 Purchase Price; Payment.
(a) As consideration for the purchase of the Share, the
Purchaser shall pay to the Shareholders as follows (such aggregate consideration
hereinafter collectively referred to as the "Purchase Price"):
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(i) to the Shareholders, pro rata in proportion to
their respective percentage ownership of the Stock as set forth on EXHIBIT A
attached hereto, an aggregate of $20,000,000 in cash, by wire transfer in
immediately available funds (as unadjusted, the "Unadjusted Cash Payment"), such
amounts to be subject to a decrease by the Adjustment Amount as provided in
SECTION 2.03 (as adjusted, the "Cash Payment"); plus
(ii) the amount, if any, of the Earn-out Payment, as
provided in SECTION 2.04; as further adjusted by
(iii) the adjustment as provided in SECTION 4.01 of
the Master Transaction Agreement.
(b) At the Closing, the Purchaser shall deliver:
(i) to each Shareholder his respective portion of an
amount equal to (a) the Unadjusted Cash Payment, as decreased by the Estimated
Adjustment Amount as provided in SECTION 2.02(c), minus (b) the Escrow Amount
delivered to the Escrow Agent pursuant to SECTION 2.02(b)(II), such amount to be
allocated pro rata between the Shareholders in accordance with their respective
percentage ownership of the Stock as set forth on EXHIBIT A attached hereto, by
wire transfer of immediately available funds to the account of such Shareholder,
written notice of which account shall have been provided to the Purchaser not
less than three (3) business days prior to the Closing. The aggregate cash
payment to be paid to the Shareholders at the Closing (after giving effect to
the decrease by the Estimated Adjustment Amount) together with the Escrow
Amount, is hereinafter referred to as the "Estimated Cash Payment;" and
(ii) to Frost National Bank, as escrow agent (the
"Escrow Agent"), an amount equal to Two Million Dollars ($2,000,000) (together
with the amounts deposited pursuant to SECTION 2.08, the "Escrow Amount"). The
Escrow Amount shall be maintained by the Escrow Agent pursuant to the terms of
SECTION 2.08 hereof and the Escrow Agreement in substantially the form of
EXHIBIT E attached hereto (the "Escrow Agreement") by and among the Purchaser,
the Shareholders and the Escrow Agent.
(c) As soon as reasonably practical, but in no event later
than ten (10) business days prior to the Closing, the Shareholders shall in good
faith cause to be prepared and delivered to the Purchaser estimated consolidated
and individual balance sheets (as finally agreed upon by the parties, the
"Estimated Closing Date Balance Sheet") of the Companies, which shall set forth
on both a consolidated and individual basis, an estimate of the assets and
liabilities of the Companies as of the Closing Date to be calculated and
prepared in accordance with GAAP (subject to SECTION 2.02(d)) and to be
delivered to the Purchaser. The Purchaser and the Shareholders shall, after
reviewing the balance sheet prepared by the Shareholders, in good faith attempt
to agree upon the Estimated Closing Date Balance Sheet. The amount of assets
reflected on the Estimated Closing Date Balance Sheet shall hereinafter be
referred to as the "Estimated
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<PAGE> 13
Assets" and the amount of liabilities reflected thereon shall hereinafter be
referred to as the "Estimated Liabilities." For purposes of calculating the
Estimated Cash Payment due to the Shareholders at the Closing pursuant to
SECTION 2.02(b)(I), the Unadjusted Cash Payment shall be decreased by the amount
by which the Estimated Assets are less than Six Million Three Hundred Thousand
Dollars ($6,300,000) and further decreased by the aggregate amount of the
Estimated Liabilities (the aggregate amount of such decreases being hereinafter
referred to as the "Estimated Adjustment Amount").
(d) The Estimated Closing Date Balance Sheet and the Closing
Date Balance Sheet shall be prepared consistent with the following:
(i) In addition to any other liabilities reflected on
the Closing Date Balance Sheet, the following shall be accounted for as
"Liabilities" of the Companies as of the Closing Date:
Balance of the Loan to Central Fidelity Bank to be paid off at
Closing Balance of payment to Visionary, Inc. of Maryland to
be paid off at Closing Severance Payments to Employees
Termination Payments to Phantom Doctors Payments to Executive
Officers
Deferred Bonuses
Accrued Bonuses
Amounts accrued for 401(k) Contributions for 1997
Transaction costs incurred prior to the Closing Date by the
Companies associated with the negotiation, execution and
consummation of transactions contemplated by this Agreement,
the Master Transaction Agreement, the PC Purchase Agreement
and other documents contemplated herein, including, but not
limited to legal fees.
(ii) The funds provided to Dr. Sarnit since December
31, 1996 and accounted for on the books and records of the Companies as
reimbursement for business expenses or amounts in excess of reasonable
compensation shall be, to the extent such expenses are not reasonable business
expenses, reclassified as a loan to Dr. Samit, to be repaid by Dr. Samit prior
to or concurrent with the Closing as contemplated in SECTION 7.19.
2.03 Closing Financial Statements, Purchase Price Adjustments.
(a) As soon as practicable following the Closing but in no
event later than sixty (60) days following the Closing Date, the Purchaser shall
cause to be prepared and audited consolidated and individual balance sheets of
the Companies as of the Closing Date (as finally determined pursuant to this
SECTION 2.03, the "Closing Date Balance Sheet") and the related statements of
income, retained earnings and cash flows for the period from January 1, 1997
until the Closing Statement which shall set forth on a consolidated and
individual basis such financial information of the Companies and be prepared in
accordance with GAAP, subject to SECTION 2.02(d) above (the amount of assets
reflected on the Closing Date Balance Sheet shall hereinafter
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be referred to as the "Assets" and the amount of liabilities set forth thereon
shall hereinafter be referred to as the "Liabilities"). The costs of such audit
shall be paid one-half by the Purchaser and one-half by the Shareholders, as
between the Shareholders such costs to be allocated pro rata in accordance with
their respective percentage ownership of the Stock as set forth on EXHIBIT A
attached hereto. The Shareholders shall cooperate with the Purchaser in the
preparation and audit of, and, to the extent necessary, provide the Purchaser
access to the information reasonably necessary to prepare and audit, the Closing
Date Balance Sheet. On the basis of the Closing Date Balance Sheet, subject,
however, to the rights of the Purchaser and the Shareholders as provided in
SECTIONS 2.03(b) and 2.03(c), for purposes of calculating the Cash Payment
pursuant to SECTION 2.02(a)(i) the Unadjusted Cash Payment shall be decreased by
the amount by which the Assets are less than Six Million Three Hundred Thousand
Dollars ($6,300,000) and further decreased by the amount of the Liabilities (the
aggregate amount of such decreases being hereinafter referred to as the
"Adjustment Amount"). Within the time period set forth in SECTION 2.03(c), (i)
the Purchaser shall pay to the Shareholders the amount, if any, by which the
Cash Payment exceeds the Estimated Cash Payment, such payment to be allocated
between the Shareholders pro rata in accordance with their respective percentage
ownership of the Stock as set forth on Exhibit A attached hereto, or (ii) each
of the Shareholders shall pay to the Purchaser their respective share of the
amount by which the Estimated Cash Payment exceeds the Cash Payment, such
payment obligation to be allocated between the Shareholders pro rata in
accordance with their percentage ownership of the Stock as set forth on EXHIBIT
A attached hereto.
(b) Within ten (10) business days after the Purchaser's
delivery of the Closing Date Balance Sheet, each Shareholder receiving the
Closing Date Balance Sheet may deliver a written notice (a "Balance Sheet
Protest Notice") to the Purchaser of any objections, and the basis therefor,
which the Shareholders may have to the Closing Date Balance Sheet. The Purchaser
shall cooperate with the Shareholders in their review of the Closing Date
Balance Sheet and shall provide the Shareholders with such information and
access to such records as either of the Shareholders reasonably request in
connection with the review of the Closing Date Balance Sheet by the
Shareholders, their agents or their professional advisors. The failure of the
Shareholders to deliver a Balance Sheet Protest Notice within the prescribed
time period will constitute the Shareholders' acceptance of the Closing Date
Balance Sheet as delivered by the Purchaser. If either Shareholder timely
delivers a Balance Sheet Protest Notice, both Shareholders shall be deemed to
have delivered a Balance Sheet Protest Notice on the terms set forth in either
or both such notices. During the ten (10) business days following the
Purchaser's receipt of a Balance Sheet Protest Notice, the Purchaser and the
Shareholders shall attempt to resolve any disagreement with respect to the
Closing Date Balance Sheet and the accuracy thereof If at the end of the period
specified in the immediately preceding sentence, the Purchaser and the
Shareholders shall have failed to resolve the disagreement specified in such
Balance Sheet Protest Notice, the items in dispute shall be referred to Price
Waterhouse LLP or such other "Big Six" accounting firm as may be agreed to by
the parties (the "Adjustment Arbitrator") for final determination within
forty-five (45) days. This provision for arbitration shall be specifically
enforceable by the parties, and the determination of the Adjustment Arbitrator
in accordance with the provisions hereof shall be final and binding upon the
Purchaser and the Shareholders, with no right of appeal therefrom consistent
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<PAGE> 15
with the provisions of SECTION 10.14. The fees and expenses of the Adjustment
Arbitrator shall be paid by the party (i.e., the Purchaser, on the one hand, or
the Shareholders, on the other hand) whose last proposed written offer for the
settlement of the terms in dispute prior to the commencement of such
arbitration, taken as a whole, was farther away from the final determination of
the Adjustment Arbitrator. If the final determination of the Adjustment
Arbitrator is equal to the difference between the last proposed written offers
of the Purchaser, on the one hand, and the Shareholders, on the other hand, then
the Purchaser and the Shareholders shall each pay one-half of the fees and
expenses of the Adjustment Arbitrator, with the Shareholders paying their
one-half share pro rata in accordance with their respective percentage ownership
of the Stock as set forth on EXHIBIT A attached hereto.
(c) The Shareholders and the Purchaser agree that within five
(5) business days after the final determination of the Assets and Liabilities
and the amount of the Cash Payment as provided in this SECTION 2.03 (either
because no Balance Sheet Protest Notice is delivered or upon receipt of the
Adjustment Arbitrator's final determination or otherwise), each of the
Shareholders shall pay to the Purchaser, or the Purchaser shall pay to the
Shareholders, as the case may be, the amount owed as provided in SECTION
2.03(a). In the event that such amount is due, but is not paid when due, simple
interest shall accrue on such obligation and be payable therewith from the due
date to the day preceding the date of payment at the annual rate equal to the
lesser of 12% or the maximum rate allowed by applicable law.
2.04 Earn-out Payment.
(a) In addition to the Cash Payment, the Purchaser shall pay
to the Shareholders, to be allocated pro rata between the Shareholders in
accordance with their respective percentage ownership of the Stock as set forth
on EXHIBIT A attached hereto, an earn-out payment (the "Earn-out Payment") to be
calculated as follows:
If Gross Income for the period commencing January 1, 1997 and ending
January 3, 1998 ("Fiscal 1997") exceeds the Gross Income for the period
commencing January 1, 1996 and ending December 31, 1996 ("Fiscal 1996")
by more than $600,000 (such excess being hereinafter referred to as the
"Excess Gross Income"), then the amount of the Earn-out Payment shall
be an amount equal to $2,250,000 multiplied by the Earnout Ratio. The
"Earn-out Ratio" shall be equal to (1) the Excess Gross Income divided
by (11) eight hundred fifty thousand dollars ($850,000); provided,
however, in no event shall the Earn-out Ratio exceed one (1). If the
Excess Gross Income is less than $600,000, the Earn-out Payment shall
be $-0-. "Gross Income" shall be equal to the sum of the following,
after the adjustments set forth below: (i) Gross Retail Income, (ii)
Skylab Net Income, (iii) MVS Net Income, (iv) Corporate Inventory Gain
Income, and (v) Management Fee Income.
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<PAGE> 16
(b) Subject to the qualifications set forth in SECTION 2.04(c)
below, the following definitions shall apply:
(i) "Gross Retail Income" shall be an amount equal to
(a) total sales during the applicable period with respect to the retail sales of
eye wear and related products and the provision of optometric services at the
retail locations owned and operated by the Companies as of the Closing Date
minus (b) the following costs and expenses incurred in connection with the
operation of such retail locations during the applicable period:
Cost of Goods Sold
Salaries
Commission & Bonus
Benefits
C.C. Discount
Supplies
Shipping
Telephone
Utilities
Repairs & Maintenance
O.D. Salary
O.D. Bonus
O.D. Benefits
Marketing (including corporate-level marketing)
License & Taxes
Insurance
Rent
To the extent not included in the above accounts, the costs and expenses of
"floating" optometrists shall be included in the calculation of Gross Retail
Income.
(ii) "Skylab Net Income" shall mean the net income of
Skylab, as calculated consistent with past practice.
(iii) "MVS Net Income" shall mean the net income of
MVS, as calculated consistent with past practice.
(iv) "Corporate Inventory Gain Income" shall mean the
net income derived from the sale of corporate inventory to the stores.
(v) "Management Fee Income" shall mean any income
earned from managing a store or facility not owned by the Companies.
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<PAGE> 17
(c) In calculating Gross Income, the following adjustments
shall be taken into account: (i) revenues and expenses incurred with respect to
new store openings subsequent to the consummation of the Contemplated
Transactions shall not be included in the calculation of Gross Income; (ii) the
revenues and expenses incurred with respect to (a) the two Humana locations, (b)
the Springfield Mall location, (c) the St. Charles location, (d) the Tenley
Circle location and (f) the Annapolis location shall not be included in the
calculation of Gross Income; (iii) cost savings realized in Fiscal 1997 due to
the Purchaser's operation of such retail locations shall be subtracted from the
Gross Income for Fiscal 1997. The financial statements used for the purpose of
calculating the Gross Income for Fiscal 1996 and Fiscal 1997 shall be prepared
according to GAAP. The calculation of Gross Income for Fiscal 1996 is set forth
on EXHIBIT F attached hereto and the Gross Income for Fiscal 1997 shall be
calculated in the same manner.
(d) The parties acknowledge and agree that the Purchaser
intends to make structural changes in the operations of the Companies including,
without limitation, an Affiliate of the Purchaser providing management services
to the Professional Corporation for the management of its optical dispensary.
The parties agree that for purposes of determining the amount of the Earn-out
Payment, the financial statements of the Companies shall be prepared in
accordance with GAAP consistently applied on a consolidated basis excluding the
management fees paid under the Management Services Agreement (except to the
extent such management fees represents costs and expenses incurred by the
management companies which would have been incurred by the Professional
Corporation but for such Management Services Agreements).
(e) If, after the Closing Date, the Purchaser substantially
changes or modifies the operations of the businesses of the Companies (other
than structural changes or modifications which do not materially effect the
operations of the Companies, taken as a whole), the parties will in good faith
attempt to mutually agree upon the effect, if any, such change in operations has
to the calculation of Gross Income, and that if the parties cannot so agree, the
matter will be submitted to arbitration in accordance with SECTION 2.04(f).
(f) For purposes of calculating the Earn-out Payment set forth
in SECTION 2.04(a), the books and records of the Companies shall be maintained
in accordance with GAAP. As soon as possible following the completion of the
Purchaser's audit for Fiscal 1997, but in no event later than April 15, 1998,
the Purchaser shall calculate and deliver to each Shareholder a notice setting
forth the Earn-out Payment (the "Earn-out Payment Notice"), allocated between
the Shareholders pro rata in accordance with their respective percentage
ownership of the Stock as set forth on EXHIBIT A attached hereto. Within fifteen
(15) business days after the Purchaser's delivery of the Earn-out Payment Notice
(the "Earn-out Objection Period"), each Shareholder may deliver a written notice
(an "Earn-out Protest Notice") to the Purchaser setting forth any objections,
and the basis therefor, which such Shareholder may have to the Earn-out Payment
Notice. The Purchaser shall cooperate with the Shareholders in their review of
the Earn-out Payment Notice and shall provide the Shareholders with such
information
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<PAGE> 18
and access to such records as either of the Shareholders reasonably request in
connection with the review of the Earn-out Payment Notice by the Shareholders,
their agents or their professional advisors. The failure of either of the
Shareholders to deliver an Earn-out Protest Notice within the prescribed period
will constitute the Shareholders' acceptance of the Earn-out Payment as set
forth on the Earn-out Payment Notice. If either Shareholder timely delivers an
Earn-out Protest Notice, both Shareholders shall be deemed to have delivered an
Earn-out Protest Notice on the terms set forth in either or both such notices.
During the ten (10) business days following the Purchaser's receipt of an
Earn-out Protest Notice, the Purchaser and the Shareholders shall attempt in
good faith to resolve any disagreement with respect to the calculation of such
Earn-out Payment. If at the end of the period specified in the immediately
preceding sentence, the Purchaser and any Shareholder shall have failed to
resolve the disagreement specified in the Earn-out Protest Notice, the items in
dispute shall be referred to Price Waterhouse LLP or such other "Big Six"
accounting firm as may be agreed to by the parties (the "Earn-out Arbitrator")
for final determination within thirty (30) days. This provision for arbitration
shall be specifically enforceable by the parties, and the determination of the
Earn-out Arbitrator in accordance with the provisions hereof shall be final and
binding upon the Purchaser and both Shareholders, with no right of appeal
therefrom consistent with the provisions of SECTION 10.14. The fees and expenses
of the Earn-out Arbitrator shall be paid by the party (i.e., the Purchaser, on
the one hand, or the Shareholders, on the other hand) whose last proposed
written offer for the settlement of the items in dispute prior to the
commencement of such arbitration, taken as a whole, was farther away from the
final determination of the Earn- out Arbitrator. If the final determination of
the Earn-out Arbitrator is equal to the difference between the last proposed
written offers of the Purchaser, on the one hand, and the Shareholders, as the
case may be, on the other hand, then the Purchaser and the Shareholders shall
each pay one-half of the fees and expenses of the Earn-out Arbitrator, with the
Shareholders paying their one-half share pro rata in accordance with their
respective percentage ownership of the Stock as set forth on EXHIBIT A attached
hereto.
(g) Subject to SECTION 2.08 hereof, unless a timely Earn-out
Protest Notice is delivered by a Shareholder to the Purchaser pursuant to
SECTION 2.04(f), the Earn-out Payment shall be paid to the Shareholders, by wire
transfer in immediately available funds, not later than the fifth (5th) business
day after the expiration of the earlier of (i) Earn-out Objection Period or (ii)
the Shareholders' delivery of a written notice to the Purchaser accepting the
calculation. Subject to SECTION 2.08 hereof, if a timely Earn-out Protest Notice
is delivered by a Shareholder, the Earn-out Payment shall be paid to the
Shareholders, by wire transfer in immediately available funds, not later than
the fifth (5th) business day after the Shareholders and the Purchaser resolve
(through use of an Earn-out Arbitrator or otherwise) the dispute as to the
appropriate amount for the Earn-out Payment. In the event that such amount is
due, but is not paid when due, simple interest shall accrue on such obligation
and be payable therewith from the due date to the day preceding the date of
payment at the annual rate equal to the lesser of 12% or the maximum rate
allowed by applicable law. Notwithstanding the foregoing, if, as of the date the
Earn-out Payment is to be made, the Shareholders have not paid to the Purchaser
the amount, if any, owed to the Purchaser pursuant to SECTION 2.03(c), the
Purchaser may offset
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<PAGE> 19
against such Earn-out Payment the amount then owed by the Shareholders under
SECTION 2.03(c).
(h) Notwithstanding anything in this SECTION 2.04 to the
contrary, in the event that
(i) Gross Income for the period commencing January 1,
1997 and ending September 30, 1997 exceeds Gross Income for the period
commencing January 1, 1996 and ending September 30, 1996 by an amount equal to
or greater than $765,000, and
(ii) the gross revenue of the Companies as measured
in accordance with GAAP is equal to or greater than $2,040,000 for the month of
October, 1997,
then, regardless of the operating results of the Companies during November 1997
and December 1997, (x) Excess Gross Income shall be deemed to exceed $600,000,
and (y) the Earn-Out Ratio shall be deemed to be 1. As soon as reasonably
practicable, but in no event later than sixty days following the Closing Date,
the Purchaser shall deliver to each Shareholder a notice (the "Early Earn-Out
Notice") setting forth the Purchaser's conclusion as to whether the provisions
of this SECTION 2.04(H) have been met and the basis for such conclusion. The
Shareholders may object to the Early Earn-Out Notice within the time periods and
under the procedures set forth in SECTION 2.04(f) with respect to the Earn-Out
Payment Notice. The calculation of Gross Income with respect to clause (h)(1)
above shall be based upon the Closing Date Balance Sheet.
The Shareholders acknowledge and agree that in the event Excess Gross Income is
deemed to exceed $600,000 and the Earn-Out Ratio is deemed to be 1 pursuant to
this SECTION 2.04(H), the Earn-Out Payment shall not be due until April 15,
1998. In such event, and subject to SECTION 2.08 hereof, the Earn-Out Payment
shall be paid to the Shareholders, by wire transfer in immediately available
funds, on or before April 15, 1998. If such Earn-Out Payment is not made as of
April 15, 1998, simple interest shall accrue on such obligation and be payable
therewith from April 15, 1998 to the day preceding the date of payment at the
annual rate equal to the lesser of 12% or the maximum rate allowed by applicable
law.
2.05 Closing Date. The Closing under this Agreement (the "Closing")
shall be held on the date hereof if all conditions specified in this Agreement
have been satisfied or evidenced, otherwise not more than two (2) business days
following the satisfaction of all conditions specified in this Agreement, unless
duly waived by the party entitled to satisfaction thereof, but in no event later
than October 31, 1997 or such other date as the Purchaser and the Shareholders
may agree to in writing. Such date on which the Closing is to be held is herein
referred to as the "Closing Date." The Closing shall be held at the offices of
Cox & Smith Incorporated, 112 East Pecan Street, Suite 1800, San Antonio, Texas
78205, at 10:00 A.M. on such date, or at such other time and place as the
Purchaser and the Shareholders may agree upon in writing.
2.06 Closing Obligations. At the Closing:
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<PAGE> 20
(a) The Shareholders will deliver, or cause to be delivered,
to the Purchaser:
(i) Certificates representing the Stock, duly
endorsed (or accompanied by duly executed stock powers), for transfer to the
Purchaser;
(ii) Certificates executed by each of the
Shareholders representing and warranting to the Purchaser that, except as
otherwise stated in such certificate, (a) each of the Shareholders'
representations and warranties in this Agreement was accurate in all respects as
of the date of this Agreement and is accurate in all respects as of the Closing
Date as if made on the Closing Date, (b) the Shareholders have performed or
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with and (c) such other matters required
to be certified as a condition to the Purchaser's obligations pursuant to
Article VII;
(iii) Certificates executed by Robert Brodney, as
President of TSGI, and Greg Barford, as Chief Financial Officer of TSGI,
representing and warranting that, except as otherwise stated in such certificate
and to their respective Knowledge, (a) each of the Shareholders' representations
and warranties in this Agreement was accurate in all respects as of the date of
this Agreement (to the extent such representations and warranties relate to the
Companies) and is accurate in all respects as of the Closing Date as if made on
the Closing Date and (b) the Shareholders have performed or complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with;
(iv) Non-Competition Agreement in substantially the
form of Exhibit G attached hereto, executed by Dr. Davidson (the
"Non-Competition Agreement");
(v) Employment Agreement, in the form of Exhibit H
attached hereto (the "Employment Agreement"), executed by Robert H. Brodney and
the Designee;
(vi) Termination and Release Agreements, in
substantially the forms of Exhibit I attached hereto (the "Termination and
Release Agreements"), executed by each of the optometrists and other persons
listed on Exhibit J attached hereto, terminating their respective employment
agreements and releasing all of the Companies from any and all claims with
respect thereto,
(vii) Employment and Non-Competition Agreements, in
substantially the form of Exhibit K attached hereto with such changes and
modifications acceptable to the Purchaser (the "Employment and Non-Competition
Agreements"), executed by the Professional Corporation or HEI, as the case may
be, and each of the optometrists listed on Exhibit L attached hereto;
(viii) Consulting and Non-Competition Agreement, in
the form of Exhibit M attached hereto ("Consulting Agreement"), executed by Dr.
Robert Samit;
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<PAGE> 21
(ix) Management Services Agreements executed by the
Professional Corporation;
(x) Release ("Release") executed by each of the
Shareholders in substantially the form of EXHIBIT N attached hereto whereby the
Shareholders will release and waive any claims they may have against the
Companies;
(xi) The Landlord Estoppel Certificate executed by
each of the landlords, the Sublease Agreements executed by HEI or the
Professional Corporation, as the case may be, and the Assignments executed by
HEI or the Professional Corporation, as the case may be;
(xii) Certificate executed by Dr. Samit, in form
satisfactory to the Purchaser, to the effect that his total assets for purposes
of the HSR Act are less than $10,000,000;
(xiii) Assignment to the Professional Corporation of
the employment agreements of the optometrists performing services in Virginia
and the consent of such optometrists thereto, the form of such consents and
assignments in a form reasonably acceptable to the Purchaser; and
(xiv) Agreement terminating the employment agreement
of Dr. Samit with the Company.
(b) The Purchaser will deliver to the Shareholders:
(i) The Estimated Cash Payment as provided in SECTION
2.02(b);
(ii) Certificate executed by the Purchaser
representing and warranting to the Shareholders that, except as otherwise stated
in such certificate, (a) the Purchaser's representations and warranties in this
Agreement were accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the Closing Date,
(b) the Purchaser has performed or complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with and (c)
such other matters required to be certified as a condition to the Shareholder's
obligations pursuant to Article VIII;
(iii) Noncompetition Agreement executed by the
Purchaser;
(iv) Consulting Agreement executed by the Purchaser;
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<PAGE> 22
(v) The Retail Business Management Agreement executed
by Visionary Retail Management, Inc. and the Professional Business Management
Agreement executed by Visionary MSO, Inc.; and
(vi) The Assignments and Subleases executed by
Visionary Properties, Inc.
(c) the Purchaser will deliver to the Escrow Agent:
(i) the Escrow Amount; and
(ii) the Escrow Agreement duly executed by the
Purchaser,
(d) the Shareholders will deliver to the Escrow Agent:
(i) the Escrow Agreement duly executed by the
Shareholders.
2.07 Further Assurances. Each of the Shareholders agrees that, from
time to time, at the Purchaser's request and without further consideration, such
Shareholder will execute and deliver such additional instruments of transfer and
take such other actions as the Purchaser may require to more effectively
transfer ownership of the shares of the Stock to the Purchaser.
2.08 Escrow Funds.
(a) Upon the Final Settlement of the Medicaid Investigation,
the Purchaser shall promptly give written notice of such settlement to the
Escrow Agent with instructions to disburse the Escrow Funds in accordance with
the terms of the Escrow Agreement.
(b) If, as of the date of Earn-out Payment would otherwise be
paid pursuant to SECTION 2.04(G), the Final Settlement of the Medicaid
Investigation has not occurred, the Purchaser shall deposit $750,000 of the
Earn-out Payment with the Escrow Agent to be maintained by the Escrow Agent
pursuant to the terms of the Escrow Agreement. The remaining portion of the
Earn-out Payment, if any, shall be paid to the Shareholders as provided in
SECTION 2.04(G).
(c) If, as of the date the Earn-out Payment would otherwise be
paid pursuant to SECTION 2.04(G), the Final Settlement of the Medicaid
Investigation has occurred, the Purchaser shall deposit with the Escrow Agent,
to be maintained pursuant to the terms of the Escrow Agreement, the amount, if
any, up to the full Earn-out Payment, by which (i) the amount that would then be
needed to satisfy Pending Claims (as defined in the Escrow Agreement) plus
amounts then distributed by the Escrow Agent to the Purchaser, or the Doctor as
contemplated in SECTION 6.01 of the Master Transaction Agreement, to satisfy
indemnity
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<PAGE> 23
claims exceeds (ii) $150,000. The remaining portion of the Earn-out Payment, if
any, shall be paid to the Shareholders as provided in SECTION 2.04(G).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders jointly and severally represent, warrant and agree, as
follows:
3.01 Ownership of Stock. Each Shareholder is, or will be as of the
Closing, the lawful owner of the number of the shares of the Stock listed
opposite the name of such Shareholder on EXHIBIT A attached hereto, free and
clear of all Encumbrances. Each Shareholder has full legal right, power and
authority to enter into this Agreement and to sell, assign, transfer and convey
the shares of the Stock so owned by such Shareholder pursuant to this Agreement
and to perform his other obligations hereunder. The delivery by each Shareholder
to the Purchaser of such Shareholder's shares of the Stock pursuant to the
provisions of this Agreement will transfer to the Purchaser good, valid and
marketable title thereto, free and clear of all Encumbrances.
3.02 Existence, Good Standing and Authority. Each of the Companies is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Each of the Companies has the power to own
its respective properties and to carry on its respective businesses as now being
conducted. Each of the Companies is duly qualified to do business in all
jurisdiction(s) in which the character or location of the properties owned or
leased by it or the nature of the businesses conducted by it makes such
qualification necessary. The Shareholders have provided to the Purchaser true
and complete copies of all of the Organizational Documents for the Companies.
The Shareholders are licensed optometrists, in good standing, in Virginia and
all other states in which the nature of their responsibilities and duties on
behalf of the Companies so require.
3.03 Capital Stock. (a) Except as set forth on Schedule 3.03(a), TSGI
has an authorized capitalization consisting solely of 20,000 shares of Common
Stock, of which 10,000 shares are and outstanding as of the date of this
Agreement, and 10,520 shares will be issued and outstanding as of the Closing
Date. No shares of Common Stock are held in TSGI's treasury. All such
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth on Schedule 3.03(a), there are no
preemptive rights nor any outstanding options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of the
capital stock of TSGI, other than as contemplated by this Agreement.
(b) Schedule 3.03(b) contains a complete and correct
list of each Subsidiary of TSGI, together with (i) their respective
jurisdictions of incorporation and (ii) the respective authorized and
outstanding capital stock of each. No shares are held in the treasury of any
Subsidiary of TSGI. All such outstanding shares have been duly authorized and
validly
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<PAGE> 24
issued and are fully paid and nonassessable. TSGI owns all of the issued and
outstanding capital stock of each Subsidiary, free and clear of any Encumbrances
or agreement with respect thereto, including, without limitation, any agreement,
understanding or restriction affecting the voting rights or other incidents of
record or beneficial ownership pertaining to such shares. Except as set forth on
Schedule 3.03(b), there are no preemptive rights nor any outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of any Subsidiary or the Professional
Corporation, other than as contemplated by this Agreement.
3.04 Investments. Except as set forth on Schedule 3.03(b) or 3.04, TSGI
does not own, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity. No Subsidiary of TSGI owns,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any other corporation, partnership, association, trust,
joint venture or other entity.
3.05 Financial Statements. The Shareholders have heretofore furnished
the Purchaser with the (i) audited consolidated and individual balance sheets of
the Companies dated as of December 31, 1995 and December 31, 1996 and the
related statements of income, retained earnings and cash flows for each of the
years ended December 31, 1995 and December 31, 1996 as audited by Beers and
Cutler LLP whose unqualified reports thereon are included therewith and (ii)
unaudited consolidated and individual balance sheets of the Companies dated as
of July 31, 1997 and the related unaudited statements of income, retained
earnings and cash flows prepared internally by TSGI for the seven-month period
ended July 31, 1997 (collectively, the "Financial Statements"). The respective
consolidated and individual balance sheets of the Companies dated as of December
31, 1996 and July 31, 1997 are hereinafter together referred to as the "Balance
Sheets." Except for the absence of footnotes to the unaudited Financial
Statements and normal year-end adjustments, which such adjustments would not
individually or in the aggregate be material, the Financial Statements are true,
correct and complete, have been prepared from the books and records of the
Companies in accordance with GAAP consistently applied throughout the periods
indicated and fairly present the financial condition of the Companies as of
their respective dates or for the periods indicated, as the case may be. The
balance sheets included in the Financial Statements reflect all claims against
and all debts and liabilities of the Companies, fixed or contingent, as at their
respective dates, are true, correct and complete and fairly present the
financial condition of the Companies at the respective dates thereof, and the
related statements of income, retained earnings and cash flows for such periods
are true, correct and complete and fairly present the results of operations of
the Companies and the changes in their financial position for the periods
indicated.
3.06 No Material Changes. Since December 31, 1996 (the "Balance Sheet
Date") and except as reflected on Schedule 3.06 or 3.24 hereto, there has been
(a) no material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in
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<PAGE> 25
the results of operations, or prospects, of any of the Companies, and (b) no
material change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations, or prospects, of any of
the Companies except in the Ordinary Course of Business and no fact or condition
exists, is contemplated, or, to the Knowledge of the Shareholders, is threatened
which might cause such a material change in the future. The statements of income
included in the Financial Statements do not contain any items of special or
non-recurring income or any other income not earned in the Ordinary Course of
Business except as expressly specified therein.
3.07 Books and Records. The books of account, minute books, stock
record books, and other records of the Companies, all of which have been made
available to the Purchaser, are complete and correct in all material respects
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute books of
the Companies contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, Boards of Directors, and committees
of the Boards of Directors of the Companies, and no meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of such books and records will be in the possession of the
Companies.
3.08 Title to Properties, Encumbrances, Condition of Assets. Except as
set forth on Schedule 3.08, and except for properties and assets which have been
sold or otherwise disposed of in the Ordinary Course of Business since the
Balance Sheet Date, the Companies have good, valid and marketable title to (a)
all of their properties and assets (real and personal, tangible and intangible),
including, without limitation, all of the properties and assets reflected in the
Balance Sheets, except as indicated in the notes thereto, and (b) all of the
properties and assets purchased by the Companies since the Balance Sheet Date;
in each case not subject to any Encumbrances except as otherwise set forth on
Schedule 3.08. All of the properties and assets owned, leased or used by the
Companies are in good operating condition and repair, are suitable for the
purpose used, are adequate and sufficient for all current operations of the
Companies and are directly related to the business of the Companies.
3.09 Inventory. All items of inventory and related supplies (including
raw materials, work-in-process and finished goods) reflected on the Balance
Sheets or thereafter acquired (and not subsequently disposed of in the Ordinary
Course of Business), to the Knowledge of the Shareholders, are merchantable, are
held for sale in the Ordinary Course of Business as first quality goods at
normal mark-ups, and are not obsolete or below standard quality and each item of
such inventory reflected in the Balance Sheets and the books and records of the
Companies is so reflected on the basis of a complete physical count and is
valued at the lower of cost (on a first in, first out basis) or market in
accordance with GAAP.
3.10 Real Property and Leases. (a) Schedule 3. 10(a) contains a true
and complete list of all real property owned by any of the Companies, including
a list of all real property which
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<PAGE> 26
has been acquired by any of the Companies since the Balance Sheet Date, and a
true and complete list of additional real property to be acquired by any of the
Companies prior to the Closing Date. Such lists include all real property, which
any of the Companies has agreed to purchase or has an option to purchase or
which any of the Companies will have agreed to purchase or will have acquired an
option to purchase, as the case may be, prior to the Closing Date. Except as set
forth on Schedule 3. 10(a), each of the Companies has good and marketable title
in fee simple absolute to all such real property free and clear of all
Encumbrances. Except as set forth on Schedule 3.10(a), there exists no violation
of any law, regulation or ordinance relating to any such real property. Except
as set forth on Schedule 3.10(a), all buildings, improvements and fixtures which
form a part of the premises described on Schedule 3.10(a) are structurally
sound, have no known defects and are in good condition and repair.
(b) Schedule 3.10(b) contains a true and complete list of all
real property leases (collectively, the "Leases") (i) to which any of the
Companies is a party, (ii) to be acquired by or assigned to any of the Companies
prior to the Closing and, (iii) all leases into which any of the Companies has
agreed to enter into or has an option to enter into, or into which any of the
Companies will have agreed to enter into or will have an option to enter into,
as the case may be, prior to the Closing Date, in each case specifying the name
of the lessor or sublessor, the lease term, the basic annual rental and other
amounts paid or payable with respect thereto and any purchase options exercised
or exercisable by any of the Companies. Except as set forth on Schedule 3.10(b),
the Companies enjoy peaceful possession under each Lease, and each Lease is in
good standing and in full force and effect. None of the Companies or, to the
Knowledge of the Shareholders, any other party to any Lease has breached such
Lease or is in default thereunder and no breach of or default under any Lease
has occurred which would prevent the exercise by any of the Companies of any
right to renew or extend such Lease. Subject to receipt of any required consents
or approvals, the sale of the shares of the Stock by the Shareholders in
accordance with this Agreement will not result in the termination of any Lease,
and immediately after the Closing, all Leases will continue in full force and
effect without, to the Knowledge of the Shareholders, the imposition of any
burdensome condition or other obligation on any of the Companies resulting from
such sale of the Stock.
3.11 Equipment. Except as set forth on Schedule 3.11, the Companies
have good, valid and marketable title, free and clear of any Encumbrances, to
all equipment reflected on the Balance Sheets and all equipment acquired by any
of the Companies after the Balance Sheet Date, other than equipment disposed of
in the Ordinary Course of Business. At the time of the Closing, each of the
Companies will have good, valid and marketable title, free and clear of any
Encumbrances, to all additional equipment to be acquired by any of them, except
as set forth on Schedule 3.11.
3.12 Material Contracts. Set forth on Schedule 3.12 is a complete list
of all of the following Contracts to which any of the Companies is a party or by
which they, or any of them, is bound: (a) all Contracts relating to the
employment of any person, and all bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase, phantom stock,
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<PAGE> 27
retirement and other employee benefit plans, (b) all Contracts which contain
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock, (c) all Contracts relating to capital expenditures
in excess of $5,000, (d) all loans, advances to, and investments in, any other
Person, and all Contracts relating to the making of any such loan, advance or
investment, (e) all guarantees and other contingent liabilities with respect to
any indebtedness or obligation of any other Person (other than the endorsement
of negotiable instruments for collection in the Ordinary Course of Business),
(f) all management services, consulting and any other similar type contracts,
(g) all leases of personal property, (h) all Contracts limiting the freedom of
any of the Companies to engage in any line of business or to compete with any
other Person, (i) all Contracts not entered into in the Ordinary Course of
Business, (j) all Contracts which involve the expenditure by any of the
Companies of more than $10,000, (k) any Contract with any director, officer or
employee of any of the Companies, or Contract with any Related Party of any of
the Shareholders or the Companies, (l) Contracts with any Governmental Body
relating in any way to the operations of any of the Companies, (m) all Contracts
which, in the Shareholders' good faith belief, could have a potential material
adverse impact on the business or operations of any of the Companies and (n) all
other Contracts material to the business or operations of any of the Companies.
Each Contract set forth on Schedule 3.12 is a valid and binding agreement of the
Company that is a party thereto and in full force and effect and enforceable in
accordance with its terms. The enforceability of such Contracts will not be
affected in any manner by the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions. None of the Companies has
violated any of the terms or conditions of any of the Contracts set forth on
Schedule 3.12 or is otherwise in default thereof, and, to the Knowledge of the
Shareholders, all of the terms and conditions to be performed by any party
thereto other than the Companies have been fully performed and such Contract is
free from any right of termination on the part of any party thereto. There
exists no default or event of default or event, occurrence, condition or act
(including the purchase of the shares of the Stock hereunder) which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder. None of the
parties to any of the Contacts has given notice (written or oral) of its intent
to terminate such Contract and the Shareholders do not have reason to believe
that any party intends to terminate any Contract prior to or following the
consummation of the Contemplated Transactions. There have been no amendments or
modifications to any of the Contracts set forth on Schedule 3.12 which would
make any of the information disclosed herein inaccurate or incomplete. Copies of
all such modifications and amendments have been made available to the Purchaser
by the Shareholders.
3.13 No Conflict. (a) Except as set forth on Schedule 3.13(a), neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (a) any provision of the Organizational Documents of any of the
Companies, or (b) any resolution adopted by the Board of Directors or the
shareholders of any of the Companies;
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(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which any of the
Companies or either Shareholder, or any of the assets owned or used by any of
the Companies, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any of the Companies or that
otherwise relates to the business of, or any of the assets owned or used by, any
of the Companies;
(iv) cause any of the Companies or, to the Knowledge
of the Shareholders, the Purchasers to become subject to, or to become liable
for the payment of, any Tax;
(v) cause any of the assets owned by any of the
Companies to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a
violation or Breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by any of
the Companies.
(b) Except as set forth on Schedule 3.13(b), none of the
Companies or either Shareholder is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.14 Litigation. There is no Proceeding by any person or entity, or by
or before (or any investigation by) any Governmental Body, pending, or to the
Knowledge of the Shareholders threatened, against or affecting (i) any of the
Companies or any of their respective properties or rights or either of the
Shareholders (to the extent affecting the Companies or any of the Companies'
properties or rights), (ii) any Employee Benefit Plan or any fiduciary or
administrator thereof or (iii) the Contemplated Transactions; and the
Shareholders do not know of any valid basis for any such Proceeding. None of the
Companies or the Shareholders is subject to any Order entered in any Proceeding
which may have an adverse effect on any of the Companies or on their ability to
acquire any property or conduct business in any area.
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<PAGE> 29
3.15 Taxes.
(a) Each of the Companies has filed or caused to be filed (on
a timely basis since inception) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. The
Shareholders have delivered or made available to the Purchaser copies of, and
Schedule 3.15 contains a complete and accurate list of, all such Tax Returns
relating to income or franchise taxes filed since December 31, 1992. Each of the
Companies had paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by any of the Shareholders or any of the Companies,
except such Taxes, if any, as are listed on Schedule 3.15 and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Financial Statements.
(b) The Tax Returns of the Companies subject to such Taxes
have been audited by the IRS or relevant state tax authorities or are closed by
the applicable statute of limitations for all taxable years through December 31,
1992. Schedule 3.15 contains a complete and accurate list of all audits of all
such Tax Returns, including a reasonably detailed description of the nature and
outcome of each audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described on Schedule 3.15, are
being contested in good faith by appropriate proceedings. Schedule 3.15
describes all adjustments to the Tax Returns filed by any of the Companies or
any group of corporations including any of the Companies for all taxable years
since December 31, 1991, and the resulting deficiencies proposed by the IRS or
relevant state tax authorities. Except as described on Schedule 3.15, none of
the Shareholders or the Companies has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
the Companies or for which any of the Companies may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of each of the Companies are adequate (determined in
accordance with GAAP) and are at least equal to that Company's liability for
Taxes. There exists no proposed tax assessment against any of the Companies
except as disclosed in the Balance Sheet or on Schedule 3.15. No consent to the
application of Section 341(f)(2) of the Code has been filed with respect to any
property or assets held, acquired, or to be acquired by any of the Companies.
All Taxes that any of the Companies is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person. The
Shareholders are not subject to withholding under Section 1445 of the Code with
respect to any transaction contemplated hereby. None of the Companies has been a
member of any affiliated group (as defined in Code Section 1504(a)) or
consolidated, combined or unitary group for purposes of any other Taxes. None of
the material or property used by any of the Companies is subject to a lease,
other than a "true" lease for federal income tax purposes.
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<PAGE> 30
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Companies are true, correct, and complete. There is no
tax sharing agreement that will require any payment by any of the Companies
after the date of this Agreement.
3.16 Liabilities. None of the Companies has, and none of any of their
respective assets or properties is subject to, any outstanding claims,
liabilities or indebtedness, accrued, contingent or otherwise, and whether due
or to become due, except as set forth in the Financial Statements or referred to
in the footnotes thereto or on Schedule 3.16 hereto, other than liabilities
incurred subsequent to the Balance Sheet Date in the Ordinary Course of Business
not involving borrowings by any of the Companies. None of the Companies is in
default in respect of the terms or conditions of any indebtedness, nor do the
Shareholders have Knowledge of any facts which, with the passage of time, would
result in any such default. The reserves reflected in the Balance Sheets are
adequate, appropriate and reasonable in accordance with generally accepted
accounting principles applied on a consistent basis. Except as set forth in
Schedule 3.16, the Shareholders have no Knowledge of any valid basis for the
assertion against any of the Companies of any such liability not fully reflected
or accrued for in the Balance Sheets.
3.17 Insurance. Each of the Companies has maintained, and as of the
date hereof has in effect, such policies of motor vehicle, property, casualty,
workers' compensation, malpractice, general liability and other insurance,
including without limitation group insurance and other life health, disability
or other insurance for the benefit of employees or their dependents or both as
are required by law and are adequate and appropriate with respect to their
respective businesses. Set forth on Schedule 3.17 is a complete list, with a
summary thereof, of all insurance policies ("Insurance Policies") which each of
the Companies maintains with respect to their respective businesses, properties
or employees, which Insurance Policies are in full force and effect. None of the
Companies has violated any of the terms or conditions of the Insurance Policies
or is otherwise in default thereof, and all of the terms and conditions to be
performed by the issuers of the Insurance Policies have been fully performed and
the Insurance Policies are free from any right of termination on the part of the
issuers thereof. Since January 1, 1995, there has not been any material adverse
change in the relationship of any of the Companies with their respective
insurers or in the premiums payable pursuant to the Insurance Policies. Except
as set forth on Schedule 3.17, the Insurance Policies are "occurrence" policies
and not "claims made" policies.
3.18 Intellectual Properties. Set forth on Schedule 3.18 are all
patents, patent rights, licenses, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights, copyrights or similar
rights (collectively, "Intellectual Property Rights") used by any of the
Companies in connection with the conduct of their respective businesses. Except
as set forth on Schedule 3.18, each of the Companies has valid and enforceable
rights to utilize the Intellectual Property Rights in their respective
businesses as they are presently operated, free and clear of any Encumbrances.
None of the Companies is infringing, or otherwise acting adversely to, the right
of any Person under or in respect to, any Intellectual Property Right, and
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<PAGE> 31
there is no claim by any Person pending or to the Shareholders' Knowledge,
threatened against any of the Companies with respect thereto and to the
Shareholders' Knowledge, there is no Person infringing upon any Intellectual
Property Rights utilized by any of the Companies.
3.19 Compliance with Laws. Except as set forth on Schedule 3.19, each
of the Companies, and the Shareholders (to the extent their activities affect
any of the Companies) are, and have been since January 1, 1990, in compliance
with all Legal Requirements of any Governmental Body including, but not limited
to, applicable optometric laws and regulations, the Federal Occupational Safety
and Health Act, ERISA, all Legal Requirements relating to the safe conduct of
business and all Environmental and Safety Requirements. Except as set forth on
Schedule 3.19, none of the Companies has received any notice of any asserted
present or past failure of any of the Companies to comply with any of such Legal
Requirements.
3.20 Accounts Receivable. The Shareholders have provided the Purchaser
with a complete list of all accounts receivable of each of the Companies as of
July 31, 1997, showing the amounts due and an aging analysis thereof. The
accounts and other receivables shown on the list provided to the Purchasers
pursuant to this Section 3.20 and as will be reflected on the Closing Date
Balance Sheet have arisen in the Ordinary Course of Business, are not in dispute
with the respective obligors therefor and are, to the Shareholders' Knowledge,
collectible. None of such accounts receivable or other debts are or will as of
the Closing Date be subject to any counterclaim or set-off except to the extent
of any bad debt provision or reserve. There has been no material adverse change
since the Balance Sheet Date in the amount of accounts receivable or other debts
due or the allowances with respect thereto, or accounts payable by any of the
Companies from that reflected in the Balance Sheets.
3.21 Employees.
(a) Schedule 3.21 contains a complete and accurate list of the
employees of each of the Companies, with the employer of each such employee
identified. The Shareholders have provided the Purchasers with following
information for each employee or director of the Companies, including each
employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since
December 31, 1995; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any of the Companies' pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other employee benefit plan. In addition, with respect to
each of the optometrists employed by the Companies, Schedule 3.21 shall contain
a complete and accurate list of the following: (i) the locations at which such
optometrist performs services; (ii) whether such optometrist is full-time,
part-time or floating; (iii) base salary; (iv) bonus paid for the year ended
December 31, 1996, and the bonus accrued for such optometrist as of the Closing
Date; (v) benefits; and (vi) amounts credited, or to be credited with respect to
past services, to an optometrist under the deferred bonus plan. Each optometrist
employed by any of the Companies
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is duly licensed and in good standing as an optometrist in each jurisdiction in
which he performs services for any of the Companies and such licensing is
required.
(b) No employee or director of any of the Companies is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of any of the Companies, or (ii) the ability of any of
the Companies to conduct its business, including any Proprietary Rights
Agreement with any of the Shareholders or any of the Companies by any such
employee or director. To the Shareholders' Knowledge, no director, officer, or
other key employee of any of the Companies intends to terminate his employment
with any Company.
(c) Schedule 3.21 also contains a complete and accurate list
of the following information for each retired employee or director of any of the
Companies, or their dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other benefits.
3.22 Labor Relations, Compliance. None of the Companies has been or is
a party to any collective bargaining or other labor Contract since its
inception. Since January 1, 1992, there has not been, there is not presently
pending or existing, and to the Shareholders' Knowledge there is not threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting the Companies relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting any of the Companies or
their premises, or (c) any application for certification of a collective
bargaining agent. To the Shareholders' Knowledge, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by any of the Companies, and
no such action is contemplated by any of the Companies. Each of the Companies
has complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. None of the Companies
is liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.23 Employee Benefit Plans. (a) List of Plans. Set forth on Schedule
3.23 is a complete and accurate list of all employee benefit plans within the
meaning of Section 3(3) of ERISA, as well as all stock option plans, bonus or
incentive award plans, severance pay policies
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or agreements, parachute payment arrangements, deferred compensation agreements,
supplemental income arrangements, and all other employee benefit plans,
agreements and arrangements ("Employee Benefit Plans") whether or not any such
Employee Benefit Plans are exempt from the provisions of ERISA, established,
maintained or contributed to by any of the Companies (including, without
limitation, for this purpose and for the purpose of all of the representations
in this SECTION 3.23, all entities (whether or not incorporated) which are
treated together with any of the Companies and/or either of the Shareholders as
a single employer within the meaning of Section 414(b), (c), (m) or (o) of the
Code) at any time within three years prior to the Balance Sheet Date.
(b) Status of Plans. None of the Companies takes part in or is
a party to, or has ever taken part in or was a party to, (i) maintaining or
contributing to any Employee Benefit Plan subject to ERISA which is not in
compliance both in form and operation, with ERISA, the Code and all applicable
laws, (ii) maintaining or contributing to, at any time, a defined benefit plan
within the meaning of Section 3(35) of ERISA, or (iii) maintaining or
contributing to, at any time, a multiemployer plan within the meaning of Section
3(37) of ERISA, or (iv) maintaining or contributing to any employee benefit
plans other than those listed on Schedule 3.23. The respective assets of the
Companies' Employee Benefit Plans are adequate to pay all debts, liabilities and
claims with respect to such plan to the extent that claims have been made on or
prior to the Closing Date. No litigation, claims, or governmental audit,
investigation, or proceeding (other than routine claims for benefits) is pending
or threatened with respect to any Employee Benefit Plan.
(c) Tax Qualification and Employee Benefits. Each Employee
Benefit Plan intended to be qualified under Section 401(a) of the Code has been
determined to be so qualified by the IRS and nothing has occurred since the date
of the last such determination which resulted or is likely to result in the
revocation of such determination. Full payment has been made of all amounts
which any of the Companies are required, under applicable law or under any
Employee Benefit Plan or any agreement relating to any Employee Benefit Plan to
which any of the Companies is a party, to have paid as contributions thereto as
of the Closing Date. Each of the Companies has made adequate provision for
reserves to meet contributions that have not been made because they are not yet
due under the terms of any Employee Benefit Plan or related agreements. Benefits
under all Employee Benefit Plans are as represented and have not been increased
subsequent to the date as of which documents have been provided.
(d) Transactions. None of the Companies has engaged in any
transaction with respect to the Employee Benefit Plans which would subject any
of the Companies to a tax, penalty or liability for prohibited transactions
under ERISA or the Code, and none of the Companies, their respective directors,
officers or employees to the extent they or any of them are fiduciaries with
respect to such plans, breached any of their responsibilities or obligations
imposed upon fiduciaries under Title I of ERISA or taken or failed to take any
action that would result in any claim being made under, by or on behalf of any
such plans by any party with standing to make such claim.
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(e) Documents. The Shareholders have delivered or caused to be
delivered to the Purchaser and its counsel true and complete copies of (i) all
Employee Benefit Plans as in effect for all of the Companies, together with all
amendments thereto which will become effective at a later date, as well as the
latest IRS determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code, (ii) Form 5500 for
the three most recent completed fiscal year for each Employee Benefit Plan
required to file such form, (iii) all trust agreements and insurance or annuity
contracts relating to all Employee Benefit Plans, (iv) the current Summary Plan
Description for each Employee Benefit Plan (or other descriptions of such
Employee Benefit Plans provided to employees) and any material modifications
thereto, and (v) the Summary Annual Report for the three most recent completed
fiscal years for each Employee Benefit Plan required to provide such report to
participants.
(f) COBRA. The Companies have complied with the Consolidated
Omnibus Budget Reconciliation Act of 1984, as amended ("COBRA").
(g) None of the Employee Benefit Plans provides health care or
any other non-pension benefit to any employee after their employment was
terminated (other than as required by COBRA), or has ever promised to provide
such post-termination benefits. There are no promised increases in benefits
(whether expressed, implied, oral or written) under any Employee Benefit Plan,
nor are there any obligations, commitments or understandings to continue any
benefits under such Employee Benefit Plans (whether expressed, implied, oral or
written), except as required by COBRA. Each Employee Benefit Plan may be
modified, amended, or terminated by the Companies at any time. As of the Closing
Date, each Employee Benefit Plan may be terminated by the Companies without any
further liability or obligation on the part of the Companies, other than the
payment of benefits pursuant to such plan, and the termination of any Employee
Benefit Plan will not accelerate or increase any benefits payable under such
plan.
(h) Except as set forth in the Schedules attached hereto or
contemplated in connection with the Termination and Release Agreements, neither
the execution of this Agreement nor the consummation of the Contemplated
Transactions will (i) result in any payment to be made by the Companies
(including, without limitation, severance, unemployment compensation, or
parachute payment (as defined in Section 280G of the Code)) becoming due to any
employee, director or consultant, or (ii) increase any benefits otherwise
payable under any Employee Benefit Plan.
3.24 No Changes Prior to Closing Date. Except as set forth on Schedule
3.24, during the period from the Balance Sheet Date to and including the Closing
Date, except as otherwise expressly contemplated by this Agreement, none of the
Companies has, or will have (a) suffered any material adverse change in their
respective working capital, financial condition, assets, liabilities, business
or prospects, experienced any labor difficulty or suffered any material casualty
loss (whether or not insured), (b) incurred any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise), except in the
Ordinary Course of
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Business, (c) permitted any of their respective assets to be subjected to any
Encumbrances, (d) paid, discharged or satisfied any claim, Encumbrance or
liability other than those which are reflected on the Balance Sheets or which
were incurred after the Balance Sheet Date in the Ordinary Course of Business,
(e) sold, transferred or otherwise disposed of any assets except in the Ordinary
Course of Business, (f) made any capital expenditure or commitment therefor,
except in the Ordinary Course of Business, (g) made any distribution on any
shares of their respective capital stock, or redeemed, purchased or otherwise
acquired any shares of their respective capital stock or granted any option,
warrant or other right to purchase or acquire any such shares, (h) issued or
committed to issue any shares of capital stock or obligations or securities
convertible into or exchangeable for shares of capital stock, (i) made any bonus
or profit sharing distribution or payment of any kind except in the Ordinary
Course of Business, 0) increased their indebtedness for borrowed money, except
current borrowings from banks in the Ordinary Course of Business, or made any
loan to any Person, (k) written down the value of any inventory or written off
as uncollectible any notes or accounts receivable, except write-offs in the
Ordinary Course of Business charged to applicable reserves, none of which
individually or in the aggregate is material to any of the Companies, (l)
granted any increase in the rate of wages, salaries, bonuses or other
remuneration of any executive employee or other employees, or any increase in
any benefits payable under any Employee Benefit Plan except in the Ordinary
Course of Business, (m) canceled or waived any claims or rights of substantial
value, (n) made any change in any method of accounting or auditing practice, (o)
otherwise conducted its business or entered into any transaction except in the
usual and ordinary manner and in the Ordinary Course of Business, or (p) agreed,
whether or not in writing, to do any of the foregoing.
3.25 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Shareholders or any of the Companies is, or will be, entitled
to any commission or broker's or finder's fees from any of the parties hereto,
or from any Affiliate of the parties hereto, in connection with any of the
Contemplated Transactions.
3.26 Directors and Officers. Schedule 3.26 sets forth a complete list
showing the names of all the directors and officers of each of the Companies.
3.27 Licenses, Permits, Consents and Approvals. Each of the Companies
has, and at the Closing Date will have, all Governmental Authorizations required
to conduct their respective businesses. Except as set forth on Schedule 3.27, no
Consent, notice or other action of any kind by any of the Companies or either of
the Shareholders will be required as a result of the consummation of the
Contemplated Transactions (a) to avoid the loss of any Governmental
Authorization or the violation, breach or termination of, or any default under,
or the creation of any Encumbrances on any asset of any of the Companies
pursuant to the terms of, any Legal Requirement or any Contract binding upon any
of the Companies or to which any such asset may be subject or (b) to enable the
Purchaser (or the Doctors with respect to the Professional Corporation) to
continue the operation of each of the Acquired Companies substantially as
conducted prior to the Closing Date. All such filings (other than those, if any,
which may be
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required to be filed, given, obtained or taken solely by the Purchaser) will be
duly filed, given, obtained or taken on or prior to the Closing Date and will be
in full force and effect on the Closing Date.
3.28 Environmental and Health and Safety Matters.
(a) Except as set forth on Schedule 3.28:
(i) Each of the Companies is and has been in
compliance at all times with all applicable Environmental and Safety
Requirements, and none of the Companies has received any notice, report or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under Environmental and Safety Requirements with respect to
the past or present operations or properties of the respective businesses.
(ii) Each of the Companies has obtained, and is and
has been in compliance at all times with all terms and conditions of, all
permits, licenses and other authorizations required pursuant to Environmental
and Safety Requirements for the occupation of the properties of their respective
businesses and the conduct of their respective operations.
(iii) To the Knowledge of the Shareholders, none of
the following exists at any property owned or occupied by any of the Companies:
asbestos-containing material in any form or condition; polychlorinated
biphenyl-containing materials or equipment; or underground storage tanks.
(iv) The transactions contemplated by this Agreement
do not impose any obligations under Environmental and Safety Requirements for
site investigation or cleanup or notification to or consent of any Governmental
Body or third parties.
(v) No facts, events or conditions relating to the
past or present properties or operations of the respective businesses of any of
the Companies or, to the Shareholders' Knowledge, properties contiguous thereto
will (x) prevent, hinder or limit continued compliance by any of the Companies
with Environmental and Safety Requirements, (y) give rise to any corrective,
investigatory or remedial obligations on the part of any of the Companies
pursuant to Environmental and Safety Requirements, or (z) give rise to any
liabilities on the part of any of the Companies (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those liabilities relating to on
site or off site hazardous substance releases, personal injury, property damage
or natural resources damage.
(vi) None of the Companies has assumed any
liabilities or obligations of any third party under Environmental and Safety
Requirements.
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(b) The Shareholders have delivered or made available to the
Purchaser true, complete and correct copies of all environmental reports,
analyses, tests or monitoring in the possession of any of the Companies or the
Shareholders pertaining to any property owned or operated in connection with the
respective businesses of any of the Companies and a true, complete and correct
list identifying all third party facilities at which contaminants generated in
connection with the respective businesses of any of the Companies (whether by
any of the Companies or any prior owner or occupant) have been transported,
treated, stored, handled or disposed within the past five years.
3.29 Certain Payments. None of the Companies nor any director, officer,
agent or employee of any of the Companies, nor any other Person associated with
or acting for or on behalf of any of the Companies, has directly or indirectly
(a) made, offered or agreed to offer any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of any of the Companies
or any Affiliate of any of the Companies, or (iv) in violation of any Legal
Requirement, or (b) established or maintained any fund or asset that has not
been recorded in the books and records of any of the Companies.
3.30 Relationships with Related Persons. Except as set forth in
Schedule 3.30, none of the Shareholders or any Related Person of a Shareholder
or any of the Companies has, or has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to any of the Companies' businesses. None of the Shareholders, or any
Related Person of a Shareholder or any of the Companies is, or has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with any of the Companies other than
business dealings or transactions conducted in the Ordinary Course of Business
with the Companies at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with any
of the Companies with respect to any line of the products or services of such
Company (a "Competing Business") in any market presently served by such Company
except for the ownership of less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Schedule
3.30, none of the Shareholders or any Related Person of a Shareholder or any of
the Companies is a party to any Contract with, or has any claim or right
against, any of the Companies.
3.31 Fraud and Abuse. None of the Companies or any of their respective
or either of the Shareholders predecessors has engaged in any activities that
are prohibited under federal Medicare and Medicaid statutes, 42 U.S.C.
Section1320a-7b, the False Claims Act, Virginia Practitioner Self-Referral Act
or the regulations promulgated pursuant to such statutes, or any similar
federal, state or local statutes or regulations or which are prohibited by
binding rules of professional conduct, including but not limited to the
following:
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(a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any applications for any
benefit or payment;
(b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
(c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to secure such
benefit or payment fraudulently; and
(d) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration (i)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare, Medicaid or other applicable third party
payors, or (iii) in return for purchasing, leasing or ordering or arranging for
or recommending the purchasing, leasing or order of any good, facility, service,
or item for which payment may be made in whole or in part by Medicare, Medicaid
or other applicable third party payors.
None of the Companies provide or have provided any item or service for
which a claim for payment, in whole or in part, has been made or submitted to
Medicare or Medicaid, other than with respect to Medicaid claims at the store
location on "G Street" in Washington, D.C.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents, warrants and agrees as follows:
4.01 Existence and Good Standing of the Purchaser. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas.
4.02 Power and Authority. The Purchaser has the corporate power and
authority to make, execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all required corporate action
of the Purchaser.
4.03 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Affiliate
of the parties hereto, in connection with any of the Contemplated Transactions.
4.04 Restrictive Documents. The Purchaser is not subject or a party to,
any charter, by-law, Contract, Legal Requirement, Order, Governmental
Authorization or any other
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Encumbrance or restriction of any kind or character, which would prevent
consummation of the Contemplated Transactions.
4.05 Investment Intent. The shares of the Stock being acquired by the
Purchaser hereunder are being purchased for the Purchaser's own account and not
with the view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act. The Purchaser
understands that the shares of the Stock have not been registered under the
Securities Act or any applicable state laws by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act and such laws, and that the shares of the Stock must be held
indefinitely unless such shares are registered under the Securities Act and any
applicable state laws or are exempt from registration.
4.06 Commitment Letter. The Purchaser has received a commitment letter
from a financial institution with respect to providing the funds required by the
Purchaser to consummate the Contemplated Transactions. A copy of such commitment
letter has been provided to the Shareholders.
ARTICLE V
CONDUCT OF BUSINESS, REVIEW
5.01 Conduct of Business of the Companies. During the period from the
date of this Agreement to the Closing Date, the Shareholders shall cause each of
the Companies to conduct their respective operations only according to their
ordinary and usual course of business and to use their respective best efforts
to preserve intact their respective business organizations, keep available the
services of their respective officers and employees and maintain satisfactory
relationships with licensors, suppliers, distributors, lessees, clients and
others having business relationships with them. Notwithstanding the immediately
preceding sentence, pending the Closing and except as may be first approved by
the Purchaser or as is otherwise permitted or required by this Agreement, the
Shareholders will cause each of the Companies to (a) maintain their respective
Articles of Incorporation and By-Laws to be maintained in their form on the date
of this Agreement, (b) maintain the compensation payable or to become payable by
any of the Companies to any officer, employee or agent at their levels on the
date of this Agreement, (c) refrain from making any bonus, pension, retirement
or insurance payment or arrangement to or with any such persons except those
that may have already been accrued, and bonus and insurance payments in the
Ordinary Course of Business and consistent with the past practice of the
Companies, (d) refrain from entering into any contract or commitment except
contracts in the Ordinary Course of Business, (e) refrain from paying or
declaring any dividends or make any distribution in cash or in property to any
of the Shareholders, (f) refrain from creating, incurring, or assuming any
long-term or short-term debt whether for money borrowed or otherwise, (g)
refrain from assuming, guarantying, endorsing or otherwise become liable or
responsible for the obligation of any Person, (h) refrain from making any loans,
advances or capital contributions to, or investments in, any other Person, (i)
refrain from making any change
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affecting any bank, safe deposit or power of attorney arrangements of any of the
Companies, 0) refrain from incurring or committing to any capital expenditure,
obligations or liabilities in respect thereof which in the aggregate exceed or
would exceed $10,000 on a cumulative basis, (k) refrain from any action which
may subject the respective assets of the Companies to any Encumbrance of any
kind or character except in the Companies' respective Ordinary Course of
Business, and (1) refrain from taking any action, the taking of which, or from
omitting to take any action, the omission of which, would cause any of the
representations and warranties contained in Article III to fail to be true and
correct in all respects as of the Closing Date as though made on and as of the
Closing Date. During the period from the date of this Agreement to the Closing
Date, the Shareholders shall cause each of the Companies to confer on a regular
and frequent basis with one or more designated representatives of the Purchaser
to report material operational matters and to report the general status of
ongoing operations. The Shareholders shall cause each of the Companies to notify
the Purchaser of any unexpected emergency or other change in the normal course
of any of their respective businesses or in the operation of any of their
respective properties and of any Proceeding (or communications indicating that
the same may be contemplated), involving any material property of any of the
Companies, and to keep the Purchaser fully informed of such events and permit
its representatives prompt access to all materials prepared in connection
therewith. Except as otherwise expressly permitted by this Agreement, and
without limiting the generality of the foregoing, between the date of this
Agreement and the Closing Date, the Shareholders will not, and will cause each
of the Companies not to, without the prior written consent of the Purchaser,
take any affirmative action, or fail to take any reasonable action within their
or its control, as a result of which any of the changes or events listed in
SECTION 3.24 hereof is likely to occur.
5.02 Review of the Companies. The Shareholders shall cause each of the
Companies to permit the Purchaser and its representatives to have, after the
date of execution hereof, full access to the premises and to all the books and
records of each of the Companies and to cause the officers of the Companies to
furnish the Purchaser with such financial and operating data and other
information with respect to the business and properties of the Companies as the
Purchaser shall from time to time reasonably request.
5.03 Required Approvals. As promptly as practicable after the date of
this Agreement, the Shareholders will, and will cause each of the Companies to,
make all filings required by Legal Requirements to be made by them in order to
consummate the Contemplated Transactions, including, without limitation, the
filing, if any, required under the HSR Act. Between the date of this Agreement
and the Closing Date, the Shareholders will, and will cause each of the
Companies to, (a) cooperate with the Purchaser with respect to all filings that
the Purchaser elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with the
Purchaser in obtaining all consents identified in Schedules 3.13 or 3.27.
5.04 Notification. Between the date of this Agreement and the Closing
Date, the Shareholders will promptly notify the Purchaser in writing if either
of the Shareholders becomes
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aware of any fact or condition that causes or constitutes a Breach of any of the
Shareholders' representations and warranties as of the date of this Agreement,
or if either of the Shareholders becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Schedules attached hereto if such
Schedule were dated the date of the occurrence or discovery of any such fact or
condition, the Shareholders will promptly deliver to the Purchaser a supplement
to such Schedule specifying such change. During the same period, the
Shareholders will promptly notify the Purchaser of the occurrence of any Breach
of any covenant of the Shareholders in this Article V or of the occurrence of
any event that may make the satisfaction of the conditions in Article VII or
VIII impossible or unlikely.
5.05 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, the Shareholders will cause all indebtedness owed to
any of the Companies by a Shareholder or any Related Person of a Shareholder or
any of the Companies to be paid in full prior to or at the Closing.
5.06 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to SECTION 10.01 hereof, the Shareholders will not, and will
cause each of the Companies and their respective Representatives not to,
directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than Purchaser) relating to any transaction involving the sale of
the business or assets (other than in the Ordinary Course of Business) of the
any of the Companies, or any of the capital stock of any of the Companies, or
any merger, consolidation, business combination, or similar transaction
involving any of the Companies. The Shareholders will promptly communicate to
the Purchaser the terms of any proposal received or the fact that either of the
Shareholders or any of the Companies has received inquiry with respect to, or
have participated in discussions or negotiations in respect of, any such
transaction, and the identity of any Persons who initiated or participated in
such discussions or negotiations.
ARTICLE VI
MUTUAL COVENANTS
The Purchaser covenants with the Shareholders, and the Shareholders
covenant with the Purchaser, that:
6.01 Return of Documents and Disclosure. If this Agreement is
terminated for any reason pursuant to SECTION 10.01 hereof, each party shall
return all documents and materials and copies thereof which shall have been
furnished by or on behalf of the other party, and each party hereby covenants
that it/they will not disclose to any Person any confidential or proprietary
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information about the other party or any information regarding the transactions
contemplated hereby, except insofar as may be necessary to assert its rights
hereunder or as required by law.
6.02 Cooperation. Subject to the terms and conditions herein provided,
each party hereto will use such party's Best Efforts to take, or cause to be
taken, such actions, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments and to do, or cause to be
done, all things necessary, proper or advisable under the provisions of this
Agreement and applicable law to consummate and make effective all of the
Contemplated Transactions.
6.03 Publicity. Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as the Purchaser and the Shareholders
mutually determine. Unless consented to by the other party in advance or
required by Legal Requirements, prior to the Closing, Shareholders shall, and
shall cause the Companies to, and the Purchaser shall, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement or the
Contemplated Transactions to any Person including, without limitations employees
of the Companies. Shareholders and the Purchaser will consult with each other
concerning the means by which the Companies' employees, customers, and suppliers
and others having dealings with the Companies will be informed of the
Contemplated Transactions, and the Purchaser will have the right to be present
for any such communication.
6.04 Use of Dr. Samit Name. The Purchaser shall cease using "Dr. Samit"
or any name similar thereto in connection with the marketing or operation of the
Companies on or before one hundred and eighty (I 80) days after the Closing
Date. The parties agree that the Companies shall have the right to use the name
"Dr. Samit" during such transition period.
ARTICLE VII
CONDITIONS TO THE PURCHASERS OBLIGATIONS
All obligations of the Purchaser to be discharged under this Agreement
at the Closing are subject to the fulfillment, prior to or at the Closing, of
each of the following conditions, unless waived in writing by the Purchaser
prior to or at the Closing:
7.01 Truth of Representations and Warranties. The representations and
warranties of the Shareholders contained in this Agreement or in any Schedule
delivered pursuant hereto shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, and the Shareholders shall have each delivered to
the Purchaser a certificate, dated the Closing Date, to such effect.
7.02 Covenants and Agreements of the Shareholders. The Shareholders
shall have caused all covenants, agreements, and conditions required by this
Agreement to be performed
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or complied with by them prior to or at the Closing to be so performed or
complied with. The Shareholders shall have each executed and delivered to the
Purchaser a certificate, dated the Closing Date, to such effect.
7.03 Good Standing and Tax Certificates. The Shareholders shall have
delivered to the Purchaser (a) copies of the charters of each of the Companies,
including all amendments thereto, certified by the respective Secretary of State
of the state of incorporation of each of the Companies and (b) certificates as
to the tax status of each of the Companies certified by the tax authority in the
respective jurisdiction of incorporation and each jurisdiction in which such
Company is qualified to do business.
7.04 No Material Adverse Change. Prior to the Closing Date, there shall
have been no material adverse change in the assets or liabilities, the business
or condition, financial or otherwise, the results of operations, or prospects of
any of the Companies since the Balance Sheet Date, and there shall not have been
any events, circumstances or developments which, with the passage of time, might
reasonably be expected to have a Material Adverse Effect on any of the
Companies, and the Shareholders shall have each delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
7.05 No Litigation Threatened. No Proceeding shall have been instituted
or, to the Knowledge of the Shareholders, threatened before a court or other
Governmental Body or by any public authority to restrain or prohibit any of the
Contemplated Transactions, and the Shareholders shall have each delivered to the
Purchaser a certificate, dated the Closing Date, to such effect.
7.06 Consents; Filings. All Consents necessary to permit the
consummation of the Contemplated Transactions shall have been received. All
filings shall have been duly filed, given, obtained or taken on or prior to the
Closing Date and will be in full force and effect on the Closing Date.
7.07 Proceedings. All Proceedings to be taken in connection with the
Contemplated Transactions and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel and the
Purchaser shall have received copies of all such documents and other evidences
as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
7.08 Opinion of Counsel. The Shareholders shall have furnished the
Purchaser with a favorable opinion, dated the Closing Date, of Shaw, Pittman,
Potts & Trowbridge in substantially the form of Exhibit O attached hereto.
7.09 Restrictive Agreements; Change of Control Payments. All agreements
restricting the transfer of the shares of the Stock to the Purchaser shall have
been terminated. The
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optometrists and other persons listed on Exhibit J attached hereto shall have
executed and delivered a Termination and Release Agreement with respect to the
right to receive any termination payment and his or her respective employment
agreement. Concurrent with the Closing, such optometrists and other persons
shall be paid the consideration set forth in the respective Termination and
Release Agreement, such payment being deemed to be made by the entity set forth
on Exhibit J.
7.10 PC Purchase Agreement. The transactions contemplated by the Master
Transaction Agreement and the PC Purchase Agreement shall be consummated prior
to or concurrent with the Closing upon the terms set forth in such agreements,
and none of the Doctor's conditions to closing set forth in the PC Purchase
Agreement shall have been waived by the Doctor without the prior written consent
of the Purchaser.
7.11 Management Services Agreements. The Professional Corporation shall
have executed the Management Services Agreements.
7.12 Optometric Director Agreement. The Doctor, and entity owned by the
Doctor and HEI shall have executed and delivered the Optometric Director
Agreement.
7.13 Consulting Agreement. Dr. Samit shall have executed and delivered
the Consulting Agreement.
7.14 Non-Competition Agreement. Dr. Davidson shall have executed and
delivered the Non-Competition Agreement.
7.15 Employment and Non-Competition Agreements. The optometrists listed
on Exhibit J attached hereto and the Professional Corporation shall have
executed and delivered the Employment and Non-Competition Agreements.
7.16 Key Employee. Robert H. Brodney shall have executed and delivered
the Employment Agreement.
7.17 Escrow Agreement. The Shareholders and the Escrow Agent shall have
executed and delivered the Escrow Agreement.
7.18 Financing. The Purchaser shall have obtained financing, upon terms
acceptable to Purchaser, as necessary to fund the acquisition of the Stock.
7.19 Related Party Debt. All amounts owed to any of the Companies by
Related Persons of the Companies or the Shareholders shall have been repaid in
full prior to or at the Closing.
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7.20 Resignation of Officers and Directors. All of the officers and
directors of each of the Companies, unless otherwise requested by the Purchaser,
shall have resigned effective upon the consummation of the Contemplated
Transactions.
7.21 Bank Accounts. The permitted signatories on each of the bank
accounts of the Acquired Companies shall have been changed as instructed by the
Purchaser.
7.22 Leases; Landlord Estoppel Letters. The landlords with respect to
each of the real property leases of the Companies shall have delivered estoppel
certificates (the "Landlord Estoppel Certificate") in substantially the form of
Exhibit P attached hereto with such changes, additions and deletions acceptable
to the Purchaser. Each of the leases with respect to the Companies' stores shall
be assigned to Visionary Properties, Inc., a Delaware corporation and
wholly-owned indirect Subsidiary of ECCA and concurrently sublet to the
Professional Corporation (with respect to the stores in Virginia) and to HEI
(with respect to the stores in Maryland and Washington D.C.), such sublease (the
"Sublease Agreement") to be in substantially the form of Exhibit Q attached
hereto with such changes, additions and deletions acceptable to the Purchaser.
The form of Assignment (the "Assignments") assigning each such Lease to
Visionary Properties, Inc., shall be in substantially the form of Exhibit R
attached hereto with such changes, additions and deletions acceptable to the
Purchaser. Each estoppel certificate shall so reflect the landlord's consent to
such assignment and concurrent sublease.
7.23 Management of Herndon Store. The Management Agreement between Eye
Care Centers, Inc. and the Professional Corporation with respect to the
management of the Hemdon, Virginia store shall be in such form and substance
satisfactory to the Purchaser.
7.24 Option to Purchase the Professional Corporation. The Doctor shall
have executed and delivered to the Purchaser the Option Agreement (the "Option
Agreement") in the form of Exhibit S attached hereto granting to the optionee,
or its designee, an option to purchase all of the shares of common stock of the
Professional Corporation.
7.25 Release. Each of the Shareholders shall have executed and
delivered to the Purchaser a Release.
7.26 HSR Certificate. Dr. Robert Samit shall have executed and
delivered a certificate, in form satisfactory to the Purchaser, to the effect
his total assets for purposes of the HSR Act are less than $10,000,000.
7.27 Management Agreement. Any management agreement between TSGI and
any of the other Companies shall be terminated prior to Closing.
ARTICLE VIII
CONDITIONS TO THE SHAREHOLDERS' OBLIGATIONS
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All obligations of the Shareholders to be discharged under this
Agreement at the Closing are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions, unless waived in writing by the
Shareholders prior to or at the Closing:
8.01 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchaser shall have delivered to the Shareholders a certificate, dated the
Closing Date, to such effect.
8.02 Covenants and Agreements of the Purchaser. The Purchaser shall
have caused all covenants, agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing to be so
performed or complied with. The Purchaser shall have executed and delivered to
the Shareholders a certificate, dated the Closing Date, to such effect.
8.03 No Litigation Threatened. No Proceeding shall have been instituted
or, to the Knowledge of the Purchaser, threatened before a court or other
Governmental Body or by any public authority to restrain or prohibit any of the
Contemplated Transactions.
8.04 Consents; Filings. All Consents, if any, necessary to permit the
consummation of the Contemplated Transactions shall have been received. All
filings shall have been duly filed, given, obtained or taken on or prior to the
Closing Date and will be in full force and effect on the Closing Date.
8.05 Proceedings. All Proceedings to be taken in connection with the
Contemplated Transactions and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Shareholders and their
respective counsel, and the Shareholders shall have received copies of all such
documents and other evidences as they or their counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
8.06 Escrow Agreement. The Purchaser and the Escrow Agent shall have
executed and delivered the Escrow Agreement.
8.07 Consulting Agreement. The Purchaser shall have executed and
delivered the Consulting Agreement.
8.08 PC Purchase Agreement. The transactions contemplated by the Master
Transaction Agreement and the PC Purchase Agreement shall be consummated prior
to or concurrent with the Closing.
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8.09 Dr. Davidson Agreement. The letter agreement between Dr. Davidson
and the Purchaser regarding Dr. Davidson's practice and its relationship to the
Companies post-Closing shall be in form and substance satisfactory to Dr.
Davidson and shall have been executed by all parties thereto.
8.10 Officers' Certificates. The certificates contemplated in SECTION
2.06(a)(III) shall have been delivered to the Purchaser and the Shareholders.
ARTICLE IX
INDEMNIFICATION; REMEDIES
9.01 Survival, Right to Indemnification Not Affected by Knowledge. All
representations warranties, covenants, and obligations in this Agreement and the
Schedules attached hereto, and the certificates delivered pursuant to SECTION
2.06 hereof, and any other certificate or document delivered pursuant to this
Agreement shall survive the Closing. The right of any party hereto to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based upon the accuracy of
any representation or warranty, or upon the performance of or compliance with
any covenant or obligation, will not affect the right of any party hereto to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
9.02 Indemnification and Payment of Damages by Shareholders. The
Shareholders Jointly and severally will indemnify and hold harmless the
Purchaser, and its Representatives, shareholders, controlling persons, and
Affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of any loss, liability, claim, damage (including
all damages to which such party is entitled under applicable laws), or expense
(including costs of investigation and defense and reasonable attorneys' fees),
whether or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by any
of the Shareholders in this Agreement or any Schedule attached hereto, or any
other certificate or document delivered by any of the Shareholders pursuant to
this Agreement;
(b) any Breach of any representation or warranty made by any
of the Shareholders in this Agreement as if such representation or warranty were
made on and as of the Closing Date without giving effect to any supplement to
the Schedules attached hereto;
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<PAGE> 48
(c) any Breach by either of the Shareholders of any covenant
or obligation of such Shareholders in this Agreement;
(d) any product shipped or manufactured by, or any services
provided by, the Companies prior to the Closing Date;
(e) any matter disclosed in Schedule 3.28;
(f) any liability or obligation of any of the Companies as of
the Closing Date not reflected on the Closing Date Balance Sheet as it may be
adjusted pursuant to the provisions of SECTIONS 2.03(b) and (c);
(g) any claim by any Person for broker's or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any of the Shareholders or any
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions;
(h) the Medicaid Investigation;
(i) any liability or obligation arising out of or relating to
the failure of the Shareholders to obtain any consent required in connection
with consummation of the Contemplated Transactions including, without
limitation, the Landlord Estoppel Certificate and consents contained therein;
provided, however, that the Shareholders shall be entitled to reasonable control
of the process of obtaining the Landlord Estoppel Certificates on and after the
Closing Date; and provided further that this indemnification shall not apply to
(a) any Landlord Estoppel Certificate or lease assignment that the Shareholders
fall to obtain as a result of ECCA's failure to consent to any reasonable terms
the landlords seek in connection with such Certificate or assignment, or (b) the
lease for real property located at 4301 Wisconsin Ave., N.W., Washington, D.C.;
or
(j) any liability or obligation arising out of or relating to
the leasehold interest conveyed to Day, Patterson & Whitten, M.D., P.C. pursuant
to that certain Asset Purchase Agreement dated March 28, 1995 by and between
MVS, the Professional Corporation and Day, Patterson & Whitten, M.D., P.C.
The remedies provided in this SECTION 9.02 will not be exclusive of or
limit any other remedies that may be available to the Purchaser or the other
Indemnified Persons. The Shareholders acknowledge and agree that the execution
and delivery of the Management Services Agreements and performance thereunder by
the Professional Corporation is a material inducement for the Purchaser to
consummate the Contemplated Transactions and that the Purchaser and its
Affiliates are relying, and are entitled to rely, on the representations and
warranties of the Shareholders herein relating to the Professional Corporation.
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<PAGE> 49
9.03 Indemnification and Payment of Damages by
Shareholders--Environmental Matters. The Shareholders agree, jointly and
severally, to indemnify and hold the Purchaser harmless from Damages suffered or
paid, directly or indirectly, as a result of any and all claims, demands, suits,
causes of action, proceedings, judgments and liabilities (whether asserted
directly or as a common law or statutory claim for contribution or indemnity),
including, without limitation, the costs of any remedial action, expert and
engineering fees, reasonable attorney's fees and costs incurred in litigation or
otherwise, assessed, incurred or sustained by or against any of them with
respect to or arising out of the failure of the representation and warranty set
forth in SECTION 3.28 hereof to be true and correct in all respects as of the
date of this Agreement and as of the Closing Date or the failure of any other
representation or warranty set forth in this Agreement or any Schedule delivered
pursuant hereto to be true and correct in all respects as of the date of this
Agreement and as of the Closing Date as a result of a violation or alleged
violation of any Environmental and Safety Requirements or any environmental
claim against the Companies, the presence or existence of any contaminants or
hazardous material in or on the ground or any ground water or water source or
supply (regardless of whether such contaminant or hazardous material is located
on or under the facilities of the Companies) arising from any use, storage,
transportation, disposal or spill thereof by any of the Companies, the need to
take any remedial action or any release by any of the Companies. The Purchaser
will be entitled to control any cleanup, any related Proceeding, and, except as
provided in the following sentence, any other Proceeding with respect to which
indemnity may be sought under this SECTION 9.03. The procedure described in
SECTION 9.09 will apply to any claim solely for monetary damages relating to a
matter covered by this SECTION 9.03.
9.04 Indemnification and Payment of Damages by the Purchaser. The
Purchaser will indemnify and hold harmless the Shareholders, and will pay to the
Shareholders the amount of any Damages arising, directly or indirectly, from or
in connection with (a) any Breach of any representation or warranty made by the
Purchaser in this Agreement or in any certificate delivered by the Purchaser
pursuant to this Agreement, (b) any Breach by the Purchaser of any covenant or
obligation of the Purchaser in this Agreement, (c) any claim arising after the
Closing Date (i) made by one or more third parties against the Shareholders
based solely on their capacity as officers or directors of any of the Companies
or shareholders of either TSGI or the Professional Corporation prior to the
Closing Date, or (ii) made against any guaranty or lease that either of the
Shareholders may have executed with respect to obligations of any of the
Companies under any of the Leases, in each case to the extent such claim is
based on facts or circumstances arising after the Closing Date and neither the
Purchaser or the Doctor is entitled to indemnification with respect to such
claim pursuant to SECTION 9.02 or 9.03 hereof or SECTION 9.02 or 9.03 of the PC
Purchase Agreement, respectively, or (d) any claim by any Person for broker's or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with the Purchaser (or
any Person acting on its behalf) in connection with any of the transactions
contemplated hereby.
9.05 Time Limitations. If the Closing occurs, the Shareholders will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant
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<PAGE> 50
or obligation to be performed and complied with prior to the Closing Date,
(other than those in SECTIONS 3.01, 3.03, 3.15, 3.199 3.239 3.28, 3.299 3.30 and
3.31), unless on or before April 30, 2000, the Purchaser notifies the
Shareholders of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by the Purchaser; provided, however, a claim
with respect to SECTION 3.15 or 3.23 may be made by the Purchaser at any time
prior to the expiration of the applicable statute of limitations, including any
extension thereof, provided further that with respect to a claim made in
connection with SECTIONS 3.19, 3.28, 3.29, 3.30 or 3.31, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date (other than SECTION 9.02(H) if there has not been a Final
Settlement of the Medicaid Investigation), the Shareholders will have no
liability (for indemnification or otherwise) unless on or before April 30, 2003
the Purchaser notifies the Shareholders of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by the Purchaser;
and further provided that a claim with respect to SECTIONS 3.01 or 3.03, or
SECTION 9.02(H) may be made at any time. If the Closing occurs, the Purchaser
will have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before April 30, 2000,
Shareholders notify the Purchaser of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Shareholders,
provided, however, that a claim made in connection with SECTION 9.04(c) may be
made at any time.
9.06 Limitations on Amount -- Shareholders. Except as provided in the
following two sentences, with respect to the matters described in SECTIONS
9.02(a) or (b) and SECTION 9.03 of this Agreement or SECTIONS 9.02(a) and (b)
and SECTION 9.03 of the PC Purchase Agreement, the Shareholders will have no
liability (for indemnification or otherwise) until, and only to the extent that,
the total of all Damages under such Sections with respect to such matters
exceeds $100,000 in the aggregate. This SECTION 9.06 will not apply to any
Breach of any of the Shareholders' representations, warranties or covenants
contained in SECTIONS 3.01, 3.03, 3.15, 3.16, 3.29, 3.30 and 3.31.
Notwithstanding anything in SECTIONS 9.02 or 9.03 to the contrary, the
Shareholders indemnification liability to the Purchaser under SECTIONS 9.02 and
9.03 of this Agreement and SECTIONS 9.02 and 9.03 of the PC Purchase Agreement
shall not exceed $15,000,000 in the aggregate; provided, however, that this
limitation shall not apply to claims or losses arising from fraud, willful
misfeasance, gross negligence or misconduct committed by either of the
Shareholders. This SECTION 9.06 will not apply to any Breach of any of the
Shareholders' representations and warranties of which the Shareholders had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by either of the Shareholders of any
covenant or obligation, and Shareholders will be jointly and severally liable,
for all Damages with respect to such Breaches.
9.07 Limitation on Amount -- the Purchaser. Except as provided in the
following two sentences, with respect to the matters described in SECTION
9.04(a) of this Agreement and SECTIONS 9.04(a) of the PC Purchase Agreement, the
Purchaser will have no liability (for
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<PAGE> 51
indemnification or otherwise) until, and only to the extent that, the total of
all Damages with respect to such matters exceeds $100,000 in the aggregate. This
SECTION 9.07 will not apply to (i) any Breach of any of the Purchaser's
representations and warranties of which the Purchaser had Knowledge at any time
prior to the date on which such representation and warranty is made, (ii) any
intentional Breach by the Purchaser of any covenant or obligation, or (iii) any
Breach of the Purchaser's obligations under SECTION 9.04(c) and the Purchaser
will be liable for all Damages with respect to such Breaches.
9.08 Escrow. Upon notice to the Shareholders, the Purchaser may give
notice of an indemnification claim pursuant to SECTION 9.02 or 9.03 and assert
such claim against the Escrow Amount in accordance with the terms of the Escrow
Agreement. Neither the exercise of nor the failure to give a notice of a claim
under the Escrow Agreement will constitute an election of remedies or limit the
Purchaser in any manner in the enforcement of any other remedies that may be
available to it.
9.09 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party under
SECTION 9.02, 9.03 or 9.04 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in SECTION 9.09(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes or the Medicaid Investigation, be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (1) the
indemnifying party is also a party to such Proceeding and the indemnified party
reasonably determines that joint representation would be inappropriate, or (11)
the indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Article IX for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the
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<PAGE> 52
indemnified party's consent unless (a) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any Person and
no effect on any other claims that may be made against the indemnified party,
and (b) the sole relief provided is monetary damages that are paid in full by
the indemnifying party; and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected without its
consent. If notice is given to an indemnifying party of the commencement of any
Proceeding and the indemnifying party does not, within twenty (20) days after
the indemnified party's notice is given, give notice to the indemnified party of
its election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any reasonable
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) The Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Shareholders with respect
to such a claim anywhere in the world.
9.10 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
9.11 Procedure for Indemnification - Medicaid Investigation.
(a) With respect to the Medicaid Investigation of the
Companies, the Shareholders shall be entitled to participate with the Companies
in the defense of the Medicaid Investigation; provided, however, if (i) the
Purchaser determines in good faith that there is a reasonable probability prove
that the Medicaid Investigation may adversely affect it, its Subsidiaries or its
Affiliates, (11) the Purchaser reasonably believes such participation would be
inappropriate due to a conflict of interest, or (111) such Medicaid
Investigation has not been finally settled or compromised with respect to the
Companies subject thereto within 180 days of receipt by the Companies of a
notice of a claim, charges or other action from the OCC or other applicable
regulatory authority, the Purchaser may conduct the defense of the Medicaid
Investigation on behalf of the Companies and take such actions to settle and
compromise the Medicaid Investigation as it relates to the Companies subject to
such investigation in the manner
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<PAGE> 53
it deems appropriate or advisable. Without limiting the generality of SECTION
9.02(h), the Shareholders will be liable to the Purchaser under this Article IX
for all reasonable fees of counsel or any other expenses and costs with respect
to the defense of the Medicaid Investigation. No compromise or settlement of the
Medicaid Investigation, or any portion thereof, may be effected by the
Shareholders (whether such settlement or compromise relates to either of the
Shareholders or any Related Person of the Shareholders), without the Purchaser's
consent, which may be withheld in its sole discretion; provided, however, the
Purchaser shall be obligated to consent to such settlement or compromise if (a)
there is no finding or admission by any of the Companies of any violation of
Legal Requirements or of any violation of the rights of any Person and no effect
on any other claims that may be made by the Purchaser against the Shareholders,
(b) the sole relief provided is monetary damages that are paid in full by the
Shareholders or other third parties (of which no more than $750,000 shall be
assessed against the Companies), and (c) such compromise or settlement
represents the full and final settlement with respect to the Companies as to all
matters that are then subject to the Medicaid Investigation and the Companies
are fully and finally released from all claims related thereto, such settlement
agreement and related release to be in form and substance reasonably
satisfactory to the Purchaser.
(b) In the event that the Purchaser shall negotiate and enter
into a compromise or settlement with the appropriate Governmental Body with
respect to the Companies as to the matters that are then subject to the Medicaid
Investigation, the Shareholders will not be obligated to indemnify the Purchaser
with respect to any compromise or settlement effected without its consent (which
consent of the Shareholders may not be unreasonably withheld); provided,
however, if the Purchaser determines in good faith that there is a reasonable
probability that the Medicaid Investigation may adversely affect it or its
Affiliates, the Purchaser shall have the right to compromise, or settle such
Medicaid Investigation in its discretion and the Shareholders will be obligated
to indemnify the Purchaser with respect to a reasonable settlement or
compromise, or to the extent any settlement or compromise is reasonable.
Notwithstanding any provision in this Agreement to the contrary, the Purchaser
shall be entitled to recover from the Escrow Account the entire amount of such
settlement or compromise. If the Shareholders believe such settlement or
compromise is unreasonable, the Shareholders' sole remedy shall be to attempt to
recover the amounts by which such settlement or compromise is unreasonable
through the arbitration process set forth in SECTION 10.14.
(c) The Shareholders acknowledge and agree that the Escrow
Funds are not intended to be applied toward any monetary damages relating to the
Medicaid Investigation to be paid by either of the Shareholders or any Related
Person of any of the Shareholders, and such funds are intended to secure the
indemnity obligations of the Shareholders with respect to monetary and other
damages of the Companies arising out of the Medicaid Investigation and with
respect to other indemnification claims by the Purchaser under this Article IX
(d) The execution and delivery by all of the Companies subject
to the Medicaid investigation of a full and final settlement or compromise of
the Medicaid
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<PAGE> 54
Investigation as it relates to all of such Companies in accordance with SECTION
9.11(a) or (b) above, and the payment by the Shareholders of indemnification
obligations with respect thereto as provided in SECTION 9.02(h), is herein
referred to as the "Final Settlement of the Medicaid Investigation."
9.12 Right of Off-Set. If the Purchaser reasonably believes that it, or
any of its Affiliates, has suffered, or will suffer, Damages for which it is
entitled to indemnification under this Agreement, the Purchaser may, but if and
only to the extent that the Escrow Amount is less than the sum of all
indemnification claims against the Shareholder hereunder and under the PC
Purchase Agreement, withhold any payments owed to Dr. Samit with respect to the
Consulting Agreement, in such amounts equal to the amount of such Damages or a
reasonable estimate thereof, as a set-off and in satisfaction of such
indemnification claims. If the Purchaser withholds payments with respect to any
Damages it estimates it will suffer, the Purchaser shall pay to Dr. Samit the
amount, if any, by which such off-set amount exceeds the Damage actually
incurred, plus simple interest on such excess amount at the annual rate equal to
the lesser of 12% or the maximum rate allowed by applicable law, calculated from
the date of such off-set to the day preceding the date of payment of such excess
to Dr. Samit.
ARTICLE X
MISCELLANEOUS
10.01 Termination. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(i) by the mutual written agreement of the Purchaser
and the Shareholders;
(ii) by either the Purchaser, on the one hand, or the
Shareholders, on the other hand, if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived or cured;
(iii) (a) by the Purchaser if any of the conditions
contained in Article VII has not been satisfied as of the Closing, or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of the Purchaser to comply with its obligations under this
Agreement) and the Purchaser has not waived such condition on or before October
31, 1997, or (b) by the Shareholders if any of the conditions in Article VIII
has not been satisfied as of October 31, 1997, or if satisfaction of such a
condition is or becomes impossible (other than through the failure of the
Shareholders to comply with their obligations under this Agreement) and the
Shareholders have not waived such condition on or before October 31, 1997.
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<PAGE> 55
(iv) if the Closing shall not have occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) as of October 31, 1997,
or such later date as the parties may agree upon in writing.
(b) Nothing in this SECTION 10.01 shall relieve any party of
any liability for a Breach of this Agreement prior to the termination hereof.
10.02 Knowledge of the Shareholders. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
Knowledge, information and/or belief of the Shareholders, the Shareholders
confirm that they have made due and diligent inquiry as to the matters that are
the subject of such representations and warranties.
10.03 Expenses. The parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers; provided, however, that any filing fees incurred in connection with
the a filing required under the HSR Act, if any, in connection with the
Contemplated Transactions shall be borne one-half (1/2) by the Shareholders and
one-half (1/2) by the Purchaser, pro rata in accordance with their respective
percentage ownership of the Stock as set forth on Exhibit A attached hereto.
10.04 Governing Law. The interpretation and construction of this
Agreement, the Contemplated Transactions and all matters relating hereto, shall
be governed by the laws of the State of Delaware.
10.05 Enforcement, Service of Process. In the event either party shall
seek enforcement of any covenant, warranty or other term or provision of this
Agreement or seek to recover damages for the breach thereof, the party which
prevails in such proceedings shall be entitled to recover reasonable attorneys'
fees and expenses actually incurred by it in connection therewith. The parties
hereto agree that the service of process or any other papers upon them or any of
them by any of the methods specified and in accordance with SECTION 10.07 hereto
(other than by telecopy) shall be deemed good, proper, and effective service
upon them.
10.06 Captions, References. The Article and Section captions used
herein are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement. References to a "Section" or
"Subsection" when used without further attribution shall refer to the particular
sections or subsections of this Agreement.
10.07 Notices. Any notice or other communications required or permitted
hereunder shall be in writing and, unless otherwise provided herein, shall be
deemed to have been duly given upon delivery in person, by telecopy, by
overnight courier or by certified or registered mail, return receipt requested,
as follows:
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<PAGE> 56
If to the Shareholders: Robert Samit, O.D.
7009 Deep Creek Court
Bethesda, Maryland 20817
Facsimile: (301) 229-5354
and: Michael Davidson, O.D.
8350 Traford Lane
Springfield, Virginia 22152
Facsimile: (703) 569-3536
With a copy to: Shaw, Pittman, Potts & Trowbridge
2300 N. St., NW.
Washington, D.C. 20037
Attn: Thomas H. McCormick, Esq.
Facsimile: (202) 663-8007
If to the Purchaser: Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213-1392
Attention: Bernard Andrews, President
Facsimile: (210) 524-6996
With a copy to: Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Attention: James B. Smith, Jr.
Facsimile: (210)226-8395
or at such other address or telecopy number as shall have been furnished in
writing by any such party, except that such notice of such change shall be
effective only upon receipt. Each such notice or other communication shall be
effective when received or, if given by mail, when delivered at the address
specified in this SECTION 10.07 or on the fifth business day following the date
on which such communication is posted, whichever occurs first.
10.08 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may not be transferred, assigned, pledged
or hypothecated by any party hereto except that the Purchaser shall have the
right, at or before the Closing, to designate (a) a direct or indirect
wholly-owned subsidiary to which it may assign it rights and obligations
hereunder respecting the purchase of the Stock (a "Designee"); provided, however
that any such designation shall (i) be made in writing and be in form and
substance reasonably satisfactory to the Shareholders and (ii) evidence the
agreement of the Designee to assume and agree to perform the obligations of the
Purchaser hereunder and to be bound by this Agreement;
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<PAGE> 57
provided, however such assumption and agreement by the Designee shall not
relieve or release the Purchaser from any of the Purchaser's obligations
hereunder or those pursuant to any agreement or other document entered into or
executed pursuant to this Agreement, as to which obligations the Purchaser shall
be jointly and severally liable with the Designee, as a principal and not as a
surety.
10.09 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
10.10 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof or any other written agreements that
the parties enter into pursuant to or relating to the transactions contemplated
by this Agreement, contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter. All exhibits and schedules referred to herein
and attached hereto are incorporated herein by reference.
10.11 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchaser and the Shareholders.
10.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto and any Designee of the
Purchaser.
10.14 Arbitration, Waiver of Trial By Jury (a) Any and every dispute of
any nature whatsoever that may arise between the parties, whether sounding in
contract, statute, tort, fraud, misrepresentation, discrimination or any other
legal theory, including, but not limited to, disputes relating to or involving
the construction, performance or breach of this Agreement, the Master
Transaction Agreement, the PC Purchase Agreement, or any schedule, certificate
or other document delivered by any party hereto or thereto, or any other
agreement between the parties, whether entered into prior to, on, or subsequent
to the date of this Agreement, or those arising under any federal, state or
local law, regulation or ordinance, shall be determined by binding arbitration
in accordance with the then-current commercial arbitration rules of the American
Arbitration Association, to the extent such rules do not conflict with the
provisions of this paragraph. If the amount in controversy in the arbitration
exceeds Two Hundred Fifty Thousand Dollars ($250,000), exclusive of interest,
attorneys fees and costs, the arbitration shall be conducted by a panel of three
(3) neutral arbitrators. Otherwise, the arbitration shall be conducted by a
single neutral arbitrator. The parties shall endeavor to select neutral
arbitrators by mutual agreement. If such agreement cannot be reached within
thirty (30) calendar days after
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<PAGE> 58
a dispute has arisen which is to be decided by arbitration, any party or the
parties jointly shall request the American Arbitration Association to submit to
each party an identical panel of fifteen (15) persons. Alternate strikes shall
be made to the panel, commencing with the party bringing the claim, until the
names of three (3) persons remain, or one (1) person if the case is to be heard
by a single arbitrator. The parties may, however, by mutual agreement, request
the American Arbitration Association to submit additional panels of possible
arbitrators. The person(s) thus remaining shall be the arbitrator(s) for such
arbitration. If three (3) arbitrators are selected, the arbitrators shall elect
a chairperson to preside at all meetings and hearings. The arbitrator(s), or a
majority of them, shall have the power to determine all matters incident to the
conduct of the arbitration, including without limitation all procedural and
evidentiary matters and the scheduling of any hearing. The award made by a
majority of the arbitrators shall be final and binding upon the parties thereto
and the subject matter. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the award
rendered by the arbitrator(s) may be entered by any court having jurisdiction
thereof The arbitrators shall have no authority to award punitive or exemplary
damages or any statutory multiple damages, and shall only have the authority to
award compensatory damages, arbitration costs, attorneys' fees, declaratory
relief and permanent injunctive relief, if applicable. Unless otherwise agreed
by the parties, the arbitration shall be held in Atlanta, Georgia This SECTION
10.14 shall not prevent either party from seeking a temporary restraining order
or temporary or preliminary injunctive relief from a court of competent
jurisdiction in order to protect its rights under this Agreement. In the event a
party seeks such injunctive relief pursuant to this Agreement, such action shall
not constitute a waiver of the provisions of this SECTION 10.14, which shall
continue to govern any and every dispute between the parties, including without
limitation the right to damages, permanent injunctive relief and any other
remedy, at law or in equity.
(b) EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE WHATSOEVER THAT MAY ARISE BETWEEN
THEM, INCLUDING, BUT NOT LIMITED TO, THOSE DISPUTES RELATING TO OR INVOLVING, IN
ANY WAY THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT OR ANY OTHER
AGREEMENT BETWEEN THE PARTIES, THE PROVISIONS OF ANY FEDERAL, STATE OR LOCAL
LAW, REGULATION OR ORDINANCE NOTWITHSTANDING. By execution of this Agreement,
each of the parties hereto acknowledges and agrees that he/she/it has had an
opportunity to consult with legal counsel and that he/she/It knowingly and
voluntarily waives any night to a trial by jury of any dispute pertaining to or
relating in any way to the transactions contemplated by this Agreement, the
provisions of any federal, state or local law, regulation or ordinance
notwithstanding.
IN WITNESS WHEREOF, the Purchaser and the Shareholders have executed
this Agreement to be effective as of the day and year first above written.
- 58 -
<PAGE> 59
EYE CARE CENTERS OF AMERICA, INC.
By: /s/ Mark Pearson
--------------------------------
Title: CFO
/s/Dr. Robert A. Samit
--------------------------------
Dr. Robert A. Samit
/s/ Michael Davidson
--------------------------------
Dr. Michael Davidson
- 59 -
<PAGE> 1
EXHIBIT 2.3
================================================================================
RECAPITALIZATION AGREEMENT
Dated as of March 6, 1998
Among
ECCA MERGER CORP.,
EYE CARE CENTERS OF AMERICA, INC.,
and
THE SELLERS NAMED HEREIN
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
Definitions
1.1 Defined Terms....................................................1
1.2 Other Definitions...............................................11
ARTICLE II
The Recapitalization
2.1 The Merger......................................................11
2.2 Effective Time; Closing.........................................12
2.3 Articles of Incorporation and By-Laws...........................12
2.4 Directors and Officers..........................................12
2.5 Company Actions Prior to the Effective Time.....................13
2.6 Effect on Capital Stock.........................................14
2.7 Capital Stock of Newco..........................................16
2.8 Exchange of Certificates........................................16
2.9 Dissenter's Rights..............................................17
2.10 Stock Transfer Books............................................18
2.11 No Further Ownership Rights in Company Stock....................18
2.12 Lost, Stolen or Destroyed Certificates..........................18
2.13 Adjustments to Merger Consideration.............................18
2.14 Authorization of Merger and this Agreement;
Waiver of Dissenter's Rights.................................21
2.15 Further Action..................................................22
2.16 Reservation of Right to Revise Transaction......................22
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Company and the Sellers...22
3.2 Representations and Warranties of Newco.........................40
ARTICLE IV
Conditions to Closing
4.1 Conditions to the Obligations of Sellers and Newco..............42
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C>
4.2 Conditions to the Obligations of Newco..........................42
4.3 Conditions to the Obligations of the Sellers....................44
ARTICLE V
Covenants
5.1 Interim Operations of the Company...............................45
5.2 Access by Newco; Confidentiality................................47
5.3 Consents and Reasonable Best Efforts............................48
5.4 Notification of Certain Matters.................................49
5.5 Publicity.......................................................49
5.6 Notice of Cancellation..........................................49
5.7 Senior Notes Offer..............................................49
5.8 Employee Benefits...............................................50
5.9 Non-solicitation of Employees...................................50
5.10 Further Assurances..............................................50
5.11 Exclusivity.....................................................51
ARTICLE VI
Survival
6.1 Survival of Representations, Warranties and Covenants...........51
ARTICLE VII
Miscellaneous
7.1 Payment of Expenses.............................................51
7.2 Waiver of Conditions............................................51
7.3 Termination.....................................................52
7.4 Schedules.......................................................53
7.5 Counterparts....................................................53
7.6 Governing Law...................................................53
7.7 Notices.........................................................53
7.8 Entire Agreement, etc...........................................54
7.9 Captions........................................................54
7.10 Tax Matters.....................................................55
7.11. Seller Representative...........................................56
EXHIBITS
</TABLE>
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<PAGE> 4
A Form of Plan of Merger
B Form of Company's Charter
C Form of Opinion of Counsel to the Company
D Form of Non-Competition Agreement
E Form of Opinion of Counsel to Newco
SCHEDULES
Schedule 2.5 Sale and Purchase of the Securities
Schedule 2.6(g) Rollover Shares
Schedule 3.1(c) Authorized Capital
Schedule 3.1(e) Consents and Approvals (Company and Sellers)
Schedule 3.1(g) Compliance with Law
Schedule 3.1(h)(i) Lease Consents
Schedule 3.1(h)(ii) Owned Real Property
Schedule 3.1(h)(iii) Title and Leasehold Exceptions
Schedule 3.1(i) Subsidiaries
Schedule 3.1(j) Contracts and Commitments
Schedule 3.1(l) Certain Changes
Schedule 3.1(m) Certain Liabilities
Schedule 3.1(n) Plans
Schedule 3.1(o) Litigation
Schedule 3.1(p) Taxes
Schedule 3.1(q) Intellectual Property
Schedule 3.1(r) Environmental Matters
Schedule 3.1(s) Material Insurance Policies
Schedule 3.1(u) Employee Matters
Schedule 3.1(v) Contingent Payments
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<PAGE> 5
RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT (this "Agreement"), dated as of March 6,
1998, among ECCA Merger Corp., a Delaware corporation ("Newco"), Eye Care
Centers of America, Inc., a Texas corporation (the "Company"), and the Sellers
identified on the signature pages to this Agreement (the "Sellers").
WHEREAS, the Sellers collectively own of record or beneficially
substantially all of the issued and outstanding capital stock of the Company and
all other securities of the Company that are convertible into or exercisable or
exchangeable for shares of capital stock of the Company other than the Class A
Warrants and the BNP Warrant (as such terms are defined herein); and
WHEREAS, each Seller owns (a) that number of shares ("Outstanding
Shares") of Common Stock, par value $.01 per share ("Common Stock"), of the
Company, (b) that number of shares ("Preferred Shares") of Preferred Stock (as
defined herein) of the Company, (c) that number of Class B Warrants (as defined
herein) of the Company and (d) Employee Options (as defined herein) to purchase
that number of shares of Common Stock of the Company, in each case as is set
forth opposite such Seller's name on Schedule 2.5; and
WHEREAS, the Boards of Directors of the Company and Newco have each
determined that it is advisable to effect a recapitalization of the Company by
means of a merger of Newco with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of the Merger, the Boards of Directors of
the Company and Newco have each approved the merger of Newco with and into the
Company in accordance with the applicable provisions of the Texas Business
Corporation Act (the "TBCA") and the Delaware General Corporation Law ("DGCL"),
respectively;
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Defined Terms. For purposes of this Agreement, including the
Exhibits and Schedules hereto, the following terms have the meanings assigned to
them:
<PAGE> 6
"Actions" has the meaning specified in Section 3.1(o).
"Adjusted Net Working Capital" has the meaning specified in
Section 2.13(b).
"Adjustment Date" has the meaning specified in Section 2.13(b).
"Affiliate" shall mean a Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
with the Person specified. For purposes of this definition and as used elsewhere
in this Agreement, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to (i) vote 10% or more of the
voting securities of such Person or (ii) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Aggregate Funding Amount" has the meaning specified in Section
2.6(a).
"Aggregate Merger Consideration" has the meaning specified in
Section 2.6(a).
"Agreement" means this Recapitalization Agreement and includes the
Exhibits and Schedules hereto.
"Applicable Laws" means any federal, state, local or foreign
statute, law or ordinance, or any regulation, rule, order, policy or procedures
of any Governmental Authority, including without limitation any of the foregoing
which relate to fraud and abuse, kick-backs, false claims, physician referrals,
antitrust matters and Environmental Laws.
"BNP" means Banque Nationale de Paris.
"BNP Warrant" means the warrant to purchase Common Stock of the
Company held by BNP.
"BNP Warrant Shares" has the meaning specified in Section 2.6(f).
"Business Day" means any day other than a Saturday, Sunday or day on
which banks are required or authorized to close in The City of New York.
"CAI Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of October 7, 1993, by and among the Company, Credit
Agricole Indosuez, New York Branch, and the Lending Institutions named therein,
as amended through the date hereof.
"Certificate" has the meaning specified in Section 2.8(a).
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<PAGE> 7
"Class A Warrant Agreement" means the Warrant Agreement, dated as of
October 7, 1993, between the Company (formerly Eye Care Holdings, Inc.) and
United States Trust Company of New York, Warrant Agent.
"Class A Warrantholder" means a "Holder" as defined under the Class
A Warrant Agreement.
"Class A Warrants" means the warrants to acquire Common Stock issued
under the Class A Warrant Agreement.
"Class A Warrant Shares" has the meaning specified in Section
2.6(d).
"Class B Warrant Agent" means United States Trust Company of New
York, as Warrant Agent under the Class B Warrant Agreement.
"Class B Warrant Agreement" means the Warrant Agreement, dated as of
September 27, 1996, between the Company and United States Trust Company of New
York, as Warrant Agent.
"Class B Warrantholder" means each Seller having any number of Class
B Warrants set forth opposite such Seller's name on Schedule 2.5.
"Class B Warrants" means the Class B Warrants to Purchase Common
Stock issued under the Class B Warrant Agreement.
"Class B Warrant Shares" has the meaning specified in Section
2.5(a).
"Closing" has the meaning specified in Section 2.2.
"Closing Date" has the meaning specified in Section 2.2.
"Closing Time" means the time the Closing actually occurs on the
Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Exchange Shares" means all Common Shares as to which the
Seller or Sellers owning such shares have elected to exchange such Common Shares
for shares of New Preferred Stock, as set forth on Schedule 2.6(g).
"Common Shares" means, collectively, the Outstanding Shares, the
Deferred Shares and the Class B Warrant Shares outstanding immediately prior to
the Effective Time.
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<PAGE> 8
"Common Stock" has the meaning specified in the recitals hereto.
"Company" means Eye Care Centers of America, Inc., a Texas
corporation.
"Company Transaction Expenses" means the out-of-pocket fees and
expenses, including fees and expenses of accountants, attorneys and financial
advisers, incurred by the Company and the Sellers in connection with the
negotiation, preparation, documentation and closing of the transactions
contemplated by this Agreement (including the Senior Notes Offer). Company
Transaction Expenses also shall include an aggregate of up to $150,000 of
signing bonuses paid by the Company after the date of this Agreement and prior
to the Closing Date to senior executive officers hired by the Company during
such time. In no event shall Company Transaction Expenses include any premium,
penalty or interest accrued, paid or payable in respect of the Senior Notes or
any of them.
"Confidentiality Agreement" has the meaning specified in Section
5.2(c).
"Contract" means any agreement, lease, contract, note, purchase
order, instrument, order, mortgage, indenture, commitment, arrangement,
understanding or other similar obligation, whether written or oral.
"Consultants" has the meaning specified in Section 3.1(n).
"Deferred Shares" has the meaning specified in Section 2.5(f).
"Deferred Stock Plan Participant" means each participant having a
Deferred Stock Account under the Company's Deferred Stock Plan as of the date of
this Agreement.
"DGCL" has the meaning specified in the recitals hereto.
"Directors" has the meaning specified in Section 3.1(n).
"Dissenter's Shares" has the meaning specified in Section 2.9.
"Effective Date" has the meaning specified in Section 2.2.
"Effective Time" has the meaning specified in Section 2.2.
"Employee" has the meaning specified in Section 3.1(n).
"Employee Option" means each outstanding option, whether or not
vested, to purchase Common Stock, as set forth in Appendix 3.1(c)(1).
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<PAGE> 9
"Employee Optionholder" means each Person listed in Appendix
3.1(c)(1) as a holder of Employee Options.
"Employee Option Shares" means the shares of Common Stock subject to
the Employee Options.
"Encumbrance" means any lien, charge, encumbrance, security
interest, pledge, equity, beneficial interest of others, option, warrant, call,
restriction (other than restrictions on resale without registration arising
under federal or state securities laws) or claim of third party rights of any
nature.
"Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding, request for information or other
communication by any person alleging liability or potential liability (including
without limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages, property
damage, personal injury, fines or penalties) arising out of, relating to, based
on or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Substances at any location, whether or not
owned, leased or operated by the Company or any Subsidiary or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws.
"Environmental Laws" means all applicable national, state,
provincial and local statutes, rules, regulations, ordinances, orders, decrees
and common law relating in any manner to contamination, pollution or protection
of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, the Solid
Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the Emergency Planning and
Community Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar national, state, provincial and local laws.
"Environmental Permits" means all permits, licenses, registrations
and other governmental authorizations required for each of the Company and the
Subsidiaries and the operations of each of the Company's and the Subsidiaries'
facilities and otherwise to conduct its business under Environmental Laws.
"ERISA" has the meaning specified in Section 3.1(n).
"ERISA Affiliate" has the meaning specified in Section 3.1(n).
"ERISA Affiliate Plan" has the meaning specified in Section 3.1(n).
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<PAGE> 10
"Ernst & Young" means Ernst & Young LLP, independent accountants to
the Company.
"Estimated Closing Date Balance Sheet" has the meaning specified in
Section 2.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" has the meaning specified in Section 2.8(b).
"Excluded Shares" has the meaning specified in Section 2.6(b).
" Final Balance Sheet" has the meaning specified in Section 2.13(b).
"Financing Deadline" has the meaning specified in Section 5.3(c).
"Financing Letters" means the Fund IV Letter and the letters, dated
March 5, 1998, previously delivered to the Company, providing for the respective
commitments of Bankers Trust Company, Merrill Lynch Capital Corporation and
Bankers Trust New York Corporation to provide senior and subordinated debt
financing for the Recapitalization.
"Fund IV" means Thomas H. Lee Equity Fund IV, L.P.
"Fund IV Letter" means the commitment letter of Fund IV, dated March
5, 1998, delivered to Newco and the Company providing for the commitment of Fund
IV to provide equity financing for the Recapitalization.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any federal, state, local or foreign
court, tribunal, governmental department, agency, board or commission,
regulatory authority or other governmental body or instrumentality.
"Hazardous Substances" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials, substances and forces,
including but not limited to electromagnetic fields, regulated pursuant to, or
that could form the basis of liability under, any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all applicable regulations promulgated thereunder.
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<PAGE> 11
"Independent Firm" has the meaning specified in Section 2.13(b).
"Indicative Net Working Capital" has the meaning specified in
Section 2.13(a).
"Insurance Policies" has the meaning specified in Section 3.1(s).
"Intellectual Property" has the meaning specified in Section 3.1(q).
"Investor Sellers" means Indosuez Eye Care Partners and Richard W.
Roberson.
"KPMG" means KPMG Peat Marwick LLP, independent accountants to
Newco.
"Lease Agreements" has the meaning specified in Section 3.1(h).
"Lease Consents" has the meaning specified in Section 3.1(h).
"Liquidation Preference per Preferred Share" means $100, plus (i)
accumulated unpaid dividends on each share of Preferred Stock (whether or not
declared) to the Closing Date and (ii) interest on the amount in clause (i) at a
rate equal to 8% per annum, accrued from the date on which such unpaid dividends
were accumulated to the Closing Date.
"Major Marks" has the meaning specified in Section 3.1(q).
"Management Sellers" means all of the Sellers other than the
Investor Sellers.
"Material Adverse Effect" means a material adverse effect on the
financial condition, properties, business, prospects or results of operations of
the Company and the Subsidiaries, considered as a whole.
"Material Contract" has the meaning specified in Section 3.1(j).
"Merger" has the meaning specified in the recitals hereto.
"Newco" has the meaning specified in the recitals hereto.
"New Preferred Stock" means the Preferred Stock of the Surviving
Corporation having the designations, rights, preferences and limitations as
agreed by Fund IV.
"Net Working Capital" means, with respect to a consolidated balance
sheet of the Company and its Subsidiaries as of any date, (x) the sum of
accounts and notes receivable, inventory, and other current assets, MINUS (y)
the sum of accounts payable, accrued liabilities,
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<PAGE> 12
taxes payable and other current liabilities. In no event shall Net Working
Capital be reduced by the current portion of long-term debt, accrued interest,
the Samit Earnout Payment, or accrued Severance and Change in Control Payments.
"Objection" has the meaning specified in Section 2.13(b).
"Optometrists" has the meaning specified in Section 3.1(g).
"Outstanding Shares" has the meaning specified in the recitals
hereto.
"Owned Real Property" has the meaning specified in Section 3.1(h).
"PBGC" has the meaning specified in Section 3.1(n).
"Pension Plan" has the meaning specified in Section 3.1(n).
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
federal, state, local or foreign laws (including Environmental Laws) and
governmental or regulatory bodies and all industry or other non-governmental
self-regulatory organizations.
"Permitted Encumbrances" has the meaning specified in Section
3.1(h).
"Per Share Merger Consideration" has the meaning specified in
Section 2.6(a).
"Person" means an individual, corporation, partnership, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity that may be treated as a person under applicable
law.
"Plans" has the meaning specified in Section 3.1(n).
"Preferred Shares" has the meaning specified in the recitals hereto.
"Preferred Stock" means the Series A Cumulative Mandatorily
Redeemable Exchangeable Pay-in-Kind Preferred Stock, par value $.01 per share,
of the Company.
"Preferred Stockholder" means each Seller having any number of
shares of Preferred Stock set forth opposite such Seller's name on Schedule 2.5.
"Pro Rata Share" means, with respect to each holder of securities of
the Company entitled to receive the applicable Per Share Merger Consideration
under Article II, a fraction, the
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<PAGE> 13
numerator of which is the aggregate Per Share Merger Consideration for all
of such securities of such holder and the denominator of which is the Aggregate
Merger Consideration.
"Recapitalization" means all of the transactions contemplated in
Article II, collectively.
"Relevant Group" has the meaning specified in Section 3.1(p).
"Retained Common Shares" means all Common Shares as to which the
Seller or Sellers owning such shares have elected to retain such Common Shares,
as set forth on Schedule 2.6(g).
"Rollover Shares" means all Retained Common Shares and all Common
Exchange Shares.
"Samit Acquisition Agreements" means the second and sixth Contracts
identified on Schedule 3.1(j) under the caption "Documents Relating to the
Acquisition by the Company of The Samit Group, Inc."
"Samit Earnout Payment" has the meaning specified in Section 3.1(v).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Representative" means Desai Capital Management Incorporated.
"Sellers" has the meaning specified in the recitals hereto.
"Senior Notes" means the 12% Senior Notes due 2003 of the Company
issued under the Senior Note Indenture.
"Senior Note Indenture" means the Indenture, dated as of October 7,
1993, between the Company (formerly Eye Care Holdings, Inc.) and United States
Trust Company of New York, as Trustee.
"Senior Notes Offer" has the meaning specified in Section 5.7.
"Severance and Change in Control Payments" means the aggregate
amount of cash payments required to satisfy in full the Company's obligations
under any severance, employment, consulting, change-in-control or similar
agreement in force as of the date hereof, as set forth on Schedule 3.1(j), upon
the consummation of the Merger.
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<PAGE> 14
"Shareholders Agreement" means the Amended and Restated Shareholders
Agreement, dated as of March 31, 1994, by and among the Company and the
Shareholders listed therein.
"Subsidiary" means any Person in which the Company directly or
indirectly beneficially owns more than 50% of the outstanding capital stock or
other ownership interests, or has the right, directly or indirectly, to elect a
majority of the board of directors or other body performing similar functions.
"Surviving Corporation" has the meaning specified in Section 2.1.
"Tax" means all federal, state, local and foreign taxes, levies,
deficiencies or other assessments and other charges of whatever nature
(including income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, franchise, profits, withholding, backup withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative minimum, and estimated) imposed
by any taxing authority, as well as any obligation to contribute to the payment
of Taxes determined on a consolidated, combined or unitary basis with respect to
the Company, any Subsidiary or any Affiliate, including any interest, penalty
(civil or criminal), or addition thereto, whether disputed or not, as well as
any expenses incurred in connection with the determination, settlement or
litigation of any liability.
"Tax Losses" has the meaning specified in Section 3.1(p).
"Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund, amended return, declaration of estimated
Tax, information return or statement relating to Taxes, and any schedule or
attachment thereto, filed or maintained, or required to be filed or maintained
in connection with the calculation, determination, assessment or collection of
any Tax, and including any amendment thereof, as well as, where permitted or
required, combined, unitary or consolidated returns for any group of entities
that include the Company or any Subsidiary.
"TBCA" has the meaning specified in the recitals hereto.
"Transfer Taxes" has the meaning specified in Section 7.10(c).
"VisionWorks Acquisition Agreement" means the Stock Purchase
Agreement, dated August 15, 1996, among the Company, VisionWorks Holdings, Inc.
and the stockholders of VisionWorks Holdings, Inc.
"Year-End Financial Statements" has the meaning specified in
Section 3.1(k).
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<PAGE> 15
1.2 Other Definitions. Capitalized terms not otherwise defined in
Section 1.1 hereof shall have the respective meanings assigned to them elsewhere
in this Agreement. The words "he", "him" and "his" as used herein shall be
deemed to refer equally to the female gender.
ARTICLE II
The Recapitalization
2.1 The Merger. At the Effective Time (as defined in Section 2.2):
Newco shall merge with and into the Company; the corporate existence of the
Company shall continue; and the separate existence of Newco shall cease. All
rights, title and interests to all real estate and other property owned by the
Company and Newco shall be allocated to and vested in the Company without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon. At the Effective Time, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations of the
Company and Newco, and any proceeding pending by or against the Company or Newco
may be prosecuted as if the Merger had not occurred or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger. The
Merger shall have other effects as provided for in Article 5.06 of the TBCA. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation". At the Closing, the Company and
Newco shall execute and deliver a Plan of Merger in substantially the form
attached hereto as EXHIBIT A (the "Plan of Merger").
2.2 Effective Time; Closing. Subject to satisfaction or waiver of
the conditions set forth in Article IV, the parties hereto shall cause the
effective date of the Merger (the "Effective Date" or the "Closing Date") to
occur on (1) the second Business Day after the day on which all the conditions
set forth in Article IV (other than conditions that by their terms may be
satisfied only at the Closing) have been satisfied or waived in accordance with
the terms of this Agreement or (2) such other date upon which the parties may
agree in writing. The parties shall cause the Merger to be consummated by filing
Articles of Merger as required by Article 5.04 of the TBCA in the office of the
Texas Secretary of State (the record time of such filing being the "Effective
Time") and by filing a Certificate of Merger as required by Section 252 of the
General Corporation Law of the State of Delaware in the office of the Delaware
Secretary of State. A closing with respect to the Merger and the other
transactions contemplated hereunder (the "Closing") shall take place at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 10:00
A.M. on the Effective Date.
2.3 Articles of Incorporation and By-Laws.
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<PAGE> 16
(a) Articles of Incorporation. Upon such Merger, the Articles of
Incorporation of the Surviving Corporation shall be substantially in the form
attached as EXHIBIT B, with appropriate insertions to Article Four consistent
with the equity capital contemplated by the Recapitalization.
(b) By-Laws. The By-Laws of the Company, as in effect immediately
prior to the Effective Time but with such amendments thereto as the parties
hereto may mutually agree prior to the Effective Date, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance with the TBCA,
the Articles of Incorporation of the Surviving Corporation and such By-Laws.
2.4 Directors and Officers. The directors of Newco immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, each
to hold office in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
2.5 Company Actions Prior to the Effective Time.
(a) Exercise of Class B Warrants. As soon as practicable after the
date hereof but in any event prior to the Effective Time, each Class B
Warrantholder shall exercise all of the Class B Warrants held by such Class B
Warrantholder for the number of shares of Common Stock (the "Class B Warrant
Shares") set forth under the heading "Class B Warrant Shares" on Schedule 2.5 by
delivering to the Class B Warrant Agent, in accordance with Section 3.03 of the
Class B Warrant Agreement, an Election to Exercise (as defined in the Class B
Warrant Agreement) and a number of shares of Preferred Stock having an aggregate
Liquidation Preference per Preferred Share equal to the aggregate exercise price
for such Class B Warrants, and the Company shall deliver to each Class B
Warrantholder the number of Class B Warrant Shares certificates for the number
of Class B Warrant Shares for which such Class B Warrants are then exercisable.
(b) Repurchase of Preferred Shares. As soon as practicable after the
date hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions, giving notice to the Preferred
Stockholders and taking any other actions, to repurchase from each Preferred
Stockholder as of the Effective Time the number of Preferred Shares equal to (i)
the number of Preferred Shares set forth opposite such Preferred Stockholder's
name under the heading "Preferred Shares" on Schedule 2.5 LESS (ii) the number
of Preferred Shares surrendered to the Company in respect of the exercise of
Class B Warrants pursuant to Section 2.5(a), for a purchase price per share
equal to the Liquidation Preference per Preferred Share. The execution of this
Agreement by each Preferred Stockholder shall constitute
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<PAGE> 17
a full and irrevocable consent by such Preferred Stockholder to the repurchase
of his Preferred Shares on the terms and conditions contained herein.
(c) Notice to Class A Warrantholders. As soon as practicable after
the date hereof but in any event prior to the Effective Time, the Company shall
take action, including by adopting resolutions, giving notice to the Class A
Warrantholders in accordance with Section 4.04(a) of the Class A Warrant
Agreement and taking any other necessary actions, to cause all of the Class A
Warrants, after adjustment to the number of shares of Common Stock issuable on
exercise of the Class A Warrants as contemplated by Section 8.01 of the Class A
Warrant Agreement, on the basis of current market values of the Common Stock
determined in good faith by the Board of Directors of the Company, to be retired
and canceled as of the Effective Time in accordance with Section 4.04(b) of the
Class A Warrant Agreement and on the terms and conditions contained herein.
(d) Employee Options. As soon as practicable following the date
hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions or taking any other actions, subject
to and contingent upon receiving the consent of each Employee Optionholder to
the extent such consent is required, to cancel as of the Effective Time, the
Employee Options which are outstanding immediately prior to the Effective Time,
whether or not such Employee Options to be canceled are then exercisable.
(e) BNP Warrant. As soon as practicable following the date hereof
but in any event prior to the Effective Time, the Company shall take action,
including by adopting resolutions or taking any other actions, subject to and
contingent upon receiving any consent of BNP that may be required, to cancel as
of the Effective Time the BNP Warrant for the consideration provided and
otherwise on the terms and conditions contained herein, whether or not such BNP
Warrant to be canceled is then exercisable.
(f) Deferred Shares. As soon as practicable following the date
hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions, amendments to Plans or taking any
other actions, subject to and contingent upon any consent of Deferred Stock Plan
Participants which may be required, to accelerate the vesting of all shares of
Common Stock held for the benefit of the Deferred Stock Plan Participants, as
set forth on Schedule 2.5 (the "Deferred Shares"), and to provide for the
distribution of such Deferred Shares prior to the Effective Time in connection
with the Recapitalization.
2.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Newco or the holders
of any of the following securities:
(a) Conversion of Capital Stock. Each Common Share issued and
outstanding immediately prior to the Effective Time (other than the Rollover
Shares, Excluded Shares and
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<PAGE> 18
Dissenter's Shares) shall be converted into the right to receive the Per Share
Merger Consideration (as defined below). The "Aggregate Merger Consideration"
shall be equal to $300,000,000, subject to adjustment as provided in Section
2.13 (as adjusted, the "Aggregate Funding Amount"), LESS (i) the total
indebtedness of the Company immediately prior to the Effective Time (including
without limitation, capitalized lease obligations, the amount required to be
deposited in trust for the benefit of the holders of Senior Notes pursuant to
Section 4.2(l) and any other premiums, penalties and interest accrued or payable
in respect thereof), LESS (ii) if the Samit Earnout Payment has not been paid in
full prior to the Effective Date, the Samit Earnout Payment, LESS (iii) the
aggregate Severance and Change in Control Payments, LESS (iv) the aggregate
Liquidation Preference per Preferred Share in respect of all of the Preferred
Shares, whether surrendered in respect of the exercise of Class B Warrants
pursuant to Section 2.5(a) or repurchased by the Company pursuant to Section
2.5(b), LESS (v) the amount of the Company Transaction Expenses in excess of
$3,920,000, if any, LESS (vi) the amount of any Transfer Taxes paid by the
Company, LESS (vii) the amount by which the Company's cash and cash equivalents
as of the Closing Date are less than $2,500,000, PLUS (viii) the aggregate
exercise price of all of the Class B Warrants, PLUS (ix) the aggregate exercise
price of all Employee Options canceled pursuant to Section 2.5(d), PLUS (x) the
exercise price of the BNP Warrant, plus (xi) the aggregate amount of Company
Transaction Expenses (not to exceed $3,920,000 in the aggregate). The additions
and deductions to the "Aggregate Merger Consideration" shall not be duplicative.
The "Per Share Merger Consideration" will be equal to (a) the Aggregate Merger
Consideration divided by (b) the number of Common Shares outstanding immediately
prior to the Effective Time (including the Outstanding Shares, the Deferred
Shares and the Class B Warrant Shares) PLUS the number of Employee Option Shares
subject to Employee Options canceled pursuant to Section 2.6(e), PLUS the number
of Class A Warrant Shares subject to Class A Warrants retired and canceled
pursuant to Section 2.6(d), PLUS the number of BNP Warrant Shares subject to the
BNP Warrant canceled pursuant to Section 2.6(f).
(b) Cancellation. Each share of Common Stock held in the treasury of
the Company and each share of Common Stock owned by any direct or indirect
wholly owned subsidiary of the Company immediately prior to the Effective Time
("Excluded Shares"), if any, shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) Preferred Stock. At the Effective Time, each Preferred Share
repurchased by the Company pursuant to Section 2.5(b) shall be retired and
canceled and each Preferred Stockholder shall be entitled to receive an amount
in cash, payable at the Effective Time, equal to the product of (x) the number
of Preferred Shares repurchased and (y) the Liquidation Preference per Preferred
Share.
(d) Class A Warrants. At the Effective Time, each Class A Warrant
shall be canceled and each Class A Warrantholder shall be entitled to receive in
respect of such Class A
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<PAGE> 19
Warrant an amount in cash, payable at the Effective Time, equal to the product
of (x) the number of shares of Common Stock subject to such Class A Warrant
("Class A Warrant Shares") immediately prior to the Effective Time and (y) the
excess of the Per Share Merger Consideration over the per share exercise price
of such Class A Warrant.
(e) Employee Options. At the Effective Time, each Employee Option
shall be canceled and each Employee Optionholder shall be entitled to receive in
respect of such Employee Option an amount in cash, payable at the Effective
Time, equal to the product of (x) the number of shares of Common Stock subject
to such Employee Option ("Employee Option Shares") immediately prior to the
Effective Time and (y) the excess of the Per Share Merger Consideration over the
per share exercise price of such Option.
(f) BNP Warrant. At the Effective Time, the BNP Warrant shall be
canceled and BNP shall be entitled to receive an amount in cash, payable at the
Effective Time, equal to the product of (x) the number of shares of Common Stock
subject to the BNP Warrant ("BNP Warrant Shares") immediately prior to the
Effective Time and (y) the excess of the Per Share Merger Consideration over the
per share exercise price of the BNP Warrant.
(g) Rollover Shares. (i) At and after the Effective Time, each
Retained Common Share (as determined pursuant to the formula set forth below in
this Section 2.6(g)) shall remain outstanding, shall have all of the rights and
preferences provided under the Articles of Incorporation of the Surviving
Corporation and shall not be entitled to any part of the Aggregate Merger
Consideration. The aggregate number of Retained Common Shares shall be equal to
the quotient obtained by dividing (x) $5,625,000 by (y) the Per Share Merger
Consideration. The number of Retained Common Shares to be retained by each
Seller shall be equal to the quotient obtained by dividing (x) the dollar value
to be retained by each Seller set forth opposite the name of such Seller under
column (2) on Schedule 2.6(g) by (y) the Per Share Merger Consideration. (ii) At
and after the Effective Time, each Common Exchange Share (as determined pursuant
to the formula set forth below in this Section 2.6(g)) shall be entitled to
receive one share of New Preferred Stock and shall not be entitled to any part
of the Aggregate Merger Consideration. The aggregate number of Common Exchange
Shares to be exchanged for shares of New Preferred Stock shall be equal to the
quotient obtained by dividing (x) $2,625,000 by (y) the Per Share Merger
Consideration. The number of Common Exchange Shares to be exchanged for shares
of New Preferred Stock by each Seller shall be equal to the quotient obtained by
dividing (x) the dollar value to be exchanged for New Preferred Stock set forth
opposite the name of such Seller under column (3) on Schedule 2.6(g) by (y) the
Per Share Merger Consideration.
2.7 Capital Stock of Newco. All shares of Newco's common stock, par
value $.01 per share, issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for an aggregate number of validly
issued, fully paid and nonassessable
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<PAGE> 20
shares of Common Stock of the Company equal to the quotient obtained by dividing
$69,375,000 by the Per Share Merger Consideration.
2.8 Exchange of Certificates. (a) At the Closing, each Seller shall
deliver certificates to the Surviving corporation (each, a "Certificate"), which
immediately prior to the Effective Time represented outstanding Common Shares
(other than Retained Common Shares), Preferred Shares. Upon surrender of such a
Certificate for cancellation, Certificate so surrendered shall forthwith be
canceled and the holder of such Certificate shall be entitled to receive in
exchange therefor the type and amount of consideration due in respect thereof
calculated in accordance with Section 2.6. All required cash payments to the
Sellers shall be paid by wire transfer of immediately available funds at the
Closing to the accounts specified by the Sellers not later than one Business Day
prior to the Closing Date.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause an exchange agent selected by it (the "Exchange Agent"), to mail to
each holder of record of Class A Warrants (i) a letter of transmittal specifying
that delivery shall be effected, and that risk of loss and title to the
Certificates which immediately prior to the Effective Time represented Class A
Warrants shall pass, only upon delivery of such Certificates (or affidavits of
loss in lieu thereof) to the Exchange Agent, such letter of transmittal to be in
such form and have such other provisions as the Company may require, and (ii)
instructions for surrendering such Certificates in exchange for the cash
consideration such Class A Warrantholder is entitled to receive in respect of
such Class A Warrants pursuant to Section 2.6(d). Upon surrender of such
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check in the amount (after giving effect to any
required tax withholdings) of such consideration.
(c) Anything herein to the contrary notwithstanding, no interest or
dividends shall accrue or be payable or paid on any portion of the applicable
consideration payable to any person pursuant to this Article II. At and after
the Effective Time, each holder of a Certificate to be canceled pursuant to this
Section 2.8 shall cease to have any rights as a securityholder of the Company,
except for the right to surrender such Certificates in the manner prescribed by
this Section 2.8 in exchange for payment of the applicable consideration.
2.9 Dissenter's Rights. No holder of Common Shares immediately prior
to the Effective Time who shall have perfected his dissenter's rights in
accordance with Article 5.12 of the TBCA and shall not have effectively
withdrawn or lost such holder's right to dissent from the Merger under the TBCA,
(each, a "Dissenting Shareholder") shall be entitled to vote or exercise any
other rights of a shareholder, including without limitation, any rights to any
dividends or other distributions pursuant to this Article II, and any Dissenting
Shareholder shall be entitled to receive only the payment as provided by Article
5.12 of the TBCA with respect to Company Shares owned by such Dissenting
Shareholder ("Dissenter's Shares"). If any Person who would otherwise be deemed
a Dissenting Shareholder shall have failed properly to perfect or
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<PAGE> 21
shall have effectively withdrawn or lost the right to dissent with respect to
any Common Shares, such shares shall thereupon be treated as though such shares
had been converted into the right to receive the Per Share Merger Consideration
pursuant to Section 2.6(a). The Company shall give Newco (i) prompt written
notice of any dissenters' demands for payment, attempted withdrawals of such
demands and any other instruments served pursuant to applicable law received by
the Company relating to dissenters' rights and (ii) the opportunity to direct
all negotiations with respect to dissenters under the TBCA. The Company shall
not, without the prior written consent of Newco, voluntarily make any payment
with respect to any demands for payment by Dissenting Shareholders, offer to
settle or settle any such demands or approve any withdrawal of such demands.
2.10 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of capital stock thereafter on the records of the Company.
2.11 No Further Ownership Rights in Company Stock. The Applicable
Merger Consideration delivered upon the surrender of each Certificate in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
2.12 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder thereof
and delivery of bond in such sum as the Surviving Corporation may reasonably
direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificates alleged to have been lost, stolen
or destroyed, such Per Share Merger Consideration as may be required pursuant to
Section 2.6.
2.13 Adjustments to Merger Consideration.
(a) Adjustment at Closing. Two Business Days prior to the Closing
Date, the Company shall deliver or cause to be delivered to Newco a projected
consolidated balance sheet (the "Estimated Closing Date Balance Sheet") of the
Company and its Subsidiaries as of the Closing Date. The Estimated Closing Date
Balance Sheet (i) shall set forth the Net Working Capital as of the Closing Date
(the "Indicative Net Working Capital"), without giving effect to the
Recapitalization and the transactions contemplated hereby, and (ii) be prepared
in accordance with GAAP applied on a basis consistent with the principles,
practices and methodologies used in the preparation of the consolidated balance
sheet of the Company and its Subsidiaries for the year ended January 3, 1998.
the event that the Indicative Net Working Capital is less than $7,000,000
("Target Net Working Capital"), the Aggregate Funding Amount shall be decreased
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<PAGE> 22
by the amount of such shortfall and the Aggregate Merger Consideration shall be
adjusted accordingly.
(b) Post-Closing Adjustment. (i) Within 60 days after the Closing
Date, the Sellers shall deliver or cause to be delivered to the Company a
consolidated balance sheet of the Company and its Subsidiaries as of the Closing
Date, together with an unqualified opinion thereon by Ernst & Young (the "Final
Balance Sheet"). All the parties to this Agreement accept, for purposes of the
calculation of the adjustment provided for in this Section 2.13(b), the
principles, practices and methodologies, consistent with GAAP, used in the
preparation of the consolidated balance sheet of the Company and its
Subsidiaries for the year ended January 3, 1998.
(ii) The Company after the Closing Date shall cause Ernst &
Young to have access to the records and personnel of the Company
reasonably requested by them for purposes of preparing or auditing
the Final Balance Sheet. The Company shall cause KPMG to take such
reasonable steps as they deem necessary to calculate the Net Working
Capital of the Company and its Subsidiaries as of the Closing Date
and to review the procedures and materials (including work papers)
employed by Ernst & Young in connection therewith. Not later than 30
days after receipt of the Final Balance Sheet, the Company shall
deliver to the Seller Representative a written notice ("Objection"),
setting forth any items with which the Company disagrees and a
description of the basis for such disagreement.
(iii) In the event that the Company delivers an Objection to
the calculation of the Net Working Capital of the Company and the
Subsidiaries set forth in the Final Balance Sheet, the Seller
Representative shall negotiate in good faith with the Company, and
the Company hereby agrees to negotiate in good faith with the Seller
Representative, for a period of 30 days after receipt of such
Objection, to seek to resolve their differences with respect to the
Final Balance Sheet. If the Company and the Seller Representative
are unable to resolve all of such disagreements within such 30 day
period, then no later than seven days following such 30 day period
they shall refer their remaining differences to Arthur Andersen or
any other internationally recognized firm of independent public
accountants as to which the Seller Representative and the Company
mutually agree (the "Independent Firm") who shall, acting as experts
and not as arbitrators, determine, only with respect to the
remaining differences so submitted, whether and to what extent, if
any, the Net Working Capital, as derived from the Final Balance
Sheet, requires adjustment. The parties shall instruct the
Independent Firm to deliver its written determination to the Company
and the Seller Representative no later than the twentieth day after
the remaining differences underlying the Objection are referred to
the Independent Firm. The Independent
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<PAGE> 23
Firm's determination of Net Working Capital shall be conclusive and
binding upon the Company and Sellers absent manifest error. The fees
and disbursements of the Independent Firm shall be shared equally by
the Company and Sellers. The Company and Sellers shall make readily
available to the Independent Firm all relevant books and records and
any work papers (including those of the parties' respective
accountants) relating to the Final Balance Sheet and all other items
reasonably requested by the Independent Firm.
(iv) The "Adjusted Net Working Capital" shall be the Net
Working Capital included in (i) the Final Balance Sheet as delivered
by the Sellers in the event that (x) the amount of Net Working
Capital is unchanged from the Estimated Closing Date Balance Sheet
to the Final Balance Sheet; (y) no Objection is delivered to the
Seller Representative during the 30 day period specified above or
(z) Seller Representative and the Company so agree, (ii) the Final
Balance Sheet, as adjusted in accordance with the Objection, in the
event that the Seller Representative does not dispute the Objection
within the 30 day period following receipt by the Seller
Representative of the Objection, or (iii) the Final Balance Sheet,
as adjusted by either (x) the agreement of the Seller Representative
and the Company or (y) the Independent Firm.
(v) If Adjusted Net Working Capital is less than both Target
Net Working Capital and Indicative Net Working Capital, then the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Net Working Capital is less than Indicative
Net Working Capital and the Sellers shall pay this shortfall amount
(the "Shortfall Amount") to the Company; PROVIDED, HOWEVER, that no
adjustment payment shall be required unless the Shortfall Amount is
greater than $100,000, in which event the Sellers shall pay the
entire Shortfall Amount to the Company; PROVIDED, FURTHER, HOWEVER,
that if Indicative Net Working Capital is greater than Target Net
Working Capital and Adjusted Net Working Capital is less than Target
Net Working Capital then the Shortfall Amount shall not exceed the
amount by which the Adjusted Net Working Capital is less than Target
Net Working Capital. Each Seller shall pay to the Company only such
Seller's proportionate share of the Shortfall Amount, calculated for
each Seller by multiplying the Shortfall Amount by a fraction, the
numerator of which is the portion of the Aggregate Merger
Consideration paid to such Seller, and the denominator of which is
the sum of the portions of the Aggregate Merger Consideration paid
to all Sellers.
(vi) If Adjusted Net Working Capital is greater than
Indicative Net Working Capital and Indicative Net Working Capital is
less than Target Net Working Capital, the Aggregate Merger
Consideration shall be adjusted upward by the amount by which
Adjusted Net Working Capital exceeds Indicative Net
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<PAGE> 24
Working Capital and the Company shall pay to the Sellers an
aggregate amount equal to the excess (the "Excess Amount");
PROVIDED, HOWEVER, that the amount of any upward adjustment to the
Aggregate Merger Consideration, and any resulting payment by the
Company to the Sellers, shall not exceed the amount by which
Indicative Net Working Capital is less than Target Net Working
Capital; and PROVIDED, FURTHER, HOWEVER, that no adjustment payment
shall be required unless the Excess Amount is greater than $100,000,
in which event the Company shall pay the entire Excess Amount to the
Sellers. Any Excess Amount payable by the Company shall be allocated
among all securityholders of the Company receiving any part of the
Aggregate Merger Consideration in accordance with such holders'
respective Pro Rata Shares.
(vii) If both Adjusted Net Working Capital and Indicative Net
Working Capital are equal to or greater than Target Net Working
Capital no adjustment shall be made to Aggregate Merger
Consideration and no post-closing payment shall be required to be
made to any Person pursuant to this Section 2.13(b)
(viii) Any amount owing pursuant to this Section 2.13(b) shall
be paid, by certified or official bank check or checks payable in
New York Clearing House (next day) funds not later than two Business
Days following final determination of the Adjusted Net Working
Capital in accordance with this Section 2.13(b).
(ix) No adjustment or other action taken pursuant to this
Section 2.13(b) shall affect the rights and obligations of the
parties under this Agreement or with respect to the transactions
contemplated hereby other than to the extent directly related to the
determination of the Adjusted Net Working Capital.
2.14 Authorization of Merger and this Agreement; Waiver of
Dissenter's Rights. The Board of Directors of the Company have (i) approved the
Merger, this Agreement, the Plan of Merger, and the transactions contemplated
herein, (ii) recommended that the shareholders of the Company approve the
Merger, the Plan of Merger and the transactions contemplated therein, and (iii)
directed that the Merger, Plan of Merger and the transactions contemplated
therein be submitted to the shareholders of the Company for their approval at a
special meeting of the shareholders of the Company to be held on or before April
30, 1998 (the "Special Meeting"), all in accordance with Section 5.03 of the
TBCA. The Company shall submit the Merger and the Plan of Merger to the
shareholders of the Company for their approval at the Special Meeting to be held
on or before April 30, 1998. The Sellers covenant and agree to vote their Common
Shares in favor of the Merger and the Plan of Merger at the Special Meeting.
(b) Prior to the Effective Date, Newco shall submit the approval and
adoption of the Merger and this Agreement to its sole stockholder.
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<PAGE> 25
(c) By the execution and delivery of this Agreement by the Sellers,
each Seller electing to receive a cash payment equal to the Per Share Merger
Consideration hereby waives any dissenter's rights which such Seller may have
against the Company pursuant to Articles 5.11, 5.12 and 5.13 of the TBCA.
2.15 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Newco, the officers and directors of the Company and Newco
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
2.16 Reservation of Right to Revise Transaction. Newco and the
Company may at any time change the method of effecting the Recapitalization
(including without limitation the provisions of this Article II) if and to the
extent they mutually deem such change to be desirable; provided, however, that
no such change shall (A) alter or change the amount or kind of consideration to
be issued to holders of the Company's capital stock or warrants or options to
acquire any of the Company's capital stock provided for in this Agreement, (B)
materially impede or delay receipt of any required regulatory approval or the
consummation of the transactions contemplated by this Agreement, (C) alter any
contractual or other arrangement made by the Company or any of its Subsidiaries
(except as specifically provided herein) unless, in any such case, the requisite
approval of the stockholders of the Company is obtained.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Company and the Sellers.
The Company and each Management Seller, severally and not jointly, hereby
represent and warrant to Newco and each of the Investor Sellers hereby
represents and warrants to Newco solely as to the matters set forth in
paragraphs (a), (c), (d), (e) and (f), insofar as such matters relate to such
Investor Seller individually, as follows:
(a) Organization and Authority of Sellers. Each Seller has full
power and authority (corporate, partnership or other) to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by such Seller and constitutes a valid and
binding obligation of such Seller, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and no other proceedings on
the part of such Seller are necessary to authorize this Agreement and the
consummation of the transactions contemplated hereby.
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<PAGE> 26
(b) Organization, Authority and Qualification of Company. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Texas and has full corporate power and
authority to carry on its business substantially as it is now being conducted,
to enter into this Agreement and to perform its obligations hereunder. The
Company is duly licensed or qualified to do business, and has all Permits, in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or operated by
it makes such licensing or qualification necessary except where the failure to
be so qualified or licensed would not be reasonably likely to have a Material
Adverse Effect. This Agreement has been duly authorized, executed and delivered
by the Company. The Board of Directors have (i) adopted and approved the Merger,
this Agreement, the Plan of Merger and the transactions contemplated herein,
(ii) recommended that the shareholders approve the Merger, the Plan of Merger
and the transactions contemplated therein, and (iii) directed that the Merger,
the Plan of Merger and the transactions contemplated herein be submitted to the
shareholders of the Company for their approval at the Special Meeting, all in
accordance with Article 5.03 of the TBCA. The Sellers have the requisite number
of Outstanding Shares and Preferred Shares to adopt and approve the Plan of
Merger and the Merger at the Special Meeting in accordance with Article 5.03 of
the TBCA. Upon the adoption and approval of the Merger, the Plan of Merger and
the transactions contemplated thereby at the Special Meeting, no further
proceedings on the part of the Company will be necessary to approve the Merger
and the Plan of Merger. This Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, and, except
for approval of the shareholders of the Company in accordance with Article 5.03
of the TBCA, no other proceedings on the part of the Company are necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby.
(c) Authorized Capital. The authorized capital stock of the Company
consists of 3,000,000 shares of Common Stock, of which 1,011,989 shares are
issued and outstanding, and 1,011,902 shares are owned by the Sellers, as of the
date hereof; and 1,000,000 shares of Preferred Stock, of which 110,000 shares
are issued and outstanding as of the date hereof. All of the issued and
outstanding shares of Common Stock and Preferred Stock have been duly authorized
and validly issued and are fully paid and nonassessable. As of the date hereof,
70,000 Class A Warrants are outstanding and 150,000 Class B Warrants are
outstanding. Except as set forth above, as provided under Sections 2.6 of the
Shareholders Agreement or as disclosed on Schedule 2.5, there are no preemptive
rights nor any outstanding subscriptions, options, warrants, rights (including
without limitation, stock appreciation rights), convertible securities or other
agreements or commitments of any character of the Company or any Seller relating
to the issued or unissued capital stock of the Company. Schedule 2.5 lists the
name of each Employee Optionholder and the number of Employee Options held by
each such Employee Optionholder.
(d) The Securities. Such Seller is the record and beneficial owner
of the number of Common Shares, Preferred Shares and Class B Warrants identified
to such Seller on
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<PAGE> 27
Schedule 2.5. Schedule 2.5(d) lists the name of each recordholder of Class A
Warrants and the number of Class A Warrants held by each such holder.
(e) Consents and Approvals. Except for the Lease Consents, as set
forth on Schedule 3.1(e) or as required by the HSR Act, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Authority or any other Person, is required to be made or obtained by the
Company, any Subsidiary or any Seller in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, except for such consents, approvals, authorizations,
declarations, filings or registrations which the failure to make or obtain,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect or to prohibit or materially impair the Company's or the
Sellers' ability to perform their respective obligations under this Agreement.
(f) Non-contravention. The execution and delivery of this Agreement
by the Sellers and the Company do not, and the consummation by the Sellers and
the Company of the transactions contemplated hereby on their part will not,
constitute or result in (i) a breach or violation of, or a default under, the
articles of incorporation or by-laws (or comparable constitutional documents) of
the Company, any Subsidiary or any Seller that is not a natural person or (ii)
subject to obtaining the consents referred to in Section 3.1(e) as being
required hereunder (including those set forth on Schedule 3.1(e)) and the Lease
Consents, a breach or violation of, a default under, or the acceleration of or
the creation of an Encumbrance on assets of the Company or any Subsidiary (with
or without the giving of notice or the lapse of time) pursuant to, (A) any right
or obligation of the Company or any Subsidiary under any Contract, or (B)
assuming compliance with the matters set forth in Section 4.1, any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
Permit, in either case to which the Company, any Subsidiary or any Seller, is
subject or by which any of them or their respective properties or assets is
bound, except where, in all cases (other than those relating to the articles of
incorporation or by-laws (or comparable constitutional documents) of the Company
or any Subsidiary, any Material Contract or any governmental Permit the failure
of which to maintain would be reasonably likely to impair the ability of the
Company or any Subsidiary to conduct its business substantially in the ordinary
and usual course consistent with past practice), such breach, violation,
default, acceleration or creation, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect, or would not be
reasonably likely to prohibit or materially impair the Company's or the Sellers'
ability to perform their respective obligations under this Agreement.
(g) Compliance with Law. Except as set forth in Schedule 3.1(g), the
Company and the Subsidiaries are not in violation of any Applicable Laws, are in
compliance with all billing policies and procedures of Governmental Authorities
applicable to the operation of their respective businesses, and all governmental
Permits required to be held by the Company and the Subsidiaries to conduct their
respective businesses have been obtained and are in full
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force and effect and are being complied with in all respects, except for any
violation, non-compliance or failure to hold a Permit which, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect.
Notwithstanding the foregoing or any other representation or warranty in this
Agreement, neither the Company nor any Seller makes any representation or
warranty with respect to whether the businesses of doctors of optometry having
contractual arrangements with the Company or any of its Subsidiaries are in
violation of any Applicable Laws, in compliance with applicable billing policies
and procedures or in possession of required Permits to conduct their respective
businesses, except in each case to the extent that the foregoing affects the
Company's compliance with Applicable Laws, billing policies and procedures, or
the Company's need to possess Permits.
(h) Title to Properties; Absence of Encumbrances, etc.
(i) Schedule 3.1(h)(i) hereto lists all real property leases
and subleases entered into by the Company or its Subsidiaries at the
locations described thereon as of the date hereof (the "Lease
Agreements"). Each Lease Agreement which by its terms requires the consent
of any Person to be obtained in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby is designated as such on Schedule 3.1(h)(i) (such
consents, the "Lease Consents"). With respect to each Lease Agreement:
(A) the Lease Agreement is and, subject to obtaining the
applicable Lease Consents, will continue to be legal,
valid, binding, enforceable against the Company or its
Subsidiary, as applicable, and in full force and effect
on identical terms following the consummation of the
transactions contemplated hereby;
(B) neither the Company nor the applicable Subsidiary party
thereto or, to the knowledge of the Company and the
Management Sellers, any other party is in breach or
default, and, subject to obtaining the applicable Lease
Consents, no event has occurred which, with notice or
lapse of time, would constitute such a breach or default
or permit termination, modification, or acceleration
thereunder;
(C) to the knowledge of the Company and the Management
Sellers, there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(D) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold; and
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<PAGE> 29
(E) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for
operation of said facilities;
EXCEPT, in each case (A) through (E), for any failure of such
representations and warranties to be true and correct which, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(ii) Schedule 3.1(h)(ii) lists all real property owned by the
Company or the Subsidiaries as of the date hereof other than those
properties that are not material to the Company and the Subsidiaries
considered as a whole (the "Owned Real Property").
(iii) Except as set forth on Schedule 3.1(h)(iii), each of the
Company and the Subsidiaries has good and, in the case of the Owned Real
Property, marketable title to, or a valid and binding leasehold interest
in, all of the properties and assets owned or leased by the Company or any
Subsidiary, free and clear of any Encumbrances, except for: (A) any
Encumbrances incurred or created since January 3, 1998 in the ordinary and
usual course of business consistent with past practice and which,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect; (B) any Encumbrances for taxes, assessments and
other governmental charges not yet due and payable or due but not
delinquent or being contested in good faith by appropriate proceedings;
(C) any mechanics', workmen's, repairmen's, warehousemen's, carriers' or
other like liens and encumbrances arising in the ordinary and usual course
of business consistent with past practice or being contested in good faith
by appropriate proceedings (all of the foregoing Encumbrances, "Permitted
Encumbrances"); and (D) any Encumbrances which are matters of public
record or would be shown by a current title report or survey or physical
inspection, such as easements, quasi easements, covenants, licenses,
rights of way, land use, zoning or other legal requirements, ordinances or
plans, which, individually or in the aggregate, would not materially
adversely affect the ability of the Company and its Subsidiaries,
considered as a whole, to conduct their business substantially as
heretofore conducted.
(i) Subsidiaries. Schedule 3.1(i) contains a complete and correct
list of each Subsidiary, together with (i) their respective jurisdictions of
organization and (ii) the respective authorized and outstanding capital stock
(which term, for the purposes of this Section 3.1(i), includes any equivalent
equity interests) of each. All outstanding shares of capital stock of the
Subsidiaries have been duly and validly authorized and issued and, to the extent
applicable, are fully paid and nonassessable. The Company owns, directly or
indirectly, all of the issued and outstanding capital stock of each Subsidiary,
free and clear of any Encumbrance or agreement with respect thereto, including,
without limitation, any agreement, understanding or restriction affecting the
voting rights or other incidents of record or beneficial ownership pertaining to
such capital stock. There are no preemptive rights nor any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character
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<PAGE> 30
giving any person a right to subscribe for or acquire any capital stock of any
Subsidiary. Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
full corporate power and authority to carry on its business substantially as it
is now being conducted. Each Subsidiary is duly licensed or qualified to do
business, and has all Permits, in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such licensing or qualification
necessary except where the failure to be so qualified or licensed would not be
reasonably likely to have a Material Adverse Effect. Schedule 3.1(i) contains a
complete and correct list of (a) all direct or indirect interests of the Company
or any Subsidiary in the securities of any corporation, partnership, joint
venture or other entity and (b) any agreement, understanding, contract or
commitment relating to the capital stock of or any other investment in any such
entity.
(j) Contracts and Commitments. (i) Except as set forth in Schedule
3.1(j) or Schedule 3.1(h)(i), neither the Company nor any Subsidiary is a party
to or bound by any Contract of any kind which is to be performed, or as to which
the Company or any Subsidiary may have any right or obligation, on or after the
Closing Date other than:
(A) Contracts which have been entered into in the
ordinary course of business consistent with past practice (including
purchase orders, leases and general contracts relating to store
construction); or
(B) Contracts pursuant to which the Company or any
Subsidiary, as the case may be, is or would be obligated to expend,
or entitled to receive, less than $250,000 in any 12-month period or
which is subject to cancellation by the Company or the Subsidiary,
as the case may be, upon less than three months' notice, without
incurring any expenditure and without penalty or increased cost.
(ii) Each Contract required to be disclosed in Schedule 3.1(j)
and each Lease Agreement identified as a significant Lease Agreement on
Schedule 3.1(h)(i) (each, a "Material Contract") is a valid and binding
agreement of the Company or a Subsidiary, as the case may be, and
(assuming in the case of each Material Contract other than the Samit
Acquisition Agreements and the VisionWorks Acquisition Agreement the due
authorization of parties other than the Company or such Subsidiary, as the
case may be) enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability affecting creditors' rights and
to general equity principles, except, in the case of each Material
Contract (other than the Samit Acquisition Agreements and the VisionWorks
Acquisition Agreement) for any failure of validity or enforceability
which, individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect. Except as set forth on Schedule 3.1(i),
(i) the Company and its Subsidiaries have complied in all respects with
all contractual and administrative requirements of insurers and other
third
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<PAGE> 31
party payors with whom the Company and/or any of the Subsidiaries have or
are conducting business, except for any failure of compliance which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect, (ii) since January 3, 1998, neither the Company
nor any Subsidiary, nor, to the Company's and the Management Sellers'
knowledge, any other party thereto has terminated, cancelled or
substantially modified any Material Contract and, (iii) neither the
Company nor any Subsidiary nor, to the Company's and the Management
Sellers' knowledge, any other party thereto is in default under any
Material Contract, except for any default or breach which, individually or
in the aggregate, would not be reasonably likely to have a Material
Adverse Effect. Except as otherwise disclosed on Schedule 3.1(j), there
are no Contracts between or among any of the Company and/or any of the
Subsidiaries, on the one hand, and any officer or director of the Company
or any Subsidiary or any person owning five percent (5%) or more of the
outstanding shares of Common Stock or Preferred Stock or any respective
family member or affiliate of such officer, director, stockholder or note
holder, on the other hand.
(k) Financial Information. Newco has received true and complete
copies of (i) the audited consolidated balance sheets of the Company as of
December 28, 1996 and the related audited consolidated statements of operations,
stockholders' equity and cash flows for the year then ended, together with the
notes thereto (the "Audited Financial Statements"), and (ii) the unaudited
consolidated balance sheets of the Company as of January 3, 1998 and the related
unaudited consolidated statements of operations, stockholders' equity and cash
flows for the year then ended, together with the notes thereto (the "Unaudited
Financial Statements" and, collectively, with the Audited Financial Statements,
the "Year-End Financial Statements"). The Year-End Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be noted therein) throughout the periods indicated and present fairly, in
all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the respective dates thereof or for the
periods then ended.
(l) Absence of Certain Changes. Except as set forth in Schedule
3.1(l), or Schedule 3.1(j), since January 3, 1998, the Company and each
Subsidiary has conducted its business only in, and has not engaged in any
material transaction other than in, the ordinary and usual course of its
business and there has not been:
(i) any change in the financial condition, properties,
business or results of operations of the Company and the
Subsidiaries, considered as a whole, except those changes that,
individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the
Company or any Subsidiary other than dividends on the Preferred
Stock;
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<PAGE> 32
(iii) any sale, assignment or transfer of any of the assets of
the Company or any of the Subsidiaries which has had or would be
reasonably likely to have a Material Adverse Effect;
(iv) any change by the Company or any Subsidiary in account
ing principles, practices or methods;
(v) any increase in excess of $15,000 per annum in the
compensation of any officer or director of the Company or any
Subsidiary or any employee whose total compensation in 1996 exceeded
$100,000, or any material increase in or acceleration of the
benefits under, or adoption or amendment of, any bonus, insurance,
pension or other employee benefit plan, payment or arrangement, for
or with any such officer, director or employee;
(vi) except as set forth on Schedule 3.1(c) or as contemplated
by this Agreement, any commitment of the Company or any Subsidiary
to issue any shares of capital stock or obligations or securities
convertible into or exchangeable for shares of capital stock other
than dividends on the Preferred Stock paid or payable in shares of
Preferred Stock; or
(vii) any material damage, destruction or loss adversely
affecting any material asset or property of the Company or any
Subsidiary not covered to the full extent thereof by insurance other
than any applicable deductible.
(m) Absence of Undisclosed Liabilities. Except as disclosed in or
reserved for in the Year-End Financial Statements or as set forth on Schedule
3.1(m), there are no debts, liabilities or obligations, whether or not accrued,
contingent or otherwise, of the Company or the Subsidiaries except for (i)
obligations and liabilities arising in the ordinary course of business
subsequent to the date of the Year-End Financial Statements and (ii) obligations
or liabilities incurred by Newco or caused to be incurred by the Company or any
Subsidiary as a result of the transactions contemplated by this Agreement.
(n) Employee Benefits.
(i) Schedule 3.1 (n) contains a complete and accurate list of
all material bonus, deferred compensation, incentive, pension,
retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock
option, severance, welfare and fringe benefit plans, employment or
severance agreements and all similar practices, policies and
arrangements in which any employee or former employee (the
"Employees"), consultant or former consultant (the "Consultants") or
director or former director (the "Directors") of the
Company or any Subsidiary participates or to which any such
Employees,
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<PAGE> 33
Consultants or Directors are a party (the "Plans"). Neither the
Company nor any of its subsidiaries has any commitment to create any
additional Plan or to modify or change any existing Plan in a
material respect.
(ii) Each Plan has been operated and administered in all
material respects in accordance with its terms and with applicable
law, including, but not limited to, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code. Each Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter (including a determination that the related
trust under such Plan is exempt from tax under Section 501 (a) of
the Code) from the Internal Revenue Service for "TRA" (as defined in
Rev. Proc. 93-39), and the Company is not aware of any circumstances
which could result in revocation of any such favorable determination
letter. There is no material pending or, to the best knowledge of
the Company or the Management Sellers, threatened legal action, suit
or claim relating to the Plans. Neither the Company nor any
Subsidiary has engaged in a transaction with respect to any Plan
that would reasonably be expected to subject the Company or any
Subsidiary to a material Tax or penalty imposed by either Section
4975 of the Code or Section 501 (i) of ERISA.
(iii) No liability (other than for payment of premiums to the
Pension Benefit Guaranty Corporation (the "PBGC") which have been
made or will be made on a timely basis) under Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or any
single-employer plan of any entity (an "ERISA Affiliate") which is
or has been considered one employer with the Company under Section
4001(b) of ERISA or Section 414 of the Code (an "ERISA Affiliate
Plan"). Except for the Company's 401(k) plans or except as set forth
on Schedule 3.1(n), none of the Company, the Subsidiaries or any
ERISA Affiliate contributes to, sponsors, or maintains, or have ever
contributed to, sponsored, or maintained a single employer plan or
any Pension Plan subject to Section 412 of the Code. None of the
Company, the Subsidiaries or an ERISA Affiliate contributes to or
has ever contributed to a multiemployer plan under Title IV of
ERISA.
(iv) All contributions required to be made under the terms of
any Plan or ERISA Affiliate Plan have been timely made or have been
reflected on the Company's financial statements.
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<PAGE> 34
(v) Except as set forth on Schedule 3.1(n), neither the
Company nor any Subsidiary has any obligations to provide retiree
health and life insurance benefits or other death benefits under any
Plan, other than benefits mandated by Section 4980B of the Code. To
the knowledge of the Company and the Management Sellers, there has
been no communication to Employees by the Company that would
reasonably be expected to promise or guarantee such Employees
retiree health or life benefits on a permanent basis, and each such
Plan may be amended or terminated without incurring liability
thereunder.
(vi) With respect to each Plan, the Company has provided or
made available to Newco, if applicable, true and complete copies of
existing: (A) current Plan documents and amendments thereto; (B)
current trust instruments and insurance contracts; (C) the latest
Forms 5500 filed with the IRS; (D) most recent actuarial report and
financial description; (E) forms filed with the PBGC; (F) most
recent determination letter issued by the IRS; (G) any Form 5310 or
Form 5330 filed with the IRS; and (H) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and
401(m) tests).
(vii) All Plans covering foreign Employees comply in all
respects with applicable local law. The Company and its Subsidiaries
have no material unfunded liabilities with respect to any Plan which
covers foreign Employees. Any liabilities of the Company and its
Subsidiaries with respect to any Plan which covers foreign Employees
are reflected in the Company's Year-End Financial Statements.
(viii) Except as expressly contemplated by this Agreement or
as set forth on Schedule 3.1(n), the consummation of the
transactions contemplated by this Agreement would not, directly or
indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective Date)
reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar
compensation) except as expressly contemplated by the agreements set
forth under the heading "Employment, Consulting and Related
Agreements" on Schedule 3.1(j), (B) result in the vesting or
acceleration of any benefits under any Plan, or (C) result in any
material increase in benefits under any Plan.
(ix) Except as set forth on Schedule 3.1(n), as a result,
directly or indirectly, of the transactions contemplated by this
Agreement (including, without limitation, as a result of any
termination of employment prior to or following the Closing Date),
none of Newco or the Company or any Subsidiary will be obligated to
make a payment to an individual who is a "disqualified individual"
that would be characterized as an "excess parachute payment" (as
such terms are
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<PAGE> 35
defined in Section 280(b)(1) of the Code) without regard to whether
such payment is reasonable compensation for personal services
performed or to be performed in the future.
(o) Litigation. Except as disclosed in Schedule 3.1(o), there is no
action, order, writ, injunction, judgment or decree outstanding or suit,
litigation, proceeding, labor dispute (other than routine grievance procedures),
arbitral action, investigation known to the Company or the Management Sellers,
lawsuit or reported claim (collectively, "Actions") pending or, to the knowledge
of the Company or any Management Seller, threatened against or relating to the
Company or any Subsidiary, except for Actions which, if resolved adversely to
the Company or a Subsidiary, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.
(p) Taxes. Except as set forth in Schedule 3.1(p), as reflected in
the Year-End Financial Statements or as would not be reasonably likely to have a
Material Adverse Effect,
(i) All Tax Returns required to have been filed by or with
respect to the Company or any Subsidiary or any affiliated,
combined, consolidated, unitary or similar group of which the
Company or any Subsidiary is or was a member (a "Relevant Group")
with any taxing authority have been duly filed, and each such Tax
Return is correct and complete in all respects and correctly and
completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes owed by the Company or
any Subsidiary or any member of a Relevant Group (whether or not
shown on any Tax Return) have been paid or, in the case of Taxes
attributable to the Company and the Subsidiaries, are duly provided
for in the Year-End Financial Statements.
(ii) The reserves for Taxes due or owing by the Company and
the Subsidiaries (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) in the Year-End Financial Statements are and will be
sufficient for all unpaid Taxes, whether or not disputed, of the
Company and the Subsidiaries. As of the Closing Date, such reserves
as adjusted in accordance with past practice, will be sufficient for
the then-unpaid Taxes of the Company and the Subsidiaries
attributable to periods prior to and ending on the Closing Date.
(iii) Neither the Company nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No
claim has ever been made by any taxing authority in a jurisdiction
in which the Company or any Subsidiary does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
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<PAGE> 36
(iv) The Company and each Subsidiary have withheld and paid
all Taxes required to have been withheld and paid and have complied
with information reporting and backup withholding requirements,
including all related record keeping requirements, in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(v) There is no dispute or claim concerning any Tax liability
of the Company or any Subsidiary either (i) claimed or raised by any
taxing authority or (ii) otherwise known to any Seller, the Company
or any Subsidiary. No issues have been raised in any examination by
any taxing authority with respect to the Company or any Subsidiary
which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not
so examined. Schedule 3.1(p) lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company
or any Subsidiary for all taxable periods ended on or after December
31, 1993 (and the dates on which those Tax Returns were filed with
the relevant taxing authority), indicates those Tax Returns, if any,
that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Sellers have made available to
Newco or its Affiliates complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against
or agreed to by, the Company or any Subsidiary for taxable periods
ended on or after December 31, 1993.
(vi) Neither the Company nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any tax assessment or deficiency.
(vii) Neither the Company nor any Subsidiary has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G of the Code
or that could give rise to an excise tax under Section 4999 of the
Code.
(viii) Neither the Company nor any Subsidiary is a party to
any Tax allocation or sharing agreement, tax indemnification or
guaranty or similar agreement regarding Taxes.
(ix) Neither the Company nor any Subsidiary is, or at any time
has been, a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
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(x) None of the assets of the Company or any Subsidiary
constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. Neither the
Company or any Subsidiary is a party to any "safe harbor lease" that
is subject to the provisions of Section 168(f)(8) of the Code as in
effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(xi) Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets
of the Company or any Subsidiary is subject to an election under
Section 341(f) of the Code or comparable provisions of any state
statutes.
(xii) Except as disclosed in Schedule 3.1(p), neither the
Company nor any Subsidiary is a party to any joint venture,
partnership or other arrangement that is treated as a partnership
for federal income Tax purposes.
(xiii) There are no accounting method changes or proposed or
threatened accounting method changes, of the Company or any
Subsidiary, nor any other item, that could give rise to an
adjustment under Section 481 of the Code for periods after the
Closing Date, and the Company and its Subsidiaries will not be
required to make any such Section 481 adjustment as a result of the
transactions contemplated by this Agreement.
(xiv) Neither the Company nor any Subsidiary has received any
written ruling of a taxing authority related to Taxes or entered
into any written and legally binding agreement with a taxing
authority relating to Taxes.
(xv) Each of the Company and its Subsidiaries has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its
federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662(d) of the Code.
(xvi) Neither the Company nor any Subsidiary has any liability
for Taxes of any Person other than the Company or any Subsidiary (i)
under Section 1.1502-6 of the treasury regulations (or any similar
provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(xvii) There currently are not and have not been in any
taxable year any limitations on the utilization of the net operating
losses, built-in losses, capital losses, tax credits or other
similar items of the Company or any Subsidiary
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(collectively, the "Tax Losses") under the Code or treasury
regulations promulgated thereunder or other applicable law.
(xviii) All deficiencies asserted or assessments made against
the Company or any Subsidiary as a result of any examinations by any
taxing authority have been settled and fully paid, or are fully
reflected as a liability in the Year-End Financial Statements. All
elections with respect to Taxes affecting the Company or any
Subsidiary, as of the date hereof, are set forth in the Tax Returns,
other than any such elections which are not required to be included
in the Tax Returns.
(xix) None of the Company or its Subsidiaries has taken any
action including, but not limited to, the sale of any asset using
the installment method that would have the effect of deferring any
material liability for Taxes for the Company or the Subsidiaries
from any taxable period ending at or before the date hereof to any
taxable period thereafter.
(xx) There are no Encumbrances on any of the assets of the
Company and its Subsidiaries with respect to Taxes, other than
Encumbrances for real property Taxes not yet due and payable.
(xxi) The Company and its Subsidiaries shall have fully
complied with all federal, state, local and foreign Tax withholding
obligations arising in connection with the cancellation or exercise
of the Company options, rights and warrants, and Newco shall have no
liability therefor.
(xxii) Any adjustment of Taxes of the Company or its
Subsidiaries made by the Internal Revenue Service in any examination
which is required to be reported to state, local, foreign or other
taxing authorities has been so reported, and any additional Taxes
due with respect thereto have been paid.
(xxiii) No power of attorney has been granted by the Company
or the Subsidiaries, and is currently in force, with respect to any
matter relating to Taxes.
(q) Intellectual Property. Schedule 3.1(q) sets forth a list and
brief description (including where applicable the country of registration and
registration numbers) of (i) all patents, patent applications, registered
trademarks, trademark applications, registered copyrights and copyright
applications ("Intellectual Property") that are owned by the Company or the
Subsidiaries and used in their businesses and (ii) all agreements under which
the Company or the Subsidiaries are licensed or otherwise permitted to use
Intellectual Property. Except as set forth in Schedule 3.1(q), (i) with respect
to the trademarks designated on Schedule 3.1(q) as "Major Marks," there are no
contractual, legal or equitable restrictions that would materially impair the
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use of the Major Marks in connection with the business of the Company and the
Subsidiaries and the Major Marks, to the knowledge of the Company and the
Management Sellers, do not infringe upon or otherwise violate the intellectual
property rights of any other Person, and (ii) no Person is challenging or, to
the knowledge of the Company and the Management Sellers, infringing or otherwise
violating the Intellectual Property of the Company and the Subsidiaries, except
in each case for restrictions, challenges, infringements or violations which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
(r) Environmental Matters. Except as disclosed in Schedule 3.1(r),
which disclosed items of noncompliance, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect with respect to the
Company and/or its Subsidiaries:
(i) The Company and its Subsidiaries hold and formerly held,
and are and have been, in compliance with, all Environmental
Permits;
(ii) The Company and its Subsidiaries are, and have been in
compliance with all applicable Environmental Laws;
(iii) Neither the Company nor any of its Subsidiaries has
received any Environmental Claim, and neither the Company nor any
Management Seller is aware after due inquiry of any threatened
Environmental Claim or of any circumstances, conditions or events
that could reasonably be expected to give rise to an Environmental
Claim against the Company or any of the Subsidiaries;
(iv) There are no (1) underground storage tanks, (2)
polychlorinated biphenyls, (3) asbestos or asbestos-containing
materials, (4) urea-formaldehyde insulation, (5) sumps, (6) surface
impoundments, (7) landfills, (8) sewers or septic systems or (9)
Hazardous Substances present at any facility currently or formerly
owned, leased, operated or otherwise used by the Company and/or any
of the Subsidiaries that could reasonably be expected to give rise
to liability of any of the Company or its Subsidiaries under any
Environmental Laws;
(v) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated
by the Company or any Subsidiary) or present actions, activities,
events, conditions or circumstances, including without limitation
the release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Substances, that could
reasonably be expected to give rise to liability of the Company or
any Subsidiary under any Environmental Laws or any contract or
agreement;
(vi) No modification, revocation, reissuance, alteration,
transfer, or amendment of the Company's or any Subsidiary's
Environmental Permits, or any
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review by, or approval of, any third party of such Environmental
Permits is required in connection with the execution or delivery of
this Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of the Company or any
Subsidiary following such consummation;
(vii) Hazardous Substances have not been generated,
transported, treated, stored, disposed of, released or threatened to
be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used,
including without limitation for receipt of the Company's or any
Subsidiary's wastes, by the Company or any Subsidiary, in violation
of or in a manner or to a location that could reasonably be expected
to give rise to liability under any Environmental Laws;
(viii) Neither the Company nor any Subsidiary has assumed,
contractually or by operation of law, any liabilities or obligations
under any Environmental Laws;
(ix) The Company and each of the Subsidiaries have accrued or
otherwise provided, in accordance with GAAP, for all damages,
liabilities, penalties or costs that they may incur in connection
with any claim pending or threatened against them, or any
requirement that is or may be applicable to them, under any
Environmental Laws, and such accrual or other provision is reflected
in the Year-End Financial Statements.
(s) Insurance. Schedule 3.1(s) lists all material insurance policies
maintained by or on behalf of the Company or any of the Subsidiaries ("Insurance
Policies") (specifying the insurer, amount of insurance, type of insurance and
expiration date). All such Insurance Policies are in full force and effect, and
all premiums due and payable that are necessary to maintain such policies in
full force and effect have been paid.
(t) Brokers and Finders. No Person is or will be entitled to receive
from Newco, any of the Sellers, the Company or any of its Subsidiaries, or their
respective directors, officers, employees or agents, any broker's, finder's or
similar fee or commission in connection with the transactions contemplated by
this Agreement on account of services rendered to any Seller or the Company or
any Subsidiary other than the fees and expenses of Goldman, Sachs & Co., as
financial advisor to the Company.
(u) Employee Matters. Except as set forth on Schedule 3.1(u),
neither the Company nor any Subsidiary is a party to any written or oral
Contract relating to employment or severance obligations. None of the employees
of the Company or any Subsidiary is represented by a labor union. No petition
has been filed or proceedings instituted by any employee or group of employees
with any labor relations board seeking recognition of a bargaining
representative
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and, to the knowledge of the Company and the Management Sellers, there is no
organizational effort currently being made or threatened by or on behalf of any
labor union to organize any employees of the Company or any of its Subsidiaries.
There arc no controversies or disputes pending between the Company and its
Subsidiaries on the one hand and any of their employees on the other hand,
except for controversies and disputes with individual employees arising in the
ordinary course of business which have not had and are not likely to have,
individually or in the aggregate, a Material Adverse Effect
(v) Contingent Payments. Except as set forth on Schedule 3.1(v),
neither the Company nor any Subsidiary is, or may become, obligated to pay any
amount, or provide any item of value, to any Person in respect of any earnout or
other contingent payment arising out of the acquisition of any assets, stock or
business. The total amount that is required to satisfy in full the Company's
obligations for earnout payments to Dr. Robert A. Samit and Dr. Michael Davidson
(the "Samit Earnout Payment") does not exceed $2,250,000.
(w) Disclosure. The representations and warranties contained in this
Section 3.1 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the representations and
warranties contained in this Section 3.1 not misleading.
(x) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.1, none of the
Sellers nor any other Person makes any other express or implied representation
or warranty on behalf of the Sellers, the Company, its directors, officers,
agents, or the Subsidiaries.
3.2 Representations and Warranties of Newco. Newco hereby represents
and warrants to the Company and the Sellers that:
(a) Organization and Authority of Newco. Newco is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to carry on its business
as it is now being conducted, to enter into this Agreement and to perform its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered by Newco and, except for the stockholder approval required by Section
2.14(b), has been approved by the holder of all of the issued capital stock of
Newco and no further proceedings on the part of Newco are necessary to authorize
this Agreement, and this Agreement constitutes a valid and binding obligation of
Newco, enforceable in accordance with its terms, and no other proceedings on the
part of Newco are necessary to authorize this Agreement and the consummation of
the transactions contemplated hereby.
(b) Consents and Approvals. Except as required by the HSR Act, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority or any other Person is required to be made or
obtained by Newco in connection with
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the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, except for such consents, approvals,
authorizations, declarations, filings or registrations which the failure to make
or obtain, individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect or to prohibit or materially impair Newco's
ability to perform its obligations under this Agreement.
(c) Non-contravention. The execution and delivery of this Agreement
by Newco does not, and the consummation by Newco of the transactions
contemplated hereby on its part will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of Newco or (ii) subject to obtaining the consents referred to in Section 3.2(b)
as being required hereunder (including those set forth on Schedule 3.2(b)), a
breach or violation of, a default under, or the acceleration of or the creation
of an Encumbrance on assets of Newco (with or without the giving of notice or
the lapse of time) pursuant to, (A) any right or obligation of Newco under any
Contract, or (B) assuming compliance with the matters set forth in Section 4.1,
any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental Permit, in either case to which Newco is subject or by which it or
its properties or assets is bound, except where, in all cases (other than those
relating to the certificate of incorporation or by-laws of Newco), such breach,
violation, default, acceleration or creation, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect, or would not
be reasonably likely to prohibit or materially impair Newco's ability to perform
its obligations under this Agreement.
(d) Brokers and Finders. No Person is or will be entitled to receive
from Newco, or its directors, officers, employees or agents, any broker's,
finder's or similar fee or commission in connection with the transactions
contemplated by this Agreement on account of services rendered to Newco. Fees
and expenses payable under the Financing Letters and to THL Equity Advisors IV,
LLC pursuant to a separate agreement in connection with the Recapitalization
shall be paid by the Surviving Corporation in connection with the Closing.
(e) Financial Capability. On the Closing Date, subject to the
funding by the institutions which have executed the Financing Letters, the
Company and Newco will have sufficient funds to consummate the Recapitalization.
Schedule 3.2(e) is a true and accurate schedule of the sources and amounts of
all funds committed to Newco for the purpose of performing its obligations
hereunder.
(f) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.2, neither Newco nor
any other Person makes any other express or implied representation or warranty
on behalf of Newco, its directors, officers, agents and Affiliates.
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ARTICLE IV
Conditions to Closing
4.1 Conditions to the Obligations of Sellers and Newco. The
obligations of the parties to consummate the Recapitalization shall be subject
to the satisfaction or waiver by both parties prior to or at the Effective Date
of each of the following conditions:
(a) No Injunction. No injunction, temporary restraining order,
judgment or other order or decree of any Governmental Authority shall have been
issued or been entered, nor shall any statute, rule or regulation have been
enacted or promulgated, in either case which is in effect on the Closing Date
and prohibits or would materially impair the parties' ability to consummate the
Recapitalization on the terms provided hereunder.
(b) HSR Act. Each party required to do so by the HSR Act shall have
duly filed with the Federal Trade Commission and the Antitrust Division of the
Department of Justice the report required under the HSR Act with respect to the
sale and purchase of the Common Shares; and the waiting period required by the
HSR Act, and any extensions thereof obtained by request or other action of such
Governmental Authorities, shall have expired or been earlier terminated by such
Governmental Authorities.
4.2 Conditions to the Obligations of Newco. The obligation of Newco
to consummate the Recapitalization shall be subject to the satisfaction or
waiver by Newco prior to or at the Effective Date of each of the following
conditions:
(a) Representations, Warranties and Covenants. Each representation
and warranty of the Company and the Sellers shall be true and correct, in each
case when made and as of the Effective Date as if such representations and
warranties were made at and as of the Effective Date, provided that
representations and warranties expressly made as of a specific date need be true
and correct only as of such specific date; and the Company and the Sellers shall
have performed in all material respects all agreements and covenants required
hereby to be performed by the Company and the Sellers, respectively, prior to or
at the Effective Date. There shall be delivered to Newco certificates of the
Company and Management Sellers, respectively, to the foregoing effect.
(b) Opinion of Counsel to the Company. Cox & Smith, Incorporated
counsel for the Company, shall have delivered to Newco an opinion, dated the
Closing Date, substantially in the form of EXHIBIT C.
(c) FIRPTA Certificate. The Company and the Sellers shall have
provided to Newco and the Company, both Company and stockholder FIRPTA
certificates, pursuant to Sections 897 and 1445 of the Code and the treasury
regulations thereunder.
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(d) Funding. The financing transactions contemplated by the
Financing Letters shall be consummated concurrently with the consummation of the
Merger and the other transactions contemplated by the Recapitalization.
(e) Other Regulatory Approvals and Consents. The Company shall have
obtained all consents and approvals of Governmental Authorities, if any, set
forth on Schedule 3.1(e).
(f) Releases. The Company shall have received a consent and release,
in a form reasonably acceptable to Newco, from the holder of the BNP Warrant and
each holder of Employee Options other than any Seller.
(g) Cancellation of Securities. Prior to or at the Effective Time,
all outstanding Employee Options, Class A Warrants, Class B Warrants, the BNP
Warrant, and all other securities convertible for or exercisable into shares of
the Company's capital stock, shall have been exercised or canceled in accordance
with Article II.
(h) Preferred Stock. All shares of the Preferred Stock shall have
been repurchased.
(i) Samit Earnout Payment. The Samit Earnout Payment shall have been
paid in full and a release, in a form reasonably satisfactory to Newco, shall
have been executed and delivered by each of Dr. Samit and Dr. Davidson to the
Company in respect of the foregoing.
(j) Severance Obligations; Change in Control Payments. The Company
and its Subsidiaries shall have paid in full all of the Severance and Change in
Control Payments and the Company shall have received a release from each of the
recipients thereof in a form reasonably acceptable to Newco.
(k) Senior Credit Facility. All of the Company's obligations under
the CAI Credit Agreement shall have been terminated and all amounts outstanding,
accrued or payable in respect thereto, including all principal, interest,
penalties, premiums, fees, expenses and any other charges or liabilities
associated therewith, shall have been paid in full, all security interests,
pledges, guarantees and encumbrances in respect thereof shall have been released
and Credit Agricole Indosuez shall have delivered a certificate to the foregoing
effect in form reasonably acceptable to Newco, provided that the release of the
Company's guarantee of the indebtedness of Daniel Poth, O.D. to Credit Agricole
Indosuez shall be effected concurrently with the refinancing of such
indebtedness by the Company's senior lenders pursuant to the Financing Letters.
(l) Repurchase of Senior Notes. Not less than 65% of the outstanding
Senior Notes shall have tendered into the Senior Notes Offer and shall have been
repurchased by the
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Company and the Company shall have deposited in trust for the benefit of the
holders of Senior Notes an amount of cash and/or U.S. Treasury securities to be
sufficient, as of October 1, 1998, to pay and discharge all amounts outstanding,
accrued or payable (including all principal, interest, premiums and penalties)
as of the Effective Date in respect of all of the Senior Notes not theretofore
tendered to and repurchased by the Company in connection with the Senior Notes
Offer.
(m) Noncompetition Agreement. The Sellers shall have executed and
delivered to Newco a non-competition agreement in the form attached hereto as
EXHIBIT D.
(n) The Shareholders Agreement shall have been terminated in
accordance with its terms, and shall no longer be in force as of the Effective
Time.
(o) Newco shall have received a true and complete copy of the
audited consolidated balance sheets of the Company as of January 3, 1998 and the
related audited consolidated statements of operations, stockholders' equity and
cash flows for the year then ended, together with the notes thereto (the "Fiscal
1997 Audited Financial Statements") which confirm the accuracy of the Unaudited
Financial Statements.
(p) All agreements (other than this Agreement and the other
agreements entered into with Newco's approval in connection with the
Recapitalization) between the Company or any of its Subsidiaries, on the one
hand, and Desai Capital Management Incorporated or any of its Affiliates, on the
other hand, shall have been terminated, all amounts accrued or payable
thereunder shall have been paid in full and all the Company's obligations
thereunder shall have been fully discharged.
(q) The shareholders of the Company shall have approved the Plan of
Merger.
(r) The amount of the Company's cash and cash equivalents shall not
be less than $2,500,000 as of the Closing Date.
4.3 Conditions to the Obligations of the Sellers. The obligations of
the Sellers to consummate the sale of the Common Shares under this Agreement
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
(a) Representations, Warranties and Covenants. Each representation
and warranty of Newco shall be true and correct, in each case when made and at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, provided that representations and warranties
expressly made as of a specific date need be true and correct only as of such
specific date; and Newco shall have performed in all material respects all
material agreements and covenants required hereby to be performed by Newco prior
to or at
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the Closing Date. There shall be delivered to the Seller Representative
certificates of Newco to the foregoing effect.
(b) Opinion of Counsel to Newco. Hutchins, Wheeler & Dittmar, A
Professional Corporation, counsel for Newco, shall have delivered to the Seller
Representative an opinion, dated the Closing Date, addressed to the Company and
the Sellers substantially to the effect set forth in EXHIBIT E.
(c) The Company shall have provided evidence reasonably satisfactory
to Newco that none of the payments made or scheduled to be made to any
"disqualified individual" of the Company (within the meaning of section 280G(c)
of the Code and the regulations issued thereunder) shall constitute "excess
parachute payments" (within the meaning of section 280G(b) of the Code and the
regulations issued thereunder), but only with respect to those individuals who
shall have timely requested of the Company in writing that such payments are to
not constitute "excess parachute payments" and who have agreed in writing with
the Company that any such payments shall be made only upon obtaining shareholder
approval in accordance with Section 280G(b)(5) of the Code and the regulations
issued thereunder.
ARTICLE V
Covenants
5.1 Interim Operations of the Company. Following the date hereof and
prior to the Closing, except as otherwise expressly permitted by this Agreement
or consented to or approved by Newco in writing, the Company agrees that, and
each Seller shall use its reasonable best efforts to ensure that:
(a) the Company and the Subsidiaries shall operate their business
only in the ordinary and usual course consistent with past practice and use
reasonable best efforts which are consistent with past practice to preserve
their properties (including, without limitation, intellectual property rights)
and business and relationships with suppliers, customers, employees, creditors,
sublessees, licensees and other Persons with whom they have commercial dealings;
(b) the Company shall not (i) amend its articles of incorporation or
by-laws; (ii) split, combine or reclassify the outstanding shares of capital
stock of the Company; (iii) issue, sell, pledge, dispose of or encumber any
shares of, or securities convertible or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or any Subsidiary, except that (A) the Company may
issue or reserve for issuance additional shares of Preferred Stock to pay
dividends on the Preferred Stock in accordance with the Statement of Resolution
of the Preferred Stock and (B) the Company may issue shares of Common Stock upon
exercise of any Employee Options; or (iv) declare, set aside
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or pay any dividend payable in cash, stock or property with respect to any class
of capital stock other than dividends payable on Preferred Stock;
(c) neither the Company nor any Subsidiary shall (i) transfer,
lease, license, guarantee, sell, dispose of or create any Encumbrance with
respect to any individual capital asset of the Company or any Subsidiary if the
greater of the book value and the fair market value of such capital asset
exceeds $1,000,000, other than Permitted Encumbrances; (ii) incur or modify any
indebtedness for money borrowed or guarantee thereof, including without
limitation capitalized lease obligations, in excess of $500,000 other than
indebtedness incurred under the credit facilities of the Company in effect on
the date hereof in the ordinary and usual course of business consistent with
past practice; (iii) acquire directly or indirectly, by repurchase or otherwise
any shares of the capital stock of the Company or any Subsidiary except as
contemplated by this Agreement; (iv) except as expressly contemplated by the
Company's business plan for the fiscal year ending January 2, 1999 (the
"Business Plan"), a copy of which was previously delivered to Newco, authorize
any capital expenditure in excess of $500,000 individually or $1,000,000 in the
aggregate; or (v) except as expressly contemplated by the Business Plan, enter
into or renew any lease or other commitment in respect of real or personal
property to be performed over a period exceeding one year where the present
value of payments to be made thereunder exceeds $250,000 individually or
$1,000,000 in the aggregate;
(d) neither the Company nor any Subsidiary shall (i) except for
annual merit salary increases, which are being implemented in the ordinary
course of business and contemporaneously with the date of this Agreement,
increase the compensation payable by the Company or any Subsidiary to any of
their directors, officers or employees; or (ii) establish, amend, adopt, enter
into, or make any new (or accelerate or otherwise modify any existing) grants or
awards under, any Plan or award any bonus to any such director, officer or
employee;
(e) neither the Company nor any Subsidiary shall settle or
compromise any material claims or litigation or modify, amend or terminate any
of its Material Contracts or waive, release or assign any material rights or
claims;
(f) neither the Company nor any Subsidiary shall accelerate or delay
the delivery or sale of products or services, the incurrence of capital
expenditures, the satisfaction of payables or other liabilities or the
collection of receivables;
(g) the Company and the Subsidiaries shall maintain in full force
and effect the Insurance Policies;
(h) the Company and the Subsidiaries shall continue performance in
the ordinary course of their obligations under all Contracts;
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(i) the Company and the Subsidiaries shall continue to discharge
liabilities and obligations in the ordinary course of business;
(j) neither the Company nor any Subsidiary shall dispose of any
Owned Real Property;
(k) neither the Company nor any Subsidiary shall voluntarily permit
to be incurred any Encumbrances on any of its material assets;
(l) neither the Company nor any Subsidiary shall sell, assign,
transfer, license or convey any of their respective intellectual property
rights, except in the ordinary course of business;
(m) neither the Company nor any Subsidiary shall make any investment
in international operations, except for investments in existing international
operations in the ordinary course of business but not to exceed $50,000 in the
aggregate per annum; and
(n) neither the Company nor any Subsidiary shall authorize or enter
into an agreement to do any of the foregoing.
5.2 Access by Newco; Confidentiality. The Company shall allow Newco,
during regular business hours and upon reasonable advance notice, to have
reasonable access to the properties, books and records of the Company and the
Subsidiaries, and to conduct such examination of their condition as Newco
reasonably deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of the Sellers hereunder. No investigation by
Newco or other information received by Newco shall operate as a waiver or
otherwise affect any representation, warranty or other agreement given or made
by the Sellers hereunder.
(b) In the event of the termination of this Agreement, Newco at its
own expense shall promptly deliver (without retaining any copies thereof) to the
Company, or (at the Company's option) confirm in writing to the Company that it
has destroyed, all information furnished to Newco or its representatives by
Sellers, the Company, the Subsidiaries or any of their respective agents,
employees or representatives as a result hereof or in connection herewith,
whether so obtained before or after the execution hereof, and confirm in writing
to the Company that it has destroyed all analyses, compilations, forecasts,
studies or other documents prepared by Newco or its Affiliates or their
respective agents or representatives which contain or reflect any such
information. Newco shall at all times prior to the Closing Date, and in the
event of termination of this Agreement, cause any information so obtained to be
kept confidential and will not use, or permit the use of, such information in
its business or in any other manner or for any other purpose except as
contemplated hereby.
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(c) All information provided or obtained pursuant to clause (a)
above shall be held by Newco in accordance with and subject to the terms of the
confidentiality agreement, dated December 5, 1997, between Thomas H. Lee Company
and the Company.
5.3 Consents and Reasonable Best Efforts. (a) As soon as practicable
after execution and delivery of this Agreement (and in no event more than ten
Business Days after the date hereof), Newco and the Sellers shall make, or cause
their Affiliates to make, all filings required under the HSR Act. In addition,
Newco and the Sellers will promptly furnish all information as may be required
by the Federal Trade Commission and the Department of Justice under the HSR Act
in order that the requisite approvals for the purchase and sale of the Shares
pursuant hereto, and the transactions contemplated hereby, be obtained or to
cause any applicable waiting periods to expire. The Company, the Sellers and
Newco will, as soon as practicable (and in no event more than ten Business Days
after the date hereof), commence to take all other action required to obtain as
promptly as practicable all other necessary consents, approvals, authorizations
and agreements of, and to give all notices and make all other filings with, any
third parties, including Governmental Authorities, necessary to authorize,
approve or permit the consummation of the transactions contemplated hereby, and
to obtain from BNP and each Employee Optionholder other than the Sellers a
consent to the payment of the applicable Per Share Merger Consideration due to
such Persons pursuant to Article II, and the Company, Newco and the Sellers
shall cooperate with each other with respect thereto. In addition, subject to
the terms and conditions herein provided, each of the parties hereto covenants
and agrees to use its reasonable best efforts to take, or cause to be taken, all
action or do, or cause to be done, all things necessary, proper or appropriate
to consummate and make effective the transactions contemplated hereby and to
cause the fulfillment of the parties' obligations hereunder. The Company and the
Sellers further agree that, subject to the terms and conditions of this
Agreement, each of the Company and the Sellers shall use reasonable best efforts
to cause the Closing to occur on or prior to the date 60 days after the date
hereof.
(b) Newco and the Company agree to use their reasonable best efforts
to take, or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by the Financing Letters, to cause the fulfillment of
the parties' obligations hereunder and to cause the Closing to occur on or prior
to the date 60 days after the date hereof. Such reasonable best efforts shall
not include any obligation to obtain the bridge loan contemplated by Section
5.3(c) within such 60-day period.
(c) In the event that the offering of up to $150,000,000 aggregate
principal amount of senior subordinated debt securities contemplated by the
Financing Letters shall not have been consummated on or before the date 90 days
after the date hereof (the "Financing Deadline"), Newco agrees that it shall
exercise its right to obtain, on behalf of the Company, the bridge loan
contemplated by the bridge loan commitment letter dated March 5, 1998, among
Newco, Bankers Trust New York Corporation and Merrill Lynch Capital Corporation
(the
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"Bridge Loan Commitment Letter"), and shall use its reasonable best efforts and
take all actions necessary promptly, and in no event later than 14 days
following the Financing Deadline, to effect the transactions contemplated by the
Bridge Loan Commitment Letter for the purpose of satisfying the condition set
forth in Section 4.2(d).
5.4 Notification of Certain Matters. The Sellers and the Company
shall give prompt notice to Newco, and Newco shall give prompt notice to the
Seller Representative, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement and required to be made by the notifying
party to be untrue or inaccurate in any material respect any time from the date
hereof to the Closing Date and (ii) any material failure of the Company, Newco
or any Seller, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
each party shall use reasonable efforts to remedy such failure, provided,
HOWEVER, that no disclosure by any party pursuant to this Section 5.4 shall be
deemed to amend or supplement any representation, warranty or schedule to this
Agreement or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
5.5 Publicity. Newco, the Company and the Seller Representative
agree to issue a joint press release announcing the execution of this Agreement
immediately following execution and delivery of this Agreement (the "Signing
Announcement"). Between the date hereof and the Closing (or, if the Closing does
not occur, the date this Agreement is terminated), Newco, the Company and the
Seller Representative agree not to issue any press release or make any similar
public announcement or communication, written or oral, in respect of the
transactions contemplated by this Agreement, other than the Signing Announcement
and any other press release, announcement or communication jointly approved by
Newco, the Company and the Seller Representative; provided, however, that no
party shall be restrained, after consultation with the others, from making such
disclosure as it shall be advised by counsel is required by Applicable Laws.
5.6 Notice of Cancellation. As soon as practicable after the date
hereof, the Company shall deliver to the Class A Warrantholders the notification
of a "Non-Surviving Combination" required under Section 4.04(a) of the Class A
Warrant Agreement.
5.7 Senior Notes Offer. As soon as practicable after the date
hereof, the Company shall deliver to the holders of Senior Notes an offer to
purchase all outstanding Senior Notes (the "Senior Notes Offer"). The Company
shall take all action necessary or advisable to consummate prior to the Closing
Date the purchase of all Senior Notes properly tendered to the Company as
contemplated by the Senior Notes Offer.
5.8 Employee Benefits. The Company will maintain, for a period of
one year after the Closing Date, without interruption, employee compensation and
benefit plans, programs and policies and fringe benefits (including
post-employment welfare benefits and severance) that
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will provide benefits to employees of the Company or the Subsidiaries who
continue employment that are in the aggregate no less favorable than those
provided pursuant to the Plans as in effect on the Closing Date. For a period of
one year following the Closing, the Company will honor all Plans pursuant to
their terms. Employees who continue employment shall be given credit for all
service with the Company and the Subsidiaries (or service credited by the
Company or the Subsidiaries for similar plans, programs or policies) under all
of the Company's employee benefit and fringe benefit plans, programs and
policies (other than equity compensation plans adopted on or after the Closing
Date) (including post-employment welfare benefits and severance) in which they
become participants for the first time after the Closing Date for all purposes
other than any benefit accrual.
5.9 Non-solicitation of Employees. Newco agrees that between the
date hereof and the Closing (or, if the Closing does not occur, the date this
Agreement is terminated), except with the prior written consent of the Company
or as expressly contemplated by this Agreement, Newco shall not, and shall
direct its subsidiaries and its and their respective directors, officers,
employees and representatives not to, directly or indirectly, hire, offer to
hire or entice away any officer or employee of the Company or in any other
manner persuade or attempt to persuade any such officer or employee to terminate
his relationship with the Company.
5.10 Further Assurances. Subject to the terms and conditions hereof,
the parties hereto agree to use their respective reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper and advisable under Applicable Laws to consummate the
Recapitalization on the terms provided hereunder. In case at any time after the
Closing any further action is necessary, proper or advisable to carry out the
purposes of this Agreement, as soon as reasonably practicable the parties hereto
shall take all such action to effectuate such purposes.
5.11 Exclusivity. During the term of this Agreement, the Company and
each Seller agrees not to, directly or indirectly, solicit or initiate or enter
into discussions or transactions with, or encourage, or provide any confidential
information to, or continue to do any of the foregoing with any corporation,
partnership or other entity or group (other than Newco and its designees)
concerning any proposed sale of stock or partnership interest or any merger or
sale of securities or substantial assets of, or any similar transaction
involving, the Company or any of its component corporations or partnerships, and
the Company and each Seller shall cause each of the Subsidiaries to abide by the
foregoing restrictions. The Company and each Seller represents that neither he,
she or it nor any of his, her or its Affiliates is a party to or bound by any
agreement with respect to any such transaction other than as contemplated by
this Agreement.
ARTICLE VI
Survival
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<PAGE> 52
6.1 Survival of Representations, Warranties and Covenants.
Notwithstanding any otherwise applicable statute of limitations, all
representations and warranties of the parties contained in this Agreement, and
any covenants or other agreements the performance of which is specified to occur
on or prior to the Closing or the Effective Date, shall not survive, and shall
terminate effective as of, the Effective Date.
ARTICLE VII
Miscellaneous
7.1 Payment of Expenses. Except as expressly provided in Sections
2.6(a) and 3.2(d), whether or not the transactions contemplated by this
Agreement shall be consummated, each party hereto shall pay all of his or its
own out-of-pocket and other expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incident to preparing for, entering into and
carrying out this Agreement.
7.2 Waiver of Conditions. The conditions to each party's obligations
to consummate the transactions contemplated hereby are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by Applicable Laws. Any such waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
7.3 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) by mutual agreement of Newco, the Company and the Seller
Representative, on behalf of the Sellers;
(b) by Newco or by the Company and the Seller Representative, on
behalf of the Sellers, by giving written notice of such termination to the other
party, if (x) any condition to the terminating party's obligations hereunder has
not been satisfied or waived and (y) the Closing shall not have occurred on or
prior to September 30, 1998; provided, that the terminating party is not in
material breach of its obligations under this Agreement;
(c) by either Newco or the Company if the condition set forth in
Section 4.1(b) cannot be satisfied;
(d) by the Company and the Seller Representative on behalf of the
Sellers if the Closing shall not have occurred on or prior to 10 Business Days
following the satisfaction of all the conditions to Closing set forth in Article
IV hereof (other than conditions which, by their terms, are to be satisfied at
the Closing) as a result of any action or inaction by Newco;
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<PAGE> 53
(e) by Newco if the Closing shall not have occurred on or prior to
10 Business Days following the satisfaction of all the conditions to Closing set
forth in Article IV hereof (other than conditions which, by their terms, are to
be satisfied at the Closing) as a result of any action or inaction by the
Company or any Seller; or
(f) by the Company and the Seller Representative, on behalf of the
Sellers, in the event that the condition to the Company's and the Seller's
obligations under Section 4.2(d) cannot be satisfied by the date 14 days after
the Financing Deadline;
in any case, without liability of any party hereto; provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination and no party shall be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) willful failure of such party to have performed its
obligations hereunder, or (ii) any knowing misrepresentation made by such party
of any matter set forth herein; and provided further that, notwithstanding any
termination of this Agreement, the provisions of Sections 5.2 (Access by Newco;
Confidentiality), 5.5 (Publicity), 7.1 (Payment of Expenses) and this Section
7.3 shall continue in full force and effect.
7.4 Schedules. The inclusion of any matter in any Schedule to this
Agreement shall be deemed to be an inclusion for all purposes of this Agreement,
including each representation and warranty to which it may relate, but only to
the extent that the relevance of such matter to a particular portion of this
Agreement, including any representation or warranty, is reasonably apparent from
the matter so disclosed.
7.5 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
7.7 Notices. Any notice, request, instruction or other document to
be given hereunder shall be in writing and shall be given by hand delivery,
courier service, facsimile transmission (with confirmation of receipt) at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
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<PAGE> 54
If to Newco:
ECCA Merger Corp.
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Anthony J. DiNovi
Facsimile: (617) 227-3154
With copies to:
Hutchins, Wheeler & Dittmar,
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attn: James Westra
Facsimile: (617) 951-1295
If to the Company or the Sellers:
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
Attention: Mark T. Pearson
Facsimile: (210) 524-6996
and
Desai Capital Management Incorporated
540 Madison Avenue
New York, New York 10022
Attention: Timothy R. Kelleher
Facsimile: (212) 838-9807
With copies to:
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<PAGE> 55
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Earl D. Weiner, Esq.
Facsimile: (212) 558-3588
7.8 Entire Agreement, etc. This Agreement (i) constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof; (ii) shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors and
permitted assigns; (iii) is for the benefit only of such parties and is not
intended to create any obligations to, or rights in respect of, any other
persons or entities, except to the extent employee benefits are continued under
Section 5.8; and (iv) shall not be assignable by operation of law or otherwise;
provided, however, that (a) prior to the Effective Time, Newco shall be
permitted to assign or delegate any or all of its rights and/or obligations
hereunder to any affiliate of Newco reasonably satisfactory to the Company and
the Sellers and (b) at or after the Effective Time, the Company shall be
permitted to assign any or all of its rights hereunder to any Person.
7.9 Captions. The Article, Section, Schedule and paragraph captions
and the table of contents herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof.
7.10 Tax Matters.
(a) Cooperation on Tax Matters.
(i) Newco, the Company and any Subsidiary and Sellers shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder. The Company and any Subsidiary and
Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company and any Subsidiary relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations including any extension
thereof of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other party so
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<PAGE> 56
requests, the Company and any Subsidiary or Sellers, as the case may
be, shall allow the other party to take possession of such books and
records.
(ii) Newco and Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may
be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) Newco and Sellers further agree, upon request, to
provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and the
treasury regulations thereunder.
(iv) The Company agrees that all Tax Returns filed on or
before the Closing Date will be prepared consistent with past
practice. A draft of any such Tax Return will be provided to Newco
no less than 14 Business Days in advance of filing for Newco's
review and comment.
(b) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company and any Subsidiary shall be
terminated as of the Closing Date and, after the Closing Date, the Company and
any Subsidiary shall not be bound thereby or have any liability thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains Tax, New York City Transfer Tax and any similar tax imposed in other
states or subdivisions ("Transfer Taxes")), shall be paid by Sellers when due,
and Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
Company will, and will cause its Affiliates to, join in the execution of any
such Tax Returns and other documentation. The Sellers shall deliver to the
Company Form W-8 and W-9, as applicable, at the Closing and prior to any payment
for the securities pursuant to Article II. The Company shall withhold from
payments to Sellers any withholding taxes required by law.
7.11. Seller Representative. The Seller Representative is hereby
appointed by each Seller to act for the Sellers in connection with the
transactions contemplated by this Agreement, and any action under or in respect
of this Agreement taken by the Seller Representative shall be binding upon all
the Sellers. Each Seller agrees that the Seller Representative shall not be
liable for, and agrees to indemnify and hold the Seller Representative harmless
against, any claims, damages or losses that may arise out of any action or
omission of the Seller Representative in connection with its service in such
capacity, except any such claim,
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<PAGE> 57
damage or loss that results from the Seller Representative's bad faith or
willful disregard of its duties hereunder.
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<PAGE> 58
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
ECCA MERGER CORP.
/s/ Charles A. Brizins
------------------------------
By: Charles A. Brizins
Title: Vice President
EYE CARE CENTERS OF
AMERICA, INC.
/s/ Bernard N. Andrews
------------------------------
By: Bernard N. Andrews
Title: President/CEO
SELLERS:
EQUITY LINKED INVESTORS L.P.
By: Rohit M. Desai Associates
General Partner
/s/ Frank J. Pados
------------------------------
By: Frank J. Pados
Attorney-in-fact
EQUITY LINKED INVESTORS II
By: Rohit M. Desai Associates - II
General Partner
/s/ Frank J. Pados
------------------------------
By: Frank J. Pados
Attorney-in-fact
<PAGE> 59
INDOSUEZ EYE CARE PARTNERS
By: Indosuez CM II, Inc., its
Managing General Partner
By: /s/ Allen Gruenhut
-------------------------
Allen Gruenhut
Vice President
By: /s/ Michael F. Walsh
-------------------------
Michael F. Walsh
Vice President
BERNARD W. ANDREWS
/s/ Bernard W. Andrews
---------------------------------
NORMAN S. MATTHEWS
/s/ Norman S. Matthews
---------------------------------
RICHARD W. ROBERSON
/s/ Richard W. Roberson
---------------------------------
AGT HOLDINGS, LLC
By: /s/ Antoine G. Treville
-------------------------
Antoine G. Treville
President
<PAGE> 60
WILLIAM J. PUETZ
/s/ William J. Puetz
------------------------------
JOHN HENRY WOLFORD
/s/ John Henry Wolford
------------------------------
<PAGE> 61
EXHIBIT A
Form of Opinion of Counsel to the Company
<PAGE> 62
EXHIBIT B
Form of Opinion of Counsel to Newco
<PAGE> 1
Exhibit 2.4
AMENDMENT NO. 1 TO THE
RECAPITALIZATION AGREEMENT
AMENDMENT NO. 1, dated as of April 23, 1998 (this "Amendment"), to
the Recapitalization Agreement, dated as of March 6, 1998 (the "Agreement"),
among ECCA Merger Corp., a Delaware corporation ("Newco"), Eye Care Centers of
America, Inc., a Texas corporation (the "Company"), and the Sellers named
therein (the "Sellers").
WHEREAS, Newco, the Company and the Sellers (collectively, the
"Parties") have entered into the Agreement; and
WHEREAS, the Parties recognize that Section 2.6(a) of the Agreement
contains an error not intended by the Parties at the time of entering into the
Agreement; and desire to amend the Agreement to correct the aforementioned
error; and
WHEREAS, the Parties understand that any adjustment to the Merger
Consideration pursuant to Section 2.13 of the Agreement would cause a
post-closing adjustment to the Per Share Merger Consideration (as defined in the
Agreement) and would therefore affect the consideration to be paid to all
holders of interests in the Company entitled to payments under Section 2.6 of
the Agreement, the Parties desire, in the interest of further certainty with
regard to the timing and the amounts of payments to be made pursuant to Article
II of the Agreement, to amend the Agreement expressly to provide for the several
obligations of all of such interest holders to pay their respective pro rata
portions of any Shortfall Amount (as defined in the Agreement), to make
reference to the arrangements by which such interest holders will fund any such
payments from the cash consideration otherwise payable to them upon the
Effective Date (as defined in the Agreement) and to make certain related
amendments;
NOW THEREFORE, in consideration of the agreements and mutual
premises contained herein and in the Agreement, the Parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For purposes of this Amendment, unless otherwise
indicated, capitalized terms have the meanings ascribed to them in the
Agreement.
<PAGE> 2
ARTICLE II
AMENDMENTS
2.1 AMENDMENTS TO SECTION 2.6(a). Section 2.6(a) of the Agreement is
hereby amended as follows:
(a) to delete from clause (v) thereof the words "in excess of
$3,920,000, if any", so that clause (v) thereof shall read in its entirety
as follows:
"(v) the amount of the Company Transaction Expenses, less"; and
(b) to amend the definition of "Per Share Merger Consideration"
contained therein to read in its entirety as follows:
"The "Per Share Merger Consideration" will be equal to (a) the
Aggregate Merger Consideration divided by (b) the number of Common
Shares outstanding immediately prior to the Effective Time,
including the Outstanding Shares, the Class B Warrant Shares and the
Deferred Shares (it being understood that the number of Deferred
Shares deemed outstanding at such time for purposes of this Section
2.6 shall include any fractional Deferred Shares required to be
distributed in cash in accordance with the Company's Deferred Stock
Plan), plus the number of Employee Option Shares subject to Employee
Options canceled pursuant to Section 2.6(e), plus the number of
Class A Warrant Shares subject to Class A Warrants retired and
canceled pursuant to Section 2.6(d), plus the number of BNP Warrant
Shares subject to the BNP Warrant canceled pursuant to Section
2.6(f)."
2.2 ADDITION OF SECTION 2.6(h). Section 2.6 of the Agreement is
hereby amended to add a paragraph (h), which shall read in its entirety as
follows:
"(h) Receipt of Payments. Notwithstanding anything to the contrary
contained in this Section 2.6:
(i) any cash amount payable at the Effective Time to any
holder of Common Shares (excluding Dissenter's Shares and Excluded
Shares as of the Effective Time), Employee Option Shares or BNP
Warrant Shares (each, a "Common Holder") shall be subject to the
adjustment to the Per Share Merger Consideration, if any, to be made
pursuant to Section 2.13. Accordingly, the amount of such cash
payable by the Company to each Common Holder, other than any
Potential Dissenting Shareholder (as defined in Section 2.9), shall
be paid subject to the withholding by the Seller Representative of
an amount equal to
2
<PAGE> 3
such Common Holder's Pro Rata Share (based on all securities of the
Company other than Preferred Shares for which such Common Holder is
entitled to cash consideration hereunder) of the aggregate amount
which the Sellers shall agree shall be deposited in escrow for the
purposes of funding the payment of any Shortfall Amount to the
Company pursuant to Section 2.13. At the Effective Time, the Company
shall pay such amount to be withheld by the Seller Representative in
accordance with the instructions of the Seller Representative.
(ii) For purposes of this Section 2.6 and Sections 2.9 and
2.13, a Potential Dissenting Shareholder shall be deemed a "Common
Holder" until he shall have perfected his dissenter's rights in
accordance with Article 5.12 of the TBCA. Any amounts that would
otherwise be payable at the Effective Time to a Potential Dissenting
Shareholder shall be retained by the Company until such time as the
holder thereof shall have either (A) perfected his dissenter's
rights or (B) consented to the Merger or otherwise waived, lost or
failed timely to perfect his dissenter's rights, at which time the
applicable provisions of Section 2.9 shall apply. In the case of any
Potential Dissenting Shareholder who thereafter becomes entitled to
receive the Per Share Merger Consideration with respect to such
Potential Dissenting Shareholder's Common Shares pursuant to Section
2.9, the Company shall promptly thereafter pay to such holder the
aggregate consideration to which he is then entitled.
(iii) The Seller Representative shall have authority to act on
behalf of each Common Holder (other than a Potential Dissenting
Shareholder) for purposes of giving instructions and notices to the
Company, any of the Company's representatives and any escrow agent
appointed by the Sellers with respect to the deposit, custody and
release of funds to be escrowed pursuant to clause (i) hereof. Any
Shortfall Amount that shall be paid to the Company from the funds in
escrow shall be deducted from the escrowed amount with respect to
each such Common Holder, and any additional amounts owed by a Common
Holder shall be determined, on the basis of each such Common
Holder's Pro Rata Share of the Aggregate Merger Consideration. Any
Shortfall Amount that shall be payable by any former Potential
Dissenting Shareholder who shall have theretofore received the
aggregate consideration to which he was entitled in accordance with
clause (ii) of this Section 2.6(h) shall be paid to the Company
(based on such holder's Pro Rata Share of the Shortfall Amount) by
such holder.
(iv) The parties acknowledge and agree that the escrow of
funds otherwise payable to the Common Holders at the Effective Time
in accordance with clause (i) of this Section 2.6(h) is intended for
the benefit of the Sellers only and the Company is not an intended
third party beneficiary of such escrow, provided that nothing in
this clause (iv) shall be construed to limit any rights or
3
<PAGE> 4
remedies that may otherwise be available to the Company with respect
to property or assets of such Common Holders generally, whether or
not subject to an escrow."
2.3 AMENDMENTS TO SECTION 2.9. Section 2.9 shall be amended to read
in its entirety as follows:
"2.9 Dissenter's Rights. A holder of Common Shares immediately prior
to the Effective Time who shall not have consented to the Merger or
otherwise waived, effectively withdrawn or lost such holder's right to
dissent from the Merger under the TBCA (a "Potential Dissenting
Shareholder") shall not be entitled to vote or exercise any other rights
of a shareholder, including without limitation, any rights to any
dividends or other distributions pursuant to this Article II. Any Person
(including any Person who is a Potential Dissenting Shareholder as of the
Effective Time) who shall have perfected his dissenter's rights in
accordance with Article 5.12 of the TBCA and shall not have effectively
withdrawn or lost such holder's right to dissent from the Merger under the
TBCA (each, a "Dissenting Shareholder") shall be entitled to receive only
the payment as provided by Article 5.12 of the TBCA with respect to Common
Shares owned by such Dissenting Shareholder ("Dissenter's Shares"). If any
Potential Dissenting Shareholder shall have failed properly to perfect or
shall have effectively withdrawn or lost the right to dissent with respect
to any Common Shares, such shares shall thereupon be treated as though
such shares had been converted into the right to receive the Per Share
Merger Consideration pursuant to Section 2.6(a). The Company shall give
Newco (i) prompt written notice of any dissenters' demands for payment,
attempted withdrawals of such demands and any other instruments served
pursuant to applicable law received by the Company relating to dissenters'
rights and (ii) the opportunity to direct all negotiations with respect to
dissenters under the TBCA. The Company shall not, without the prior
written consent of Newco, voluntarily make any payment with respect to any
demands for payment by Dissenting Shareholders, offer to settle or settle
any such demands or approve any withdrawal of such demands."
2.4 AMENDMENTS TO SECTION 2.13(b). Paragraphs (v) and (vi) of
Section 2.13(b) shall be amended to read in their entirety as follows:
"(v) If Adjusted Net Working Capital is less than both Target
Net Working Capital and Indicative Net Working Capital, then the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Net Working Capital is less than Indicative
Net Working Capital and the Sellers shall pay this shortfall amount
(the "Shortfall Amount") to the Company; provided, however, that no
adjustment payment shall be required unless the Shortfall Amount is
greater than $100,000, in which event the Sellers shall pay the
entire Shortfall Amount to the Company; provided, further, however,
that if Indicative
4
<PAGE> 5
Net Working Capital is greater than Target Net Working Capital and
Adjusted Net Working Capital is less than Target Net Working Capital
then the Shortfall Amount shall not exceed the amount by which the
Adjusted Net Working Capital is less than Target Net Working
Capital. Amounts withheld by the Seller Representative, and
deposited in escrow, in accordance with Section 2.6(h)(i) from the
cash consideration to which the Common Holders are otherwise
entitled at the Effective Time shall be held for the benefit of the
Sellers in order to satisfy the several obligations of the Sellers
to pay any Shortfall Amount; provided that, for such purpose, each
Common Holder (including any Seller) shall be liable for only such
Common Holder's Pro Rata Share of any Shortfall Amount.
(vi) If Adjusted Net Working Capital is greater than
Indicative Net Working Capital and Indicative Net Working Capital is
less than Target Net Working Capital, the Aggregate Merger
Consideration shall be adjusted upward by the amount by which
Adjusted Net Working Capital exceeds Indicative Net Working Capital
and the Company shall pay to the Common Holders an aggregate amount
equal to the excess (the "Excess Amount"); provided, however, that
the amount of any upward adjustment to the Aggregate Merger
Consideration, and any resulting payment by the Company to the
Common Holders, shall not exceed the amount by which Indicative Net
Working Capital is less than Target Net Working Capital; and
provided, further, however, that no adjustment payment shall be
required unless the Excess Amount is greater than $100,000, in which
event the Company shall pay the entire Excess Amount to the Common
Holders. Any Excess Amount payable by the Company shall be allocated
among all Common Holders receiving any part of the Aggregate Merger
Consideration in accordance with such Common Holders' respective Pro
Rata Shares."
ARTICLE III
MISCELLANEOUS
3.1 SCOPE OF AMENDMENTS. Except as otherwise expressly provided for
in this Amendment, the Agreement shall remain in full force and effect. All
references in the Agreement to the "Agreement" shall be deemed to be references
to the Agreement as amended by this Amendment.
3.2 COUNTERPARTS. For the convenience of the parties hereto, this
Amendment may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the Parties or their duly authorized representatives as of the date
first above written.
ECCA MERGER CORP.
/s/ Warren C. Smith, Jr.
--------------------------------------
By: Warren C. Smith, Jr.
Title: Vice President
EYE CARE CENTERS OF
AMERICA, INC.
/s/ Bernard W. Andrews
--------------------------------------
By: Bernard W. Andrews
Title: President and CEO
SELLERS:
EQUITY LINKED INVESTORS L.P.
By: Rohit M. Desai Associates
General Partner
/s/ Frank J. Pados
--------------------------------------
By: Frank J. Pados
Attorney-in-fact
EQUITY LINKED INVESTORS II
By: Rohit M. Desai Associates - II
General Partner
/s/ Frank J. Pados
--------------------------------------
By: Frank J. Pados
Attorney-in-fact
6
<PAGE> 7
INDOSUEZ EYE CARE PARTNERS
By: Indosuez CM II, Inc., its
Managing General Partner
By: /s/ Allen Gruenhut
--------------------------------
Allen Gruenhut
Vice President
By: /s/ Michael F. Walsh
---------------------------
Michael F. Walsh
Vice President
BERNARD W. ANDREWS
/s/ Bernard W. Andrews
--------------------------------------
NORMAN S. MATTHEWS
/s/ Norman S. Matthews
--------------------------------------
RICHARD W. ROBERSON
/s/ Richard W. Roberson
--------------------------------------
AGT HOLDINGS, LLC
By: /s/ Antoine Treuille
--------------------------------------
Name: Antoine Treuille
Title: President
7
<PAGE> 8
WILLIAM J. PUETZ
/s/ William J. Puetz
--------------------------------------
JOHN HENRY WOLFORD
/s/ John Henry Wolford
--------------------------------------
8
<PAGE> 1
Exhibit 2.5
AMENDMENT NO. 2 TO THE
RECAPITALIZATION AGREEMENT
AMENDMENT NO. 2, dated as of April 24, 1998 (this "Amendment"), to
the Recapitalization Agreement, dated as of March 6, 1998, as amended as of
April 23, 1998 (as so amended, the "Agreement"), among ECCA Merger Corp., a
Delaware corporation ("Newco"), Eye Care Centers of America, Inc., a Texas
corporation (the "Company"), and the Sellers named therein (the "Sellers").
WHEREAS, the Company, Newco and the Sellers have agreed to make
certain amendments to the provisions in the Agreement for a post-closing
adjustment to the aggregate consideration payable upon the consummation of the
Merger (as defined in the Recapitalization Agreement); and
WHEREAS, the amendments contained herein have been approved by the
requisite vote of the stockholders of the Company in accordance with Section
2.16 of the Recapitalization Agreement;
NOW THEREFORE, in consideration of the agreements and mutual
premises contained herein and in the Agreement, the parties hereto agree as
follows:
ARTICLE I
Definitions
1.1 Defined Terms. For purposes of this Amendment, unless otherwise
indicated, capitalized terms have the meanings ascribed to them in the
Agreement.
<PAGE> 2
ARTICLE II
Amendments
2.1 Deletion of Particular Sections. Sections 2.8(b), 4.3(c) and 5.7
are hereby deleted in their entirety from the Agreement.
2.2 Amendment of Section 1.1. Section 1.1 is hereby amended to add
the following defined term:
"Shortfall Amount" has the meaning set forth in Section 2.13."
2.3 Amendment of Section 2.13. Section 2.13 is hereby amended to
read in its entirety as follows:
"2.13 Adjustments to Merger Consideration.
(a) Adjustment at Closing. Two Business Days prior to the Closing
Date, the Company shall deliver or cause to be delivered to Newco a
projected consolidated balance sheet (the "Estimated Closing Date Balance
Sheet") of the Company and its Subsidiaries as of the Closing Date. The
Estimated Closing Date Balance Sheet (i) shall set forth the Net Working
Capital (the "Indicative Net Working Capital") and the amount of cash and
cash equivalents (the "Indicative Cash"), in each case as of the Closing
Date, without giving effect to the Recapitalization and the transactions
contemplated hereby, and (ii) be prepared in accordance with GAAP applied
on a basis consistent with the principles, practices and methodologies
used in the preparation of the consolidated balance sheet of the Company
and its Subsidiaries for the year ended January 3, 1998. In the event that
the Indicative Net Working Capital is less than $7,000,000 ("Target Net
Working Capital"), the Aggregate Funding Amount shall be decreased by the
amount of such shortfall and the Aggregate Merger Consideration shall be
adjusted accordingly.
(b) Post-Closing Adjustments. (i) Within 60 days after the Closing
Date, the Sellers shall deliver or cause to be delivered to the Company a
consolidated balance sheet of the Company and its Subsidiaries as of the
Closing Date, together with an unqualified opinion thereon by Ernst &
Young (the "Final Balance Sheet"). All the parties to this Agreement
accept, for purposes of the calculation of the adjustment provided for in
this Section 2.13(b), the principles, practices and methodologies,
consistent with GAAP, used in the preparation of the consolidated balance
sheet of the Company and its Subsidiaries for the year ended January 3,
1998.
(ii) The Company after the Closing Date shall cause Ernst &
Young to have access to the records and personnel of the Company
reasonably requested by
-2-
<PAGE> 3
them for purposes of preparing or auditing the Final Balance Sheet.
The Company shall cause KPMG to take such reasonable steps as they
deem necessary to calculate the Net Working Capital, and confirm the
cash and cash equivalents ("Cash") of the Company and its
Subsidiaries as of the Closing Date and to review the procedures and
materials (including work papers) employed by Ernst & Young in
connection therewith. Not later than 30 days after receipt of the
Final Balance Sheet, the Company shall deliver to the Seller
Representative a written notice ("Objection"), setting forth any
items with which the Company disagrees and a description of the
basis for such disagreement. In the event that the Company delivers
an Objection to the calculation of the Net Working Capital or Cash
of the Company and the Subsidiaries set forth in the Final Balance
Sheet, the Seller Representative shall negotiate in good faith with
the Company, and the Company hereby agrees to negotiate in good
faith with the Seller Representative, for a period of 30 days after
receipt of such Objection, to seek to resolve their differences with
respect to the Final Balance Sheet. If the Company and the Seller
Representative are unable to resolve all of such disagreements
within such 30 day period, then no later than seven days following
such 30 day period they shall refer their remaining differences to
Arthur Andersen or any other internationally recognized firm of
independent public accountants as to which the Seller Representative
and the Company mutually agree (the "Independent Firm") who shall,
acting as experts and not as arbitrators, determine, only with
respect to the remaining differences so submitted, whether and to
what extent, if any, the Net Working Capital or Cash, as derived
from the Final Balance Sheet, requires adjustment. The parties shall
instruct the Independent Firm to deliver its written determination
to the Company and the Seller Representative no later than the
twentieth day after the remaining differences underlying the
Objection are referred to the Independent Firm. The Independent
Firm's determinations of Net Working Capital and Cash shall be
conclusive and binding upon the Company and Sellers absent manifest
error. The fees and disbursements of the Independent Firm shall be
shared equally by the Company and Sellers. The Company and Sellers
shall make readily available to the Independent Firm all relevant
books and records and any work papers (including those of the
parties' respective accountants) relating to the Final Balance Sheet
and all other items reasonably requested by the Independent Firm.
The "Adjusted Net Working Capital" shall be the Net Working Capital
included in (i) the Final Balance Sheet as delivered by the Sellers
in the event that (x) the amount of Net Working Capital is unchanged
from the Estimated Closing Date Balance Sheet to the Final Balance
Sheet; (y) no Objection with respect to the Net Working Capital is
delivered to the Seller Representative during the 30 day period
specified above or (z) Seller Representative and the Company so
agree, (ii) the Final Balance Sheet, as adjusted in accordance with
the Objection, in the event that the Seller Representative does not
dispute the Objection within the 30 day period following
-3-
<PAGE> 4
receipt by the Seller Representative of the Objection, or (iii) the
Final Balance Sheet, as adjusted by either (x) the agreement of the
Seller Representative and the Company or (y) the Independent Firm.
The "Adjusted Cash" shall be the Cash included in (i) the Final
Balance Sheet as delivered by the Sellers in the event that (x) the
amount of Cash is unchanged from the Estimated Closing Date Balance
Sheet to the Final Balance Sheet; (y) no Objection affecting the
Cash is delivered to the Seller Representative during the 30 day
period specified above or (z) Seller Representative and the Company
so agree, (ii) the Final Balance Sheet, as adjusted in accordance
with the Objection, in the event that the Seller Representative does
not dispute the Objection within the 30 day period following receipt
by the Seller Representative of the Objection, or (iii) the Final
Balance Sheet, as adjusted by either (x) the agreement of the Seller
Representative and the Company or (y) the Independent Firm.
(iii) If Adjusted Net Working Capital is less than both Target
Net Working Capital and Indicative Net Working Capital, then the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Net Working Capital is less than Indicative
Net Working Capital, (the "Capital Shortfall Amount") and the
Sellers shall pay the Capital Shortfall Amount to the Company;
provided, however, that no adjustment payment shall be required
unless the Capital Shortfall Amount is greater than $100,000, in
which event the Sellers shall pay the entire Shortfall Amount to the
Company; provided, further, however, that if Indicative Net Working
Capital is greater than Target Net Working Capital and Adjusted Net
Working Capital is less than Target Net Working Capital, then the
Capital Shortfall Amount shall not exceed the amount by which the
Adjusted Net Working Capital is less than Target Net Working
Capital. If Adjusted Net Working Capital is greater than Indicative
Net Working Capital and Indicative Net Working Capital is less than
Target Net Working Capital, the Aggregate Merger Consideration shall
be adjusted upward by the amount by which Adjusted Net Working
Capital exceeds Indicative Net Working Capital (the "Excess Capital
Amount") and the Company shall pay to the Common Holders the Excess
Capital Amount, provided, however, that the Excess Capital Amount
shall not exceed the amount by which Indicative Net Working Capital
is less than Target Net Capital.
(iv) If Adjusted Cash is less than Indicative Cash, the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Cash is less than Indicative Cash (a "Cash
Shortfall Amount") and the Sellers shall pay the Cash Shortfall
Amount to the Company; provided, however, that no adjustment payment
shall be required unless the Cash Shortfall Amount is greater than
$100,000, in which event the Sellers shall pay the entire Cash
Shortfall Amount to the Company. If Adjusted Cash exceeds Indicative
Cash, the
-4-
<PAGE> 5
Aggregate Merger Consideration shall be adjusted upward by the
amount by which Adjusted Cash exceeds Indicative Cash (the "Excess
Cash Amount") and the Company shall pay to the Common Holders an
aggregate amount equal to the Excess Cash Amount; provided, however,
that no adjustment payment shall be required unless the Excess Cash
Amount is greater than $100,000, in which event the Company shall
pay the entire Excess Cash Amount to the Common Holders. If Adjusted
Cash is equal to Indicative Cash, there shall be no adjustment to
the Aggregate Merger Consideration in respect of Cash.
(v) Notwithstanding any of the foregoing provisions of this
Section 2.13(b), any amounts payable by the Sellers to the Company
under this Section 2.13(b), whether in respect of a Capital
Shortfall Amount or a Cash Shortfall Amount, may be set off against
any Excess Capital Amount or Excess Cash Amount payable by the
Company to the Common Holders under this Section 2.13 (b), and vice
versa, such that only the net amount of such adjustments, taken
together, shall be payable by the Company or the Sellers, as the
case may be. Any such net amount that shall be payable by the
Sellers (a "Shortfall Amount") shall be paid severally by the
Sellers to the Company in accordance with their proportionate
shares, calculated for each Seller by multiplying the Shortfall
Amount by a fraction, the numerator of which is the portion of the
Aggregate Merger Consideration paid to such Seller and the
denominator of which is the sum of the portions of the Aggregate
Merger Considerations paid to all Sellers. Amounts withheld by the
Seller Representative, and deposited in escrow, in accordance with
Section 2.6(h)(I) from the cash consideration to which the Common
Holders are otherwise entitled at the Effective Time shall be held
for the benefit of the Sellers in order to satisfy the several
obligations of the Sellers to pay any Shortfall Amount; provided
that, for such purpose, each Common Holder (including any Seller)
shall be liable for only such Common Holder's Pro Rata Share of any
Shortfall Amount.
(vi) Any such net amount payable by the Company in accordance
with clause (v) shall be allocated among all Common Holders
receiving any part of the Aggregate Merger Consideration in
accordance with such Common Holders' respective Pro Rata Shares.
(vii) If the net adjustment calculated in accordance with
clause (v) is equal to zero, no adjustment shall be made to
Aggregate Merger Consideration and no post-closing payment shall be
required to be made to any Person pursuant to this Section 2.13(b)
(viii) Any amount owing pursuant to this Section 2.13(b) shall
be paid, by certified or official bank check or checks payable in
New York Clearing House
-5-
<PAGE> 6
(next day) funds not later than two Business Days following final
determination of the Adjusted Net Working Capital in accordance with
this Section 2.13(b).
(ix) No adjustment or other action taken pursuant to this
Section 2.13(b) shall affect the rights and obligations of the
parties under this Agreement or with respect to the transactions
contemplated hereby other than to the extent directly related to the
determination of the Adjusted Net Working Capital."
2.4 Amendment of Section 4.2(a). The last sentence of Section 4.2(a)
is hereby amended to read in its entirety as follows:
"There shall be delivered to Newco certificates of the Company, the
Management Sellers and the Investor Sellers to the foregoing effect with
respect to their respective representations, warranties and covenants."
2.5 Addition of Section 4.2(s). Section 4.2 is hereby amended to add
at the end thereof a paragraph (s), which shall read in its entirety as follows:
"(s) The Company shall have provided evidence reasonably
satisfactory to Newco that none of the payments made or scheduled to be
made to any "disqualified individual" of the Company (within the meaning
of section 280G(C) of the Code and the regulations issued thereunder) upon
the consummation of the Merger shall constitute "excess parachute
payments" (within the meaning of section 280G(b) of the Code and the
regulations issued thereunder), but only with respect to those individuals
who shall have timely requested of the Company in writing that such
payments are not to constitute "excess parachute payments" and who shall
have agreed in writing with the Company that any such payments shall
be made only upon obtaining shareholder approval in accordance with
Section 280G(b)(5) of the Code and the regulations issued thereunder."
2.6 Amendment of Section 4.2(l). Section 4.2(l) is hereby amended to
read in its entirety as follows:
"(l) Defeasance of the Notes. The Company shall have taken all
actions required to be taken under Article VIII of the Senior Note
Indenture for the defeasance of the Senior Notes, including the
irrevocable deposit with the trustee under the Senior Note Indenture of
U.S. Government Obligations (as defined in the Senior Note Indenture)
sufficient to pay and discharge all installments of principal and interest
on the Senior Notes through the first date of redemption permitted under
the Senior Note Indenture."
2.7 Amendment of Section 4.2(m). Section 4.2(m) is hereby amended to
read in its entirety as follows:
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<PAGE> 7
"(m) Noncompetition Agreement. The Sellers other than Richard
Roberson shall have executed and delivered to Newco a non-competition
agreement in the form attached hereto as Exhibit D ."
ARTICLE III
Miscellaneous
3.1 Scope of Amendment. Except as otherwise expressly provided for
in this Amendment, the Agreement shall remain in full force and effect. All
references in the Agreement to the "Agreement" shall be deemed to be references
to the Agreement as amended by this Amendment.
3.2 Counterparts. For the convenience of the parties hereto, this
Amendment may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the parties hereto by their duly authorized officers or
representatives on the date first hereinabove written.
ECCA MERGER CORP.
______________________________________
By:
Title:
EYE CARE CENTERS OF
AMERICA, INC.
______________________________________
By: Bernard W. Andrews
Title: President and CEO
SELLERS:
EQUITY LINKED INVESTORS, L.P.
By:
______________________________________
By:
Attorney-in-fact
EQUITY LINKED INVESTORS II
By:
______________________________________
By:
Attorney-in-fact
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<PAGE> 9
INDOSUEZ EYE CARE PARTNERS
By: __________________________________
Attorney-in-Fact
BERNARD W. ANDREWS
______________________________________
NORMAN S. MATTHEWS
______________________________________
RICHARD W. ROBERSON
______________________________________
AGT HOLDINGS, LLC
By: __________________________________
Name:
Title:
-9-
<PAGE> 10
WILLIAM J. PUETZ
______________________________________
JOHN HENRY WOLFORD
______________________________________
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<PAGE> 1
EXHIBIT 2.6
ARTICLES OF MERGER
OF
ECCA MERGER CORP.
(a Delaware corporation)
WITH AND INTO
EYE CARE CENTERS OF AMERICA, INC.
(a Texas corporation)
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following Articles of
Merger for the purpose of merging ECCA MERGER CORP. ("NEWCO") with and into EYE
CARE CENTERS OF AMERICA, INC. ("ECCA") into one of such corporations (such
merger being hereinafter referred to as the "Merger"):
1. That the names and states of incorporation of each of the corporations
party to the Merger are as follows:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
ECCA MERGER CORP. ("Newco") Delaware
EYE CARE CENTERS OF AMERICA, INC. Texas
("ECCA")
</TABLE>
2. That the Plan of Merger, dated April 24, 1998, by and between Newco and
ECCA has all been approved by the shareholders of ECCA in accordance with
Article 5.03 of the Texas Business Corporation Act and all of the stockholders
of Newco in accordance with Section 252 of the Delaware General Corporation Law.
3. As to each of the undersigned corporations, the number of shares of
stock outstanding, being the only outstanding capital stock of each such
corporation entitled to vote on the Plan of Merger, are as follows:
<TABLE>
<CAPTION>
Name of Class of Number of
Corporation Shares Shares Outstanding
----------- ------ ------------------
<S> <C> <C>
ECCA Common 1,178,813
Series A Cumulative
Mandatorily Redeemable
Exchangeable Pay-in-Kind
Preferred Stock 110,000
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
Newco Common 573,928
</TABLE>
4. As to each of the undersigned corporations, the number of shares of
each class of stock voted for and against the Plan of Merger, respectively, are
as follows:
<TABLE>
<CAPTION>
Name of Class of Number of
Corporation Shares Shares Voted
----------- ------ ----------------
For Against
--- -------
<S> <C> <C> <C>
ECCA Common 925,805 -0-
Series A Cumulative
Mandatorily Redeemable
Exchangeable Pay-in-Kind
Preferred Stock 110,000 -0-
Newco Common 573,928 -0-
</TABLE>
5. As to each of the parties to the Plan of Merger, the Plan of Merger and
the performance of its terms were duly authorized by all action required by the
laws under which such party was incorporated and by its constituent documents.
6. Newco will be merged with and into ECCA and ECCA will be the surviving
corporation of the Merger (the "Surviving Corporation").
7. The Restated Articles of Incorporation of ECCA, as the Surviving
Corporation, attached hereto as Exhibit A shall be the articles of incorporation
of the Surviving Corporation.
8. The executed Plan of Merger is on file at the principal place of
business of ECCA at 11103 West Avenue, San Antonio, Texas 78213.
9. That a copy of the executed Plan of Merger will be furnished by the
Surviving Corporation to any shareholder of ECCA at the request of such
shareholder.
10. ECCA, as the Surviving Corporation in the Merger, will be responsible
for the payment of all fees and franchise taxes of each of ECCA and Newco and
will be obligated to pay such fees and franchise taxes if the same are not
timely paid.
<PAGE> 3
IN WITNESS WHEREOF, Newco and ECCA, the parties to the Merger, have caused
these Articles of Merger to be signed in their respective corporate names and on
their behalf by a duly authorized officer.
April 24, 1998.
ECCA MERGER CORP.
By: ___________________________
Name: Charles A. Brizius
Title: Vice President
EYE CARE CENTERS OF AMERICA, INC.
By: ___________________________
Name: Mark T. Pearson
Title: Senior Vice President
<PAGE> 1
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
EYE CARE OF AMERICA, INC,
ARTICLE ONE
The name of the corporation (which is hereinafter called the
"Corporation") is Eye Care Centers of America, Inc.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be organized under the Texas
Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have the
authority to issue is twenty million (20,000,000), of which three hundred
thousand (300,000) shares, par value $.01 per share, shall be preferred stock
("Preferred Stock") and nineteen million seven hundred thousand 19,700,000
shares, par value $.01 per share, shall be common stock ("Common Stock").
The Preferred Stock may be divided into and issued in one or more
series. The Board of Directors of the Corporation is expressly authorized to
establish series of unissued shares of Preferred Stock and to fix and determine
the designations, preferences, limitations, and relative rights, including
voting rights, of the shares of such series in a resolution or resolutions
adopted by the Board of Directors providing for the issue of Preferred Stock of
such series. In such resolution or resolutions the Board of Directors, to the
extent applicable, shall:
(a) designate the series and specify the number of shares of Preferred
Stock which shall belong to such series;
(b) fix the rate of any dividend for such series of Preferred Stock,
which dividend may vary from series to series;
<PAGE> 2
(c) specify whether dividends for such series are cumulative,
non-cumulative or partially cumulative;
(d) specify the manner in which dividends for such series are payable
and the date or dates from which such dividends shall accrue;
(e) state whether the shares of such series have preferences over any
other class, classes or series of shares as to the payment of
dividends;
(f) state whether such series shall be redeemable and the price at and
the terms and conditions on which shares of such series may be
redeemed, which redemption may be at the option of the Corporation, the
shareholder or another person or upon the occurrence of a designated
event or any combination of the foregoing;
(g) fix the amount payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation;
(h) state whether the shares of such series have preference in the
assets of the Corporation over any other class, classes or series of
shares upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation;
(i) state whether a sinking fund shall be created for the redemption or
purchase of the shares of such series, and, if such a fund is
established, the terms and provisions governing the operation of any
such fund and the status as to reissuance of shares of Preferred Stock
of such series purchased or otherwise reacquired, redeemed or retired
through the operation thereof;
(j) state whether the shares of such series shall be convertible, and,
if convertible, the terms and conditions on which such shares of such
series may be converted, which terms and conditions may provide that
such shares are convertible at the option of the Corporation, the
shareholder or another person or upon the occurrence of a designated
event, or any combination of the foregoing into shares of any other
class or series;
(k) state whether the shares of such series are exchangeable, at the
option of the Corporation, the shareholder or another person or upon
the occurrence of a designated event, or any combination of the
foregoing, for shares, obligations, indebtedness, evidence of
ownership, rights to purchase securities or other securities of the
Corporation or one or more other domestic, or foreign
- 2 -
<PAGE> 3
corporations or other entities or for other property or for any
combination of the foregoing; and
(l) state what voting rights and shares of such series shall have, if
any.
The Board of Directors of the Corporation, in such resolution or
resolutions, may, in a manner not inconsistent with the provisions of these
Articles and to the extend permitted by law.
(a) limit the number of shares which may be issued;
(b) impose conditions or restrictions upon the creation of indebtedness
of the Corporation or upon the issue of additional shares of Preferred
Stock or other stock ranking equally therewith or prior thereto as to
dividends or distribution of assets on voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(c) impose conditions or restrictions upon the payment of dividends
upon, or the making of other distributions of any kind of character, or
the redemption, purchase, retirement or reacquisition of shares of
stock ranking junior to Preferred Stock of such series as to dividends
or distribution of assets on voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(d) grant other such special rights to the holders of Preferred Stock
of such series as the Board of Directors may determine.
ARTICLE FIVE
The Corporation has received for the issuance of its shares
consideration of the value of at least One Thousand Dollars ($1,000.000).
ARTICLE SIX
No shareholder or other holder of securities of the Corporation shall
have any preemptive right to acquire additional, unissued or treasury shares of
the Corporation, or securities of the Corporation convertible into or carrying a
right to subscribe to or acquire shares.
- 3 -
<PAGE> 4
ARTICLE SEVEN
Cumulative voting by the shareholders of the Corporation at any
election for directors or upon any other matter is expressly prohibited, and the
directors of the Corporation shall be elected by plurality vote of the
shareholders entitled to vote at such election.
ARTICLE EIGHT
A. With respect to any matter for which, but for this provision, the
affirmative vote of the holders of more than a majority of the shares entitled
to vote is required by the Texas Business Corporation Act, the act of the
shareholders on that matter shall be the affirmative vote of a majority of the
shares entitled to vote on that matter rather than the affirmative vote
otherwise required by such Act. With respect to any matter for which, but for
this provision, the affirmative vote of the holders of more than a majority of
the shares of any class or series is required by the Texas Business Corporation
Act, the act of the holders of the shares of that class or series on that matter
shall be the affirmative vote of the majority of the shares of that class or
series rather than the affirmative vote of the holders of shares of that class
or series otherwise required by such Act.
B. Any action required by the Texas Business Corporation Act to be
taken at any annual or special meeting of shareholders, or any action which may
be taken at any annual or special meeting of shareholders, may be taken without
a meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
ARTICLE NINE
The post office address of the initial registered office of the
Corporation is 811 Dallas Avenue, Houston, TX 77002, and the name of the initial
registered agent for the Corporation at such address is CT Corporation System.
ARTICLE TEN
The Corporation shall indemnify and advance expenses to its directors
and officers to the fullest extent permitted by the Texas Business Corporation
Act, as it now exists and as it may hereafter be amended, and shall have the
power to purchase and maintain liability insurance for those persons as and to
the fullest extent permitted by such Act.
- 4 -
<PAGE> 5
ARTICLE ELEVEN
To the extent permitted by the Texas Business Corporation Act, as it
now exists and as it may hereafter be amended, a director of the Corporation
shall not be and is not liable to the Corporation or its shareholders for
monetary damages for any act or omission in such director's capacity as a
director, except for liability of such director for (a) a breach of such
director's duty of loyalty to the Corporation or its shareholders, (b) an act or
omission not in good faith that constitutes a breach of duty of such director to
the Corporation or an act or omission that involves intentional misconduct or a
knowing violation of the law, (c) a transaction from which such director
received an improper benefit, whether or not the benefit resulted from an action
taken within the scope of such director's office, or (d) an act or omission for
which the liability of such director is expressly provided for by statue. No
amendment to or repeal of this Article Eleven shall apply to or have any effect
upon the liability or alleged liability of any director of the Corporation for
or with respect to any act or omission of such director occurring prior to such
amendment or repeal.
ARTICLE TWELVE
The number of directors currently constituting the board of directors
is six, and the names and addresses of the persons who are to serve as the
director until the next annual meeting of the shareholders or until his
successor is elected and qualified is:
Name Address
- ---- -------
Bernard W. Andrews 11103 West Avenue
San Antonio, Texas 78213
Norman S. Matthews 650 Madison Avenue
23rd Floor
New York, NY 10022
Antoine G. Treuille Charter Pacific Corporation
200 Park Avenue, 28h Floor
New York, NY
Anthony J. DiNovi 3 Ravine Road
Wellesley, MA 02181
Charles A. Brizius 191 Marlborough St., Apt. 4
Boston, MA 02116
- 5 -
<PAGE> 6
Warren C. Smith, Jr. 38 Collidge Lane
Dedham, MA 02026
EXECUTED THIS 24TH day of April, 1998
EYE CARE CENTERS OF AMERICA, INC.
/s/ Mark T. Pearson
----------------------------------
Mark T. Pearson, Vice President
- 6 -
<PAGE> 1
EXHIBIT 3.2
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES OF PREFERRED STOCK
OF
EYE CARE CENTERS OF AMERICA, INC.
To The Secretary of State of Texas:
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, Eye Care Centers of America, Inc. (the "Company") submits the
following statement for the purpose of establishing and designating a series of
shares of Preferred Stock and fixing and determining the relative rights and
preferences thereof:
A. The name of the Company is Eye Care Centers of America, Inc.
B. The following resolutions, establishing and designating a series of
shares of Preferred Stock and fixing and determining the relative rights and
preferences thereof, was duly adopted by the Board of Directors of the
Corporation on April 24, 1998:
RESOLVED: That pursuant to the authority expressly granted to and vested in
the Board of Directors of Eye Care Centers of America, Inc., a Texas
corporation (the "Company" in accordance with the provisions of its
Articles of Incorporation, a series of Preferred Stock, par value $.01 per
share, of the Company be, and hereby is, established and given the
distinctive designation of "Series A Preferred Stock" (hereinafter referred
to as the "Series A Preferred Stock"), said Series to consist of Three
Hundred Thousand (300,000) shares, which number the Board of Directors may
decrease (but not below the number of shares of the Series then
outstanding), and the rights and preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions on such rights and/or preferences of which shall be as set
forth on the attached Exhibit A.
IN WITNESS WHEREOF, this Statement of Resolution is executed on behalf of
the Company by its __________ this 24th day of April, 1998.
EYE CARE CENTERS OF AMERICA, INC.
By:_______________________________________
Name:
Title:
<PAGE> 2
EXHIBIT A
1. DESIGNATION. The Series of Three Hundred Thousand (300,000) shares of
Series A Preferred Stock, $.01 par value per share, shall be designated the
"Series A Preferred Stock" and shall have the following rights, terms and
privileges.
2. DIVIDENDS. The holders of the then outstanding Series A Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
cumulative preferential dividends when, as and if declared from time to time by
the Board of Directors of the Company, which dividends shall accrue on a daily
basis (whether or not declared) from the original date of issue at an annual
rate per share equal to thirteen percent (13%) (the "Dividend Rate") of the
Original Issue Price (as defined below), such amount to be compounded quarterly
on each February 1, May 1, August 1, and November 1, such that if the dividend
is not paid for such quarter, the unpaid amount shall be added to the Original
Issue Price per share of the Series A Preferred Stock for purposes of
calculating succeeding quarters' dividends (but not for any other purpose
hereunder). If such cumulative dividends in respect of any prior or current
quarterly dividend period shall not have been declared and paid or if there
shall not have been a sum sufficient for the payment thereof set apart, the
deficiency shall first be fully paid before any dividend or other distribution
(other than a liquidating distribution governed by Section 3 below) shall be
paid or declared and set apart with respect to any class of the Company's
capital stock, now or hereafter outstanding. Dividends payable on the Series A
Preferred Stock shall be computed on the basis of a 360-day year consisting of
twelve 30-day months.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP.
(i) In the event of any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, before any distribution may be
made with respect to the Common Stock or any other class or series of capital
stock, holders of each share of Series A Preferred Stock shall be entitled to be
paid out of the assets of the Company available for distribution to holders of
the Company's capital stock of all classes, whether such assets are capital,
surplus or capital earnings, an amount equal to the original purchase price of
$100 per share of Series A Preferred Stock (which amount shall be subject to
equitable adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series A Preferred Stock)
(as so adjusted, the "Original Issue Price") plus all accrued and unpaid
dividends thereon, whether or not declared, since the date of issue up to A
including the date full payment shall be tendered to the holders of the Series A
Preferred Stock with respect to such liquidation, dissolution or winding up
(collectively, the "Liquidation Amount").
(ii) After such payment shall have been made in full to the
holders of the Series A Preferred Stock, the holders of the Series A Preferred
Stock shall be entitled to
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no further participation in the distribution of the assets of the Company, and
the remaining assets available for distribution shall be available to be
distributed among the holders of other classes of securities of the Company in
accordance with their respective terms.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution provided
for in this Section 3 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Company.
4. VOTING POWER. Except as otherwise expressly provided herein or as
required by law, the holders of the shares of Series A Preferred Stock shall not
vote on any corporate matters.
5. NO REISSUANCE OF SERIES A PREFERRED STOCK. No share or shares of Series
A Preferred Stock acquired by the Company by reason of redemption, purchase or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of Series A Preferred Stock
accordingly.
6. REDEMPTION. Subject to the Company's existing debt agreements:
(a) Optional Redemption.
(i) The Company may elect to redeem the then outstanding shares
of Series A Preferred Stock at the price and terms set forth in this Section 6
upon the closing of (i) any public offering of the Company's Common Stock
pursuant to a registration statement declared effective by the Securities and
Exchange Commission, (ii) a sale of all, or substantially all, of the assets of
the Company, or merger of the Company with or into another corporation or entity
with the result that a Change of Control (as defined in Section 6(a)(iii))
occurs, or (iv) a sale or issuance of Common Stock in one or a series of related
transactions that results in a Change of Control.
(ii) The redemption price for each share of Series A Preferred
Stock redeemed pursuant to Section 6 (the "Redemption Price") shall be the sum
of (A) the Original Issue Price plus (B) the product of (x) the Original Issue
Price multiplied by (Y) the Dividend Rate, plus (C) accrued and unpaid
dividends, whether or not declared.
(iii) "Affiliate" means a Person who directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the foregoing, no
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Person (other than the Company or any Subsidiary of the Company) in whom a
Receivables Entity makes an Investment in connection with a Qualified
Receivables Transaction shall be deemed to be an Affiliate of the Company or any
of its Subsidiaries solely by reason of such Investment.
(iv) "Capital Stock" means (i) with respect to any Person that is
a corporation, any and all shares, interests, participations or other
equivalents (however designated) of corporate stock, including each class of
common stock and preferred stock of such Person and (iii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
(v) "Change of Control" means the occurrence of one or more of
the following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons (other than
one or more Permitted Holders) for purposes of Section 13(d) of the Exchange Act
(a "Group"), together with any Affiliates thereof, (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company; (iii) any Person or Group (other than
one or more Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing 50% or more of the aggregate
ordinary voting power represented by the issued and outstanding Capital Stock of
the Company; or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
(vi) "Permitted Holder" means and includes (i) the Principal or
any of its Affiliates, (ii) any corporation the outstanding voting power of the
capital stock of which is beneficially owned, directly or indirectly, by the
Principal or any of its Affiliates in substantially the same proportions as
their ownership of the voting power of the capital stock of the Company, or
(iii) any underwriter during the period engaged in a firm commitment
underwriting on behalf of the Company with respect to the shares of capital
stock being underwritten.
(vii) "Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdividision therefor any other entity.
(viii) "Principal" means Thomas H. Lee Company and its
Affiliates.
(b) EQUITABLE ADJUSTMENT. The Redemption Price shall be subject to
equitable adjustment whenever there shall occur a stock split, stock dividend,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the Series A Preferred Stock.
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<PAGE> 5
(c) REDEMPTION NOTICE. If the Company elects to redeem the outstanding
shares of Series A Preferred Stock as aforesaid, written notice to that effect
(the "Redemption Notice") shall be hand delivered or mailed by the Company to
the holders thereof at least ten (10) days prior to the Redemption Date (as
defined below), which notice shall also set forth the date fixed for redemption
pursuant to this Section 6 (hereinafter referred to as the "Redemption Date").
The Redemption Notice shall be hand delivered or mailed certified mail, return
receipt requested, postage prepaid, by the Company to each holder or record of
the series which is to be redeemed, at its address shown on the Company's stock
records. The Redemption Notice shall contain the following information:
(i) the number of shares of Series A Preferred Stock held by the
holder which shall be redeemed by the Company and the total number of shares of
Series A Preferred Stock held by all holders to be so redeemed;
(ii) the Redemption Date and the Redemption Price;
(iii) a statement that the holder is to surrender to the Company,
at the place designated therein, its certificate or certificates representing
the shares to be redeemed.
(d) SURRENDER OF CERTIFICATES. Each holder of shares of Series A
Preferred Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Company at the place designated by the Company,
and thereupon the Redemption Price for such shares shall be paid to the order of
the person whose name appears on such certificate or certificates and each
surrendered certificate shall be canceled and retired.
(e) DIVIDENDS AND MODIFICATION AFTER REDEMPTION. From and after the
Redemption Date, no shares subject to redemption shall be entitled to any
further dividends pursuant to Section 2 hereof, or to the modification
provisions set forth in Section I 1 or Section 12(a) hereof.
7. AMENDMENTS TO CHARTER. The Company shall not amend its Articles of
Incorporation without the approval, by vote or written consent, by the holders
of a majority of the then outstanding shares of Series A Preferred Stock, voting
as a separate class, unless a greater percentage is required by law, with each
share of Series A Preferred Stock entitled to one vote in each instance, if such
amendment would:
(a) cause the Company to redeem, purchase or otherwise acquire for
value (or pay into or set aside for a sinking fund for such purpose), any share
or shares of Series A Preferred Stock, otherwise than as provided in Section 6
hereof, or
(b) reduce the amount payable to the holders of Series A Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company; or
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<PAGE> 6
(c) cancel or modify the liquidation preferences, dividend rights, or
redemption rights of the holders of Series A Preferred Stock; or
(d) cancel or modify the modification rights of the holders of Series
A Preferred Stock provided for in Section 11 or Section 12(a) herein; or
(e) authorize, create or increase the authorized amount of any shares
of any class or series of stock, unless the same ranks junior to the Series A
Preferred Stock as to the rights of redemption, the payment of dividends, and
the distribution of assets upon liquidation, dissolution, or winding up of the
Company.
8. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of capital stock or
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Series A Preferred Stock set forth herein, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holders of the Series A Preferred Stock against impairment.
9. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company, or any transfer of all or substantially all of the
assets of the Company to any other Company, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of Series A Preferred Stock a notice specifying (i)
the record date for the purpose of such dividend, distribution or right and a
description of such dividend, distribution or right, (i) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (iii) the time, if any, that is to be fixed, as to when
the holders of record of Common Stock (or other securities) , shall be entitled
to exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
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<PAGE> 7
winding up. Such notice' shall be mailed )y first class mail, postage prepaid,
at least ten (10) days prior to the date specified in such notice on which such
action is to be taken.
10. NO SINKING FUND. The Series A Preferred Stock shall not be entitled to
the benefits of any retirement or sinking fund.
11. MODIFICATION OF TERMS FOLLOWING CERTAIN TRANSFERS.
(a) If any of the original holders of shares of Series A Preferred
Stock (or their successive Permitted Transferees (as defined in the
Stockholders' Agreement, dated as of April 24, 1998 (the "Stockholders'
Agreement") among the Company and the Stockholders named therein) (the "Original
Holders") desire to sell or transfer any of their shares of Series A Preferred
Stock to one or more persons or entities which are not included within such
definition of Permitted Transferee ("Subsequent Holders"), then the Original
Holders desiring to make such sale or transfer shall give written notice (the
"Transfer Notice") to the Company at least ten (10) days prior to the effective
date of such sale or transfer. Such notice shall set forth the name of the
Original Holders desiring to effect such sale or transfer, the number of shares
of Series A Preferred Stock to be sold or transferred, the consideration to be
received therefor, the name and address of the intended Subsequent Holder, the
intended effective date of such sale or transfer, and a request by such Original
Holder that the Company grant the intended Subsequent Holder the right to modify
the terms of the Series A Preferred Stock to be as set forth in Sections 1, 12
and 13.
(b) The right of the Original Holders to sell or transfer their shares
of Series A Preferred Stock shall not be restricted by the provisions of this
Section 1 1; provided, however, that the provisions of Sections 12 and 13 shall
be applicable in respect of shares of Series A Preferred Stock which are sold or
transferred to a Subsequent Holder (the "Subsequent Holder Shares"), only if the
Company, in its sole and absolute discretion, grants such Subsequent Holder the
right to modify the terms of the Series A Preferred Stock to be as set forth in
Sections 1, 12 and 13. If the Company elects to grant such right to the intended
Subsequent Holder (the "Modification Election"), the Company shall give written
notice of the Modification Election to the Original Holders selling or
transferring shares of Series A Preferred Stock and the intended Subsequent
Holder on or before the intended effective date of such sale or transfer, as set
forth in the Transfer Notice. If the Company does not make a Modification
Election on or before such date, then neither the intended Subsequent Holder nor
any transferee thereof shall have any rights under Sections 12 or 13 with
respect to the shares of Series A Preferred Stock transferred to such Subsequent
Holder.
(c) Failure to deliver a Transfer Notice shall not affect the
effectiveness of any sale or transfer of shares of Series A Preferred Stock;
provided, however, that if the Company does not make a Modification Election
with respect to any shares of Series A Preferred Stock which are sold or
transferred, then the Subsequent Holder thereof shall not have any rights under
Section 12 or 13 with respect to such shares.
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<PAGE> 8
12. RIGHT TO MODIFY TERMS FOLLOWING A MODIFICATION ELECTION.
(a) If the Company makes a Modification Election in respect of
Subsequent Holder Shares, then the Subsequent Holder thereof shall have the
right, at its or his sole election, to modify the Terms (as defined below) of
all, but not less than all, of the Subsequent Holder Shares then owned by such
Subsequent Holder to be as set forth in Sections 1, 12 and 13 by giving written
notice of such election (the "Modification Notice") to the Company at its
corporate headquarters, attention: Board of Directors. In order to be effective,
the Modification Notice shall be received by the Company no later than 5:00 p.m.
central time on the tenth business day following the effective date of the sale
or transfer of such Subsequent Holder Shares to such Subsequent Holder. The
Modification Notice shall be accompanied by the materials described in Section
12(b) and shall set forth the name and address of the Subsequent Holder desiring
to modify the terms of his or its shares and the number of Subsequent Holder
Shares owned by him or it. Commencing on the first business day following
receipt by the Company of the Modification Notice, the terms of the Subsequent
Holder Shares listed in the Modification Notice (the "Modification Effective
Date") shall be deemed to be modified as follows:
(i) The provisions of Section 2 through and including Section 11
hereof shall have no force or effect with respect to the Modified Preferred
Stock, and
(ii) The provisions of Sections 1, 12 and 13 shall constitute the
entire statement of the rights and preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions on such rights and/or preferences (collectively, the "Terms") of
the Modified Preferred Stock.
(b) The Modification Notice shall be accompanied by the original stock
certificates representing the Modified Preferred Stock and a stock power
executed by the Subsequent Holder thereof Promptly following receipt of such
materials, the Company shall issue one or more replacement stock certificates
representing such shares, which certificates shall bear a legend substantially
as follows:
THE TERMS OF THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE HAVE BEEN MODIFIED, EFFECTIVE AS OF __________, TO BE AS SET
FORTH IN SECTIONS 1, 12 AND 13 OF THE COMPANY'S STATEMENT OF RESOLUTION
ESTABLISHING THE COMPANY'S SERIES A PREFERRED STOCK.
(c) The Terms of all shares of Series A Preferred Stock, other than
the Modified Preferred Stock, shall not be affected by Sections 12 or 13 or any
actions taken hereunder or thereunder.
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<PAGE> 9
13. TERMS OF MODIFIED PREFERRED STOCK. The provisions of this Section 13
shall apply only to shares of Modified Preferred Stock.
(a) DIVIDENDS.
(i) The Holders of shares of the Series A Preferred Stock shall
be entitled to receive in preference to holders of all other Capital Stock of
the Company, when, as and if dividends are declared by the Board of Directors
out of funds of the Company legally available therefor, cumulative preferential
dividends from the Modification Effective Date accruing at the rate of 13% per
annum (subject to increase as set forth below), payable quarterly in arrears on
each February 1, May 1, August I and November I or, if any such date is not a
Business Day, on the next succeeding Business Day (each, a "Dividend Payment
Date"), to the Holders of record as of the next preceding January 15, April 15,
July 15 and October 15 (each, a "Record Date"). Upon an Increased Dividend
Triggering Event (as defined) dividends on the Series A Preferred Stock will
accrue at the rate of 15% per annum of the liquidation preference thereof until
such Increased Dividend Triggering Event is cured. Dividends shall be payable in
cash, or dividends may be paid, at the Company's option, by the issuance of
additional shares of Series A Preferred Stock (including fractional shares)
having an aggregate Liquidation Preference equal to the amount of such
dividends. The shares of Series A Preferred Stock issued as dividends will be
duly authorized, validly issued, fully paid and non-assessable. The issuance of
such additional shares of Series A Preferred Stock shall constitute "payment" of
the related dividend for all purposes of this Statement of Resolution. Dividends
payable on the Series A Preferred Stock shall be computed on the basis of a 360-
day year consisting of twelve 30-day months and shall be deemed to accrue on a
daily basis.
(ii) The rate of the cumulative preferential dividends of the
Series A Preferred Stock may be increased as hereinafter provided. Upon:
(A) the failure Of the Company to redeem the Series A
Preferred Stock on the Mandatory Redemption Date (as defined below);
(B) the failure of the Company to make a Change of Control
Offer on the terms and in accordance with the provisions described below in
Section 13(e) hereof to the extent required to make such Change of Control Offer
by such provisions.
(C) the failure of the Company to comply with any of the
other covenants or agreements set forth in this Section 13 (other than the
payment of dividends) and the continuance of such failure for 30 consecutive
days or more following the delivery of written notice to the Company from the
holders of at least 25% of the shares of Series A Preferred Stock then
outstanding;
(D) the failure to pay at final maturity (giving effect to
any
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applicable grace periods and any extensions thereof) the principal amount of any
Indebtedness of the Company or any Restricted Subsidiary (other than a
Receivables Entity) of the Company, or the acceleration of the final stated
maturity of any such Indebtedness, if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
in default for failure to pay principal at final maturity or which has been so
accelerated, aggregates $10,000,000 or more; or
(E) the failure to pay dividends in cash after the later of
(i) the sixth anniversary of the Issue Date and (ii) the fifth anniversary of
the first Modification Effective Date (each of the events described in clauses
(A), (B), (C), (D) and (E) being referred to herein as an "Increased Dividend
Triggering Event");
then the cumulative preferential dividends of the Series A Preferred Stock will
accrue at a rate of 15% of the Liquidation Preference per share per annum from
the date of such Increased Dividend Triggering Event until such Increased
Dividend Triggering Event is cured. The increased dividend rate provided above
shall be the exclusive remedy at law or in equity for, or as a result of, any
Increased Dividend Triggering Event.
(iii) Dividends on the Series A Preferred Stock shall accrue
whether or not the Company has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends shall accrue to the extent they are not paid
on the Dividend Payment Date for the period to which they relate. The Company
shall take all actions required or permitted under the Texas Business
Corporation Act (the "TBCA") to permit the payment of dividends on the Series A
Preferred Stock, including, without limitation, through the revaluation of its
assets in accordance with the TBCA, to make or keep funds legally available for
the payment of dividends, provided, that the Company in all events shall pay
such dividends only out of funds legally available therefor and only in
compliance with the provisions of the Credit Agreement and the Indenture.
(iv) No dividends whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding share of
the Series A Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid, or
declared and a sufficient sum set apart for the payment of such dividend, upon
all outstanding shares of Series A Preferred Stock. Unless full cumulative
dividends on all outstanding shares of Series A Preferred Stock have been
declared and paid for the current dividend period and the two most recent
dividend periods in which the Series A Preferred Stock were outstanding, or
declared and a sufficient sum set apart for the payment thereof, then: (A) no
dividend (other than a dividend payable solely in shares of any class of stock
ranking junior to the Series A Preferred Stock as to the payment of dividends
and as to rights in liquidation, dissolution or winding up of the affairs of the
Company ("Junior Securities")) shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any shares of Junior Securities; (B) no
other distribution shall be
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<PAGE> 11
declared or made upon, or any sum set apart for the payment of any distribution
upon, any shares of Junior Securities, other than a distribution consisting
solely of Junior Securities- (C) no shares of Junior Securities shall be
purchased, redeemed or otherwise acquired or retired for value (excluding an
exchange for shares of other Junior Securities) by the Company or any of its
Subsidiaries, except as provided in clauses (2), (3), and (7) of the
notwithstanding paragraph of Section 13(f)(i); and (D) no monies shall be paid
into or set apart or made available for a sinking or other like fund for the
purchase, redemption or other acquisition or retirement for value of any shares
of Junior Securities by the Company or any of its Subsidiaries. Holders of the
Series A Preferred Stock shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of the full cumulative dividends as herein
described.
(b) DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock (a "reduction or decrease in capital stock"), each
Holder of shares of the Series A Preferred Stock shall be entitled to payment
out of the assets of the Company available for distribution of any amount equal
to the Liquidation Preference per share of Series A Preferred Stock held by such
Holder, phis accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, common stock of the Company. After payment in full of the
Liquidation Preference and all accrued dividends, if any, to which Holders of
Series A Preferred Stock are entitled, such Holders shall not be entitled to any
further participation in any distribution of assets of the Company. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Company or reduction
or decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding up of the
business of the Company or reduction or decrease in capital stock.
(c) REDEMPTION BY THE COMPANY.
(i) On the twelfth anniversary of each Modification Effective
Date (the "Mandatory Redemption Date"), the Company shall be required to redeem
(subject to the legal availability of funds therefor) all outstanding shares of
Series A Preferred Stock the terms of which were modified on such date in
accordance with the provisions hereof (the "Applicable Modified Shares") at a
price in cash equal to the Liquidation Preference thereof, plus accrued and
unpaid dividends, if any, to the date of redemption. The Company shall not be
required
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to make sinking fund payments with respect to the Series A Preferred Stock. The
Company shall take all actions required or permitted under the TBCA to permit
such redemption.
(ii) Prior to the fifth anniversary of the Modification Effective
Date the Applicable Modified Shares may not be redeemed at the option of the
Company, except as set forth below. On or after the fifth anniversary of each
Modification Effective Date, the Applicable Modified Shares may be redeemed, in
whole or in part, at the option of the Company, at the Applicable Redemption
Price. At any time, or from time to time, on or prior to the fifth anniversary
of each Modification Effective Date, the Company may, at its option, use the net
cash proceeds of any Equity Offering to redeem the Applicable Modified Shares at
a redemption price equal to 113 % of the Liquidation Preference together with
accrued and unpaid dividends, if any, to the date of redemption. In order to
effect the foregoing redemption with the proceeds of such Equity Offering, the
Company shall make such redemption not more than 120 days after the consummation
of such Equity Offering.
(iii) In case of redemption of less than all of the shares of
Series A Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected pro rata or by lot as determined by the Company in its sole
discretion.
(iv) Notice of any redemption shall be sent by or on behalf of
the Company not less than 30 nor more than 60 days prior to the date specified
for redemption in such notice (including the Mandatory Redemption Date, the
"Redemption Date"), by first class mail, postage prepaid, to all Holders of
record of the Series A Preferred Stock at their last addresses as they shall
appear on the books of the Company; provided, however, that no failure to give
such notice or any defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares of Series A
Preferred Stock except as to the Holder to whom the Company has failed to give
notice or except as to the Holder to whom notice was defective. In addition to
any information required by law or by the applicable rules of any exchange upon
which Series A Preferred Stock may be listed or admitted to trading, such notice
shall state: (A) whether such redemption is being made pursuant to the optional
or the mandatory redemption provisions hereof, (B) the Redemption Date; (C) the
Applicable Redemption Price(D) the number of shares of Series A Preferred Stock
to be redeemed and, if less than all shares held by such Holder are to be
redeemed, the number of such shares to be redeemed; (E) the place or places
where certificates for such shares are to be surrendered for payment of the
Applicable Redemption Price, including any procedures applicable to redemptions
to be accomplished through book entry transfers; and (F) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date. Upon the
mailing of any such notice of redemption, the Company shall become obligated to
redeem at the time of redemption specified therein all shares called for
redemption.
(v) If notice has been mailed in accordance with Section
13(d)(iv) above and provided that on or before the Redemption Date specified in
such notice, all funds necessary for such redemption shall have been set aside
by the Company, separate and apart
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from its other funds in trust for the pro rata benefit of the Holders of the
shares so called for redemption, so as to be, and to continue to be available
therefor then, from and after the Redemption Date, dividends on the shares of
the Series A Preferred Stock so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding and shall not have the
status of shares of Series A Preferred Stock, and all rights of the Holders
thereof as stockholders of the Company (except the right to receive from the
Company the Applicable Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so require and
the notice shall so state), such shares shall be redeemed by the Company at the
Applicable Redemption Price. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate or certificates shall be
issued representing the unredeemed shares without cost to the Holder thereof
(vi) Any funds deposited with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(A) the Company shall be entitled to receive from such bank
or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the Holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the Company and
unclaimed by the Holders of the Series A Preferred Stock entitled
thereto at the expiration of two years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings
earned thereon, to the Company, and after any such repayment, the
Holders of the shares entitled to the funds so repaid to the Company
shall look only to the Company for payment without interest or other
earnings.
(vii) No Series A Preferred Stock may be redeemed except with
funds legally available for the purpose and as permitted by the Credit Agreement
and the Indenture. The Company shall take all actions required or permitted
under the TBCA to permit any such redemption.
(viii)Notwithstanding the foregoing provisions of this Section
13(d), unless the full cumulative dividends on all outstanding shares of Series
A Preferred Stock shall have been paid or contemporaneously are declared and
paid for all past dividend periods, none of the shares of Series A Preferred
Stock shall be redeemed unless all outstanding shares of Series A Preferred
Stock are simultaneously redeemed.
(ix) All shares of Series A Preferred Stock redeemed pursuant to
this Section 13(d) shall be restored to the status of authorized and unissued
shares of preferred
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<PAGE> 14
stock, without designation as to series and may thereafter be reissued as shares
of any series of preferred stock other than shares of Series A Preferred Stock.
(d) VOTING RIGHTS.
(i) The Holders of record of shares of the Series A Preferred
Stock shall have no voting rights, except as required by law, and as hereinafter
provided in this Section 13 (d).
(ii) The Company shall not, without the affirmative vote or
consent of the Holders of a majority of the shares of Series A Preferred Stock
then outstanding (with shares held by the Company or its Affiliates not being
considered to be outstanding for this purpose) unless a greater percentage is
required by law:
(A) authorize, create (by way of reclassification or
otherwise) or issue any Parity Securities or any obligation or
security convertible into or evidencing the rights to purchase any
Parity Securities;
(B) attend or otherwise alter its Articles of Incorporation
in any manner that adversely affects the rights of Holders of Series A
Preferred Stock;
(C) amend or otherwise alter this Statement of
Resolution (including the provisions of Section 13(e) hereof) in any
manner; or
(D) waive any existing Increased Dividend Triggering
Event or compliance with any provision of this Statement of
Resolution.
(iii) Without the consent of each Holder affected, an
amendment or waiver of the Company's Articles of Incorporation or of this
Statement of Resolution may not (with respect to any shares of Series A
Preferred Stock held by a non-consenting Holder):
(A) reduce the number of shares of Series A Preferred Stock
whose Holder must consent to an amendment, supplement or waiver;
(B) reduce the Liquidation Preference of or change the
Mandatory Redemption Date of any share of Series A Preferred Stock or
alter the provisions with respect to the redemption of the Series A
Preferred Stock;
(C) reduce the rate of or change the time for payment of
dividends on any share of Series A Preferred Stock;
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<PAGE> 15
(D) make any share of Series A Preferred Stock payment in
any form other than that stated in this Statement of Resolution;
(E) waive a redemption payment with respect to any share of
Series A Preferred Stock; and
(F) make any change in the foregoing amendment and waiver
provisions contained in this paragraph (iii).
(iv) The Company shall not, without the consent of at least 75%
of the then outstanding shares of Series A Preferred Stock (with shares held by
the Company or its Affiliates not being considered to be outstanding for this
purpose), authorize, create (by way of reclassification or otherwise) or issue
any Senior Securities or any obligation or security convertible into or
evidencing a right to purchase any Senior Securities.
(v) The Company in its sole discretion may without the vote or
consent of any Holders of Series A Preferred Stock amend or supplement this
Statement of Resolution:
(A) to cure any ambiguity, defect or inconsistency;
(B) to provide for uncertificated Series A Preferred Stock
in addition to or in place of certificated Series A Preferred Stock;
or
(C) to make any change that would provide any additional
rights or benefits to the Holders of the Series A Preferred Stock;
provided that any such amendment or supplement does not adversely affect the
legal rights under this Statement of Resolution of any Holder.
(e) CHANGE OF CONTROL.
(i) Upon the occurrence of a Change of Control Triggering Event,
each Holder of shares of Series A Preferred Stock shall have, subject to the
terms hereof, the right to require the Company to repurchase all or any part
(but not, in the case of any Holder requiring the Company to purchase less than
all of the shares of Series A Preferred Stock held by such Holder, any
fractional shares) of such Holder's Series A Preferred Stock pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate Liquidation Preference thereof plus accrued and
unpaid dividends, if any, thereon to the date of purchase (the "Change of
Control Payment").
(ii) The Change of Control Offer shall include all instructions
and materials necessary to enable Holders to tender their shares of Series A
Preferred Stock.
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<PAGE> 16
(iii) The Company shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Series A Preferred Stock as a result of a Change of
Control.
(iv) Within 90 days following any Change of Control Triggering
Event, the Company shall send, by first-class mail, a notice to each Holder
stating:
(A) that the Change of Control Offer is being made pursuant
to this Section 13(e) and that all shares of Series A Preferred Stock
tendered will be accepted for payment;
(B) the purchase Price and the purchase date, which shall be
no earlier than 30 days not later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date");
(C) that any share of Series A Preferred Stock not tendered
will continue to accrue dividends;
(D) that, unless the Company fails to pay the Change of
Control Payment, all shares of Series A Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Series A
Preferred Stock purchased pursuant to a Change of Control Offer will
be required to surrender the shares of Series A Preferred Stock, with
the form entitled "Option of Holder to Elect Purchase" which shall be
included with the Notice of Change of Control completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control
Payment Date;
(F) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the number of shares of Series A Preferred Stock
delivered for purchase, and a statement that such Holder is
withdrawing his election to have such shares purchased; and
(G) the circumstances and relevant facts regarding such
Change of Control Triggering Event (including, but not limited to,
information with respect to proforma historical financial information
after giving effect to
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<PAGE> 17
such Change of Control and information regarding the Person or Persons
acquiring control).
(v) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (A) accept for payment all shares of Series A Preferred Stock
or portions thereof properly tendered pursuant to the Change of Control Offer,
(B) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all shares of Series A Preferred Stock or portions thereof
so tendered and (C) deliver or cause to be delivered to the Paying Agent the
shares of Series A Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate Liquidation Preference of the shares of Series
A Preferred Stock or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to each Holder of Series A Preferred Stock so tendered
the Change of Control Payment for such Series A Preferred Stock, and the
Transfer Agent shall promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new certificate representing the shares of
Series A Preferred Stock equal in Liquidation Preference amount to any
unpurchased portion of the shares of Series A Preferred Stock surrendered, if
any. The Company shall publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
(vi) Prior to complying with the provisions of this Section
13(e), but in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Indebtedness to
permit the repurchase of Series A Preferred Stock required by this Section
13(e). The Company's failure to comply with this provision shall constitute an
Increased Dividend Triggering Event described in clause (C) of Section 13(a)(ii)
and not in clause (B) of such Section 13(a)(ii).
(vii) The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 13(e) applicable to a Change of Control
Offer made by the Company and purchases all shares of Series A Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
(f) CERTAIN COVENANTS. The Company will comply with the following
covenants or, if the Company shall fail to comply therewith after the notice and
cure period described in Section 13(a)(ii)(C) above, then an Increased Dividend
Triggering Event shall be deemed to have occurred.
(i) RESTRICTED PAYMENT. The Company and its Restricted
Subsidiaries may not, directly or indirectly:
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<PAGE> 18
(A) declare or pay any dividend or make any distribution in
respect of any Capital Stock of the Company that are Junior Securities
other than dividends or distributions payable in Junior Securities of
the Company that are not Disqualified Capital Stock;
(B) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire the same that are Junior Securities
(other than the exchange of any such Capital Stock for Qualified
Capital Stock); or
(C) make any Investment (other than Permitted Investments);
each of the foregoing actions set forth in clause (A), (B) and (C) above being
referred to as a "Stock Restricted Payment," unless, at the time of such Stock
Restricted Payment;
(1) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the "Incurrence of
Additional Indebtedness" covenant of Section 13(f)(ii); and
(2) such Stock Restricted Payment, together with the aggregate of all
other Stock Restricted Payments made by the Company and its Subsidiaries
after the Issue Date (the amount expended for such purposes if other than
in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company), is
less than the sum of (w) 50% of the cumulative Consolidated Net Income (or
if cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned subsequent to the Issue Date and on or prior to
the date the Stock Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period); plus (x) 100% of the
aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to
the Issue Date and on or prior to the Reference Date of Qualified Capital
Stock of the Company (including Qualified Capital Stock issued upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness but excluding the net cash proceeds received from the sale of
Qualified Capital Stock to the extent such amounts have been applied in
accordance with clause (2)(ii) of the following paragraph); plus (y)
without duplication of any amounts included in clause (3)(x) above, 100% of
the aggregate net cash proceeds of any equity contribution received by the
Company from a holder of the Company's Capital Stock; plus (z) to the
extent that any Investment (other than a Permitted Investment) that was
made after the Issue Date is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash received with respect to such
sale, liquidation or repayment of such Investment (less the cost of such
sale, liquidation or repayment, if any) and (B) the initial amount of such
Investment, but only to the extent not included in the calculation of
Consolidated Net Income. Any net cash proceeds
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<PAGE> 19
included in the foregoing clauses (3)(x) or (3)(y) shall not be included in
clause (x)(A) or clause (x)(B) of the definition of "Permitted Investments"
to the extent actually utilized to make a Restricted Payment under this
paragraph.
Notwithstanding the foregoing, the provisions set forth above in the
immediately preceding paragraph will not prohibit: (1) the payment of any
dividend or the consummation of any irrevocable redemption within sixty (60)
days after the date of declaration of such dividend or notice of such redemption
if the dividend or payment of the redemption price, as the case may be, would
have been permitted on the date of declaration or notice under the provisions of
this Statement of Resolution; (2) so long as no Increased Dividend Triggering
Event shall have occurred and be continuing as a consequence thereof, the
acquisition of any Junior Securities of the Company either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital Stock
of the Company- (3) so long as no Increased Dividend Triggering Event shall have
occurred and be continuing, payments for the purpose of and in an amount equal
to the amount required to permit the Company to redeem or repurchase shares of
its Capital Stock or options in respect thereof, in each case in connection with
the repurchase provisions under employee stock option or stock purchase
agreements or other agreements to compensate management employees; provided that
such redemptions or repurchases pursuant to this clause (3) shall not exceed
$5.0 million in the aggregate since the Modification Effective Date (which
amount shall be increased by. the amount of any cash proceeds to the Company
from (x) sales of its Capital Stock to management employees subsequent to the
Modification Effective Date and (y) any "key-man" life insurance policies which
are used to make such redemptions or repurchases); (4) the payment of fees and
compensation as permitted under clause (1) of paragraph (B) of Section 13(0(iv);
(5) repurchases of Capital Stock deemed to occur upon the exercise of stock
options if such Capital Stock represents a portion of the exercise price
thereof, (6) Restricted Payments made pursuant to the Recapitalization
Agreement; (7) so long as no Increased Dividend Triggering Event shall have
occurred or be continuing, payments in respect of any redemption, repurchase,
acquisition, cancellation or other retirement for value of shares of Capital
Stock of the Company or options, stock appreciation or similar securities, in
each case held by then current or former officers, directors or employees of the
Company or any of its Subsidiaries (or their estates or beneficiaries under
their estates) or by an employee benefit plan, upon death, disability,
retirement or termination of employment, not to exceed $2.5 million in the
aggregate in any fiscal year or $10. 0 million in the aggregate since the
Modification Effective Date; (8) purchase of all (but not less than all),
excluding directors' qualifying shares, of the Capital Stock or other ownership
interests in a Subsidiary of the Company which Capital Stock or other ownership
interests were not theretofore owned by the Company or a Subsidiary of the
Company, such that after giving effect to such purchase such Subsidiary becomes
a Restricted Subsidiary of the Company; and (9) so long as no Increased Dividend
Triggering Event shall have occurred or be continuing, payments not to exceed $
1 00,000 in the aggregate since the Modification Effective Date to enable the
Company to make payments to holders of its Capital Stock in lieu of issuance of
fractional shares of its Capital
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Stock- (10) the payment of cash dividends on the Series A Preferred Stock; and
(I 1) the repurchase of Series A Preferred Stock after a Change of Control
Triggering Event. In determining the aggregate amount of Stock Restricted
Payments made subsequent to the Modification Effective Date in accordance with
clause (3) of the immediately preceding paragraph, amounts expended (to the
extent such expenditure is in the form of cash or other property other than
Qualified Capital Stock) pursuant to clauses (1), (3), (7) and (10) of this
paragraph shall be included in such calculation; provided that such expenditures
pursuant to clauses (3) or (7) shall not be included to the extent of cash
proceeds received by the Company from any "key man" life insurance policies, and
(b) amounts expended pursuant to clauses (2), (4), (5), (6), (8) and (9) shall
be excluded from such calculation.
(ii) INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness)- provided, however, that if no Increased Dividend Triggering Event
shall have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company may incur Indebtedness
(including, without limitation, Acquired Indebtedness), and Restricted
Subsidiaries of the Company may incur Indebtedness (including, without
limitation, Acquired Indebtedness), in each case if on the date of the
Incurrence of such Indebtedness, or the issuance of Disqualified Capital Stock,
after giving effect to the Incurrence or issuance thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2. 0 to 1. 0.
(iii) MERGER, CONSOLIDATION, AND SALE OF ASSETS. The Company may
not consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity unless (A) the
Company is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof, or the District of Columbia; (B) if the
Company is not the Surviving Corporation, the Series A Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor,
transferee, or resulting Person, having in respect of such successor,
transferee, or resulting Person the same powers, preferences, and relative
participating, optional, or other special rights and the qualifications,
limitations, or restrictions thereon, that the Series A Preferred Stock had
immediately prior to such transaction; (C) immediately after such transaction no
Increased Dividend Triggering Event exists; and (D) immediately after giving
effect to such transaction (on a proforma basis, including any Indebtedness
incurred or anticipated to be incurred in connection with such transaction and
the other adjustments referred to in the definition of "Consolidated Fixed
Charge Coverage Ratio", the Company or the surviving Person is able to incur at
least $ 1. 00 of additional Indebtedness (other than
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<PAGE> 21
Permitted Indebtedness) in compliance with the "Incurrence of Additional
Indebtedness" covenant of Section 13(f)(ii).
(iv) TRANSACTIONS WITH AFFILIATES.
(A) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction"), other than (1) Affiliate
Transactions permitted under paragraph (B) below and (2) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary; provided, however, that for a transaction or
series of related transactions with an aggregate vale of $5.0 million or
more, at the Company's option (1) such determination shall be made in good
faith by a majority of the disinterested members of the Board of the
Directors of the Company or (ii) the Board of Directors of the Company or
any such Restricted Subsidiary party to such Affiliate Transaction shall
have received a favorable opinion from an independent nationally recognized
investment banking firm that such Affiliate Transaction is fair from a
financial point of view to the Company or such Restricted Subsidiary-
provided, further, that for a transaction or series of related transactions
with an aggregate value of $1 0. 0 million or more, the Board of Directors
of the company shall have received a favorable opinion from an independent
nationally recognized investment banking firm that such Affiliate
Transaction is fair from a financial pont of view to the Company or such
Restricted Subsidiary.
(B) The restrictions set forth in clause (A) above shall not
apply to (1) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees, or consultants of
the Company or any Subsidiary of the Company (including customary
provisions contained in employment agreements with executive officers of
the Company) as determined in good faith by the Company's Board of
Directors or senior management; (2) transactions exclusively between or
among the Company and any of its Restricted Subsidiaries, or among such
Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by this Statement of Resolutions; (3) any agreement as in effect
as of the Modification Effective Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment
or replacement agreement is not more disadvantageous to the holders of
Series A Preferred Stock in any material respect than the original
agreement as in effect on the Modification Effective Date; (4) Stock
Restricted Payments permitted by this Statement of Resolutions; (5) all
payments by the Company under the TBL Agreement; (6) transactions effected
as part of a Qualified Receivables
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Transaction; (7) any Permitted Investment; (8) transactions permitted by,
and complying with, the provisions of Section 13(f) (iii)5; (9) any
payment, issuance of securities or other payments, awards or grants, in
cash or otherwise, pursuant to, or the funding of, employment arrangements
and Plans approved by the Board of Directors of the Company; (10) the
grant of stock options or similar rights to employees and directors of the
Company and its Subsidiaries pursuant to Plans and employment contracts
approved by the Board of Directors of the Company; (11) loans or advances
to officers, directors or employees of the Company or its Restricted
Subsidiaries not in excess of $3. 0 million at any one time outstanding;
(12) the granting or performance of registration rights under a written
registration rights agreement approved by the Board of Directors of the
Company; (13) transactions with Persons solely in their capacity as
holders of Indebtedness or Capital Stock of the Company or any of its
Restricted Subsidiaries, where such Persons are treated no more favorably
than holders of Indebtedness or Capital Stock of the Company or such
Restricted Subsidiary generally; and (14) any agreement to do any of the
foregoing.
(v) DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (A) pay dividends or make
any other distributions on or in respect of its Capital Stock; (B) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (C) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of. (1) applicable law; (2) this Statement of Resolutions; (3)
non-assignment provisions of any contract or any lease entered into in the
ordinary course of business; (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to the Company or any
Restricted Subsidiary of the Company, or the properties or assets of any such
Person, other than the Person or the properties or assets of the Person so
acquired; (5) agreements existing on the Modification Effective Date; (6)
Indebtedness or other contractual requirements of a Receivables Subsidiary in
connection with a Qualified Receivables Transaction, provided that such
restrictions apply only to such Receivables Subsidiary; (7) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (C) above on the property so
acquired; (8) restrictions on the transfer of assets subject to any Lien
permitted under the Indenture imposed by the holder of such Lien; (9) any
agreement to sell assets permitted under the Indenture to any Person pending the
closing of such sale; (10) any agreement or instrument governing Capital Stock
of any Person that is acquired after the Issue Date; (11) an agreement effecting
a refinancing, replacement or substitution of Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (4) or (5) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such refinancing, replacement or substitution
agreement are no less favorable to the Company or the Holders in any material
respect as determined by the Board of Directors of
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<PAGE> 23
the Company in good faith than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (4) or (5); or
(12) any agreement evidencing, or relating to, any Indebtedness incurred after
the Modification Effective Date which are not more restrictive than those
contained in the Credit Agreement as in effect on the Modification Effective
Date.
(vi) LIMITATION ON PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES. The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
(vii) REPORTS.
(A) The Company will mail to holders of Series A
Preferred Stock within 15 days after it files them with the Commission
copies of the annual and quarterly reports and the information, documents,
and other reports, if any, that the Company is required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC
Reports"). In the event the Company is not required or shall cease to be
required to file SEC Reports, pursuant to the Exchange Act, the Company
will nevertheless continue to file such reports with the Commission (unless
the Commission will not accept such a filing). In the event the Company is
not required or shall cease to be required to file SEC Reports and the
Commission will not accept the filing of SEC Reports, so long as any shares
of Series A Preferred Stock are outstanding, the Company will furnish
copies of such SEC Reports to the holders of Series A Preferred Stock at
the time the Company is required to make such information available to
Investors who request it in writing.
(B) The Company shall deliver to the Holders, within 90
days after the end of each fiscal year, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during
the preceding fiscal year has been made under the supervision of the
signing officers with a view to determining whether the Company has kept,
observed, performed, and fulfilled its obligations under this Statement of
Resolutions and further stating, as to each such officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed, and fulfilled each and every covenant contained in
this Statement of Resolutions and is not in default in the performance or
observance of any of the terms, provisions, and conditions of this
Statement of Resolutions (or, if any such default shall have occurred,
describing such defaults of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains
in existence by reason of which payments on account of the Liquidation
Preference of or dividends, if any, on the Series A Preferred Stock is
prohibited or, if such event has occurred, a
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<PAGE> 24
description of the event and what action the Company is taking or proposes
to take with respect thereto.
(C) The Company shall, so long as any of the shares of
Series A Preferred Stock are outstanding, deliver to the Holders, forthwith
upon any Executive Officer of the Company becoming aware of any default
under this Statement of Resolutions, an Officers' Certificate specifying
such default and what action the Company is taking or proposes to take with
respect thereto.
(viii) Conflicts with By-laws. If any provisions of the Company's
Bylaws conflict in any way with this Statement of Resolutions, the Company
'Shall, so long as any of the shares of Series A Preferred Stock are
outstanding, take all necessary actions to amend such By-laws and thereby
resolve the conflict.
(g) PAYMENT.
(i) All amounts payable in cash with respect to the Series A
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of dividends (if any) may be
made by check mailed to the Holders of the Series A Preferred Stock at their
respective addresses set forth in the register of Holders of Series A Preferred
Stock maintained by the Transfer Agent, provided that all cash payments with
respect to the Global Shares (as defined below) and shares of Series A Preferred
Stock the Holders of which have given wire transfer instructions to the Company
shall be required to be made by wire transfer of immediately available funds to
the accounts specified by the Holders thereof
(ii) Any payment on the Series A Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business day with the same force and effect as if made on such
due date.
(iii) The Company has initially appointed the Transfer Agent to
act as the "Paying Agent." The Company may at any time terminate the appointment
of any Paying Agent and appoint additional or other Paying Agents, provided that
until the Series A Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference and accrued
dividends on the Series A Preferred Stock have been ma e available for payment
and either paid or returned to the Company as provided in this Certificate of
Designation, it shall maintain an office or agency in the Borough of Manhattan,
The City of New York.
(iv) Dividends payable on the Series A Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be paid
to the Holders of record as of the immediately preceding Record Date.
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<PAGE> 25
(v) All moneys and shares of Series A Preferred Stock deposited
with any Paying Agent or then held by the Company in trust for the payment of
the Liquidation Preference and dividends on any shares of Series A Preferred
Stock which remain unclaimed at the end of two years after such payment has
become due and payable shall be repaid to the Company, and the Holder of such
shares of Series A Preferred Stock shall thereafter look only to the Company for
payment thereof
(h) OFFICERS' CERTIFICATE.
Each Officers' Certificate provided for in this Statement of
Resolutions shall include:
(i) a statement that the officer making such certificate or
opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(iii) a statement that, in the opinion of such officer, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(iv) a statement as to whether or not, in the opinion of such
officer, such condition or covenant has been satisfied.
(i) EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences, and relative,
participating, optional, or other special rights, other than those specifically
set forth in this Statement of Resolutions (as such Statement of Resolutions may
be amended from time to time) and in the Company's Articles of Incorporation.
The shares of Series A Preferred Stock shall have no preemptive or subscription
rights.
(j) HEADINGS OF SUBDIVISIONS.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
(k) SEVERABILITY OF PROVISIONS.
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<PAGE> 26
If any voting powers, preferences and relative, participating,
optional, and other special rights of the Series A Preferred Stock and
qualifications, limitations, and restrictions thereof set forth in this
Statement of Resolutions (as it may be amended from time to time) is invalid,
unlawful, or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences, and relative, participating,
optional, and other special rights of Series A Preferred Stock and
qualifications, limitations, and restrictions thereof set forth in this
Statement of Resolutions (as so amended) which can be given effect without the
invalid, unlaw u , or unenforceable voting powers, preferences, and relative,
participating, optional, and other special rights of Series A Preferred Stock
and qualifications, limitations, and restrictions thereof shall, nevertheless,
remain in full force and effect, and no voting powers, preferences, and
relative, participating, optional, or other special rights of Series A Preferred
Stock and qualifications, limitations, and restrictions thereof herein set forth
shall be deemed dependent upon any other such voting powers, preferences, and
relative, participating, optional, or other special rights of Series A Preferred
Stock and qualifications, limitations, and restrictions thereof unless so
expressed.
(l) FORM OF SECURITIES.
(i) The Series A Preferred Stock shall initially be issued in the
form of one or more Global Preferred Shares (the "Global Shares"). The Global
Shares shall be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to as the "Global
Share Holder").
(ii) So long as the Global Share Holder is the registered owner
of any Series A Preferred Stock, the Global Share Holder will be considered the
sole Holder under this Statement of Resolutions of any shares of Series A
Preferred Stock evidenced by the Global Shares. Beneficial owners of shares of
Series A Preferred Stock evidenced by the Global Shares shall not be considered
the owners or Holders thereof under this Statement of Resolutions for any
purpose. The Company shall not have any responsibility or liability for any
aspect of the records of the Depositary relating to the Series A Preferred
Stock.
(iii) Payments in respect of the Liquidation Preference, and
dividends on any Series A Preferred Stock registered in the name of the Global
Holder on the applicable record date shall be payable by the Company to or at
the direction of the Global Share Holder in its capacity as the registered
Holder under this Statement of Resolutions. The Company may treat the persons in
whose names Series A Preferred Stock, including the Global Shares, are
registered as the owners thereof for the purpose of receiving such payments. The
Company does not and will not have any responsibility or liability for the
payments of such amounts to beneficial holders of Series A Preferred Stock.
(iv) Any person having a beneficial interest in a Global Share
may, upon request to the Company, exchange such beneficial interest for Series A
Preferred Stock
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<PAGE> 27
in the form of registered definitive certificates ("Certificated Securities").
Upon any such issuance, the Company shall register such Certificated Securities
in the name of, and cause the same to be delivered to, such person or persons
(or the nominee of any thereof). If (i) the Company notifies the Holders in
writing that the Depositary is no longer willing or able to act as a depository
and the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Holders in writing that it selects to
cause the issuance of Series A Preferred Stock in the form of Certificated
Securities, then, upon surrender by the Global Share Holder of its Global
Shares, Series A Preferred Stock in such form will be issued to each person that
the Global Share Holder and the Depositary identify as being the beneficial
owner of the related Series A Preferred Stock. If the Company elects to pay
dividends on the Series A Preferred Stock by issuing additional Series A
Preferred Stock, fractional shares, if any, issued in connection with any such
dividend payment may be issued to holders of Series A Preferred Stock as
Certificated Securities.
(m) EXCHANGE.
(i) REQUIREMENTS. The outstanding shares of Series A Preferred
Stock are exchangeable as a whole but not in part, at the option of the Company
and subject to the terms and conditions of the Credit Agreement, the Indenture,
and the Exchange Indenture at any time on any Dividend Payment Date for the
Company's 13% Subordinated Exchange Debentures (the "Exchange Debentures") to be
substantially in the form to be adopted by the Company's Board of Directors
prior to the first Modification Effective Date, a copy of which shall be filed
with the secretary of the Company, provided that any such exchange may only be
made if on or prior to the date of such exchange (i) the Company has paid (or is
deemed to have paid) all accumulated dividends on the Series A Preferred Stock
(including the dividends payable on the date of exchange) and there shall be no
contractual impediment to such exchange; (ii) there shall be funds legally
available sufficient therefor; (iii) immediately after giving effect to such
exchange, no Default or Event of Default (as defined in the Exchange Indenture)
would exist under the Exchange Indenture; (iv) no default or event of default
then exists under the Credit Agreement or the Indenture; and (v) such exchange
is not prohibited at such time under the Credit Agreement or the Indenture. The
exchange rate shall be $ 1. 00 principal amount of Exchange Debentures for each
$1.00 of liquidation preference of Series A Preferred Stock, including, to the
extent necessary, Exchange Debentures in principal amounts less than $1,000,
provided that the Company shall have the right, at its option, to pay cash in an
amount equal to the principal amount of that portion of any Exchange Debenture
that is not an integral multiple of $1,000 instead of delivering an Exchange
Debenture in a denomination of less than $1,000.
(ii) PROCEDURE FOR EXCHANGE.
(A) At least thirty (30) days and not more than sixty (60)
days prior to the date fixed for exchange, written notice (the "Exchange
Notice") shall be given by first-class mail, postage prepaid, to each Holder of
record on the record date fixed for such
26
<PAGE> 28
exchange of the Series A Preferred Stock at such Holder's address as the same
appears on the stock books of the Company, provided that no failure to give such
notice nor any deficiency therein shall affect the validity of the procedure for
the exchange of any shares of Series A Preferred Stock to be exchanged except as
to the Holder or Holders to whom the Company has failed to give said notice or
except as to the Holder or Holders whose notice was defective. The Exchange
Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the
Company, in the manner and at the place or places designated, his
certificate or certificates representing the shares of Series A Preferred
Stock to be exchanged,
(3) that dividends on the shares it Series A
Preferred Stock to be exchanged shall cease to accrue on such Exchange Date
whether or not certificates for shares of Series A Preferred Stock are
surrendered for exchange on such Exchange Date unless the Company shall
default in the delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall
accrue from the Exchange Date whether or not certificates for shares of
Series A Preferred Stock are surrendered for exchange on such Exchange
Date.
(B) On or before the Exchange Date, each Holder of
Series A Preferred Stock shall surrender the certificate or certificates
representing such shares of Series A Preferred Stock, in the manner and at the
place designated in the Exchange Notice. The Company shall cause the Exchange
Debentures to be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for any shares of Series A
Preferred Stock so exchanged, duly endorsed (or otherwise in prior form for
transfer, as determined by the Company), such shares shall be exchanged by the
Company into Exchange Debentures. The Company shall pay interest on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange
Date.
(C) If notice has been mailed as aforesaid, and if
before the Exchange Date specified in such notice (1) the Exchange Indenture
shall have been duly executed and delivered by the Company and the trustee
thereunder and (2) all Exchange Debentures necessary for such exchange shall
have been duly executed by the Company and delivered to the trustee under the
Exchange Indenture with irrevocable instructions to authenticate the Exchange
Debentures necessary for such Preferred Stock so exchanged as stockholders of
the Company shall cease (except the right to receive Exchange Debentures, an
amount in cash equal to the amount of accrued and unpaid dividends to the
Exchange Date and, if the Company so elects, cash in lieu of any Exchange
Debenture not an integral multiple of $1,000), and the Person or Persons
entitled to receive the Exchange Debentures issuable
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<PAGE> 29
upon exchange shall be treated for all purposes as the registered Holder or
Holders of such Exchange Debentures as of the Exchange Date.
(iii) NO EXCHANGE IN CERTAIN CASES. Notwithstanding the foregoing
provisions of this paragraph (g), the Company shall not be entitled to exchange
the Series A Preferred Stock for Exchange Debentures if (A) such exchange, or
any term or provision of the Exchange Indenture or Exchange Debentures, or the
performance of the Company's obligations under the Exchange Indenture or the
Exchange Debentures, shall (1) violate the terms of the Credit Agreement, the
Indenture or any refinancing thereof or (2) materially violate or conflict with
any applicable law or other agreement or instrument then binding on the Company,
or (B) at the time of such exchange, the Company is insolvent or would be
rendered insolvent by such exchange.
(n) CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section 13(n) shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable meanings
when used in the plural).
"Acquired Indebtedness" means Indebtedness (i) of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or (ii) assumed in connection with the acquisition of assets from
such Person, in each case whether or not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such acquisition. Acquired indebtedness shall be
deemed to have been incurred, with respect to clause (i) of the preceding
sentence, on the date such Person becomes a Restricted Subsidiary of the Company
and, with respect to clause (ii) of the preceding sentence, on the date of
consummation of such acquisition of assets.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise- and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
Notwithstanding the foregoing, no Person (other than the Company or any
Subsidiary of the Company) in whom a Receivables Entity make an Investment in
connection with a Qualified Receivables Transaction shall be deemed to be an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Applicable Redemption Price" means a price per share equal to the
following redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accrued and unpaid
dividends, if any, to the date of
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<PAGE> 30
redemption if redeemed during the 12-month period commencing on the
anniversaries of the applicable Modification Effective Date set forth below:
<TABLE>
<CAPTION>
-------------------------------------------
Anniversary of Modification
-------------------------------------------
Effective Date Redemption Rate
-------------- ---------------
-------------------------------------------
<S> <C>
5th 106.500%
6th 104.333%
7th 102.167%
8th and thereafter 100.000%
-------------------------------------------
</TABLE>
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or of any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business- provided, however, that
Asset Sales shall not include (i) any transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $2.0 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Section 13(0(iii)5 (iii) the sale or
discount, in each case without recourse, of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof, (iv) the factoring of accounts receivable arising in the
ordinary course of business pursuant to arrangements customarily in the
industry, (v) the licensing of intellectual property, (vi) disposals or
replacements of obsolete equipment in the ordinary course of business, (vii) the
sale, lease, conveyance, disposition or other transfer by the Company or any
Restricted Subsidiary of assets or property in transactions constituting
Investments that are not prohibited under Section 13(f)(i), (viii) leases or
subleases to third persons not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries, (ix) the sale of
properties (in one transaction or a series of related transactions) to be
acquired by the Company on or about February 1, 1999 related to the Company's
acquisition of Visionworks Holdings, Inc., or the
29
<PAGE> 31
capital lease in respect of such properties prior to the acquisition thereof, to
the extent that the consideration to be received by the Company or any of its
Restricted Subsidiaries in any such transaction or series of related
transactions does not exceed $10.0 million, (x) sales of accounts receivable and
related assets of the type specified in the definition of "Qualified Receivables
Transaction" to a Receivables Entity, or (xi) transfers of accounts receivable
and related assets of the type specified in the definition of "Qualified
Receivables Transaction" (or a fractional undivided interest therein) by a
Receivables Entity in a Qualified Receivables Transaction.
"Board of Directors" means, as to any Person, the Board of Directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person, and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year form the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's;.(iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A- I from S&P or at least P- I from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a
30
<PAGE> 32
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $200 million; (V) certificates of deposit or bankers'
acceptances or similar instruments maturing within one year from the date of
acquisition thereof issued by any foreign bank that is a lender under the Credit
Agreement having at the date of acquisition thereof combined capital and surplus
of not less than $500 million; (vi) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) or clause (v) above; and (vii) investments in money market funds
which invest substantially all their assets in securities of the types described
in clauses (i) through (vi) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange, or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of the Indenture);
(ii) the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of the Indenture); (iii) any Person
or Group (other than the Permitted Holder(s)) shall become the owner, directly
or indirectly, beneficially or of record, of shares representing more than 50%
of the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Change of Control Triggering Event" means the occurrence of a Change of
Control and, in the event the Notes remain outstanding, the failure of the Notes
to have a Minimum Rating on the 30th day after the occurrence of such a Change
of Control.
"Closing Date" means the effective date of the merger of ECCA Merger Corp.,
a Delaware corporation, with and into the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interest, or other
participation in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the
Modification Effective Date or issued after the Modification Effective Date, and
includes, without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period, (B) Consolidated
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<PAGE> 33
Interest Expense, (C) Consolidated Non-cash Charges, and (D) (i) cash charges
attributable to the exercise of employee options vesting upon the consummation
of the Recapitalization and (ii) for any four quarter period that includes one
or more fiscal quarters ending within the period from the Closing Date to the
first anniversary of the Closing Date, cash restructuring of nonrecurring
charges incurred in connection with the Recapitalization; provided, however,
that the cash charges in (i) and (ii) shall not exceed $2.0 million in the
aggregate since the Closing Date.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period, (ii) any Assets Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (including
pro forma adjustments for cost savings ("Cost Savings Adjustments") that the
Company reasonably believes in good faith could have been achieved during the
Four Quarter Period as a result of such acquisition or disposition (provided
that both (A) such cost savings were identified and quantified in an Officers'
Certificate delivered to the Transfer Agent at the time of the consummation of
the acquisition or disposition and (B) with respect to each acquisition or
disposition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company within 90 days
of such acquisition or disposition to effect such cost savings identified in
such Officers' Certificate and with respect to any other acquisition or
disposition, such Officers' Certificate sets forth the specific steps to be
taken within the 90 days after such acquisition or disposition to accomplish
such cost savings) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four-Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Four Quarter Period, and (iii) with respect to any such Four Quarter Period
commencing prior to the Recapitalization, the Recapitalization (including any
Cost Savings
32
<PAGE> 34
Adjustments), which shall be deemed to have taken place on the first day of such
Four Quarter Period, and (iv) any asset sales or asset acquisitions (including
any Consolidated EBITDA (including any Cost Savings Adjustments) attributable to
the assets which are the subject of the asset acquisition or asset sale during
the Four Quarter Period) that have been made by any Person that has become a
Restricted Subsidiary of the Company or has been merged with or into the Company
or any Restricted Subsidiary of the Company during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the last day of the Four Quarter Period and on or prior to the Transaction
Date that would have constituted Asset Sales or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary of the
Company or subsequent to such Person's merger into the Company, as if such asset
sale or asset acquisition (including the incurrence, assumption or liability for
any Indebtedness or Acquired Indebtedness in connection therewith) occurred on
the first day of the Four Quarter Period- provided that to the extent that
clause (ii) or (iv) of this sentences requires that pro. forma effect be given
to an asset sale or asset acquisition, such pro forma calculation shall be based
upon the four full fiscal quarters immediately preceding the Transaction Date of
the Person, or division or line of business of the Person, that is acquired or
disposed of for which financial information is available. If such Person or any
of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of
a third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs relating to the
Recapitalization and the financing therefor or relating to retired or existing
Indebtedness and amortization or write-off of customary debt issuance costs
relating to future Indebtedness incurred in the ordinary course of business plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person expressed as a decimal.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (i) the aggregate of all cash and
non-cash interest expense with respect to all outstanding Indebtedness of such
Person and its Restricted Subsidiaries, including the net costs associated with
Interest Swap Obligations, for such period determined on a consolidated basis in
conformity with GAAP, and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $2.0 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b) gains and losses de solely to fluctuations in
currency values and related tax effects according to GAAP, (c) items classified
as extraordinary, unusual or nonrecurring gains and losses, and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidates with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contact, operation of law or otherwise, (f) the net loss of any
Person other than a Restricted Subsidiary of the Company, (g) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to the Company or a Restricted Subsidiary of the
Company by such Person unless (and to the extent), in the case of a Restricted
Subsidiary of the Company who receives such dividends or distributions, such
Restricted Subsidiary is subject to clause (e) above, (h) one time non-cash
compensation charges, including any arising from existing stock options
resulting from the Recapitalization, and (i) bonus payments to be paid to senior
management of the Company in connection with the Recapitalization within 90 days
of the Issue Date in an aggregate amount not to exceed $1.0 million.
Notwithstanding the foregoing, it is understood that the payment of dividends on
the Series A Preferred Stock shall not reduce Consolidated Net Income.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges which
require an accrual of or a reserve for cash charges for any future period).
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the
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<PAGE> 36
Issue Date, (ii) was nominated for election or elected to such Board of
Directors with, or whose election to such Board of Directors was approved by,
the affirmative vote of a majority of the Continuing Directors who were members
of such Board of Directors at the time of such nomination or election, or (iii)
is any designee of a Permitted Holder or was nominated by a Permitted Holder or
any designees of a Permitted Holder on the Board of Directors.
"Credit Agent" means, at any time, the then-acting Administrative Agent as
defined in and under the Credit Agreement, which initially shall be Bankers
Trust Company. The Company shall promptly notify the Trustee of any change in
the Credit Agent.
"Credit Agreement" means (i) the Credit Agreement dated as of April 23,
1998, among the Company, the lenders party thereto from time to time and Bankers
Trust Company, as administrative agent, and Merrill Lynch Capital Corporation,
as syndication agent, and (ii) the guarantee by the Company of the Poth Loan, in
each case, together with the related documents thereto (including, without
limitation, any guarantee agreements, promissory notes and collateral
documents), in each case as such agreements may be amended, supplemented or
otherwise modified from time to time, or refunded, refinanced, restructured,
related, renewed, repaid or extended from time to time (whether in whole or in
part and whether with the original agents and lenders or other agents and
lenders or otherwise, and whether provided under the original Credit Agreement
or one or more other credit agreements (or otherwise) including, without
limitation, to increase the amount of available borrowings thereunder or to add
Restricted Subsidiaries as additional borrowers or guarantors or otherwise.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than an
event which would constitute a Change of Control Triggering Event), matures
(excluding any maturity as the result of an optional redemption by the issuer
thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder thereof (except, in
each case, upon the occurrence of a Change of Control Triggering Event) on or
prior to the final maturity date of the Series A Preferred Stock; provided that
Capital Stock of the Company that is held by a current or former employee of the
Company subject to a put option and/or a call option with the Company triggered
by the termination of such employee's employment with the Company and/or the
Company's performance shall not be deemed to be Disqualified Capital Stock
solely by virtue of such call option and/or put option.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock or that are measured by the value of Capital
Stock (but excluding any debt security that is convertible into or exchangeable
for Capital Stock).
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"Equity Offering" means a sale of Qualified Capital Stock of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Exchange Date" means a date on which shares of Series A Preferred Stock
are exchanged by the Company for Exchange Debentures.
"Exchange Debentures" shall have the meaning given to it in Section 13 (m).
"Exchange Indenture" means that certain indenture between the Company and
the trustee to be named therein and to be dated the Exchange Date, which governs
the Exchange Debentures, as such indenture may be amended or supplemented from
time to time.
"Exchange Notice" shall have the meaning given to it in Section 13 (m).
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the first Modification Effective Date, including,
without limitation, those 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 approved by
a significant segment of the accounting profession.
"Holder" means the record holder of one or more shares of Series A
Preferred Stock, as shown on the books and records of the Transfer Agent.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business), (v) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance, or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
obligations of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any lien on any property or asset of such Person but
which obligations are not assumed by such Person, the amount of such obligation
being deemed to be the lesser of the fair market value of such property or asset
or the amount of the obligation so secured, (viii) all obligations under
currency swap agreements and interest swap agreements of such persons, and (ix)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding
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accrued dividends, if any. For purposes hereof, (x) the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock and (y) any transfer of accounts receivable
or other assets which constitute a sale for purposes of GAAP shall not
constitute Indebtedness hereunder.
"Indenture" means that certain indenture between the Company, the
Guarantors named therein and the Trustee dated as of April 24, 1998, as amended
or supplemented from time to time.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a' floating or -a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purpose of the "Restricted Payments"
covenant (i) the Company shall be deemed to have made an Investment equal to the
fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and the
aggregate amount of Investments made on the Issue Date shall exclude (to the
extent the designation as an Unrestricted Subsidiary was included as a
Restricted Payment) the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary, not to exceed the amount of the Investment deemed made at
the date of designation thereof as an Unrestricted Subsidiary, and (ii) the
amount of any Investment shall be the original cost of Investment plus the cost
of all additional Investments by the Company or any of its Restricted
Subsidiaries, without any adjustments for increases or decreases in value, or
write-ups, write downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions (including tax sharing payments) in
connection with such Investment or any other amounts received in respect of such
Investment, provided that no such payment of dividends or distribution or
receipt of any
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such other amounts shall reduce the amount of any Investment if such payment of
dividends or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
indirectly, 100% (or 80% in the case of clause (ix) of the definition of
"Permitted Investments") of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Restricted Subsidiary not sold or disposed of
"Issue Date" means the date of original issuance of the Notes.
"Legal Holiday" means a Saturday or Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Liquidation Preference" means $1.00 per share of Series A Preferred Stock.
"Minimum Rating" means (i) a rating of at least BBB; (or equivalent
successor rating) by S&P and (ii) a rating of at least Baa3 (or equivalent
successor rating) by Moody's.
"Modification Effective Date" shall have the meaning given to such term
pursuant to Section 12(a).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Notes" means collectively W the Company's 9 1/8% Senior Subordinated Notes
due 2008 and (ii) the Company's Floating Interest Rate Subordinate Term
Securities due 2008.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two officers of the Company, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company that meets the requirements of Section 13(i).
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"Parity Securities" means any class or series of Capital Stock of the
Company ranking on a parity with the Series A Preferred Stock in terms of
dividends and liquidation preference.
"PermittedHolder(s)" means all stockholders of the Company as of the
Modification Effective Date, and their respective Affiliates.
"Permitted Indebtedness" means, without duplication, (i) Indebtedness under
the Notes, the Guarantees (as defined in the Indenture), and the Indenture, (ii)
Indebtedness incurred pursuant to the Credit Agreement in an aggregate
outstanding principal amount at any time not to exceed the maximum aggregate
amount of the commitments in effect on the Issue Date and permitted in the
future pursuant to the Credit Agreement as in effect on the Issue Date (without
giving effect to any reductions of term loan commitments on the Issue Date),
plus $ 1. 0 million in connection with the guarantee by the Company of the Poth
Loan, (A) less the amount of all mandatory principal payments actually made in
respect of the Term Loan Facility in the future (excluding any such repayment to
the extent refinanced and replaced at the time of payment) and (B) reduced by
any required permanent repayments actually made (which are accompanied by a
corresponding permanent commitment reduction) in respect of the Revolving Credit
Agreement (excluding any such repayment and commitment reductions to the extent
refinanced and replaced at the time of payment) in each case pursuant to this
clause (B) actually effected in satisfaction of the Net Cash Proceeds
requirement in Section 4.6 of the Indenture (it being recognized that a
reduction in any borrowing base thereunder in and of itself shall not be deemed
a required permanent repayment), (iii) other Indebtedness of the Company and its
Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon, (iv) Interest Swap Obligations of the Company
or any of its Restricted Subsidiaries covering Indebtedness of the Company or
any of its Restricted Subsidiaries; provided that any Indebtedness to which any
such Interest Swap Obligations correspond is otherwise permitted to be incurred
under this Indenture; provided, further, that such Interest Swap Obligations are
entered into, in the judgment of the Company, to protect the Company and its
Restricted Subsidiaries from fluctuation in interest rates on their respective
outstanding Indebtedness, (v) Indebtedness of the Company or any of its
Restricted Subsidiaries under Currency Agreements entered into, in the judgment
of the Company, to protect the Company or such Restricted Subsidiary from
foreign currency exchange rates, (vi) intercompany Indebtedness owed by any
Restricted Subsidiary of the Company to the Company or any Restricted
Subsidiary, (vii) Acquired Indebtedness of the Company or any Restricted
Subsidiary of the Company to the extent the Company could have incurred such
Indebtedness in accordance with Section 13(0(ii) (without giving effect to the
exception for Permitted Indebtedness) on the date such Indebtedness became
Acquired Indebtedness; provided that, in the case of Acquired Indebtedness was
not incurred in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company, (viii) Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or other similar instrument inadvertently drawn against insufficient funds
in the ordinary course of business; provided that such Indebtedness is
extinguished within five
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business days of its incurrence, (ix) any refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension '
substitution, supplement, reissuance or resale of existing or future
Indebtedness, including any additional Indebtedness incurred to pay interest or
premiums required by the instruments governing each existing or future
Indebtedness as in effect at the time of issuance thereof ("Required Premiums")
and fees in connection therewith; provided that any such event shall not (1)
result in an increase in the aggregate principal amount of Permitted
Indebtedness (except to the extent such increase is a result of a simultaneous
incurrence of additional Indebtedness (A) to pay Required Premiums and related
fees or (B) otherwise permitted to be incurred under this Statement of
Resolution) of the Company and its Restricted Subsidiaries and (2) create
Indebtedness with a Weighted Average Life to Maturity at the time such
Indebtedness is incurred that is less than the Weighted Average Life to Maturity
at such time of the Indebtedness being refinanced, modified, replaced, renewed,
restated, refunded, deferred, extended, substituted, supplemented, reissued or
resold (except that this subclause (2) will not apply in the event the
Indebtedness being refinanced, modified, replaced, renewed, restated, refunded,
deferred, extended, substituted, supplemented, reissued or resold was originally
incurred in reliance upon clause (vi) or (xv) of this definition); provided that
no Restricted Subsidiary of the Company may refinance any Indebtedness pursuant
to this clause (ix) other than its own Indebtedness, (x) Indebtedness (including
Capitalized Lease Obligations) incurred by the Company or any Restricted
Subsidiary to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate principal amount
outstanding not to exceed $1 0. 0 million at the time of any incurrence thereof
(which amount may, but shall not be required to be incurred pursuant to the
Credit Agreement, but shall be deemed not to include any such Indebtedness
incurred in whole or in part under the Credit Agreement to the extent permitted
by clause (ii) above or clause (xvi) below or pursuant to the proviso to Section
13(f)(ii), (xi) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course of business, including, without limitation,
letters of credit in respect of workers' compensation claims or self-insurance,
or other Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims, (xii) Indebtedness arising from agreements of the
Company or a Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in each
case, incurred or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Company, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of financing such
acquisition, provided that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition, (xiii) the incurrence by a Receivables Entity of Indebtedness in a
Qualified Receivables Transaction that is not recourse to the Company or any
Restricted Subsidiary of the Company (except for Standard Securitization
Undertakings), (xiv) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary of
the Company in the ordinary course
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of business, (xv) Indebtedness consisting of guarantees (x) by the Company of
Indebtedness, leases and any other obligation or liability permitted to be
incurred under this Statement of Resolution by Restricted Subsidiaries of the
Company, and (y) by Restricted Subsidiaries of the Company of Indebtedness,
leases and any other obligation or liability permitted to be incurred under this
Statement of Resolution by the Company or other Restricted Subsidiaries of the
Company, and (xvi) additional Indebtedness of the Company or any Restricted
Subsidiary of the Company in an aggregate principal amount not to exceed $1 0. 0
million at any one time outstanding (which amount may, but shall not be required
to, be incurred pursuant to the Credit Agreement, but shall not be deemed to
include any such Indebtedness incurred in whole or in part under the Credit
Agreement to the extent permitted by clause (ii) or clause (x) above or pursuant
to the proviso to Section 13(f)(ii)).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Restricted Subsidiary of the Company
(whether existing on the Issue Date or created thereafter) and Investments in
the Company by any Restricted Subsidiary of the Company; (ii) cash and cash
Equivalents- (iii) Investments existing on the Modification Effective Date- (iv)
loans and advances to employees, officers and directors of the Company and its
Restricted Subsidiaries not in excess of $3.0 million at any one time
outstanding; (v) accounts receivable owing to the Company or any Restricted
Subsidiary created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as the Company or
such Restricted Subsidiary deems reasonable under the circumstances; (vi)
Currency Agreements and Interest Swap Obligations entered into by the Company or
any of its Restricted Subsidiaries for bona fide business reasons and not for
speculative purposes, and otherwise in compliance with this Statement of
Resolution; (vii) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (viii) guarantees
by the Company or any of its Restricted Subsidiaries of Indebtedness otherwise
permitted to be incurred by the Company or any of its Restricted Subsidiaries
under this Statement of Resolution; (ix) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary of the Company or (B)
such Person is merged, consolidated or amalgamated with or into, or transfers or
conveys all or substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company; (x) additional investments
having an aggregate fair market value, taken together with all other Investments
made pursuant to this clause (x) that are at the time outstanding, not exceeding
$5. 0 million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent change in value), plus an amount equal to (A) 100% of the aggregate
net cash proceeds received by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale subsequent to the
Modification Effective Date of Qualified Capital Stock of the Company (including
Qualified Capital Stock issued upon the conversion of convertible Indebtedness
or in exchange for outstanding Indebtedness or as capital contributions to the
Company (other than from a
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Subsidiary) and (B) without duplication of any amounts included in clause (x)
(A) above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company form a holder of the Company's Capital Stock, that in
the case of amounts described in clause (x) (A) or (x) (B) are applied by the
Company within 180 days after receipt, to make additional Permitted Investments
under this clause (x) (such additional Permitted Investments being referred to
collectively as "Stock Permitted Investments"); (xi) any Investment by the
Company or a Restricted Subsidiary of the Company in a Receivables Entity or any
Investment by a Receivables Entity in any other Person in connection with a
Qualified Receivables Transaction, including investments of funds held in
accounts permitted or required by the arrangements governing such Qualified
Receivables Transaction or any related Indebtedness; provided that any
Investment in a Receivables Entity is in the form of a Purchase Money Note,
contribution of additional Receivables or an equity interest; (xii) Investments
received by the Company or its Restricted Subsidiaries as consideration for
asset sales, including Asset Sales; (xiii) Investments by the Company or its
Restricted Subsidiaries in joint ventures in an aggregate amount not in excess
of $5.0 million at any time outstanding; and (xiv) that portion of any
Investment where the consideration provided by the Company is Capital Stock of
the Company (other than Disqualified Capital Stock). Any net cash proceeds that
are used by the Company or any of its Restricted Subsidiaries to make Stock
Permitted Investments pursuant to clause (x) of this definition shall not be
included in subclauses (x) and (y) of clause (3) of the first paragraph of
Section 13(f)(i).
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, limited liability company or a
governmental agency or political subdivision thereof.
"Poth Loan" shall mean the loan in an initial aggregate principal amount of
$1 .0 million to Dr. Daniel Poth in connection with his previous purchase of the
stock of Dr. Samit Hour Eyes Optometrist, P.C., as the same may be amended or
modified from time to time pursuant to the terms thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables Transaction
to a Receivables Entity, which note (a) shall be repaid from cash available to
the Receivables Entity, other than (i) amounts required to be established as
reserves pursuant to agreements, (ii) amounts paid to investors in respect of
interest, (iii) principal and other amounts owing to such investors and (iv)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in (a).
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"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
accounts receivable (whether now existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto, including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable. The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"Recapitalization" means the transactions contemplated by the
Recapitalization Agreement, together with the financings therefor.
"Recapitalization Agreement" means the Recapitalization Agreement dated as
of March 6, 1998 by and among ECCA Merger Corp., a Delaware corporation, the
Company and the Sellers names therein, as amended and in effect on the Issue
Date.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes a
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable and related assets) which engages in no activities other
than in connection with the financing of accounts receivable, all proceeds
thereof and all rights (contractual or other), collateral and other assets
relating thereto, and any business or activities incidental or related to such
business, and which is designated by the Board of Directors of the Company (as
provided below) as a Receivables Entity (a) no portion of the Indebtedness or
any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms which the Company reasonably
believes to be no less favorable to the Company or such Subsidiary than those
that might be obtained at
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the time from Persons that are not Affiliates of the Company, other than fees
payable in the ordinary course of business in connection with servicing accounts
receivable, and (c) to which neither the Company nor any Subsidiary of the
Company has any obligation to maintain or preserve such entity's financial
condition or cause such entity to achieve certain levels of operating results
other than through the contribution of additional Receivables, related security
and collections thereto and proceeds of the foregoing. Any such designation by
the Board of Directors of the Company shall be evidenced to the Transfer Agent
by filing with the Transfer Agent a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the revolving credit facility under the
Credit Agreement.
"S&P" means Standard & Poor's Rating Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which the Company reasonably believes to be customary in an accounts
receivable transaction.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Modification Effective Date
or later acquired, which has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"Senior Securities" means any class or series of Capital Stock of the
Company ranking senior to the Series A Preferred Stock with respect to dividends
or upon liquidation.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which the Company reasonably believes to be customary in an accounts
receivable transaction.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be case in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting
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interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
"Term Loan Facility" means one or more term loan facilities under the
Credit Agreement.
"THL Agreement" means that certain Management Agreement between the Company
and TBL Equity Advisors IV, LLC.
"Transfer Agent" means the entity designated from time to time by the
Company to act as the registrar and transfer agent for the Series A Preferred
Stock.
"Trustee" means United States Trust Company of New York.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Transfer Agent that the Company's investment in such Unrestricted Subsidiary is
a Permitted Investment or that such designation complies with the "Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Incurrence of Additional Indebtedness" covenant of Section 13(f)(ii) and (y)
immediately before and immediately after giving effect to such designation, no
Increased Dividend Triggering Event shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Transfer
Agent by promptly filing with the Transfer Agent a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by
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(ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" means any Restricted Subsidiary of the Company
all the outstanding voting securities of which (other than directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned, directly or indirectly, by the Company.
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Exhibit 3.3
AMENDED AND RESTATED
BY-LAWS
OF
EYE CARE CENTERS OF AMERICA, INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation shall
be in San Antonio, Texas.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
Section 1. Time and Place of Meeting. All meetings of the shareholders
shall be held at such time and at such place within or without the State of
Texas as shall be determined by the Board of Directors.
Section 2. Annual Meeting. In the absence of an earlier meeting at such
time and place as the Board of Directors shall specify, annual meetings of the
shareholders shall be held on __________ of each year, if not a legal holiday,
and if a legal holiday, then on the next full business day following, at 11:00
a.m., or such other date and time as designated by the Board of Directors, at
which the shareholders shall elect Directors and transact such other business as
may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may be
called at any time by the President or the Board of Directors, and shall be
called by the President or Secretary at the request in writing of the holders of
not less than ten percent (10%) of all the shares issued, outstanding and
entitled to vote at the meeting. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, day and
hour of any meeting of shareholders, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
<PAGE> 2
Secretary, or the officer or person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid, to
the shareholder at such shareholder's address as it appears on the stock
transfer books of the Corporation.
Section 5. Record Date. The Board of Directors may fix in advance a record
date for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such record date to be not less than ten (10)
nor more than sixty (60) days prior to such meeting, or the Board of Directors
may close the stock transfer books for such purpose for a period of not less
than ten (10) nor more than sixty (60) days prior to such meeting. In the
absence of any action by the Board of Directors, the date upon which the notice
of the meeting is mailed shall be the record date.
Section 6. List of Shareholders. The officer or agent of the Corporation
having charge of the stock transfer books for shares of the Corporation shall
make, at least ten (10) days before each meeting of the shareholders, a complete
list of the shareholders entitled to vote at such meeting or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
voting shares held by each, which list, for a period of ten (10) days prior to
such meeting, shall be kept on file at the registered office of the Corporation
and shall be subject to inspection by any such shareholder at any time during
the usual business hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meetings of shareholders.
Section 7. Quorum. The holders of a majority of the issued and outstanding
shares and entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by the Texas Business
Corporation Act (herein called the "Act"). If, however, such quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. When any adjourned
meeting is reconvened and a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting as originally
notified. Once a quorum is constituted, the shareholders present or represented
by proxy at a meeting may continue to transact business until adjournment,
notwithstanding the subsequent withdrawal therefrom of such number of
shareholders as to leave less than a quorum.
Section 8. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall be the act of the shareholders, unless the
vote of a different number is required by the Act (after giving effect to
relevant provisions of the Restated Articles of Incorporation), the Restated
Articles of Incorporation or these Amended and Restated By-Laws.
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Section 9. Proxy. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share having
voting power held by such shareholder. Every proxy must be executed in writing
by the shareholder or by his duly authorized attorney-in-fact, and shall be
filed with the Secretary of the Corporation prior to or at the time of the
meeting. A telegram, telex, cablegram, or similar transmission by the
shareholder, or a photographic, photostatic, facsimile, or similar reproduction
of a proxy executed by the shareholder, shall be treated as an execution in
writing for purposes of this Section 9. No proxy shall be valid after eleven
(11) months from the date of its execution unless otherwise provided therein.
Each proxy shall be revocable unless expressly provided therein to be
irrevocable and unless otherwise made irrevocable by law.
Section 10. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the shareholders may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by all, or such lesser number
as permitted by relevant provisions of the Restated Articles of Incorporation,
of the shareholders entitled to vote with respect to the subject matter thereof,
and such consent shall have the same force and effect as a vote of shareholders.
A telegram, telex, cablegram, or similar transmission by a shareholder, or a
photographic, photostatic, facsimile, or similar reproduction of a consent in
writing signed by a shareholder, shall be regarded as signed by the shareholder
for purposes of this Section 10.
Section 11. Meetings by Conference Telephone. Shareholders may participate
in and hold meetings of shareholders by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transactions of any business son the ground that the meeting is not lawfully
called or convened.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the Corporation
shall be at least one and no more than ____. The number of directors may be
increased or decreased from time to time by amendment of these Amended and
Restated By-Laws or a resolution duly adopted by the Board of Directors, but no
decrease shall have the effect of reducing the term of any incumbent director.
Directors shall be elected at the annual meeting of the shareholders, except as
provided in Section 2 of this Article, and each director shall hold office until
his successor is elected and qualified. Directors need not be shareholders of
the Corporation or residents of the State of Texas.
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Section 2. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors,
though the remaining directors may constitute less than a quorum of the Board of
Directors as fixed by Section 8 of this Article. A director elected to fill a
vacancy shall be elected for the unexpired term of such director's predecessor
in office. Any directorship to be filled by reason of an increase in the number
of directors may be filled only by an election by the shareholders at an annual
meeting or at a special meeting of shareholders called for that purpose. At any
annual meeting of shareholders, or any special meeting called for such purpose,
any director may be removed from office, for or without cause, by the vote of
the shareholders of a majority of the shares entitled to vote at the meeting
called for such purpose, even though his term may not have expired.
Section 3. General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by the Act, the
Restated Articles of Incorporation or by these Amended and Restated By-Laws
directed or required to be exercised or done by the shareholders.
Section 4. Place of Meetings. Meetings of the Board of Directors, both
regular and special, may be held either within or without the State of Texas.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the shareholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the President on two days' notice to each director, either
personally or by mail or by telegram. Special meetings shall be called by the
President or Secretary in like manner and on like notice on the written request
of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the presence
of a majority of the number of directors fixed by Section 1 of this Article
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by the Act, the
Restated Articles of Incorporation or these Amended and Restated By-Laws. If a
quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time without notice other than
announcement at the meeting, until such quorum shall be present.
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Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate committees, each committee to consist
of one or more directors, which committees shall have such authority and shall
perform such functions as may be provided in such resolution. Such committee or
committees shall have such name or names as may be designated by the Board of
Directors and shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
Section 10. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided that nothing herein contained shall be construed to preclude any
directors from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 11. Action by Written Consent. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee designated
by the Board of Directors may be taken without a meeting if a written consent,
setting forth the action so taken, is signed by all the members of the Board of
Directors or of such committee, and such consent shall have the same force and
effect as a unanimous vote at a meeting.
Section 12. Meetings by Conference Telephone. Members of the Board of
Directors or members of any committee designated by the Board of Directors may
participate in and hold a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such meeting shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transactions of any business on the ground that the meeting is not lawfully
called or convened.
Section 13. Resignations. Each director shall have the right to resign at
any time upon written notice of such resignation to the President or Secretary
of the Corporation. Unless otherwise specified in such written notice, the
resignation shall take effect upon the receipt thereof, and acceptance of such
resignation shall not be necessary to make the same effective.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the Act, the
Restated Articles of Incorporation or these Amended and Restated By-Laws, notice
is required to be given to any shareholder or director, and no provision is made
as to how much such notice shall be given, it shall not be construed to mean
personal notice, but any such notice may be given in writing, by mail, postage
prepaid, addressed to such director or shareholder at such address as appears on
the books of the Corporation. Any notice required or permitted to be given by
mail
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shall be deemed to be given at the time when the same be thus deposited, postage
prepaid, in the United States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
shareholder or director of the Corporation under the provisions of the Act, the
Restated Articles of Incorporation or these Amended and Restated By-Laws, a
waiver thereof in writing signed by the person entitled to such notice, whether
before or after the time stated in such notice, shall be deemed equivalent to
the giving of such notice.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a Chairman of the Board, President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect one or more Vice Presidents, one or more Assistant Secretaries and one
or more Assistant Treasurers, all of whom shall also be officers. Two or more
officers may be held by the same person.
Section 2. Election. The Board of Directors at its first meeting after
such annual meeting of the shareholders shall elect a Chairman of the Board who
shall be a member of the Board, but the other officers need not be members of
the Board. The Board of Directors may appoint such other officers and agents as
it shall deem necessary and may determine the salaries of all officers and
agents from time to time. The officers shall hold office until their successors
are elected and qualified. Any officer elected or appointed by the Board of
Directors may be removed, for or without cause, at any time by a majority vote
of the whole Board. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 3. Chairman. The Chairman of the Board of Directors shall preside
at all meetings of the shareholders and the Board of Directors and shall have
such other powers as may from time to time be assigned by the Board of
Directors.
Section 4. President. The President shall be the chief executive officer
of the Corporation, shall preside at all meetings of the shareholders and the
Board of Directors in the absence of the Chairman of the Board, and shall have
the general and active management of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. Subject to the prior approval of the Board of Directors, the President
shall execute all contracts, mortgages, conveyances, or other legal instruments
in the name of and on behalf of the Corporation, but this provision shall not
prohibit the delegation of such powers by the Board of Directors to some other
officer, agent or attorney-in-fact of the Corporation.
Section 5. Vice President. The Vice President or if there be more than
one, the Vice Presidents in the order of their seniority in any other order
determined by the Board of Directors,
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shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall generally assist the President
and perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all sessions of the Board
of Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any other committees of the Board when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision the Secretary shall carry out such duties. The Secretary
shall keep in safe custody the seal of the Corporation.
Section 7. Assistant Secretary. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and directors, at the regular meetings of the Board or whenever
they may require it, an account of all such transactions as Treasurer and of the
financial condition of the Corporation, and shall perform such other duties as
may be prescribed the Board of Directors or the President.
Section 9. Assistant Treasurer. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled.
Certificates representing shares of the Corporation shall be in such form and
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state upon the face thereof the holder's name, the
number, class of shares, and the par value of the shares or a statement that the
shares are without par value. They shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary, and may be sealed with
the seal of the Corporation or a facsimile thereof if the Corporation shall then
have a seal. If any
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certificate is countersigned by a transfer agent or registered by a registrar,
either of which is other than the Corporation or an employee of the Corporation,
the signatures of the Corporation's officers may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on such certificate or certificates, shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been delivered by the
Corporation or its agents, such certificates or certificates may nevertheless be
adopted by the Corporation and be issued and delivered as though the person or
persons who signed the certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost or destroyed certificate, or such
owner's legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferrable only
on the books of the Corporation by the holder thereof in person or by such
holder's duly authorized attorney and, upon surrender to the Corporation or to
the transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Shareholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of the any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the Act of the Restated Articles of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and
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payments of dividends shall be in strict compliance with all applicable laws of
the Restated Articles of Incorporation. The Board of Directors may fix in
advance a record date for the purposes of determining shareholders entitled to
receive payment of any dividend, such record date to be not more than sixty (60)
days prior to the payment date of such dividend, or the Board of Directors may
close the stock transfer books for such purpose for a period of not more than
sixty (60) days prior to the payment date of such dividend. In the absence of
any action by the Board of Directors, the date upon which the Board of Directors
adopts the resolution declaring such dividend shall be the record date.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
__________________ unless otherwise determined and fixed by resolution of the
Board of Directors.
Section 3. Seal. The Corporation shall have a seal and said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
manner reproduced. Any officer of the Corporation shall have authority to affix
the seal to any document requiring it.
Section 4. Annual Statement. The Board of Directors shall present at each
annual meeting, and when called for by vote of the shareholders at any special
meeting of the shareholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
INDEMNITY
Section 1. Indemnification. The Corporation shall indemnify its directors
and officers from and against any and all liabilities, costs and expenses
incurred by them in such capacities and shall advance expenses to its directors
and officers, all to the fullest extent permitted by the Act, as presently in
effect and as may able hereafter amended. The Corporation shall also have the
power to purchase and maintain liability insurance coverage for those persons or
make and maintain other arrangements on such persons' behalf as, and to the
fullest extent permitted by the Act, as presently in effect and as may be
hereafter amended. The Corporation shall pay or reimburse, in advance,
reasonable expenses incurred by a director who was, is or is threatened to be
made a named defendant or respondent in a proceeding, without the authorization
or determination specified in the Act, after the corporation receives a written
affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification under the Act and a
written undertaking by or on behalf of the director or officer to repay the
amount paid or reimbursed if it is ultimately determined that indemnification
that he has not met that standard or if it is ultimately determined that
indemnification that he has met that standard or if it is ultimately determined
that indemnification of a director against expenses incurred by him in
connection with that proceeding is prohibited by the Act.
Section 2. Indemnification Not Exclusive. The rights of indemnification
and reimbursement provided for in Section 1 of this Article shall not be deemed
exclusive of any
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other rights to which such director or officer may be entitled under the
Restated Articles of Incorporation, any by-laws, agreement, vote of
shareholders, or as a matter of law or otherwise.
ARTICLE IX
BY-LAWS
Section 1. Amendments. These Amended and Restated By-Laws may be altered,
amended or repealed and new By-Laws may be adopted by the Board of Directors at
any regular meeting or at any special meeting called for that purpose.
Section 2. When By-Laws Silent. It is expressly recognized that when the
By-Laws are silent as to the manner of performing any corporate function, the
provisions of the Act shall control.
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EXHIBIT 3.4
ARTICLES OF INCORPORATION
OF
ECCA MANAGED VISION CARE, INC,
ARTICLE ONE
The name of the Corporation is ECCA MANAGED VISION CARE, INC.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have
authority to issue is One Thousand (1 000) shares of Common Stock, par value One
Cent ($0.01).
ARTICLE FIVE
The Corporation shall not commence business until it has received for
the issuance of shares consideration of the value of One Thousand Dollars
($1 000.00) consisting of money, labor done or property actually received.
ARTICLE SIX
The street address of the Corporation's initial registered office is
11103 West Avenue, San Antonio, Texas 78213 and the name of its initial
registered agent at such address is Robert L. McDowell.
ARTICLE SEVEN
The number of directors shall be fixed by the Bylaws of the
Corporation, but shall in no event be less than one (1). The number of directors
constituting the initial board of directors is three (3), and the names and
addresses of the persons who are to serve as directors until the first annual
meeting of the shareholders, or until their respective successors are elected
and qualified, are:
<PAGE> 2
Name Address
---- -------
Robert L. McDowell 11103 West Avenue
San Antonio, Texas 78213
Martin J. Pierce 11103 West Avenue
San Antonio, Texas 78213
Judith L. Reitzer 11103 West Avenue
San Antonio, Texas 78213
ARTICLE EIGHT
At each election for directors, every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by such shareholder for as many persons as there are directors to
be elected. Cumulative voting shall not be permitted.
ARTICLE NINE
No shareholder of the Corporation shall, by reason of such shareholder
holding shares of any class, have any preemptive or preferential right to
purchase or subscribe for any shares of any class of the Corporation, now or
hereafter to be authorized, or any notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares of any
class, now or hereafter to be authorized, whether or not the issuance or sale of
any such shares, or such notes, debentures, bonds, or other securities, would
adversely affect the dividend or voting rights of such shareholder, other than
such rights, if any, as the Board of Directors, in its discretion, may grant to
the shareholders to purchase such additional, unissued or treasury securities;
and the Corporation may issue or sell additional, unissued or treasury shares of
any class of the Corporation, or any notes, debentures, bonds, or other
securities convertible into or carrying options or warrants to purchase shares
of any class, without offering the same in whole or in part to the existing
shareholders of any class.
ARTICLE TEN
Any action required by the Texas Business Corporation Act to be taken
at any annual or special meeting of shareholders, or any action which may be
taken at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
- 2 -
<PAGE> 3
ARTICLE ELEVEN
The Corporation shall, to the full extent permitted by law, (i)
indemnify any person who was or is a party or is threatened to be made a named
defendant or respondent to any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, any
appeal in such action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit, or proceeding, because such person is or was
a director or officer of the Corporation, or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, against
judgments, penalties (including excise and similar taxes), fines, settlements,
and reasonable expenses (including attorneys fees) actually incurred by such
person in connection with such action, suit, or proceeding, and (ii) advance
reasonable expenses to such person in connection with such action, suit or
proceeding. The rights provided in this Article shall not be deemed exclusive of
any other rights permitted by law, to which such person may be entitled under
any provision of the Bylaws, a resolution of shareholders or directors, an
agreement or otherwise.
ARTICLE TWELVE
1 A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for an act or omission in
the director's capacity as a director of the Corporation, except to the extent a
director is found liable for (a) a breach of the director's duty of loyalty to
the Corporation or its shareholders, (b) an act or omission not in good faith
that constitutes a breach of duty of the director to the Corporation or an act
or omission that involves intentional misconduct or a knowing violation of the
law, (c) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (d) an act or omission for which the liability of a
director is expressly provided by an applicable statute.
2. If the laws of Texas are hereafter amended to authorize further
elimination or limitation of the personal liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on the
personal liability provided herein, shall be limited to the fullest extent
permitted by the laws of Texas as amended. Any repeal or modification of this
Article Twelve by the shareholders of the Corporation shall be prospective only
and shall not adversely affect any limitation on the personal liability of a
director at the time of such repeal or modification.
ARTICLE THIRTEEN
The name and address of the incorporator is:
-3-
<PAGE> 4
Name Address
---- -------
Judith L. Reitzer 11103 West Avenue
San Antonio, Texas 78213
/s/ Judith L. Reitzer
---------------------
Judith L. Reitzer, Incorporator
-4-
<PAGE> 5
STATEMENT OF CHANGE OF REGISTERED
REGISTERED AGENT OR BOTH BY A CORPORATION
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is ECCA MANAGED VISION CARE, INC. The entity's
charter/certificate of authority/file number is 1368252-00,
2. The registered office address as PRESENTLY shown in the records of the
Texas secretary of state is 11103 West Avenue, San Antonio, TX 78213,
3. The address of the NEW registered office is 1212 Guadalupe, Suite 102,
Austin, TX 78701.
4. The name of the registered agent as PRESENTLY shown in the records of
the Texas secretary of state is Robert L. McDowell.
5. The name of the NEW registered agent is Capitol Corporate Services,
Inc.
6. Following the changes shown above, the address of the registered office
and the address of the office of the registered agent will continue to
be identical, as required by law.
7. The changes shown above were authorized by: Business Corporations may
select A or B Non-Profit corporations may select A, B or C Limited
Liability Companies may select D or E Limited Partnerships select F
A. The board of directors; OR
B. X An officer of the corporation so authorized by the board of
directors; OR
C.__ The members of the corporation in whom management of the
corporation is vested pursuant to article 2.14C of the Texas
Non-Profit Corporation Act.
D.__ Its members
E.__ Its managers
F.__ The limited partnership
/s/ Doug Shepard
----------------------------------------
(Authorized Officer of Corporation)
(Authorized Member or Manager of LLC)
(General Partner of Limited Partnership)
-5-
<PAGE> 1
Exhibit 3.5
BYLAWS
OF
ECCA MANAGED VISION CARE, INC.
(A Texas Corporation)
ARTICLE I.
OFFICES
1.1 The principal registered office of ECCA MANAGED VISION CARE, INC.
(the "Corporation") shall be in the City of San Antonio, Bexar County, Texas.
1.2 The Corporation may also have offices at such other places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
2.1 Meetings of shareholders for any purpose may be held at such place,
within or without the State of Texas, as shall be fixed from time to time by the
Board of Directors, or, if the Board of Directors has not so specified, then at
such place as may be fixed by the person or persons calling the meeting.
2.2 An annual meeting of the shareholders shall be held on such date
and at such time as shall be fixed by the Board of Directors. At each annual
meeting, the shareholders shall elect a Board of Directors, and transact such
other business as may properly be brought before the meeting.
2.3 At least ten days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at said meeting arranged in
alphabetical order, with the residence of each and the number of voting shares
held by each, shall be prepared by the officer or agent having charge of the
share transfer records. Such list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office or principal place of
business of the Corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall be produced
and kept open at the time and place of the meeting during the whole time
thereof, and shall be subject to the inspection of any shareholder who may be
present.
<PAGE> 2
2.4 Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by statute, the Articles of Incorporation, or these
Bylaws, may be called by the Chairman of the Board, the President, a majority of
the Board of Directors, or the holders of not less than one-tenth of all the
shares entitled to vote at the meetings. Business transacted at all special
meetings shall be confined to the matters stated in the notice of the meeting.
2.5 Written or printed notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the officer or person calling the
meeting, to each shareholder of record entitled to vote at the meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
share transfer records of the Corporation, with postage thereon paid.
2.6 The holders of a majority of the shares entitled to vote
represented in person or by proxy, shall be required and shall constitute a
quorum at all meetings of the shareholders for the transaction of business
except as otherwise provided by statute, the Articles of Incorporation, or these
Bylaws. The shareholders represented in person or by proxy at a meeting of the
shareholders at which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by a vote of the holders of a
majority of the shares represented in person or by proxy at that meeting. At an
adjourned session at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
2.7 When a quorum is present at any meeting, the vote of the holders of
a majority of the shares entitled to vote and represented in person or by proxy
at such meeting shall decide any question brought before such meeting, except
with respect to the election of directors or unless the question is one upon
which, by express provision of the statutes, the Articles of Incorporation, or
these Bylaws, a different vote is required or permitted, in which case such
express provision shall govern and control the decision of such question. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.8 Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, unless otherwise provided by
statute or the Article of Incorporation. At any meeting of the shareholders,
every shareholder having the right to vote shall be entitled to vote in person
or by proxy executed in writing by such shareholder. A telegram, telex,
cablegram, facsimile or similar transmission by the shareholder, or a
photographic, photostatic or similar reproduction of a writing executed by the
shareholder, shall be treated as an execution in writing. No proxy shall be
valid after eleven months from the date of its execution, unless said instrument
provides for a longer period. Voting need not
<PAGE> 3
be by written ballot unless required by the Articles of Incorporation or by vote
of the shareholders present at the meeting.
2.9 Each proxy shall be revocable before it has been voted unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest, including the appointment as proxy of (a) a pledgee,
(b) a person who purchased or agreed to purchase, or owns or holds an option to
purchase, the shares, (c) a creditor of the Corporation who extended it credit
under terms requiring the appointment, (d) an employee of the Corporation whose
employment contract requires the appointment, or (e) a party to a voting
agreement created under the Texas Business Corporation Act. A revocable proxy
shall be deemed to have been revoked if the Secretary of the Corporation shall
have received at or before the meeting instructions of revocation or a proxy
bearing later date, which instructions or proxy shall have been duly executed
and dated in writing by the shareholder.
2.10 The Board of Directors may fix in advance a record date for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such record date to be not less than ten nor more than
sixty days prior to such meeting, or the Board of Directors may close the share
transfer records for such purpose for a period of not less than ten nor more
than sixty days prior to such meeting. In the absence of any action by the Board
of Directors, the date upon which the notice of the meeting is mailed shall be
the record date.
2.11 Unless a record date shall have previously been fixed or
determined by the Board of Directors, whenever action by shareholders is
proposed to be taken by consent in writing without a meeting of shareholders,
the Board of Directors may fix a record date for the purpose of determining
shareholders entitled to consent to that action, which record date shall not
precede, and shall not be more than ten (10) days after, the date upon which the
resolution fixing the record date is adopted by the Board of Directors and the
prior action of the Board of Directors is not required by statute or the
Articles of Incorporation, the record date for determining shareholders entitled
to consent to action in writing without a meeting shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the Corporation having
custody of the books in which proceedings of meetings of shareholders are
recorded. Delivery shall be by hand or by certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the President or principal executive officer of the
Corporation. If no record date shall have been fixed by the Board of Directors
and prior action of the Board of Directors is required by statute, the record
date for determining shareholders entitled to consent to action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts a resolution taking such prior action.
2.12 Any action required by statute to be taken at a meeting of the
shareholders, or any action which may be taken at a meeting of the shareholders,
may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing, setting
<PAGE> 4
forth the actions so taken, shall have been signed by the holder or holders of
shares having not less than the minimum number of votes that would be necessary
to take such action at a meeting at which the holders of all shares entitled to
vote on the action were present and voted. Every written consent shall bear the
date of signature of such shareholder who signs the consent. No written consent
shall be effective to take the action that is the subject of the consent unless,
within sixty (60) days after the date of the earliest dated consent delivered to
the Corporation, a consent or consents signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
the action that is the subject of the consent are delivered to the Corporation.
Prompt notice of the taking of any action by shareholders without a meeting by
less than unanimous written consent shall be given to those shareholders who did
not consent in writing to the action.
2.13 Subject to the provisions required or permitted by statute, the
Articles of Incorporation or these Bylaws for notice of meetings, shareholders
may participate in and hold a meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III.
DIRECTORS
3.1 The powers of the Corporation shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, its Board of Directors who may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be exercised or done by the shareholders.
3.2 The initial Board of Directors shall be as stated in the Articles
of Incorporation. Thereafter, the number of directors which shall constitute the
full Board shall be as determined from time to time by resolution of the Board
of Directors or by the shareholders at the annual meeting or a special meeting
called for that purpose, but no decrease shall have the effect of shortening the
term of an incumbent director. Directors need not be shareholders or residents
of the State of Texas. The directors shall be elected at the annual meeting of
the shareholders, except as hereinafter provided and, unless removed in
accordance with these Bylaws, each director elected shall hold office until his
or her successor shall have been elected and shall have qualified.
3.3 At any meeting of shareholders called expressly for that purpose,
any director or the entire Board of Directors may be removed, with or without
cause, by vote of the holders of a majority of the shares then entitled to vote
at an election of directors. If any vacancies occur in the Board of Directors
caused by death, resignation, retirement
<PAGE> 5
disqualification, or removal from office of any director or otherwise, a
majority of the directors then in office, though less than a quorum, may choose
a successor or successors or a successor or successors may be chosen at a
special meeting of shareholders called for that purpose; and each successor
director so chosen shall be elected for the unexpired term of his or her
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors may be filled by election at an annual meeting or
special meeting of shareholders called for that purpose or may be filled by the
Board of Directors for a term of office continuing only until the next election
of one or more directors by the shareholders; provided that the Board of
Directors may not fill more than two such directorships during the period
between any two successive annual meetings of shareholders.
3.4 At each election for directors, every shareholder entitled to vote
at such election shall have the right to vote, in person or by proxy, the number
of shares owned by such shareholder for as many persons as there are directors
to be elected. Directors shall be elected by a plurality of the votes cast by
the holders of shares entitled to vote in the election of directors at a meeting
of the shareholders at which a quorum is present. Cumulative voting shall not be
permitted.
Committees
3.5 The Board of Directors may, by resolution passed by a majority of
the whole Board of Directors, designate an Executive Committee, to consist of
one or more Directors of the Corporation, one of whom shall be designated as
Chairman to preside at all meetings of such Committee. To the extent provided in
the resolution of the Board of Directors, the Executive Committee shall have an
may exercise all of the authority of the Board of Directors in the management of
the business and affairs of the Corporation, except where action of the Board of
Directors is required by the Act or by the Articles of Incorporation, and shall
have power to authorize the seal of the Corporation to be affixed to all papers
which may require it, to declare dividends and to authorize the issuance of
shares of the Corporation. Any member of the Executive Committee may be removed,
for or without cause, by the affirmative vote of a majority of the whole Board
of Directors. If any vacancy or vacancies occur in the Executive Committee
caused by death, resignation, retirement, disqualification, removal from office
or otherwise, the vacancy or vacancies shall be filled by the affirmative vote
of a majority of the whole Board of Directors.
3.6 The Board of Directors may, by resolution adopted by a majority of
the whole Board, designate other committees, each committee to consist of one or
more Directors of the Corporation, which committees shall have such power and
authority and shall perform such functions as may be provided in such
resolution. Such committee or committees shall have such name or names as may be
designated by the Board of Directors and shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
<PAGE> 6
Meetings of Directors
3.7 The directors of the Corporation may hold their meetings, both
regular and special, either within or without the State of Texas.
3.8 The first meeting of each newly elected Board shall be held
without further notice immediately following the annual meeting of shareholders,
and at the same place, unless by unanimous consent of the directors then elected
and serving such time or place shall be changed.
3.9 Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by the
Board.
3.10 Special meetings of the Board of Directors may be called by the
Chairman of the Board on forty-eight hours notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
Chairman of the Board, President or Secretary in like manner and on like notice
on the written request of a majority of the directors. Except as may be
otherwise expressly provided by statute, the Articles of Incorporation, or these
Bylaws, neither the business to be transacted at, nor the purpose of, any
special meeting must be specified in a notice or waiver of notice.
3.11 At all meetings of the Board of Directors the presence of a
majority of the full Board shall be necessary and sufficient to constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by
statute or by the Articles of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
3.12 Any action required or permitted to be taken at a meeting of the
Board of Directors or any committee may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all the members of
the Board of Directors or committee, as the case may be. Such consent shall have
the same force and effect as a unanimous vote at a meeting.
3.13 Subject to the provisions required or permitted by statute, the
Articles of Incorporation, or these Bylaws for notice of meetings, members of
the Board of Directors, or members of any committee designated by the Board, may
participate in and hold a meeting of the Board or such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
<PAGE> 7
Compensation of Directors
3.14 Unless otherwise provided by resolution of the Board of Directors,
directors, as such, shall not receive any stated salary for their services.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of any committee may, by resolution of the Board of Directors,
be allowed like compensation for attending committee meetings.
ARTICLE IV.
NOTICES
4.1 Whenever under the provisions of the statutes or of the Articles of
Incorporation or of these Bylaws, notice is required to be given to any director
or shareholder, and no provision is made as to how such notice shall be given,
it shall not be construed to mean personal notice, but any such notice may be
given by mail, postage prepaid, addressed to such director or shareholder at
such address as appears on the books of the Corporation. Any notice required or
permitted to be given by mail shall be deemed to be given at the time when the
same shall be thus deposited in the United States mails as aforesaid.
4.2 Whenever any notice is required to be given to any shareholder or
director of the Corporation under the provisions of the statutes, the Articles
of Incorporation, or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated in such notice, shall be deemed equivalent to the giving of such notice.
ARTICLE V.
OFFICERS
5.1 The officers of the Corporation shall be elected by the directors
and shall consist of a President and a Secretary. The Board of Directors may
also, at its discretion, elect a Chairman of the Board, one or more Vice
Presidents and a Treasurer. Such other officers, including assistant officers
and agents as may be deemed necessary, may be elected or appointed by the Board
of Directors. Any two or more offices may be held by the same person.
5.2 The Board of Directors at its first meeting after each annual
meeting of shareholders shall choose a President, a Secretary, and such other
officers, including assistant officers and agents as may be deemed necessary,
none of whom need be a member of the Board.
<PAGE> 8
5.3 The Board of Directors may appoint such other officers and agents
as it shall deem necessary, who shall be appointed for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
5.4 The salaries of all officers and agents of the Corporation shall be
fixed by the Board of Directors.
5.5 Each officer of the Corporation shall hold office until his
successor is chosen and qualified in his stead or until his earlier death,
resignation or removal from office. Any officer or agent elected or appointed by
the Board of Directors may be removed at any time by the Board of Directors
whenever in its judgment the best interest of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board of Directors.
The Chairman of the Board
5.6 The Chairman of the Board, if one is elected, shall preside at all
meetings of the shareholders and the Board of Directors and shall perform such
other duties as the Board of Directors shall prescribe. In the absence of the
President, the Chairman of the Board shall also have the powers and perform the
duties of the President.
The President
5.7 President shall preside, in the absence of the Chairman of the
Board, at meetings of the shareholders and the Board of Directors and shall
perform such other duties as the Board of Directors shall prescribe. Unless
other powers are delegated to the President by the Board of Directors, the
President shall be the chief executive officer of the Corporation, shall have
the general powers and duties of supervision and management of the business and
affairs of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect.
The Secretary and Assistant Secretaries
5.8 The Secretary shall attend all sessions of the Board of Directors
and all meetings of the shareholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like duties
for any committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the President, under whose supervision the Secretary
shall be.
<PAGE> 9
5.9 Each Assistant Secretary shall have such powers and perform such
duties as the Board of Directors may from time to time prescribe or as the
President may from time to time delegate to him or her.
Treasurer
5.10 Any Treasurer elected by the Board of Directors shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and ' disbursements of the Corporation and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
5.11 Any Treasurer elected by the Board of Directors shall disburse the
funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the directors, at
the regular meetings of the Board, or whenever they may require it, an account
of all his or her transactions as Treasurer and of the financial condition of
the Corporation, and shall perform such other duties as the Board of Directors
may prescribe.
5.12 If required by the Board of Directors, any Treasurer elected by
the Board of Directors shall give the Corporation a bond in such form, in such
sum, and with such surety or sureties as shall be satisfactory to the Board for
the faithful performance of the duties of the office of Treasurer and for the
restoration to the Corporation, in case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money, and other property
of whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Other Offices
5.13 Any Vice President elected by the Board of Directors shall have
such powers and perform such duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to him or her.
5.14 Each Assistant Treasurer shall have such powers and perform such
duties as the Board of Directors may from time to time prescribe.
ARTICLE VI.
CERTIFICATES REPRESENTING SHARES
6.1 Certificates in such form as may be determined by the Board of
Directors shall be delivered representing all shares to which shareholders are
entitled. Such certificates shall be consecutively numbered and shall be entered
in the records of the Corporation as they are
<PAGE> 10
issued. Each certificate shall state on the face thereof the name of the
Corporation, the name of the person to whom the certificate is issued, the
number and class of shares and the designation of the series, if any, which such
certificate represents, the par value of such shares (or a statement that such
shares are without par value) and that the Corporation is organized under the
laws of Texas. Each certificate shall be signed by either the Chairman of the
Board, the President or any Vice President then in office and by either the
Secretary, an Assistant Secretary, or Treasurer then in office, and may be
sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent, or an assistant transfer agent
or registered by a registrar, the signature of any such officer of the
Corporation may be a facsimile. Each certificate (1) shall conspicuously set
forth upon the face or back of such certificate a full statement of the
limitation or denial of preemptive rights contained in the Articles of
Incorporation, or (2) shall conspicuously state on the face or back of the
certificate that (a) such statement is set forth in the Articles of
Incorporation on file in the office of the Secretary of State of Texas and (b)
the Corporation will furnish a copy of such statement to the record holder of
the certificate without charge upon request to the Corporation at its principal
place of business or registered office. If any restriction on the transfer or
the registration of the transfer of shares shall be imposed or agreed to by the
Corporation, as permitted by law, each certificate representing shares so
restricted (1) shall conspicuously set forth a full or summary statement of the
restriction on the face of the certificate, or (2) shall set forth such
statement on the back of the certificate and conspicuously refer to the same on
the face of the certificate, or (3) shall conspicuously state on the face or
back of the certificate that such a restriction exists pursuant to a specified
document and (a) that the Corporation will furnish to the record holder of the
certificate without charge upon written request to the Corporation at its
principal place of business or registered office a copy of the specified
document, or (b) if such document is one required or permitted to be and has
been filed under the Texas Business Corporation Act that such document is on
file in the office of the Secretary of State and contains a full statement of
such restriction. The Corporation is authorized to issue shares of more than one
class, each certificate representing shares issued by the Corporation (i) shall
conspicuously set forth on the face or back of the certificate a full statement
of (a) all of the designations, preferences, limitations and relative rights of
the shares of each class authorized to be issued and, (b) if the Corporation is
authorized to issue shares of any preferred or special class in series, the
variations in the relative rights and preferences of the shares of each such
series to the extent that they have been fixed and determined and the authority
of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series; or (ii) shall conspicuously state on the face
or back of the certificate that (a) such a statement is set forth in the
Articles of Incorporation on file in the office of the Secretary of State of
Texas and (b) the Corporation will furnish a copy of such statement to the
record holder of the certificate without charge on written request to the
Corporation at its principal place of business or registered office.
<PAGE> 11
Lost Certificates
6.2 The Board of Directors may direct a new certificate representing
shares to be issued in place of any certificate previously issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
Transfer of Shares
6.3 Subject to the limitations imposed in any agreement between the
Corporation and the shareholders, upon presentation to the Corporation or the
transfer agent of the Corporation with a request to register the transfer of a
certificate representing shares duly endorsed and otherwise meeting the
requirements for transfer specified in the Texas Business and Commerce Code, it
shall be the duty of the Corporation or the transfer agent of the Corporation to
register the transfer as requested.
Registered Shareholders
6.4 Prior to due presentment for transfer, the Corporation may treat
the registered owner of any share or shares of stock as the person exclusively
entitled to vote, to receive notifications, and otherwise to exercise all rights
and powers of an owner.
ARTICLE VII.
GENERAL PROVISIONS
Distributions
7.1 Distributions upon the outstanding shares of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting of the
Board or by any committee of the Board so authorized. Distributions may be paid
in cash, in property, or in shares of the Corporation, subject to the provisions
of the statutes and the Articles of Incorporation. The Board of Directors may
fix in advance a record date for the purpose of determining shareholders
entitled to receive payment of any distribution, such record date to be not more
than sixty days prior to the payment date of such distribution, or the Board of
Directors may close the stock transfer books for such purpose for a period of
not more than sixty days prior to the payment date of such distribution.
<PAGE> 12
In the absence of any action by the Board of Directors, the date upon which the
Board of Directors adopts the resolution declaring such distribution shall be
the record date.
Reserves
7.2 There may be created by resolution of the Board of Directors out of
the surplus of the Corporation such reserve or reserves as the directors from
time to time, in their discretion, think proper to provide for contingencies, or
to repair or maintain any property of the Corporation, or for such other purpose
as the directors shall think beneficial to the Corporation, and the directors
may modify or abolish any such reserve in the manner in which it was created.
Checks
7.3 All checks or demands for money and notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Execution of Contracts, Deeds, Etc.
7.4 The Board of Directors may authorize any officer or officers, agent
or agents, in the name and on behalf of the Corporation, to enter into or
execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
Fiscal Year
7.5 The fiscal year of the Corporation shall be fixed by resolution of
the Board of Directors.
Seal
7.6 The Corporation's seal shall be in such form as may be determined
by the Board of Directors. Said seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
Voting of Securities
7.7 Unless otherwise directed by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend, vote
and act, and to execute
<PAGE> 13
and deliver in the name and on behalf of the Corporation a proxy authorizing an
agent or attorney-in-fact for the Corporation to attend, vote and act, at any
meeting of security holders of any Corporation in which the Corporation may hold
securities and to execute and deliver in the name and on behalf of the
Corporation any written consent of security holders in lieu of any such meeting,
and at any such meeting he, or the agent or the attorney-in-fact duly authorized
by him, shall possess and may exercise any and all rights and powers incident to
the ownership of such securities which the Corporation as the owner thereof
might have possessed or exercised if present. The Board of Directors may by
resolution from time to time confer like power upon any other person or persons.
ARTICLE VIII.
INDEMNIFICATION
8.1 The Corporation may indemnify persons who are or were a director,
officer, employee or agent of the Corporation, or persons who are not or were
not directors, officers, employees or agents of the Corporation but who are or
were serving at the request of the Corporation as a director, officer, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, trust, partnership, joint venture, sole proprietorship, employee
benefit plan or other enterprise (such persons collectively referred to as the
"Corporation Functionaires") against any and all liability and reasonable
expense that may be incurred by them in connection with or resulting from (a)
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, (b) an appeal in such an
action, suit or proceeding, or (c) any inquiry or investigation that could lead
to such an action, suit or proceeding, all to the full extent permitted by
Article 2.02-1 of the Texas Business Corporation Act.
8.2 The rights of indemnification provided for in this Article VIII
shall be in addition to all rights to which any Corporate Functionary may be
entitled under any agreement or vote of shareholders or as a matter of law or
otherwise.
8.3 The Corporation may purchase or maintain insurance on behalf of any
Corporate Functionary against any liability asserted against him and incurred by
him in such a capacity or arising out of his status as such a person, whether or
not the Corporation would have the power to indemnify against the liability
under this Article.
ARTICLE IX
AMENDMENTS
9.1 The Board of Directors shall have the power to alter, amend or
repeal these Bylaws or adopt new Bylaws, subject to amendment, repeal or
adoption of new Bylaws by action of the shareholders and unless the shareholders
in amending, repealing or adopting a new Bylaw expressly provide that the Board
of Directors may not amend or repeal that Bylaw. The Board of Directors may
exercise this power at any regular or special meeting at which a
<PAGE> 14
quorum is present by the affirmative vote of a majority of the directors present
at the meeting and without any notice of the action taken with respect to the
Bylaws having been contained in the notice or waiver of notice of such meeting.
Unless the Corporation's Articles of Incorporation or a Bylaw adopted by the
shareholders provide otherwise as to all or some portion of the Bylaws, the
Corporation's shareholders may amend or repeal these Bylaws or adopt new Bylaws
even though the Bylaws may also be amended, repealed or adopted by the Board of
Directors.
As approved and adopted by the initial
Board of Directors by Unanimous Consent
(In Lieu of Organizational Meeting) dated
as of August 25, 1995.
/s/ Judith L. Reitzer
----------------------------
Judith L. Reitzer, Secretary
<PAGE> 1
EXHIBIT 3.6
ARTICLES OF INCORPORATION
ENCLAVE ADVANCEMENT GROUP, INC.
I, the undersigned natural person of the age of eighteen (18) years or
more, being a citizen of the State of Texas, acting as an incorporator of a
corporation (the "Corporation") under the Texas Business Corporation Act (the
"Act") adopt the following Articles of Incorporation for the Corporation:
ARTICLE ONE
Name
The name of the Corporation is ENCLAVE ADVANCEMENT GROUP, INC.
ARTICLE TWO
Duration
The period of the duration of the Corporation is perpetual.
ARTICLE THREE
Purposes
The purposes for which the Corporation is organized are:
Clause (a). To transact any and all lawful purposes for which
corporations may be incorporated under the Act.
Clause (b). To engage in the business of performing and rendering
services of every kind and description permitted by law in connection with, and
to engage in any and all lawful, economic, industrial, agricultural and business
pursuits.
Clause (c). To manufacture, construct, erect, fabricate, treat, import,
export, design, process, develop, explore for, extract, use, buy, sell and
generally deal in and with, at wholesale and retail, as principal, agent,
broker, jobber, factor and/or commission merchant, natural resources and their
products and by-products, including but not limited to rare metals, earths,
minerals, elements, ores, chemicals and combinations thereof with high heat
resistance and anti-corrosive qualities, and any and all other metals, minerals,
earths, ores, chemicals,
<PAGE> 2
fissionable substances and combinations thereof, and their products and
by-products of every kind and description, whether similar or dissimilar to
those enumerated.
Clause (d). To manufacture, produce, construct, purchase, lease as
lessee, or otherwise acquire, hold, own, use, store, lease as lessor, warehouse,
rent, mortgage, assign, pledge, encumber, pawn, consign, market, distribute,
import, export, sell at wholesale or retail or otherwise dispose of machinery,
tools, equipment, appliances, devices, accessories, supplies, materials, goods,
wares, rigs, and personal property of every class and description and articles
of every nature.
Clause (e). To apply for, obtain, register, purchase, lease, or
otherwise acquire, and to hold, own, use, develop, operate and introduce, and to
sell, assign, transfer, grant, or acquire licenses or territorial rights in
respect to any copyrights, trademarks, tradenames, brands, labels, patents,
patent rights, letters patent of the United States or of any other country or
government, inventions, processes, contrivances and improvements, whether used
in connection with or secured under letters patent or otherwise.
Clause (f). To engage in a general construction and contracting
business, including maintaining, constructing, erecting, enlarging, altering,
repairing, removing, and otherwise engaging in any work upon any and all classes
of buildings, erections, works, and improvements of every kind and nature
whatsoever, and to manufacture and furnish the building materials and supplies
connected therewith.
Clause (g). To lease, purchase, sell and subdivide real property in
towns, cities and villages and their suburbs not extending more than two (2)
miles beyond their limits; to erect, construct, or repair any buildings, or
improvements, or to contract for the erection, construction or repair thereof,
and to acquire, own or prepare for use any materials for said purposes.
Clause (h). To engage in the business of acquiring, holding, managing,
collecting revenues from, exchanging and disposing of real estate located in
cities, towns, villages, and their suburbs not extending more than two (2) miles
beyond their limits.
Clause (i). To act as a general partner in a general or limited
partnership and to act as a limited partner in a limited partnership to the
extent permitted by law, in the performance of the business of the Corporation
and the purposes listed above.
Clause (j). To do everything necessary, advisable, proper or convenient
for the accomplishment of any of the purposes set forth, and to do all other
things incidental to or connected therewith, which are not inconsistent with the
laws under which this Corporation is organized and/or pursues its purposes.
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<PAGE> 3
Clause (k). To carry out the purposes hereinabove set forth in any
state, territory, district or foreign country, to the extent that such purposes
are not forbidden by the laws of such state, territory, district or possession
of the United States, or by such foreign country.
Clause (l). The objects and purposes specified in the foregoing clauses
shall, except as otherwise expressed, be in no wise limited or restricted by
reference to, or inference from, the terms of any other clauses in these
Articles of Incorporation, but the objects and purposes specified in each of the
foregoing clauses of this Article shall be regarded as independent objects and
purposes.
ARTICLE FOUR
Capital Stock
Section 1. Authorized Shares. The aggregate number of shares which the
Corporation shall have authority to issue is Ten Thousand (10,000) shares of
common stock of the par value of Ten Cents ($0.10) each.
Section 2. Cumulative Voting Denied. No shareholder shall have the
right to cumulate his votes for the election of directors, but each share shall
be entitled to one vote in the election of each director.
Section 3. Denial of Preemptive Rights. No shareholder shall be
entitled as a matter of right to subscribe for, purchase or receive any shares
of the stock or any rights or options of the Corporation which it may issue or
sell, whether out of number of shares authorized by these Articles of
Incorporation or by amendment thereof or out of the shares of the stock of the
Corporation acquired by it after the issuance thereof, nor shall any shareholder
be entitled as a matter of right to subscribe for, purchase or receive any
bonds, debentures or other securities which the Corporation may issue or sell
that shall be convertible into or exchangeable for stock or to which shall be
attached or appertain any warrant or warrants or other instrument or instruments
that shall confer upon the holder or owner of such obligation the right to
subscribe
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<PAGE> 4
for, purchase or receive from the Corporation any shares of its capital stock;
but all such additional issues of stock, rights and options, or of bonds,
debentures or other securities convertible into or exchangeable for stock, or to
which warrants shall be attached or appertain or which shall confer upon the
holder the rights to subscribe for, purchase or receive any shares of stock, may
be issued and disposed of by the Board of Directors to such persons, firms, or
corporations as in their absolute discretion they may deem advisable. The
acceptance of stock in the Corporation shall be a waiver of any preemptive or
preferential right which in the absence of this provision might otherwise be
asserted by shareholders of the Corporation or any of them.
ARTICLE FIVE
Initial Consideration for Issuance of Shares
The Corporation will not commence business until it has received for
the issuance of shares consideration of One Thousand and No/100 Dollars
($1,000.00), consisting of money, labor done or property received.
ARTICLE SIX
Initial Registered Office and Agent
The post office address of the initial registered office of the
Corporation is 1601 Elm Street, Dallas, Texas 75201, and the name of the initial
registered agent of the Corporation, at such address, is CT Corporation System.
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<PAGE> 5
ARTICLE SEVEN
Data Respecting Directors
Section 1. Board of Directors. The number of directors shall from time
to time be fixed by the Bylaws of the Corporation. The number of directors
constituting the initial Board of Directors is three (3) who need not be
residents of the State of Texas or shareholders of the Corporation.
Section 2. Names and Addresses. The names and addresses of the persons
who are elected to serve as directors until the first annual meeting of the
shareholders, and until their successors shall have been elected and qualified,
are:
Name Address
---- -------
Jack V. Gunion 11103 West Avenue
San Antonio, Texas 78213
Alan R. Minoff Sears Tower
Dept. 702 SSM, BSC 37-21
Chicago, Illinois 60684
Robert J. Richardson Sears Tower
Dept. 702 SSM, BSC 37-21
Chicago, Illinois 60684
Section 3. Increase or Decrease of Directors. The number of directors
may be increased or decreased from time to time by amendment to the Bylaws; but
no decrease shall have the effect of shortening the term of any incumbent
director. In the absence of a Bylaw fixing the number of directors, the number
shall be three (3).
ARTICLE EIGHT
Transactions With the Corporation
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<PAGE> 6
Any contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any firm of which one or
more of its directors are members or employees, or in which they are interested,
or between the Corporation and any corporation or association of which one or
more of its directors are shareholders, members, directors, officers or
employees, or in which they are interested, shall be valid for all purposes,
notwithstanding his or their participation in the action, if the fact of such
interest shall be disclosed or otherwise known to the Board of Directors and the
Board of Directors shall, nevertheless, authorize or ratify the contract or
transaction, the interested director or directors to be counted in determining
whether a quorum is present and to be entitled to vote on such authorization or
ratification; and no director shall be liable to account to the Corporation for
any profits realized by or from or through any such contract or other
transaction by reason of interest therein when such contract or other
transaction has been authorized or ratified in accordance with the foregoing.
This Article Eight shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
ARTICLE NINE
Data Respecting Incorporator
The name and address of the incorporator of the Corporation is:
Name Address
- ---- -------
J. David Oppenheimer 711 Navarro, Suite 620
San Antonio, TX 78205
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<PAGE> 7
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of
August, 1988,
INCORPORATOR:
/s/ J. David Oppenheimer
------------------------
J. DAVID OPPENHEIMER
To the Secretary of State
of the State of Texas
C T Corporation System, as the registered agent for the domestic and
foreign corporations named on the attached list submits the following statement
for the purpose of changing the registered office for such corporations, in the
State of Texas:
1. The name of the corporation is see attached list
-------------------------------------
2. The post office address of its present registered office is c/o C T
CORPORATION SYSTEM, 1601 ELM STREET, DALLAS, TEXAS 75201
3. The post office address to which its registered office is to be changed is
c/o C T CORPORATION SYSTEM, 350 N. ST, PAUL STREET, DALLAS, TEXAS 75201
4. The name of its present registered agent is C T CORPORATION SYSTEM
5. The name of its successor registered agent is C T CORPORATION SYSTEM
6. The post office address of its registered office and the post office address
of the business office of its registered agent, as changed, will be identical.
7 . Notice of this change of address has been given in writing to each
corporation named on the attached list 10 days prior to the date of filing of
this certificate.
Dated July 2, 1990.
C T CORPORATION SYSTEM
By /s/ Herbert R. Stratman
------------------------
Its Vice President
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<PAGE> 8
STATEMENT OF CHANGE OF REGISTERED OFFICE OR
REGISTERED AGENT OR BOTH BY A CORPORATION
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is ENCLAVE ADVANCEMENT GROUP, INC. The entity's
charter/certificate of authority/file number is 1086382-00.
2. The registered office address as PRESENTLY shown in the records of the
Texas secretary of state is 350 N. St. Paul Street, Dallas, TX 75201.
3. The address of the NEW registered office is 1212 Guadalupe, Suite 102,
Austin, TX 78701.
4. The name of the registered agent as PRESENTLY shown in the records of
the Texas secretary of state is CT Corporation System.
5. The name of the NEW registered agent is Capitol Corporate Services,
Inc.
6. Following the changes shown above, the address of the registered office
and the address of the office of the registered agent will continue to
be identical, as required by law.
7. The changes shown above were authorized by: Business Corporations may
select A or B Non-Profit corporations may select A, B or C Limited
Liability Companies may select D or E Limited Partnerships select F
A. The board of directors; OR
B. X An officer of the corporation so authorized by the board of
directors; OR
C.__ The members of the corporation in whom management of the
corporation is vested pursuant to article 2.14C of the Texas
Non-Profit Corporation Act.
D.__ Its members
E.__ Its managers
F.__ The limited partnership
/s/ Doug Shepard
----------------------------------
(Authorized Officer of Corporation)
(Authorized Member or Manager of LLC)
(General Partner of Limited Partnership)
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<PAGE> 1
EXHIBIT 3.7
ENCLAVE ADVANCEMENT GROUP, INC.
A Texas Corporation
BYLAWS
* * * * * * * *
ARTICLE I
OFFICES
Section 1.01. Principal Office. The principal office of the corporation
shall be in the City of San Antonio.
Section 1.02. Other Offices. The corporation may also have offices at
such other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Place of Annual Meetings. All annual meetings of the
shareholders shall be held in the City of San Antonio, Texas, or any other place
either within or without the State of Texas as the Directors may designate.
Special meetings of the shareholders may be held at such time and place within
or without the State of Texas as shall be stated in the notice of the meeting,
or in a duly executed waiver of notice thereof.
Section 2.02. Date of Annual Meeting. Annual meetings of shareholders
shall be held each year on the 1st Tuesday in May if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 11:00 AM, at which
they shall elect by a plurality vote a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 2.03. Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
articles of incorporation, may be called by the President, the Board of
Directors or by the holders of at least ten percent (10%) of all the shares
entitled to vote at the proposed special meeting. Only business within the
purpose or purposes described in the Notice of Special Meeting may be conducted
at such meeting.
Section 2.04. Notice. Notices of meetings shall be in writing and
signed by the President or Vice President, or the Secretary, or an Assistant
Secretary, or by such other person or persons as the Directors may designate.
Such notice shall state the purpose or purposes for which the meeting is called
and the time when, and the place, which may be within or without the State of
Texas, where it is to be held. A copy of such notice shall be either delivered
personally or shall
<PAGE> 2
be mailed, postage prepaid, to each shareholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before such
meeting. If mailed, it shall be directed to a shareholder at his address as it
appears upon the records of the corporation and upon such mailing of any such
notice, the service thereof shall be complete, and the time of the notice shall
begin to run from the date upon which such notice is deposited in the United
States mail for transmission to such shareholder. Personal delivery of any such
notice to any officer of a corporation or association, or to any member of a
partnership shall constitute delivery of such notice to such corporation,
association or partnership. In the event of the transfer of stock after delivery
or mailing of the notice of, and prior to the holding of the meeting, it shall
not be necessary to deliver or mail notice of the meeting to the transferee. Any
notice required to be given to any shareholder under any provision of the Texas
Business Corporation Act, articles of incorporation or these Bylaws need not be
given to the shareholder if notice of two consecutive annual meetings, and all
notices of meetings held during the period between those annual meetings, if
any, or all (but in no event less than two) payments (if sent by first class
mail) of distributions or interests on securities during a twelve-month period
have been mailed to that person, addressed at his address as shown on the
records of the corporation, and have been returned undeliverable. If such person
delivers to the corporation a written notice setting forth his then current
address, the requirement that notice be given to that person shall be
reinstated.
Section 2.05. Business. Business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
Section 2.06. List of Shareholders. The officer or agent having charge
of the stock transfer books for shares of the corporation shall make, at least
ten (10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting, or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file at the registered office of the corporation and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
Section 2.07. Quorum. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided by
statute or by the articles of incorporation. If, however, such quorum shall not
be present or represented at any meeting of the shareholders, then those
shareholders representing a majority of the shares entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at
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<PAGE> 3
which a quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified.
Section 2.08. Power of Shareholders. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the shares
of stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which, by express provision of the statutes or of the articles of incorporation
or of these Bylaws, a different vote is required, in which case such express
provision shall govern and control the decision of the question. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 2.09. Voting of Shares. Except as hereinafter provided, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of shareholders, except to the extent
that the articles of incorporation provide for more or less than one (1) vote
per share or limit or deny voting rights to the holders of the shares of any
class. At all elections of Directors, each holder of shares of stock possessing
voting power shall be entitled to vote in person or by proxy for the number of
shares of stock held by him, for as many persons as there are directors to be
elected. At all corporate meetings, the manner of voting shall be by ballot, by
voice vote, or by a showing of hands, at the discretion of the Chairman of the
meeting.
Section 2.10. Proxies. At any meeting of the shareholders, any
shareholder may be represented and vote by a proxy or proxies appointed by an
instrument in writing. In the event that any such written instrument shall
designate two or more persons to act as proxies, a majority of such persons
present at the meeting shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated, unless the
instrument shall otherwise provide. No such proxy shall be valid after the
expiration of eleven (11) months from the date of its execution unless the
person executing it specifies therein the length of time for which it is to
continue in force. Subject to the above, any proxy duly executed is not revoked
and continues in full force and effect until an instrument revoking it or a duly
executed proxy bearing a later date is filed with the Secretary of the
corporation.
Section 2.11. Unanimous Consent. Whenever the vote of shareholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the articles of
incorporation, the meeting and vote of shareholders may be dispensed with, if
all the shareholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken. Any such signed consent, or a signed copy thereof, shall be placed in the
minute book of the corporation.
Section 2.12. Telephone Meetings. Subject to the provisions required or
permitted by statute or these Bylaws for notice, the shareholders may
participate in and hold a meeting by means of conference telephone or similar
communications equipment by means of which all
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<PAGE> 4
persons participating in the meeting can hear each other, and participation in
such a meeting shall constitute presence in person at such meeting, except where
a person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. A written record of any such meeting shall thereafter be
prepared and placed in the minute book of the corporation.
ARTICLE III
DIRECTORS
Section 3.01. Number and Terms. The number of Directors which shall
constitute the whole Board shall be three (3). The number of Directors may from
time to time be increased or decreased to not less than one (1) by amendment to
these Bylaws, provided that any such decrease does not shorten the term of any
incumbent Director. The Directors shall be elected at the annual meeting of the
shareholders, and except as provided in Section 3.02 of this Article, each
Director elected shall hold office until his successor is elected and qualified.
Any directorship to be filled by reason of an increase in the number of
Directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose. Directors need not be
shareholders or residents of the State of Texas.
Section 3.02. Vacancies. Vacancies may be filled by a majority of the
remaining Directors though less than a quorum. When one or more Directors shall
give notice of his or their resignation to the Board, effective at a future
date, the Board shall have the power to fill the vacancy or vacancies to take
effect when such resignation or resignations shall become effective, each
Director so appointed to hold office during the remainder of the term of office
of the resigning Director or Directors.
Section 3.03. Authority of Directors. The business and affairs of the
corporation shall be managed by its Board of Directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the articles of incorporation or by these Bylaws directed or
required to be exercised or done by the shareholders.
Section 3.04. Directors' Meetings. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Texas.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.05. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held at the place of and immediately following the
annual meeting of shareholders, unless otherwise fixed by the vote of the
shareholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected Directors in order legally to constitute the
meeting; provided, however, that a quorum shall be present. In the event such
meeting is not held at the time and place above provided for, the meeting may be
held at such time
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and place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the Directors.
Section 3.06. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 3.07. Special Meetings. Special meetings of the Board of
Directors may be called by the President, and shall be called by the President
or Secretary on the written request of two (2) Directors. Written notice of the
time and place of special meetings of the Board of Directors shall be given to
each Director at least three (3) days prior to the date of the meeting.
Section 3.08. Quorum. At all meetings of the Board of Directors, a
majority of the number of Directors fixed by these Bylaws shall constitute a
quorum for the transaction of business. The act of the majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as otherwise specifically provided by statute or by
the articles of incorporation or by these Bylaws. If a quorum is not present at
a meeting of the Board of Directors, the Directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum is present.
Section 3.09. Unanimous Consent. Whenever the vote of the Directors at
a meeting thereof or at the meeting of the executive committee or any other
committee is required or permitted to be taken in connection with any corporate
action by any provisions of the statutes or of the articles of incorporation,
the meeting and vote of the Directors may be dispensed with, if all the members
of the Board of Directors, the executive committee, or any other committee, as
the case may be, who have been entitled to vote upon the action if such meeting
were held, shall consent in writing to such corporate action being taken. Such
consent shall have the same force and effect as a unanimous vote at a regularly
called meeting, and may be stated as such in any document or instrument filed
with the Secretary of State. Any such signed consent, or a signed copy thereof,
shall be placed in the minute book of the corporation.
Section 3.10. Telephone Meetings. Subject to the provisions required or
permitted by statute or by these Bylaws for notice, the Directors or the members
of the executive committee, or any other committee, may participate in and hold
a meeting by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in such a meeting shall constitute presence in person at such
meeting, except where a Director participates in the meeting for the express
purpose of objecting to the transaction of any business on the grounds that the
meeting is not lawfully called or convened. A written record of any such meeting
shall thereafter be prepared and placed in the minute book of the corporation.
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COMMITTEES
Section 3.11. Creation. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate an executive committee and
one or more other committees, each to consist of two (2) or more Directors of
the corporation.
Section 3.12. Authority. The executive committee and other committees,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the management of the business and
affairs of the corporation, except where action of the full Board of Directors
is required by statute or by the articles of incorporation.
Section 3.13. Minutes. The executive committee and other committees
shall keep regular minutes of their proceedings and report the same to the Board
of Directors when required. The minutes of the proceedings of the executive
committee and other committees shall be placed in the minute book of the
corporation.
Section 3.14. Removal of Members. Any member of the executive committee
or any other committee, may be removed by the Board of Directors by the
affirmative vote of a majority of the whole Board, whenever, in its judgment,
the best interests of the corporation will be served thereby.
Section 3.15. Potential Liability. The designation of an executive
committee, other committees and the delegation of authority to it shall not
operate to relieve the Board of Directors, or any members thereof, of any
responsibility upon it or him by law.
COMPENSATION OF DIRECTORS
Section 3.16. By resolution of the Board of Directors, the Directors
may be paid their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor. Members of the executive committee or any other
committee may be allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 4.01. Delivery. Notices to Directors and shareholders shall be
in writing and delivered personally or mailed to the Directors or shareholders
at their addresses appearing on the books of the corporation. Notice by mail
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to Directors may also be given by telegram
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and shall be deemed to be given at the time when the same shall be delivered to
the telegraph office for transmission.
Section 4.02. Waiver. Whenever any notice is required to be given to a
shareholder or Director under the provisions of the statutes, the articles of
incorporation or by these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to give such notice, whether before or after the time
stated therein, shall be deemed equivalent thereto to the giving of such notice.
Attendance of a Director at a Directors' meeting shall constitute a waiver of
notice of such meeting, except where a Director attends for the express purpose
of objecting to the transaction of any business on the grounds that the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 5.01. Selection of Officers. The officers of the corporation
shall be chosen by the Board of Directors and may include a Chairman of the
Board, and shall include a President, a Vice President, a Secretary and a
Treasurer. Any person may hold two (2) or more offices. No officer or agent need
be a shareholder, a Director, or a resident of the State of Texas.
Section 5.02. Necessary Officers. The Board of Directors, at its first
meeting after each annual meeting of shareholders, may choose a Chairman from
among the Directors, and shall choose a President and a Secretary neither of
whom need be a member of the Board of Directors.
Section 5.03. Additional Officers. The Board of Directors may appoint
Vice Presidents, a Treasurer, and Assistant Secretaries and Assistant Treasurers
and such other officers and agents as it shall deem necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
Section 5.04. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5.05. Term of Office. The officers of the corporation shall
hold office until their successors are chosen and shall qualify. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the corporation will be served thereby. Any
vacancy occurring in any office of the corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 5.06. Authority. Officers and agents shall have such authority
and perform such duties in the management of the corporation as are provided in
these Bylaws or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws.
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THE PRESIDENT
Section 5.07. The President shall be the ranking and chief executive
officer of the corporation. He shall preside at meetings of the Board of
Directors and of the shareholders unless he shall be absent, and he shall have
power to call special meetings of the shareholders and the Directors for any
purpose or purposes, appoint and discharge, subject to the approval or review by
the Board of Directors, employees and agents of the corporation and fix their
compensation, and shall make and sign contracts and agreements in the name of
and on behalf of the corporation. The President shall put into operation such
business policies of the corporation as shall be decided upon by the Board of
Directors. In carrying out the business policies of the Board of Directors, the
President shall have the general management and control of the business and
affairs of the corporation and shall be the managing executive officer of the
corporation, and the President, in carrying out such business policies, is given
the necessary authority to discharge such responsibility. He shall see that the
books, reports, statements and certificates required by the statutes under which
the corporation is organized or any other laws applicable thereto, are properly
kept, made and filed according to law. The President shall, in general, have
supervisory power over the other officers, the executive committee and any other
committees and the business activities of the corporation, subject to the
approval or review of the Board of Directors; and he shall generally do and
perform all acts incident to the office of President or which are authorized or
required by law.
THE VICE PRESIDENT
Section 5.08. The Vice Presidents in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the power of the
President. They shall also generally assist the President and exercise such
other powers and perform such other duties as are delegated to them by the
President and as the Board of Directors shall prescribe.
THE SECRETARY
Section 5.09. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders, and record all the proceedings
of such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or President, under whose supervision he shall be. He
shall keep in safe custody the seal of the corporation and, when authorized by
the Board of Directors, affix the same to any instrument requiring it and, when
so affixed, it shall be attested by his signature or by the signature of an
assistant secretary.
Section 5.10. Assistant Secretaries. The Assistant Secretaries, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or
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disability of the Secretary, perform the duties and have the authority and
exercise the powers of the Secretary, They shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
or as the President may from time to time delegate.
THE TREASURER
Section 5.11. Custody of Funds. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
Section 5.12. Disbursal. He shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
the regular meeting of the Board, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial condition of
the corporation.
Section 5.13. Surety Bond. If required by the Board of Directors, he
shall give the corporation a bond in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
Section 5.14. Additional Duties. He shall perform such other duties and
have such other authority and powers as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate.
THE GENERAL COUNSEL
Section 5.15. A general counsel for the corporation shall be appointed
annually by the Board of Directors, on a basis of compensation to be set by the
Board. The Board may appoint an individual or a law firm as the general counsel
of the corporation, as it may elect. If a law firm should be selected, then one
member thereof shall be designated as the particular lawyer in such firm, whose
personal services are contemplated. The general counsel shall, when called upon,
counsel and advise the officers of the corporation on any legal matters which
may arise in the conduct of the business of the corporation, shall handle all
claims and litigation involving the corporation, and shall perform such further
legal services as may be contemplated in the contract of employment.
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ARTICLE VI
OFFICERS' AND DIRECTORS' SERVICES,
CONFLICTING INTERESTS AND INDEMNIFICATION
Section 6.01. Services. No Director and, unless otherwise determined by
the Board of Directors, no officer of the corporation, shall be required to
devote his time or any particular portion of his time or render services or any
particular services exclusively to the corporation. Each and every Director and,
unless otherwise determined by the Board of Directors, each and every officer of
the corporation shall be entirely free to engage, participate and invest in any
and all such businesses, enterprises and activities, either similar or
dissimilar to the business, enterprise and activities of the corporation,
without breach of duty to the corporation or to its shareholders and without
accountability or liability to the corporation or to its shareholders in any
event or under any circumstances or conditions.
Each and every Director and, unless otherwise determined by the Board
of Directors, each and every officer of the corporation shall, respectively, be
entirely free to act for, serve and represent any other corporation or
corporations, entity or entities, and any person or persons, in any capacity or
capacities, and be or become a director or officer, or both, of any other
corporation or corporations, entity or entities, irrespective of whether or not
the business, purposes, enterprises and activities of or any of them, thereof be
similar or dissimilar to the business, purposes, enterprises and activities, or
any of them, of the corporation, without breach of duty to the corporation or to
its shareholders and without accountability or liability of any character or
description to the corporation or to its shareholders in any event or under any
circumstances or conditions.
Section 6.02. Directors' and Officers' Interests in Contracts. No
contract or other transaction between the corporation and one or more of its
Directors or officers, or between the corporation and any firm or partnership of
which one or more of its directors or officers are members or employees or in
which they are otherwise interested or between the corporation and any other
corporation or association or other entity in which one or more of the directors
or officers of the corporation are shareholders, members, directors, officers or
employees or in which they are otherwise interested, shall be void or voidable
by reason of or as a result of such connection with or holding an office or
offices as a director or officer of the corporation or such interest in or in
connection with such other firm, partnership, corporation, association or other
entity, notwithstanding the presence of such director or directors, officer or
officers, at the meeting of the Board of Directors of the corporation which acts
upon or in reference to any such contract or other transaction, and
notwithstanding his or their participation in such action, if (a) the fact of
such interest shall be disclosed or known to the Board of Directors and the
Board of Directors shall authorize, approve or ratify such contract or other
transaction by a vote of a majority of the Directors present, such interested
Director or Directors to be counted in determining whether a quorum is present,
but not to be counted in calculating the majority necessary to carry such vote,
or if (b) the fact of such interest shall be disclosed or known to the
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shareholders and the shareholders either by written consent or by vote of
holders of record of a majority of all the outstanding shares of stock entitled
to vote, shall authorize, approve or ratify such contract or other transaction;
nor shall any Director or officer be responsible to, or liable to account to the
corporation for any profits realized by or from or through any such contract or
other transaction of the corporation so authorized, ratified or approved, by
reason of such interest or his being or having been a director or officer, or
both, of the corporation. Nothing herein contained shall create responsibility
or liability in or in connection with any such event or events or prevent the
authorization, ratification or approval of such contracts or other transactions
in any other manner permitted by law or by statute. This Section shall not be
construed to invalidate any contract or other transaction which would otherwise
be valid under the common or statutory law applicable thereto.
Section 6.03. Non-Liability of Directors and Officers in Certain Cases.
No Director or officer or member of the executive committee or any other
committee shall be liable for his acts as such if he is excused from liability
under any present or future provision or provisions of the Texas Business
Corporation Act or the Articles of Incorporation of the Corporation; and, in
addition, to the fullest extent now or hereafter permitted by the Texas Business
Corporation Act, each officer or Director or member of any committee shall, in
the discharge of any duty imposed or power conferred upon him by the
corporation, be fully protected if, in the exercise of ordinary care, he acted
in good faith and in reliance upon the written opinion of an attorney for the
corporation, the books of account or reports made to the corporation by any of
its officials or by an independent certified public accountant or by an
appraiser selected with reasonable care by the Board of Directors or by such
committee, or in reliance upon other records of the corporation.
Section 6.04. Indemnification of Directors and Officers. The
corporation shall, to the fullest extent to which it is empowered to do so by
the Texas Business Corporation Act or any other applicable laws as may from time
to time be in effect, indemnify any person who was, is or is threatened to be
made, a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was a director or officer of the corporation, or is or
was serving at the request of the corporation as a director, officer, partner,
venturer, proprietary, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding. The corporation's obligations
under this Section include, but are not limited to, the convening of any
meeting, and the consideration of any matter thereby, required by statute in
order to determine the eligibility of an officer or director for
indemnification. Expenses incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of (i) a written
affirmation by the person of his good faith belief that he has met the standard
of conduct necessary for indemnification under the Texas Business Corporation
Act, and (ii) an undertaking by or on behalf of the director, officer, employee
or agent who may be entitled to such indemnification, to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified
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by the corporation. The corporation's obligation to indemnify and to prepay
expenses under this Section 6.04 shall arise, and all rights granted to
directors, officers, employees or agents hereunder shall vest, at the time of
the occurrence of the transaction or event to which such action, suit or
proceeding relates, or at the time that the action or conduct to which such
action, suit or proceeding relates was first taken or engaged in (or omitted to
be taken or engaged in), regardless of when such action, suit or proceeding is
first threatened, commenced or completed. Notwithstanding any other provision of
these Bylaws or the Articles or Certificate of Incorporation of the corporation,
no action taken by the corporation, either by amendment of the Bylaws or the
Certificate of Incorporation of the corporation or otherwise, shall diminish or
adversely affect any rights to indemnification or prepayment of expenses granted
under this Section 6.04 which shall have become vested as aforesaid prior to the
date that such amendment or other corporate action is taken. Further, if any
provision of this Section 6.04 shall be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired.
Section 6.05. Insurance. The Board of Directors shall have, in its
discretion, the power to purchase and maintain insurance or another arrangement
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of the Texas Business Corporation Act, the
articles of incorporation or these Bylaws. If the insurance or other arrangement
is with a person or entity that is not regularly engaged in the business of
providing insurance coverage, the insurance or arrangement may provide for
payment of a liability with respect to which the corporation would not have the
power to indemnify the person only if including coverage for the additional
liability has been approved by the shareholders of the corporation. Without
limiting the power of the corporation to procure or maintain any kind of
insurance or other arrangement, the Board of Directors may, for the benefit of
persons indemnified by the corporation (a) create a trust fund, (b) establish
any form of self-insurance, (c) secure the indemnity obligation by grant of a
security interest or other lien on the assets of the corporation, or (d)
establish a letter of credit, guaranty or surety arrangement. The insurance or
other arrangement may be procured, maintained or established within the
corporation or with any insurer or other person deemed appropriate by the Board
of Directors regardless of whether all or part of the stock or other securities
of the insurer or other person are owned in whole or in part by the corporation.
In the absence of fraud, the judgment of the Board of Directors as to the terms
and conditions of the insurance or other arrangement and the identity of the
insurer or other person participating in the arrangement shall be conclusive and
the insurance or arrangement shall not be voidable and shall not subject the
directors approving the insurance or arrangement to liability, on any ground,
regardless of whether directors participating in the approval are beneficiaries
of the insurance or arrangement.
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ARTICLE VII
CERTIFICATES OF STOCK
Section 7.01. Requirements. Every shareholder shall be entitled to have
a certificate signed by the President or a Vice President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative,
participating, option or other special rights of the various classes of stock or
series thereof and the qualifications, limitations or restrictions of such
rights, shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock, and, if
the corporation shall be authorized to issue only shares of special stock, such
certificate shall set forth in full or summarize the rights of the holders of
such shares of stock.
Section 7.02. Facsimiles. A facsimile of the signatures of the officers
or agents of the corporation may be printed or lithographed upon such
certificate in lieu of the actual signatures. In case any officer or officers
who shall have signed, or whose facsimile signature shall have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons whose signature appears
on such certificate or certificates, or whose facsimile signature or signatures
shall have been used thereon, had not ceased to be the officer or officers of
the corporation.
LOST CERTIFICATE(S)
Section 7.03. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate(s) to be lost or destroyed. When authorizing such issue of a new
certificate(s), the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate(s), or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate(s) alleged to have been lost or
destroyed.
TRANSFER OF STOCK
Section 7.04. Shares of stock shall be transferable only on the books
of the corporation by the holder thereof in person or by his duly authorized
attorney. Upon surrender to the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of
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succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, canceling
the old certificate and recording the transaction upon its books. A record shall
be made of each transfer.
CLOSING OF TRANSFER BOOKS
Section 7.05. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or shareholders entitled to receive a distribution by a corporation (other than
a distribution involving a purchase or redemption by the corporation of its own
shares) or a share dividend, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may provide that the stock
transfer books be closed for a period not to exceed sixty (60) days. If such
books are closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, then such books shall be closed for
at least ten (10) days immediately preceding such meetings. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive a distribution (other than a distribution
involving a purchase or redemption by the corporation of any of its own shares)
or a share dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such
distribution or share dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section, such determination shall apply to any adjournment
thereof, except where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
REGISTERED SHAREHOLDERS
Section 7.06. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Texas, the articles of incorporation or these Bylaws. When shares are
registered on the books of the corporation in the names of two or more persons
as joint owners with the right of survivorship, after the death of a joint owner
and before the time that the corporation receives actual written notice that
parties other than the surviving joint owner or owners claim an interest in the
shares or any distributions thereon, the corporation may record on its books and
otherwise effect the transfer of those shares to any person, firm or corporation
(including that surviving joint owner individually) and pay any distributions
made in respect of those shares, in each case as if the surviving joint owner or
owners were the absolute owners of the shares.
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ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 8.01. Declaration. Dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the articles of incorporation.
Section 8.02. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the corporation available therefor, such sum or
sums as the Board of Directors, from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation, and the Board of Directors may modify or abolish
any such reserves in the manner in which it was created.
CHECKS
Section 8.03. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 8.04. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE IX
Section 9.01. Any security of the corporation, which is issued to any
person without registration under the Securities Act of 1933, as amended, or the
securities or Blue Sky laws of any state, shall not be transferable or the
subject of a sale or pledge until the corporation shall have been furnished with
an opinion of counsel for such shareholder satisfactory to counsel for the
corporation that such sale, transfer or pledge does not involve a violation of
the Securities Act of 1933, as amended, or the securities or Blue Sky laws of
any state having jurisdiction.
The certificate representing the security shall bear substantially the
following legend:
- 15 -
<PAGE> 16
"The shares evidenced and represented by this certificate have
not been registered under the Securities Act of 1933, as
amended, or the securities or Blue Sky laws of any state,
Transfer or sale of the shares evidenced and represented by
this certificate shall not be made without the prior written
approval of the Company and its counsel."
Section 9.02. Any security of the corporation that is issued to any
person pursuant to an agreement, which in any way restricts the transfer of such
security, shall be restricted as to such transfer by noting conspicuously on the
certificate representing the security, a legend which shall indicate such
restriction against transferability and the appropriate officers of the
corporation shall cause to be placed on such security a stop-transfer order
subject to the terms and conditions of such agreement.
ARTICLE X
AMENDMENTS
Section 10.01. These Bylaws may be altered, amended or repealed at any
regular or special meeting of the Board of Directors.
- 16 -
<PAGE> 1
Exhibit 3.8
VISIONWORKS, INC.
ARTICLES OF INCORPORATION
I.
The name of the Corporation is:
Visionworks, Inc.
II.
The street address of the initial principal office of the Corporation is
8333 Bryan Dairy Road, Largo, Florida 34647.
III.
A. The total number of shares of capital stock that the Corporation
shall be authorized to issue is One Thousand (1,000) shares of common stock, no
par value (the "Common Stock").
B. Each share of the Common Stock shall be identical in all respects
and for all purposes and entitled to one vote per share in all proceedings in
which action may or is required to be taken by the shareholders of the
Corporation; participate equally in all dividends payable with respect to the
Common Stock, as, if, and when declared by the Board of Directors of the
Corporation; and share ratably in all of its assets of the Corporation in the
event of any voluntary or involuntary liquidation, winding up of the affairs of
the Corporation or upon any distribution of the assets of the Corporation.
<PAGE> 2
IV
The initial registered office of the Corporation shall be at 8333 Bryan
Dairy Road, Largo, Florida 34647. The initial registered agent of the
Corporation at such address shall be Richard W. Roberson.
V
The name and address of the incorporator is:
Theodore I. Blum, Esq.
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
VI
The initial Board of Directors of the Corporation shall consist of nine
members, seven of whom shall be and whose addresses are
John G. Bull
790 East Broward Boulivard
Suite 400
Fort Lauderdale, Florida 33301
William S. Green
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Bart McLean
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Larence Park
2950 Surrey Lane
Fort Lauderdale, Florida 33331
<PAGE> 3
Richard W. Roberson
8333 Bryan Dairy Road
Largo, Florida 34647
Edwin A Wahlen, Jr.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Wallace Whitley
8033 Northwest 47th Drive
Coral Springs, Florida 33067
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation
/s/ Theodore I. Blum
------------------------------
Theodore I. Blum, Esq.
Incorporator
<PAGE> 4
Acceptance by the Registered Agent as required in Section 607.0501 (3)
T.S.: Richard W. Roberson is familiar with and accepts the obligations
provided for in Section 607.0505 on behalf of VISIONWORKS, INC.
Dated January 27, 1994. By /s/ Richard W. Roberson
------------------------------
President
<PAGE> 5
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: Visionworks, Inc.
--------------------------------------------
- --------------------------------------------------------------------------------
1b. Date of incorporation 1/27/94 Document No. P94000007211
------------------------- ---------------
2. The name and address of the current registered agent and office:
Richard W. Roberson, 8333 Bryan Dairy Road, Largo, Florida 34647
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The name and address of the new registered agent and office:
(P.O. Box Not acceptable):
c/o CT Corporation System
- --------------------------------------------------------------------------------
1200 South Pine Island Road, Plantation, Florida 33324
- --------------------------------------------------------------------------------
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Sidney J. Nurkin, Asst. Secretary
- ------------------------------ ----------------------------------------
Signature Typed or printed name and title
3/15/94
- ------------------------------
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
SIGNATURE By:
--------------------------
(Registered Agent)
DATE Allan Furnell, Asst. Secy. 3/15/94
----------------------------------
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 6
Florida Department of State, Jim Smith, Secretary of State
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: VISIONWORKS, INC.
--------------------------------------------
- --------------------------------------------------------------------------------
1b. Date of incorporation 01/27/94 Document No. P94000007211
------------------------- ----------------
2. The name and address of the current registered agent and office:
CT Corporation System
- --------------------------------------------------------------------------------
1200 S. Pine Island Road, Plantation, FL 33324
- --------------------------------------------------------------------------------
3. The name and address of the new registered agent and office:
(P.O. Box Not acceptable:
NRAI SERVICES, INC.
- --------------------------------------------------------------------------------
526 East Park Avenue, Tallahassee, Florida 32301
- --------------------------------------------------------------------------------
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Doug Shepard VP/Controller
- ------------------------------ ----------------------------------------------
Signature Typed or printed name and title
8/4/97
- ------------------------------
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
NRAI Services, Inc.
SIGNATURE By: Delane Lundgren, Asst. Sec.
-------------------------------
(Registered Agent)
DATE
-----------------------------------------
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 1
EXHIBIT 3.9
BYLAWS
OF
VISIONWORKS, INC.
ARTICLE I
OFFICES
Visionworks, Inc. (the "Corporation") shall at all times maintain a
registered office in the State of Florida and a registered agent at that address
but may have other offices located within or outside the State of Florida as the
Board of Directors of the Corporation (the "Board of Directors") may determine.
ARTICLE II
SHAREHOLDERS MEETINGS
2.1 Annual Meeting. A meeting of the shareholders of the Corporation
(the "Shareholders") shall be held annually The annual meeting shall be held at
such time and place and on such date as the directors of the Corporation
(individually, a "Director" and collectively, the "Directors") shall determine
from time to time and as shall be specified in the notice of the meeting.
2.2 Special Meetings. Special meetings of the Shareholders may be called
at any time by the President and Chief Executive Officer or the Chairman of the
Board of Directors of the Corporation or any holder or holders of not less than
ten percent (10%) of the outstanding capital stock of the Corporation. Special
meetings shall be held at such a time and place and on such date as shall be
specified in the notice of the meeting.
2.3 Place. Annual or special meetings of the Shareholders may be held
within or without the State of Florida.
<PAGE> 2
2.4 Notice. Notice of annual or special meetings of the Shareholders
shall state the place, day and hour of the meeting, shall be given in writing
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, and shall be either mailed to the last known address or personally
given to each Shareholder. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. The waiver need not specify the
purpose of the meeting for the business transacted, unless one of the purposes
of the meeting concerns a plan of merger or consolidation, in which event the
waiver shall comply with the further requirements of law concerning such
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver of notice thereof. Notice of any special meeting of the Shareholders
shall state the purpose or purposes for which the meeting is called. The notice
of any meeting at which amendments to or restatements of the Articles of
Incorporation of the Corporation, merger or consolidation of the Corporation, or
the disposition of assets of the Corporation requiring approval of the
Shareholders, are to be considered, shall state such purpose, and further comply
with all requirements of law.
2.5 Quorum. At all meetings of the Shareholders a majority of the
outstanding shares of stock of the Corporation shall constitute a quorum for the
transaction of business, and no resolution or business shall be transacted
without the favorable vote of the holders of a majority of the shares of stock
of the Corporation represented at the meeting and entitled to vote. A lesser
number may adjourn from day to day, and shall announce the time and place to
which the meeting is adjourned.
2.6 Action in Lieu of Meeting. Any action to be taken at a meeting of
the Shareholders or any action that may be taken at a meeting of the
Shareholders may be taken without a meeting, without prior notice, and without a
vote if a consent in writing setting forth
<PAGE> 3
the action so taken shall be signed by the holders of not less than the minimum
number of shares of stock of the Corporation entitled to vote with respect to
the subject matter thereof that would be necessary to authorize or take such
action at a meeting at which the holders of shares of stock of the Corporation
entitled to vote thereon were present and voted, and any further requirements of
law pertaining to such action without a meeting have been complied with.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these Bylaws, the full and entire management
of the affairs and business of the Corporation shall be vested in the Board of
Directors which shall have and may exercise all of the powers that may be
exercised or performed by the Corporation.
3.2 Number of Directors. The Board of Directors shall fix by a
resolution of the Board of Directors the precise number of members of the Board
of Directors provided that the Board of Directors shall consist of not fewer
than one (1) nor more than nine (9) members. Directors shall be elected at each
annual meeting of the Shareholders and shall serve a term of one (1) year and
until their successors are elected. A majority of the Directors shall constitute
a quorum for a transaction of business. All resolutions adopted and all business
transacted by the Board of Directors shall require the affirmative vote of a
majority of the Board of Directors, whether or not present at the meeting.
3.3 Vacancies. The Directors may fill, by the affirmative vote of a
majority of the remaining directors, the place of any Director that may become
vacant prior to the expiration of his or her term, such appointment by the
Directors to continue until the expiration of the term of the Director whose
place has become vacant, or may fill any directorship created by reason of an
increase in the number of Directors, such appointment by the Directors to
continue for a term of
<PAGE> 4
office until the next election of Directors by the Shareholders and until the
election of the successor.
3.4 Meetings. The Directors shall meet annually, without notice,
following the annual meeting of the Shareholders. Special meetings of the
Directors may be called at any time by the President of the Corporation or by
any two (2) Directors on two (2) days' written notice to each Director, which
notice shall specify the time and place of the meeting. Notice of any such
meeting may be waived by an instrument in writing executed before or after the
meeting. The Directors may attend and participate in meetings either in person
or by means of conference telephones or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at any meeting. Attendance in person at such
meeting shall constitute a waiver of notice thereof.
3.5 Action in Lieu of Meeting. Any action to be taken at a meeting of
the Directors, or any action that may be taken at a meeting of the Directors,
may be taken without a meeting if a consent in writing, setting forth the
actions so taken, shall be signed by all of the Directors and any further
requirements of law pertaining to action taken without a meeting have been
complied with.
3.6 Removal. Any Director may be removed from office, with or without
cause, upon the majority vote of the Shareholders, at a meeting with respect to
which notice of such purpose is given.
3.7 Quorum. Unless otherwise provided in the Articles of Incorporation
of the Corporation, a quorum of the Board of Directors consists of a majority of
the number of Directors.
<PAGE> 5
ARTICLE IV
OFFICERS
4.1 General Provisions. The officers of the Corporation shall consist of
a President and Chief Executive Officer, a Chairman of the Board of Directors, a
Secretary and a Treasurer who shall be elected by the Board of Directors and
such other officers as may be elected by the Board of Directors or appointed as
provided in these Bylaws. Each officer of the Corporation shall be elected or
appointed for a term of office running until the meeting of the Board of
Directors following the next annual meeting of the Shareholders, or such other
term as provided by resolution of the Board of Directors for the appointment to
office. Each officer of the Corporation shall serve for the term of office for
which he or she is elected or appointed and until his or her successor has been
elected or appointed and has been qualified or his or her earlier resignation,
removal from office, or death. Any two (2) or more offices may be held by the
same person.
4.2 President and Chief Executive Officer. The President and Chief
Executive Officer shall be the chief executive officer of the Corporation and
shall have general and active management of the operations of the Corporation.
In the absence of the Chairman of the Board of Directors, the President and
Chief Executive Officer shall, if a Director, preside at all meetings of the
Shareholders and of the Board of Directors of the Corporation. He shall be
responsible for the administration of the Corporation, including general
supervision of the policies of the Corporation and general and active management
of the financial affairs of the Corporation, and shall execute bonds, mortgages
or other contracts in the name and on behalf of the Corporation.
4.3 Chairman of the Board of Directors. The Chairman of the Board of
Director shall be a Director and, when present, shall preside at all meetings of
the Shareholders and the Board
<PAGE> 6
of Directors of the Corporation, and shall execute bonds, mortgages or other
contracts in the name and on behalf of the Corporation.
4.4 Secretary. The Secretary shall keep minutes of all meetings of the
Shareholders and Directors and have charge of the minute books, stock books and
seal of the Corporation and shall perform such other duties and have such other
powers as may from time to time be delegated to him or her by the President and
Chief Executive Officer of the Corporation or the Board of Directors.
4.5 Treasurer. The Treasurer shall be charged with the management of the
financial affairs of the Corporation, shall have the power to recommend action
concerning the Corporation's affairs to the President and Chief Executive
Officer of the Corporation, and shall perform such other duties and have such
other power as may from time to time be delegated to him or her by the President
and Chief Executive Officer of the Corporation or the Board of Directors.
4.6 Assistant Secretaries and Treasurers. Assistants to the Secretary
and Treasurer of the Corporation may be appointed by the President and Chief
Executive Officer of the Corporation or elected by the Board of Directors and
shall perform such duties and have such powers as shall be delegated to them by
the President and Chief Executive Officer of the Corporation or the Board of
Directors.
4.7 Vice Presidents. The Corporation may have one (1) or more Vice
Presidents, elected by the Board of Directors, who shall perform such duties and
have such powers as may be delegated by the President and Chief Executive
Officer of the Corporation or the Board of Directors.
<PAGE> 7
ARTICLE V
CAPITAL STOCK
5.1 Share Certificates. Share certificates shall be numbered in the
order in which they are issued. They shall be signed by the President and Chief
Executive Officer of the Corporation or the Chairman of the Board of Directors
and the Secretary of the Corporation, and the seal of the Corporation shall be
affixed thereto. Share certificates shall be kept in a book and shall be issued
in consecutive order therefrom. At a minimum, each share certificate must state
on its face the name of the Corporation, that the Corporation is organized under
the laws of the State of Florida, the name of the person to whom issued, and the
number and class of shares and the designation of the series, if any, the share
certificate represents. Each share certificate must be signed (either manually
or in facsimile) by the President and Chief Executive Officer or the Chairman of
the Board of Directors and the Secretary or any Assistant Secretary, or by any
officer designated by the Board of Directors. Share certificates exchanged or
returned shall be canceled by the Secretary of the Corporation and placed in
their original place in the stock book(s) of the Corporation.
5.2 Transfer of Shares. Transfer of shares of stock of the Corporation
shall be made on the stock book(s) of the Corporation by the holder in person or
by power of attorney by, on surrender of the old share certificate for such
shares of the Corporation, duly assigned.
5.3 Voting. The holders of the common stock of the Corporation shall be
entitled to one (1) vote for each share of common stock of the Corporation
standing in their name.
<PAGE> 8
ARTICLE VI
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed to be the seal of
the Corporation. The seal shall be in the custody of the Secretary of the
Corporation and affixed by him or her or by his or her assistants on the share
certificates and other appropriate papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board if Directors
or by majority vote of the Shareholders, provided that the Shareholders may
provide by resolution that any Bylaw provision repealed, amended, adopted or
altered by them may not be repealed, amended, adopted or altered by the Board of
Directors.
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a Director or officer of the Corporation, and
each person who is or was a Director or officer of the Corporation who, at the
request of the Corporation, is serving or has served as an officer, director,
partner, joint venturer or trustee of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Corporation
against those expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement that are allowed to be paid or reimbursed by the Corporation
under the laws of the State of Florida and that are actually and reasonably
incurred in connection with any action,
<PAGE> 9
suit or proceeding, pending or threatened, whether civil, criminal,
administrative or investigative, in which such person may be involved by reason
of his or her being or having been a Director or officer of the Corporation or
of such other enterprises. Such indemnification shall be made only in accordance
with the laws of the State of Florida and subject to the conditions prescribed
therein.
In any instance where the laws of the State of Florida permit
indemnification to be provided to persons who are or have been a Director or
officer of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of another corporation, partnership, joint
venture, trust or other enterprise only on a determination that certain
specified standards of conduct have been met, upon application for
indemnification by any such person the Corporation shall promptly cause such
determination to be made (i) by the Board of Directors by majority vote of a
quorum consisting of Directors not at the time parties to the proceeding; (ii)
if a quorum cannot be obtained by majority vote of a committee duly designated
by the Board of Directors (in which designation Directors who are parties may
participate), consisting solely of two (2) or more Directors not at the time
parties to the proceeding; (iii) by special legal counsel selected by the Board
of Directors or its committee in the manner prescribed in (i) or (ii) above, and
a committee cannot be designated under (ii) above, selected by majority vote of
the full Board of Directors (in which selection Directors who are parties may
participate); or (iv) by the Shareholders, but shares of stock of the
Corporation owned by or voted under the control of Directors who are at the time
parties to the proceeding may not be voted on the determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
<PAGE> 10
The Corporation may purchase and maintain insurance on behalf of
Directors and officers of the Corporation whether or not the Corporation would
have the power to indemnify such Directors and officers of the Corporation
against any liability under the laws of the State of Florida. If any expenses or
other amounts are paid by way of indemnification, other than by court order,
action by the Shareholders or by an insurance carrier, the Corporation shall
provide notice of such payment to the Shareholders in accordance with the
provisions of the laws of the State of Florida.
<PAGE> 1
Exhibit 3.10
VISIONWORKS HOLDINGS, INC.
ARTICLES OF INCORPORATION
I.
The name of the Corporation is:
Visionworks Holdings, Inc.
II.
The street address of the initial principal office of the Corporation
is Twelve Piedmont Center, Suite 210, Atlanta, Georgia 30305.
III.
A. The total number of shares of capital stock that the Corporation
shall be authorized to issue is Two Million (2,000,000) shares of common stock,
no par value (the "Common Stock").
B. Each share of the Common Stock shall be identical in all respects
and for all purposes and entitled to one vote per share in all proceedings in
which action may or is required to be taken by the shareholders of the
Corporation; participate equally in all dividends payable with respect to the
Common Stock, as, if, and when declared by the Board of Directors of the
Corporation; and share ratably in all of the assets of the Corporation in the
event of any voluntary or involuntary liquidation, winding up of the affairs of
the Corporation or upon any distribution of the assets of the Corporation.
IV.
The initial registered office of the Corporation shall be at 8333 Bryan
Dairy Road, Largo, Florida 34647. The initial registered agent of the
Corporation at such address shall be Richard W. Roberson.
V.
The name and address of the incorporator is:
Theodore I. Blum, Esq.
Alston & Bird
One Atlantic Center
<PAGE> 2
1201 West Peachtree Street
Atlanta, Georgia 30309
VI.
The initial Board of Directors of the Corporation shall consist of nine
members, seven of whom shall be and whose addresses are:
John G. Bull
790 East Broward Boulevard
Suite 400
Fort Lauderdale, Florida 33301
William S. Green
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Bart McLean
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Larence Park
2950 Surrey Lane
Fort Lauderdale, Florida 33331
Richard W. Roberson
8333 Bryan Dairy Road
Largo, Florida 34647
Edwin A. Wahlen, Jr.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Wallace Whitley
8033 Northwest 47th Drive
Coral Springs, Florida 33067
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ Theodore I. Blum
------------------------------------
Theodore I. Blum, Esq.
Incorporator
<PAGE> 3
Acceptance by the Registered Agent as required in Section 407.0501 (3) T.S.:
Richard W. Roberson is familiar with and accepts the obligations provided for in
Section 607.0505 on behalf of VISIONWORKS HOLDINGS, INC.
Dated January 27, 1994. /s/ Richard W. Roberson
-------------------------------
<PAGE> 4
Florida Department of State, Jim Smith, Secretary of State
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: VISIONWORKS HOLDINGS, INC.
1b. Date of incorporation 1/27/94 Document No. P94000007212
2. The name and address of the current registered agent and office:
CT Corporation System
1200 S. Pine Island Road, Plantation, Fl 33324
3. The name and address of the new registered agent and office: (P.O. Box
Not acceptable):
NRAI Services, Inc.
526 Easts Park Avenue, Tallahassee, Florida 32301
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Doug Shepard, VP/ Controller
------------------------------ ------------------------------------
Signature Typed or printed name and title
8/15/97
------------------------------
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
SIGNATURE By: Delane Lundgren, Asst. Sec.
-----------------------------
(Registered Agent)
DATE 9/3/97
-----------------------------
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 5
Florida Department of State, Jim Smith, Secretary of State
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: Visionworks Holdings, Inc.
1b. Date of incorporation 1/27/94 Document No. P96000007212
2. The name and address of the current registered agent and office:
Richard W. Roberson, 8333 Bryan Dairy road, Largo, Florida 34647
3. The name and address of the new registered agent and office:
(P.O. Box Not acceptable):
CT CORPORATION SYSTEM
c/o CT Corporation System, 1200 South Pine Island Rd., Plantation, FLorida 33324
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Sidney J. Nurkin, Asst. Secretary
-------------------------- ----------------------------------
Signature Typed or printed name and title
3/15/94
--------------------------
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
CT Corporation System
SIGNATURE By:
-----------------------------
(Registered Agent)
DATE Allan Farnell, Asst. Secy. 3/15/94
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 6
Florida Department of State, Jim Smith, Secretary of State
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: Visionworks Holdings, Inc.
1b. Date of incorporation 1/27/94 Document No. P96000007212
2. The name and address of the current registered agent and office:
Richard W. Roberson, 8333 Bryan Dairy road, Largo, Florida 34647
3. The name and address of the new registered agent and office:
(P.O. Box Not acceptable):
CT CORPORATION SYSTEM
c/o CT Corporation System, 1200 South Pine Island Rd., Plantation, FLorida 33324
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Sidney J. Nurkin, Asst. Secretary
-------------------------- ----------------------------------
Signature Typed or printed name and title
3/15/94
--------------------------
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
CT Corporation System
SIGNATURE By:
-----------------------------
(Registered Agent)
DATE Allan Farnell, Asst. Secy. 3/15/94
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 1
Exhibit 3.11
BYLAWS
OF
VISIONWORKS HOLDINGS, INC.
ARTICLE I
OFFICES
Visionworks Holdings, Inc. (the "Corporation") shall at all times
maintain a registered office in the State of Florida and a registered agent at
that address but may have other offices located within or outside the State of
Florida as the Board of Directors of the Corporation (the "Board of Directors")
may determine.
ARTICLE II
SHAREHOLDERS MEETINGS
2.1 Annual Meeting. A meeting of the shareholders of the Corporation
(the "Shareholders") shall be held annually. The annual meeting shall be held at
such time and place and on such date as the directors of the Corporation
(individually, a "Director" and collectively, the "Directors") shall determine
from time to time and as shall be specified in the notice of the meeting.
2.2 Special Meetings. Special meetings of the Shareholders may be
called at any time by the President and Chief Executive Officer or the Chairman
of the Board of Directors of the Corporation or any holder or holders of not
less than ten percent (10%) of the outstanding capital stock of the Corporation.
Special meetings shall be held at such a time and place and on such date as
shall be specified in the notice of the meeting.
2.3 Place. Annual or special meetings of the Shareholders may be held
within or without the State of Florida.
<PAGE> 2
2.4 Notice. Notice of annual or special meetings of the Shareholders
shall state the place, day and hour of the meeting, shall be given in writing
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, and shall be either mailed to the last known address or personally
given to each Shareholder. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. The waiver need not specify the
purpose of the meeting for the business transacted, unless one of the purposes
of the meeting concerns a plan of merger or consolidation, in which event the
waiver shall comply with the further requirements of law concerning such
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver of notice thereof. Notice of any special meeting of the Shareholders
shall state the purpose or purposes for which the meeting is called. The notice
of any meeting at which amendments to or restatements of the Articles of
Incorporation of the Corporation, merger or consolidation of the Corporation, or
the disposition of assets of the Corporation requiring approval of the
Shareholders, are to be considered, shall state such purpose, and further comply
with all requirement of law.
2.5 Quorum. At all meetings of the Shareholders a majority of the
outstanding shares of stock of the Corporation shall constitute a quorum for the
transaction of business, and no resolution or business shall be transacted
without the favorable vote of the holders of a majority of the shares of stock
of the Corporation represented at the meeting and entitled to vote. A lesser
number may adjourn from day to day, and shall announce the time and place to
which the meeting is adjourned.
2.6 Action in Lieu of Meeting. Any action to be taken at a meeting of
the Shareholders or any action that may be taken at a meeting of the
Shareholders may be taken without a meeting, without prior notice, and without a
vote if a consent in writing setting forth
<PAGE> 3
the action so taken shall be signed by the holders of not less than the minimum
number of shares of stock of the Corporation entitled to vote with respect to
the subject matter thereof that would be necessary to authorize or take such
action at a meeting at which the holders of shares of stock of the Corporation
entitled to vote thereon were present and voted, and any further requirements of
law pertaining to such action without a meeting have been complied with.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these Bylaws, the full and entire management
of the affairs and business of the Corporation shall be vested in the Board of
Directors which shall have and may exercise all of the powers that may be
exercised or performed by the Corporation.
3.2 Number of Directors. Subject to any contrary provision contained in
any agreement among the Shareholders (a) the Board of Directors shall fix by a
resolution of the Board of Directors the precise number of members of the Board
of Directors provided that the Board of Directors shall consist of not fewer
than one (1) nor more than nine (9) members, and (b) Directors shall be elected
at each annual meeting of the Shareholders and shall serve a term of one (1)
year and until their successors are elected. A majority of the Directors shall
constitute a quorum for the transaction of business. All resolutions adopted and
all business transacted by the Board of Directors shall require the affirmative
vote of a majority of the Board of Directors, whether or not present at the
meeting.
3.3 Vacancies. The Directors may fill, by the affirmative vote of a
majority of the remaining directors, the place of any Director that may become
vacant prior to the expiration of his or her term, such appointment by the
Directors to continue until the expiration of the term of the Director whose
place has become vacant, or may fill any directorship created by reason of an
<PAGE> 4
increase in the number of Directors, such appointment by the Directors to
continue for a term of office until the next election of Directors by the
Shareholders and until the election of the successor.
3.4 Meetings. The Directors shall meet annually, without notice,
following the annual meeting of the Shareholders. Special meetings of the
Directors may be called at any time by the President of the Corporation or by
any two (2) Directors on two (2) days' written notice to each Director, which
notice shall specify the time and place of the meeting. Notice of any such
meeting may be waived by an instrument, in writing executed before or after the
meeting. The Directors may attend and participate in meetings either in person
or by means of conference telephones or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at any meeting. Attendance in person at such
meeting shall constitute a waiver of notice thereof.
3.5 Action in Lieu of Meeting. Any action to be taken at a meeting of
the Directors, or any action that may be taken at a meeting of the Directors,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the Directors and any further requirements
of law pertaining to action taken without a meeting have been complied with.
3.6 Removal. Subject to any contrary provision contained in any
agreement among Shareholders, a Director may be removed from office only for
cause upon the affirmative vote of the holders of sixty-six and two-thirds (66
2/3) of the outstanding shares of the common stock of the Corporation, at a
meeting with respect to which notice of such purpose is given.
<PAGE> 5
3.7 Quorum. Unless otherwise provided in the Articles of Incorporation
of the Corporation, a quorum of the Board of Directors consists of a majority of
the number of Directors.
ARTICLE IV
OFFICERS
4.1 General Provisions. The officers of the Corporation shall consist
of a President and Chief Executive Officer, a Chairman of the Board of
Directors, a Secretary and a Treasurer who shall be elected by the Board of
Directors and such other officers as may be elected by the Board of Directors or
appointed as provided in these Bylaws. Each officer of the Corporation shall be
elected or appointed for a term of office running until the meeting of the Board
of Directors following the next annual meeting of the Shareholders, or such
other term as provided by resolution of the Board of Directors for the
appointment to office. Each officer of the Corporation shall serve for the term
of office for which he or she is elected or appointed and until his or her
successor has been elected or appointed and has been qualified or his or her
earlier resignation, removal from office, or death. Any two (2) or more offices
may be held by the same person.
4.2 President and Chief Executive Officer. The President and Chief
Executive Officer shall be the chief executive officer of the Corporation and
shall have general and active management of the operations of the Corporation.
In the absence of the Chairman of the Board of Directors, the President and
Chief Executive Officer shall, if a Director, preside at all meetings of the
Shareholders of the Board of Directors of the Corporation. He shall be
responsible for the administration of the Corporation, including general
supervision of the policies of the
<PAGE> 6
Corporation and general and active management of the financial affairs of the
Corporation, and shall execute bonds, mortgages or other contracts in the name
and on behalf of the Corporation.
4.3 Chairman of the Board of Directors. The Chairman of the Board of
Directors shall be a Director and, when present, shall preside at all meetings
of the Shareholders and of the Board of Directors of the Corporation, and shall
execute bonds, mortgages or other contracts in the name and on behalf of the
Corporation.
4.4 Secretary. The Secretary shall keep minutes of all meetings of the
Shareholders and Directors and have charge of the minute books, stock books and
seal of the Corporation and shall perform such other duties and have such other
powers as may from time to time be delegated to him or her by the President and
Chief Executive Officer of the Corporation or the Board of Directors.
4.5 Treasurer. The Treasurer shall be charged with the management of
the financial affairs of the Corporation, shall have the power to recommend
action concerning the Corporation's affairs to the President and Chief Executive
Officer of the Corporation, and shall perform such other duties and have such
other powers as may from time to time be delegated to him or her by the
President and Chief Executive Officer of the Corporation or the Board of
Directors.
4.6 Assistant Secretaries and Treasurers. Assistants to the Secretary
and Treasurer of the Corporation may be appointed by the President and Chief
Executive Officer of the Corporation or elected by the Board of Directors and
shall perform such duties and have such powers as shall be delegated to them by
the President and Chief Executive Officer of the Corporation or the Board of
Directors.
<PAGE> 7
4.7 Vice Presidents. The Corporation may have one (1) or more Vice
Presidents, elected by the Board of Directors, who shall perform such duties and
have such powers as may be delegated by the President and Chief Executive
Officer of the Corporation or the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Share Certificates. Share certificates shall be numbered in the
order in which they are issued. They shall be signed by the President and Chief
Executive Officer of the Corporation or the Chairman of the Board of Directors
and the Secretary of the Corporation, and the seal of the Corporation shall be
affixed thereto. Share certificates shall be kept in a book and shall be issued
in consecutive order therefrom. At a minimum, each share certificate must state
on its face the name of the Corporation, that the Corporation is organized under
the laws of the State of Florida, the name of the person to whom issued, and the
number and class of shares and the designation of the series, if any the share
certificate represents. Each share certificate must be signed (either manually
or in facsimile) by the President and Chief Executive Officer or the Chairman of
the Board of Directors and the Secretary or any Assistant Secretary, or by any
officer designated by the Board of Directors. Share certificates exchanged or
returned shall be cancelled by the Secretary of the Corporation and placed in
their original place in the stock book(s) of the Corporation.
5.2 Transfer of Shares. Transfers of shares of stock of the Corporation
shall be made on the stock book(s) of the Corporation by the holder in person or
by power of attorney by, on surrender of the old share certificate for such
shares of the Corporation, duly assigned.
<PAGE> 8
5.3 Voting. The holders of the common stock of the Corporation shall be
entitled to one (1) vote for each share of common stock of the Corporation
standing in their name.
ARTICLE VI
SEAL
The seal of the Corporation shall be in such from as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed to be the seal of
the Corporation. The seal shall be in the custody of the Secretary of the
Corporation and affixed by him or her by his or her assistants or the share
certificates and other appropriate papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board of Directors
or by the affirmative vote of the holders of sixty-six and two-thirds (66 2/3)
of the outstanding shares of Common Stock of the Corporation, provided that the
Shareholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a Director or officer of the Corporation, and
each person who is or was a Director or officer of the Corporation who, at the
request of the Corporation, is serving or has served as an officer, director,
partner, joint venturer or trustee of another
<PAGE> 9
corporation, partnership, joint venture, trust or other enterprise shall be
indemnified by the Corporation against those expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement that are allowed to be
paid or reimbursed by the Corporation under the laws of the State of Florida and
that are actually and reasonably incurred in connection with any action, suit,
or proceeding, pending or threatened, whether civil, criminal, administrative or
investigative, in which such person may be involved by reason of his or her
being or having been a Director or officer of the Corporation or of such other
enterprises. Such indemnification shall be made only in accordance with the laws
of the State of Florida and subject to the conditions prescribed therein.
In any instance where the laws of the State of Florida permit
indemnification to be provided to persons who are or have been a Director or
officer of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of another corporation, partnership, joint
venture, trust or other enterprise only on a determination that certain
specified standards of conduct have been met, upon application for
indemnification by any such person the Corporation shall promptly cause such
determination to be made (i) by the Board of Directors by majority vote of a
quorum consisting of Directors not at the time parties to the proceeding; (ii)
if a quorum cannot be obtained by majority vote of a committee duly designated
by the Board of Directors (in which designation Directors who are parties may
participate), consisting solely of two (2) or more Directors not at the time
parties to the proceeding; (iii) by special legal counsel selected by the Board
of Directors or its committee in the manner prescribed in (i) or (ii) above, and
a committee cannot be designated under (ii) above, selected by majority vote of
the full Board of Directors (in which selection Directors who are parties may
participate); or (iv) by the
<PAGE> 10
Shareholders, but shares of stock of the Corporation owned by or voted under the
control of Directors who are at the time parties to the proceeding may not be
voted on the determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of
Directors and officers of the Corporation whether or not the Corporation would
have the power to indemnify such Directors and officers of the Corporation
against any liability under the laws of the State of Florida. If any expenses or
other amounts are paid by way of indemnification, other than by court order,
action by the Shareholders or by an insurance carrier, the Corporation shall
provide notice of such payment to the Shareholders in accordance with the
provisions of the laws of the State of Florida.
<PAGE> 1
EXHIBIT 3.12
CERTIFICATE OF INCORPORATION
OF
EYE CARE HOLDINGS, INC.
FIRST: The name of the corporation is Eye Care Holdings, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors and the directors need not be
elected by ballot unless required by the bylaws of the Corporation.
SIXTH: The duration of the corporation shall be perpetual.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the bylaws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
right herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The foregoing
rights of indemnification shall not be deemed exclusive of any other rights to
which any
<PAGE> 2
such person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors in its discretion
shall have the power on behalf of the corporation to indemnify similarly any
person, other than a director or officer, made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was an advisory director, employee or agent of the corporation. The
provisions of this Article Ninth shall be applicable to persons who have ceased
to be directors, advisory directors, officers, employees or agents of the
corporation and shall inure to the benefit of their heirs, executors and
administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Steven A. Elder, whose mailing address is
112 East Pecan, Suite 1800, San Antonio, Texas 78205.
The undersigned, being the incorporator named above, for the purposes
of organizing a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly
has hereunto set his hand this 2nd day of September, 1997.
/s/ Steven A. Elder
Steven A. Elder, Incorporator
2
<PAGE> 1
EXHIBIT 3.13
September 2, 1997
BYLAWS
OF
EYE CARE HOLDINGS, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in San Antonio, Texas. The Corporation
may also have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the stockholders shall
be held each year on such date and at such time as shall be designated from time
to time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect, in accordance with the Certificate
of Incorporation, a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
<PAGE> 2
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these Bylaws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
- 2 -
<PAGE> 3
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these Bylaws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be at least one (1) and no more than five (5) as may be set
from time to time by the Board of Directors. Directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director shall hold office until his successor is elected and
qualified. Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall quality.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful
- 3 -
<PAGE> 4
acts and things as are not by statute, or by the Certificate of Incorporation or
by these Bylaws directed or required to be exercised or done by the
stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
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revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressing so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
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Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers. or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records Of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these Bylaws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board, additional Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, all of whom shall
also be officers. Two or more offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
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<PAGE> 7
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed, for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall provide at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all meetings of the stockholders and of the Board of Directors.
The President shall have such other powers and duties as may be assigned to or
vested in him from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President, perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
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<PAGE> 8
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the
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signatures of the Corporation's officers may be facsimiles. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed on such certificate, shall cease to be such officer, transfer agent
or registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or
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<PAGE> 10
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
BYLAWS
Section 1. Amendments. These Bylaws may be altered, amended or repealed
and new Bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular
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meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws. Any action of the Board of Directors to effect any alteration,
amendment, repeal or adoption of new Bylaws may be taken only by the affirmative
vote of a majority of the whole Board.
Section 2. When Bylaws Silent. It is expressly recognized that when the
Bylaws are silent as to the manner of performing any corporate function, the
provisions of the statutes shall control.
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EXHIBIT 3.14
VISIONWORKS PROPERTIES, INC.
ARTICLES OF INCORPORATION
I.
The name of the Corporation is:
VISIONWORKS PROPERTIES, INC.
II.
The street address of the initial principal office of the Corporation
is 8333 Bryan Dairy Road, Largo, Florida 34647.
III.
A. The total number of shares of capital stock that the Corporation
shall be authorized to issue is One Thousand (1,000) shares of common stock, no
par value (the "Common Stock").
B. Each share of the Common Stock shall be identical in all respects
and for all purposes and entitled to one vote per share in all proceedings in
which action may or is required to be taken by the shareholders of the
Corporation, participate equally in all dividends payable with respect to the
Common Stock, as, if, and when declared by the Board of Directors of the
Corporation, and share ratably in all of its assets of the Corporation in the
event of any voluntary or involuntary liquidation, winding up of the affairs of
the Corporation or upon any distribution of the assets of the Corporation.
IV.
The initial registered office of the Corporation shall be at 8333 Bryan
Dairy Road, Largo, Florida 34647. The initial registered agent of the
Corporation at such address shall be Richard W. Roberson.
V.
The name and address of the incorporator is:
<PAGE> 2
Teri L. McMahon, Esq.
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
VI.
The initial Board of Directors of the Corporation shall consist of nine
members, seven of whom shall be and whose addresses are:
John G. Bull
790 East Broward Boulevard
Suite 400
Fort Lauderdale, Florida 33301
William S. Green
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Bart McLean
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Larence Park
2950 Surrey Lane
Fort Lauderdale, Florida 33331
Richard W. Roberson
8333 Bryan Dairy Road
Largo, Florida 34647
Edwin A. Whalen, Jr.
Twelve Piedmont Center
Suite 210
Atlanta, Georgia 30305
Wallace Whitley
8033 Northwest 47th Drive
Coral Springs, Florida 33067
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ Teri L. McMahon
Teri L. McMahon, Esq.
Incorporator
<PAGE> 3
Acceptance by the Registered Agent as required in Section 607.0501(3)
F.S.: Richard W. Roberson is familiar with and accepts the obligations provided
for in Section 607.0505 on behalf of VISIONWORKS PROPERTIES, INC.
Dated: January 31, 1994 By /s/ Richard W. Robertson
President
<PAGE> 4
STATEMENT OF CHANGE OF REGISTERED OFFICE OR REGISTERED
AGENT OR BOTH FOR CORPORATIONS
Pursuant to the provisions of sections 607.0502, 617.0502, 607.1508, or
817.1508, Florida Statutes, the undersigned corporation organized under the laws
of the State of Florida submits the following statement in order to change its
registered office or registered agent, or both, in the State of Florida.
1a. The name of the corporation is: Visionworks Properties, Inc.
1b. Date of incorporation 2/1/94 Document No. P94000007750
2. The name and address of the current registered agent and
office: Richard W. Roberson, 8333 Bryan Dairy Road, Largo,
Florida 34647
3. The name and address of the new registered agent and office: (P.O. Box
Not acceptable:
C T CORPORATION SYSTEM
c/o C T Corporation System, 1200 South Pine Island Road.,
Plantation, Florida 33324
The street address of its registered agent and the street address of the
business office of its registered agent as changed will be identical.
Such change was authorized by resolution and duly adopted by its board of
directors or by an officer so authorized by the board.
Sidney J. Nurkin, Asst. Secretary
Signature Typed or printed name and title
3/15/94
Date
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATION OF MY POSITION AS REGISTERED AGENT.
CT Corporation System
SIGNATURE By:
(Registered Agent)
DATE Alan Farnell, Asst. Secy 3/15/94
Division of Corporations, P.O. Box 6327, Tallahassee, Fl 32314
CR2E045 (7-91) FILING FEE: $35.00
<PAGE> 1
EXHIBIT 3.15
BYLAWS
OF
VISIONWORKS PROPERTIES, INC.
ARTICLE I
OFFICES
Visionworks Properties, Inc. (the "Corporation") shall at all times
maintain a registered office in the State of Florida and a registered agent at
that address but may have other offices located within or outside the State of
Florida as the Board of Directors of the Corporation (the "Board of Directors")
may determine.
ARTICLE II
SHAREHOLDERS MEETINGS
2.1 ANNUAL MEETING. A meeting of the shareholders of the Corporation
(the "Shareholders") shall be held annually. The annual meeting shall be held at
such time and place and on such date as the directors of the Corporation
(individually, a "Director" and collectively, the "Directors") shall determine
from time to time and as shall be specified in the notice of the meeting.
2.2 SPECIAL MEETINGS. Special meetings of the Shareholders may be
called at any time by the President and Chief Executive Officer or the Chairman
of the Board of Directors of the Corporation or any holder or holders of not
less than ten percent (10%) of the outstanding capital stock of the Corporation.
Special meetings shall be held at such a time and place and on such date as
shall be specified in the notice of the meeting.
<PAGE> 2
2.3 PLACE. Annual or special meetings of the Shareholders may be held
within or without the State of Florida.
2.4 NOTICE. Notice of annual or special meetings of the Shareholder
shall state the place, day and hour of the meeting, shall be given in writing
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, and shall be either mailed to the last known address or personally
given to each Shareholder. Notice of a meeting may be waived by an instrument in
writing executed before or after the meeting. The waiver need not specify the
purpose of the meeting for the business transacted, unless one of the purposes
of the meeting concerns a plan of merger or consolidation, in which event the
waiver shall comply with the further requirements of law concerning such
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver of notice thereof. Notice of any special meeting of the Shareholders
shall state the purpose or purposes for which the meeting is called. The notice
of any meeting as which amendments to or restatements of the Articles of
Incorporation of the Corporation, merger or consolidation of the Corporation, or
the disposition of assets of the Corporation requiring approval of the
Shareholders, are to be considered, shall state such purpose, and further comply
with all requirements of law.
2.5 QUORUM. At all meetings of the Shareholders a majority of the
outstanding shares of stock of the Corporation shall constitute a quorum for the
transaction of business, and no resolution or business shall be transacted
without the favorable vote of the holders of a majority of the shares of stock
of the Corporation represented at the meeting and entitled to vote. A lesser
number may adjourn from day to day, and shall announce the time and place to
which the meeting is adjourned.
2
<PAGE> 3
2.6 ACTION IN LIEU OF MEETING. Any action to be taken at a meeting of
the Shareholders or any action that may be taken at a meeting of the
Shareholders may be taken without a meeting, without prior notice, and without a
vote if a consent in writing setting forth the action so taken shall be signed
by the holders of not less than the minimum number of shares of stock of the
Corporation entitled to vote with respect to the subject matter thereof that
would be necessary to authorize or take such action at a meeting at which the
holders of shares of stock of the Corporation entitled to vote thereon were
present and voted, and any further requirements of law pertaining to such action
without a meeting have been complied with.
ARTICLE III
DIRECTORS
3.1 MANAGEMENT. Subject to these Bylaws, the full and entire
management of the affairs and business of the Corporation shall be vested in the
Board of Directors which have and may exercise all of the powers that may be
exercised or performed by the Corporation.
3.2 NUMBER OF DIRECTORS. The Board of Directors shall fix by a
resolution of the Board of Directors the precise number of members of the Board
of Directors provided that the Board of Directors shall consist of not fewer
than one (1) nor more than nine (9) members. Directors shall be elected at each
annual meeting of the Shareholders and shall serve a term of one (1) year and
until their successors are elected. A majority of the Directors shall constitute
a quorum for the transaction of business. All resolutions adopted and all
business transacted by the Board of Directors shall require the affirmative vote
of a majority of the Board of Directors, whether or not present at the meeting.
3
<PAGE> 4
3.3 VACANCIES. The Directors may fill, by the affirmative vote of a
majority of the remaining directors, the place of any Director that may become
vacant prior to the expiration of his or her term, such appointment by the
Directors to continue until the expiration of the term of the Director whose
place has become vacant, or may fill any directorship created by reason of an
increase in the number of Directors, such appointment by the Directors to
continue for a term of office until the next election of Directors by the
Shareholders and until the election of the successor.
3.4 MEETINGS. The Directors shall meet annually, without notice,
following the annual meeting of the Shareholders. Special meetings of the
Directors may be called at any time by the President of the Corporation or by
any two (2) Directors on two (2) days' written notice to each Director, which
notice shall specify the time and place of the meeting. Notice of any such
meeting may be waived by an instrument in writing executed before or after the
meeting. The Directors may attend and participate in meetings either in person
or by means of conference telephones or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute presence in person at any meeting. Attendance in person at such
meeting shall constitute a waiver of notice thereof.
3.5 ACTION IN LIEU OF MEETING. Any action to be taken at a meeting of
the Directors, or any action that may be taken at a meeting of the Directors,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the Directors and any further requirements
of law pertaining to action taken without a meeting have been complied with.
4
<PAGE> 5
3.6 REMOVAL. Any Director may be removed from office, with or without
cause, upon the majority vote of the Shareholders, at a meeting with respect to
which notice of such purpose is given.
3.7 QUORUM. Unless otherwise provided in the Article of Incorporation
of the Corporation, a quorum of the Board of Directors consists of a majority of
the number of Directors.
ARTICLE IV
OFFICERS
4.1 GENERAL PROVISIONS. The officers of the Corporation shall consist
of a President and Chief Executive Officer, a Chairman of the Board of
Directors, a Secretary and a Treasurer who shall be elected by the Board of
Directors and such other officers as may be elected by the Board of Directors or
appointed as provided in these Bylaws. Each officer of the Corporation shall be
elected or appointed for a term of office running until the meeting of the Board
of Directors following the next annual meeting of the Shareholders, or such
other term as provided by resolution of the Board of Directors for the
appointment to office. Each officer of the Corporation shall serve for the term
of office for which he or she is elected or appointed and until his or her
successor has been elected or appointed and has been qualified or his or her
earlier resignation, removal from office, or death. Any two (2) or more offices
may be held by the same person.
4.2 PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and Chief
Executive Officer shall be the chief executive officer of the Corporation and
shall have general and active management of the operations of the Corporation.
In the absence of the Chairman of the Board
5
<PAGE> 6
of Directors, the President and Chief Executive Officer shall, if a Director,
preside at all meetings of the Shareholders and of the Board of Directors of the
Corporation. He shall be responsible for the administration of the Corporation,
including general supervision of the policies of the Corporation and general and
active management of the financial affairs of the Corporation, and shall execute
bonds, mortgages or other contracts in the name and on behalf of the
Corporation.
4.3 CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors shall be a Director and, when present, shall preside at all meetings
of the Shareholders and of the Board of Directors of the Corporation, and shall
execute bonds, mortgages or other contracts in the name and on behalf of the
Corporation.
4.4 SECRETARY. The Secretary shall keep minutes of all meetings of
the Shareholders and Directors and have charge of the minute books, stock books
and seal of the Corporation and shall perform such other duties and have such
other powers as may from time to time be delegated to him or her by the
President and Chief Executive Officer of the Corporation of the Board of
Directors.
4.5 TREASURER. The Treasurer shall be charged with the management of
the financial affairs of the Corporation, shall have the power to recommend
action concerning the Corporation's affairs to the President and Chief Executive
Officer of the Corporation, and shall perform such other duties and have such
other powers as may from time to time be delegated to him or her by the
President and Chief Executive Officer of the Corporation or the Board of
Directors.
4.6 ASSISTANT SECRETARIES AND TREASURERS. Assistants to the Secretary
and Treasurer of the Corporation may be appointed by the President and Chief
Executive Officer of the
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Corporation or elected by the Board of Directors and shall perform such duties
and have such powers as shall be delegated to them by the President and Chief
Executive Officer of the Corporation or the Board of Directors.
4.7 VICE PRESIDENTS. The Corporation may have one (1) or more Vice
Presidents, elected by the Board of Directors, who shall perform such duties and
have such powers as may be delegated by the President and Chief Executive
Officer of the Corporation or the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 SHARE CERTIFICATES. Share certificates shall be numbered in the
order in which they are issued. They shall be signed by the President and Chief
Executive Officer of the Corporation or the Chairman of the Board of Directors
and the Secretary of the Corporation, and the seal of the Corporation shall be
affixed thereto. Share certificates shall be kept in a book and shall be issued
in consecutive order therefrom. At a minimum, each share certificate must state
on its face the name of the Corporation, that the Corporation is organized under
the laws of the State of Florida, the name of the person to whom issued, and the
number and class of shares and the designation of the series, if any, the share
certificate represents. Each share certificate must be signed (either manually
or in facsimile) by the President and Chief Executive Officer or the Chairman of
the Board of Directors and the Secretary or any Assistant Secretary, or by any
officer designated by the Board of Directors. Share certificates exchanged or
returned shall be canceled by the Secretary of the Corporation and placed in
their original place in the stock book(s) of the Corporation.
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5.2 TRANSFER OF SHARES. Transfers of shares of stock of the
Corporation shall be made on the stock book(s) of the Corporation by the holder
in person or by power of attorney by, or surrender of the old share certificate
for such shares of the Corporation, duly assigned.
5.3 VOTING. The holders of the common stock of the Corporation shall
be entitled to one (1) vote for each share of common stock of the Corporation
standing in their name.
ARTICLE VI
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed to be the seal of
the Corporation. The seal shall be in the custody of the Secretary of the
Corporation and affixed by him or her by his or her assistants on the share
certificates and other appropriate papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board of Directors
or by majority vote of the Shareholders, provided that the Shareholders may
provide by resolution that any Bylaw provision repealed, amended, adopted or
altered by them may not be repealed, amended, adopted or altered by the Board of
Directors.
ARTICLE VIII
INDEMNIFICATION
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Each person who is or was a Director or officer of the Corporation, and
each person who is or was a Director or officer of the Corporation who, at the
request of the Corporation, is serving or has served as an officer, director,
partner, joint venture or trustee of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Corporation
against those expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement that are allowed to be paid or reimbursed by the Corporation
under the laws of the State of Florida and that are actually and reasonably
incurred in connection with any action, suit or proceeding, pending or
threatened, whether civil, criminal, administrative or investigative, in which
such person may be involved by reason of his or her being or having been a
Director or officer of the Corporation or of such other enterprises. Such
indemnification shall be made only in accordance with the laws of the State of
Florida and subject to the conditions prescribed therein.
In any instance where the laws of the State of Florida permit
indemnification to be provided to persons who are or have been a Director or
officer of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of another corporation, partnership, joint
venture, trust or other enterprise only on a determination that certain
specified standards of conduct have been met, upon application for
indemnification by any such person the Corporation shall promptly cause such
determination to be made (i) by the Board of Directors by majority vote of a
quorum consisting of Directors not at the time parties to the proceeding; (ii)
if a quorum cannot be obtained by majority vote of a committee duly designated
by the Board of Directors (in which designation Directors who are parties may
participate), consisting solely of two (2) or more Directors not at the time
parties to the proceeding; (iii) by special legal counsel
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selected by the Board of Directors or its committee in the manner prescribed in
(i) or (ii) above, and a committee cannot be designated under (ii) above,
selected by majority vote of the full Board of Directors (in which selection
Directors who are parties may participate); or (iv) by the Shareholders, but
shares of stock of the Corporation owned by or voted under the control of
Directors who are at the time parties to the proceeding may not be voted on the
determination.
As a condition to any such right of indemnification, the Corporation
may require that it be permitted to participate in the defense of any such
action or proceeding through legal counsel designated by the Corporation and at
the expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of
Directors and officers of the Corporation whether or not the Corporation would
have the power to indemnify such Directors and officers of the Corporation
against any liability under the laws of the State of Florida. If any expenses or
other amounts are paid by way of indemnification, other than by court order,
action by the Shareholders or by an insurance carrier, the Corporation shall
provide notice of such payment to the Shareholders in accordance with the
provisions of the laws of the State of Florida.
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EXHIBIT 3.16
CERTIFICATE OF INCORPORATION
OF
VISIONARY RETAIL MANAGEMENT, INC.
FIRST: The name of the corporation is Visionary Retail Management, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors and the directors need not be
elected by ballot unless required by the bylaws of the Corporation.
SIXTH: The duration of the corporation shall be perpetual.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the bylaws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or contemplated
action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the corporation, or served another corporation, partnership, joint venture,
trust or other enterprise as a director, advisory director, officer, employee or
agent at the request of the corporation, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding. The
foregoing rights of indemnification shall not be deemed exclusive of any other
rights to which any
<PAGE> 2
such person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors in its discretion
shall have the power on behalf of the corporation to indemnify similarly any
person, other than a director or officer, made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was an advisory director, employee or agent of the corporation. The
provisions of this Article Ninth shall be applicable to persons who have ceased
to be directors, advisory directors, officers, employees or agents of the
corporation and shall inure to the benefit of their heirs, executors and
administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Steven A. Elder, whose mailing address is
112 East Pecan, Suite 1800, San Antonio, Texas 78205.
The undersigned being the incorporator named above, for the purposes of
organizing a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true, and accordingly has
hereunto set his hand this 2nd day of September, 1997.
/s/ Steven A. Elder
Steven A. Elder, Incorporator
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EXHIBIT 3.17
September 2, 1997
BYLAWS
OF
VISIONARY RETAIL MANAGEMENT, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in San Antonio, Texas. The Corporation
may also have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the stockholders shall
be held each year on such date and at such time as shall be designated from time
to time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect, in accordance with the Certificate
of Incorporation, a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
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Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid. addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
presented in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these Bylaws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly
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required by statute, the Certificate of Incorporation or these Bylaws. The
voting for election of directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be at least one (1) and no more than five (5) as may be set
from time to time by the Board of Directors. Directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director shall hold office until his successor is elected and
qualified, Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
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Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
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Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meeting by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
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ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these Bylaws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board, additional Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, all of whom shall
also be officers. Two or more offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed, for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
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Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all meetings of the stockholders and of the Board of Directors.
The President shall have such other powers and duties as may be assigned to or
vested in him from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President. perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President
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and directors, at the regular meetings of the Board or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as may be
prescribed by the Board of Directors or the President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed on such
certificate, shall cease to be such officer, transfer agent or registrar,
whether because of death, resignation or otherwise, before such certificate has
been delivered by the Corporation or its agents, such certificate may
nevertheless be issued and delivered with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the
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Corporation shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of' stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
BYLAWS
Section 1. Amendments. These Bylaws may be altered, amended or repealed
and new Bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new Bylaws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When Bylaws Silent. It is expressly recognized that when the
Bylaws are silent as to the manner of performing any corporate function, the
provisions of the statutes shall control.
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EXHIBIT 3.18
CERTIFICATE OF INCORPORATION
OF
VISIONARY PROPERTIES, INC.
FIRST: The name of the corporation is Visionary Properties, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, Country of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors and the directors need not be
elected by ballot unless required by the bylaws of the Corporation.
SIXTH: The duration of the corporation shall be perpetual.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the bylaws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The foregoing
rights of indemnification shall not be deemed exclusive of any other rights to
which any such person may be entitled under any
<PAGE> 2
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
The Board of Directors in its discretion shall have the power on behalf of the
corporation to indemnify similarly any person, other than a director or officer,
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he is or was an advisory director, employee or agent
of the corporation. The provisions of this Article Ninth shall be applicable to
persons who have ceased to be directors, advisory directors, officers, employees
or agents of the corporation and shall inure to the benefit of their heirs,
executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Steven A. Elder, whose mailing address is
112 East Pecan, Suite 1800, San Antonio, Texas 78205.
The undersigned, being the incorporator named above, for the purposes
of organizing a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly
has hereunto set his hand this 2nd day of September, 1997.
/s/ Steven A. Elder
-----------------------------
Steven A. Elder, Incorporator
<PAGE> 1
EXHIBIT 3.19
September 2, 1997
BYLAWS
OF
VISIONARY PROPERTIES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the city of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in San Antonio, Texas. The Corporation
may also have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the stockholders shall
be held each year on such date and at such time as shall be designated from time
to time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect, in accordance with the Certificate
of Incorporation, a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
<PAGE> 2
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these Bylaws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders. a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
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<PAGE> 3
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these Bylaws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation. any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, If a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be at least one (1) and no more than five (5) as may be set
from time to time by the Board of Directors. Directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director shall hold office until his successor is elected and
qualified. Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director. and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall quality.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful
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<PAGE> 4
acts and things as are not by statute, or by the Certificate of Incorporation or
by these Bylaws directed or required to be exercised or done by the
stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the President on two business days' notice to each director,
either the Chairman of the Board or the President on two business days' notice
to each director, either personally or by mail or by telegram, and in the case
of notice by mail, such notice shall be deemed to have been given on the third
day following the date on which such notice is deposited in the United States
mail. postage prepaid, properly addressed to such director. Special meetings
shall be called by the President or Secretary in like manner and on like notice
on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically, provided by statute, by
the Certificate of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors the management of the business and affairs of the Corporation. and
may authorize the seal of the Corporation to be affixed to all papers which may
require it, but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property
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<PAGE> 5
and assets, recommending to the stockholders a dissolution of the Corporation or
a revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation 'in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws. members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed. with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
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<PAGE> 6
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by, any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying good faith upon
other records the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these Bylaws, notice is required
to be given to any director or stockholder and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary, and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board. additional Vice Presidents. one or more
Assistant Secretaries and one or more Assistant Treasurers. all of whom shall
also be officers. Two or more offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
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<PAGE> 7
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board.
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed. for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all meetings of the stockholders and of the Board of Directors.
The President shall have such other powers and duties as may be assigned to or
vested in him from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President, perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committee of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
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<PAGE> 8
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it. an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfaction, to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office. of all books, papers, vouchers, money and other property 7 of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
scaled with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the
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signatures of the Corporation's officers may be facsimiles. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed on such certificate, shall cease to be such officer, transfer agent
or registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special nights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum. and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and. upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or
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shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in Writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however. that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
BYLAWS
Section 1. Amendments. These Bylaws may be altered, amended or repealed
and new Bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is
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conferred upon the Board of Directors b the Certificate of Incorporation, at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws. Any action of the Board of Directors to effect any alteration,
amendment, repeal or adoption of new Bylaws may be taken only by the affirmative
vote of a majority of the whole Board.
Section 2. When Bylaws Silent. It is expressly recognized that when the
Bylaws are silent as to the manner of performing any corporate function, the
provisions of the statutes shall control.
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EXHIBIT 3.20
CERTIFICATE OF INCORPORATION
OF
VISIONARY MSO, INC.
FIRST: The name of the corporation is Visionary MSO, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, county of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors and the directors need not be
elected by ballot unless required by the bylaws of the Corporation.
SIXTH: The duration of the corporation shall be perpetual.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the bylaws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amount paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The foregoing
rights of indemnification shall not be deemed exclusive of any other rights to
which any such person may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. The Board of Directors in
its discretion shall have the power on behalf of
<PAGE> 2
the corporation to indemnify similarly any person, other than a director or
officer, made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he is or was an advisory director,
employee or agent of the corporation. The provisions of this Article Ninth shall
be applicable to persons who have ceased to be directors, advisory directors,
officers, employees or agents of the corporation and shall inure to the benefit
of their heirs, executors and administrators.
Pursuant to section 102()(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Steven A. Elder, whose mailing address is
112 East Pecan, Suite 1800, San Antonio, Texas 78205.
The undersigned, being the incorporator named above, for the purposes
of organizing a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts therein stated are true, and accordingly
has hereunto set his hand this 2nd day of September, 1997.
/s/ Steven A. Elder
Steven A. Elder, Incorporator
<PAGE> 1
EXHIBIT 3.21
September 2, 1997
BYLAWS
OF
VISIONARY MSO, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in San Antonio, Texas. The Corporation
may also have offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the stockholders shall
be held each year on such date and at such time as shall be designated from time
to time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect, in accordance with the Certificate
of Incorporation, a board of directors and transact such other business as may
properly be brought before the meeting.
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Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any
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<PAGE> 3
purpose germane to the meeting, during ordinary business hours, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine such list
or stock ledger, or to vote at any meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these Bylaws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is
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fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these Bylaws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by
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less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be at least one (1) and no more than five (5) as may be set
from time to time by the Board of Directors. Directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director shall hold office until his successor is elected and
qualified. Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these Bylaw's directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meeting. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders,
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and at the same place, unless by unanimous consent of the directors then elected
and serving such time or place shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee
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provided for in Section 10 of this Article III, each committee to consist of one
or more of the directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it, but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock or to adopt a certificate of ownership and merger. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
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Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these Bylaws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the
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giving of such notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board, additional Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, all of whom shall
also be officers. Two or more offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors
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may be removed, for or without cause, at any time by a majority vote of the
whole Board. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all meetings of the stockholders and of the Board of Directors.
The President shall have such other powers and duties as may be assigned to or
vested in him from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President, perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a
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book to be kept for that purpose, and shall perform like duties for committees
of the Board when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. He shall keep in safe custody
the seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
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<PAGE> 13
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety, or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's
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<PAGE> 14
officers may be facsimiles. In case any officer, transfer agent or registrar who
has signed, or whose facsimile signature has been placed on such certificate,
shall cease to be such officer, transfer agent or registrar, whether because of
death, resignation or otherwise, before such certificate has been delivered by
the Corporation or its agents, such certificate may nevertheless be issued and
delivered with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the back of the certificate which the Corporation shall issue to
represent such class or series of stock, provided that, except as otherwise
provided in section 202 of the General Corporation Law of Delaware, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the
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<PAGE> 15
Board of Directors, in its discretion and as a condition precedent to the
issuance thereof, may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as it shall require and/or give the Corporation a bond in such form, in such
sum, and with such surety, or sureties as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
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<PAGE> 16
in respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty, days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
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<PAGE> 17
ARTICLE VIII
BYLAWS
Section 1. Amendments. These Bylaws may be altered, amended or repealed
and new Bylaws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new Bylaws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When Bylaws Silent. It is expressly recognized that when the
Bylaws are silent as to the manner of performing any corporate function, the
provisions of the statutes shall control.
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<PAGE> 1
EXHIBIT 3.22
CERTIFICATE OF INCORPORATION
OF
THE SAMIT GROUP, INC.
Pursuant to Section 102 of the General Corporation Law
of the State of Delaware
The undersigned, in order to form a corporation pursuant to Section 102
of the General Corporation Law of Delaware, does hereby certify:
FIRST: The name of the Corporation is The Samit Group, Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 10,000 shares of
Common Stock, par value $.01 per share.
A. Dividends. The holders of shares of Common Stock shall be entitled
to receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of Common Stock.
B. Voting Rights. At every annual or special meeting of stockholders of
the Corporation, every holder of Common Stock shall be entitled to one vote, in
person or by proxy, for each share of Common Stock standing in his name on the
books of the Corporation.
C. Liquidation, Dissolution, or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the affairs
of the Corporation, after payment or provision for payment of the debts and
other liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably in the
remaining net assets of the Corporation.
FIFTH: The name and mailing address of the Incorporator is as follows:
<PAGE> 2
Name Mailing Address
Leslee H. Moss Hertzog, Calamari & Gleason
100 Park Avenue
New York, NY 10017
SIXTH: The Board of Directors is expressly authorized to adopt, amend,
or repeal the by-laws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall otherwise provide.
EIGHTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the General Corporation Law of Delaware is hereafter amended to
permit further elimination or limitation of the personal liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of
Delaware as so amended. Any repeal or modification of this Article EIGHTH by the
stockholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director of the Corporation existing at the same time
of such repeal or modification.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolutions or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this Corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
<PAGE> 3
TENTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of
December 1992 and I affirm that the foregoing certificate is my act and deed and
that the facts stated therein are true.
/s/ Leslee H. Moss
Leslee H. Moss, Incorporator
<PAGE> 4
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
OF
THE SAMIT GROUP, INC.
It is hereby certified that:
1. The name of the Corporation is: The Samit Group, Inc.
2. The Certificate of Incorporation is hereby amended by changing the
number of shares of stock authorized set forth in Article Fourth, and
substituting in lieu thereof the following:
"Fourth: The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is 20,000 shares of
Common Stock, par value $.01 per share."
3. The amendment of the Certificate of Incorporation herein certified have
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed and attested to on April 25, 1994.
/s/ Dr. Robert A. Samit
----------------------------------
Dr. Robert A. Samit, President
Attest:
/s/ Gregory Harford
- ---------------------------
Gregory Harford, Secretary
<PAGE> 1
EXHIBIT 3.23
AMENDMENT TO BY-LAWS OF THE SAMIT GROUP, INC. - Effective 12/6/93
By Written Consent in Lieu of Special Meeting, on December 6, 1993 the
Stockholders and Director unanimously amended the By-Laws pursuant to the
following Resolutions:
RESOLVED that ARTICLE II, Section 2 of the By-Laws is deleted
in its entirety and the following substituted in its place:
Section 2. The annual meeting of the Shareholders of the
Corporation shall be held on the first Monday in December in each year.
If that day is a legal holiday, the annual meeting shall be held on the
next succeeding day not a legal holiday.
FURTHER RESOLVED that ARTICLE IX, Section 1 is deleted in its
entirety and the following substituted in its place:
Section 1. Officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President
(who shall also be the Chief Operating Officer, a Vice President, a
Secretary, a Treasurer (who shall also be the Chief Financial Officer)
and an Assistant Secretary.
FURTHER RESOLVED that ARTICLE IX, Section 6 is deleted in its
entirety and the following substituted in its place:
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer, if one shall have been
elected, shall be a member of the Board of Directors, an officer of the
Corporation, and, if present, shall preside at each meeting of the
Shareholders or the Board of Directors. The Chief Executive Officer
shall advise and counsel with the President, and in the absence of the
President, shall perform such other duties as may from time to time be
assigned by the Board of Directors.
FURTHER RESOLVED that Article IX, Section 7 is deleted in its
entirety and the following substituted in its place:
THE PRESIDENT
Section 7. The President shall, in the absence of the Chief
Executive Officer, or if a Chief Executive Officer shall not have been
elected, preside at each meeting of the Shareholders or Board of
Directors. The President shall perform all duties incident to the
<PAGE> 2
office of the President and such other duties as may from time to time
be assigned to him by the Board of Directors.
<PAGE> 3
AMENDED AND RESTATED
BY-LAWS OF
THE SAMIT GROUP, INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. Other Offices. The Corporation may also have an office or offices
other than said registered office at such place or places, either within or
without the State of Delaware, as the Board of Directors shall from time to time
determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders,
commencing with the year 1993, shall be held at 10 A.M. on the 1st of March, if
not a legal holiday, and if a legal holiday, then on the next succeeding day not
a legal holiday, at 10 A.M., or at such other date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of meeting or in a duly executed waiver thereof. At such annual meeting, the
stockholders shall elect, by a plurality vote, a Board of Directors and transact
such other business as may properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board of
Directors or the Chief Executive Officer, if one shall have been elected, or the
President and shall be called by the Secretary upon the request in writing of a
stockholder or stockholders holding of record at least two-thirds of the voting
power of the issued and outstanding shares of stock of the Corporation entitled
to vote at such meeting.
<PAGE> 4
SECTION 4. Notice of Meetings. Except as otherwise expressly required
by statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not less than ten nor
more than sixty days before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice. Notice shall be given personally or by mail and, if by mail, shall be
sent in a postage prepaid envelope, addressed to the stockholder at his address
as it appears on the records of the Corporation. Notice by mail shall be deemed
given at the time when the same shall be deposited in the United States mail,
postage prepaid, Notice of any meeting shall not be required to be given to any
person who attends such meeting, except when such person attends the meeting in
person or by proxy for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, or who, either before or after the meeting, shall submit a
signed written waiver of notice, in person or by proxy. Neither the business to
be transacted at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of notice.
SECTION 5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city, town or village where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not specified, at the place where the meeting is to be held. The list
shall be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
SECTION 6. Quorum Adjournments. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of stockholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
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<PAGE> 5
SECTION 7. Organization. At each meeting of stockholders, the Chief
Executive Officer, if one shall have been elected, or, in his absence or if one
shall not have been elected, the President, or, in his absence or if one shall
not have been elected, a Vice President selected by the Board of Directors shall
act as chairman of the meeting. The Secretary or, in his absence or inability to
act, the person whom the chairman of the meeting shall appoint secretary of the
meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 8. Notice of Stockholder Proposals. Notwithstanding anything
herein to the contrary, (a) at an annual meeting of stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by, or at the direction
of, the Board of Directors or (ii) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section of these ByLaws.
For a proposal to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than sixty days nor more than ninety days prior to the
scheduled annual meeting, regardless of any postponements, deferrals or
adjournments of that meeting to a later date; provided, however, that if less
than seventy days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business on
the tenth day following the earlier of the day on which such notice of the date
of the scheduled annual meeting was mailed or the day on which such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the proposal desired to be brought before the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business and any other stockholders known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the Corporation's stock which are beneficially owned by the
stockholder on the date of such stockholder notice and by any other stockholders
known by such stockholder to be supporting such proposal on the date of such
stockholder notice, and (iv) any financial interest of the stockholder in such
proposal.
(b) If the Chief Executive Officer of the annual meeting determines
that a stockholder proposal was not made in accordance with the terms of this
Section, he will so declare at the annual meeting and any such proposal shall
not be acted upon at the annual meeting.
(c) This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
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<PAGE> 6
SECTION 9. Order of Business. Subject to Section 8 of Article II, the
order of business at all meetings of the stockholders shall be as determined by
the chairman of the meeting.
SECTION 10. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record book of stockholders
of the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7
of Article V of these By-Laws as the record date for the determination
of the stockholders who shall be entitled to notice of and to vote at
such meeting; or
(b) if no such record date shall have been so fixed, then at
the close of business on the day next preceding the day on which notice
thereof shall be given, or, if notice is waived, at the close of
business on the date next preceding the day on which the meeting is
held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated in
the order of business for so delivering such proxies. When a quorum is present
at any meeting, the vote of the holders of a majority of the voting power of the
issued and outstanding stock of the Corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Certificate of Incorporation or of these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question, Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by his proxy, if there by such proxy, and shall
state the number of shares voted.
SECTION 11. Inspectors. The Board of Directors may, and the Board of
Directors shall if required by statute, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the validity of ballots and proxies and the existence of a
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<PAGE> 7
quorum, and shall receive votes, ballots or consents, determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, count all votes, ballots or consents, determine
the results, certify their determination of the number of shares of capital
stock represented at the meeting and their count of all votes and ballots and do
such acts as are required by statute or are proper to conduct the election or
vote with fairness to all stockholders. The inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 12. Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, and the action taken without such meeting and vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares of
stock of the Corporation entitled to vote thereon were present and voted.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the initial Board of Directors shall be 3.
Thereafter, the number of directors may be fixed, from time to time, by the
affirmative vote of a majority of the entire Board of Directors or by action of
the stockholders of the Corporation. Any decrease in the number of directors
shall be effective at the time of the next succeeding annual meeting of
stockholders unless there shall be vacancies in the Board of Directors, in which
case such decrease may become effective at any time prior to the next succeeding
annual meeting to the extent of the number of such vacancies. Directors need not
be stockholders. Except as otherwise provided by statute or these By-Laws, the
directors (other than members of the initial Board of Directors) shall be
elected at the annual meeting of stockholders. Each director shall hold office
until his successor shall have been elected and qualified, or until his death,
or until he shall have resigned, or have been removed, as hereinafter provided
in these By-Laws.
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<PAGE> 8
SECTION 3. Place of Meetings. Meetings of the Board of Directors shall
be held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.
SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware), as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chief Executive Officer, if one shall have been elected, or
by two or more directors of the Corporation or by the President.
SECTION 7. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. Quorum and Manner of Acting. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a
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<PAGE> 9
quorum at any meeting of the Board of Directors, a majority of the directors
present thereat may adjourn such meeting to another time and place. Notice of
the time and place of any such adjourned meeting shall be given to all of the
directors unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only as
a Board and the individual directors shall have no power as such.
SECTION 9. Organization. At each meeting of the Board of Directors, the
Chief Executive Officer, if one shall have been elected, or, in the absence of
the Chief Executive Officer or if one shall not have been elected, the President
(or, in his absence, another director chosen by a majority of the directors
present) shall act as chairman of the meeting and preside thereat. The Secretary
or, in his absence, any person appointed by the chairman shall act as secretary
of the meeting and keep the minutes thereof.
SECTION 10. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 11. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), an increase in
the number of directors or any other cause, may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director or by the stockholders at the next annual meeting
thereof or at a special meeting thereof. Each director so elected shall hold
office until his successor shall have been elected and qualified.
SECTION 12. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the holders of a majority of the voting
power of the issued and outstanding capital stock of the Corporation entitled to
vote at an election of directors.
SECTION 13. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in any capacity.
SECTION 14. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
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Except to the extent restricted by statute or the Certificate of
Incorporation, each such committee, to the extent provided in the resolution
creating it, shall have and may exercise all the powers and authority of the
Board of Directors and may authorize the seal of the Corporation to be affixed
to all papers which require it. Each such committee shall serve at the pleasure
of the Board of Directors and have such name as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors.
SECTION 15. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.
SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chief Executive
Officer, the President, one or more Vice-Presidents, the Secretary and the
Treasurer. If the Board of Directors wishes, it may also elect other officers
(include one or more Assistant Treasurers and one or more Assistant Secretaries)
as may be necessary or desirable for the business of the Corporation. Any two or
more officers may be held by the same person, and no officer except the Chief
Executive Officer need be a director. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed, as hereinafter
provided in these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
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SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof.
SECTION 4. Chief Executive Officer. The Chief Executive Officer, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. He shall advise and counsel with the President,
and in his absence with other executives of the Corporation, and shall perform
such other duties as may from time to time be assigned to him by the Board of
Directors.
SECTION 5. The President. The President shall, in the absence of the
Chief Executive Officer or if the Chief Executive officer shall not have been
elected, preside at each meeting of the Board of Directors or the stockholders.
He shall perform all duties incident to the office of President and Chief
Executive officer and such other duties as may from time to time be assigned to
him by the Board of Directors.
SECTION 6. Vice-President. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President, At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice-President, or if there shall be
more than one, the Vice-Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice-Presidents in the
order of their election), shall perform the duties of the President, and, when
so acting, shall have the powers of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.
SECTION 7. The Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all
the funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
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<PAGE> 12
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the Corporation;
and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 8. The Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all certificates for shares of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 10. The Assistant Secretary. The Assistant Secretary, or if
there shall be more than one, the Assistant Secretaries in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Secretary or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. Officers' Bonds or Other Security. If required by the Board
of Directors, any officer of the Corporation shall give a bond or other security
for the faithful
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performance of his duties, in such amount and with such surety as the Board of
Directors may require.
SECTION 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
SECTION 1. Stock Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chief Executive Officer or the President or a
Vice-President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. If the Corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. Facsimile Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed, When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the
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Corporation on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
SECTION 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owner, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VI
Indemnification of Directors and Officers
SECTION l. General. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contenders or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. Derivative Actions. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
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SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such Sections 1 and 2. Such determination shall be made (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
SECTION 5. Advances for Expenses. Expenses (including attorneys' fees)
incurred in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VI. Such expenses
(including attorneys' fees) incurred may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
SECTION 6. Rights Not-Exclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other subsections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 7. Insurance. The Corporation shall have power -to purchase and
maintain insurances on behalf of any Person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
SECTION 8. Definition of Corporation. For the purposes of this Article
VI, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
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SECTION 9. Survival of Rights. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article VI shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chief Executive Officer or
the President, from time
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to time, may (or may appoint one or more attorneys or agents to) cast the votes
which the Corporation may be entitled to cast as a shareholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of the shares or other securities of
such other corporation. In the event one or more attorneys or agents are
appointed, the Chief Executive Officer or the President may instruct the person
or persons so appointed as to the manner of casting such votes or giving such
consent. The Chief Executive Officer or the President may, or may instruct the
attorneys or agents appointed to, execute or cause to be executed in the name
and on behalf of the Corporation and under its seal or otherwise, such written
proxies, consents, waivers or other instruments as may be necessary or proper in
the circumstances.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new by-laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) if the Certificate of Incorporation so provides,
by action of the Board of Directors at a regular or special meeting thereof .
Any by-law made by the Board of Directors may be amended or repealed by action
of the stockholders at any annual or special meeting of stockholders.
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EXHIBIT 3.24
ARTICLES OF AMENDMENT OF
SKYLINE OPTICAL, INC.
Pursuant to Virginia Code Section 13.-710, the Board of Directors
hereby authorizes and issues the following Articles of Amendment:
1. The text of the Amendment adopted: The name of the Corporation shall
be SKYLAB OPTICAL, INC.
2. The Amendment does not exchange, reclassify or cancel issued shares.
3. The effective date of the Articles of Amendment shall be the date
filed by the State Corporation Commission.
4. This action has been approved by the Shareholders of the Corporation
by Unanimous Consent.
SKYLINE OPTICAL, INC.
By: /s/ Robert A. Samit
President
<PAGE> 2
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
RICHMOND, may 12, 1988
The accompanying articles having been delivered to the State Corporation
Commission on behalf of
SKYLAB OPTICAL, INC. (formerly SKYLINE OPTICAL, INC.)
and the Commission having found that the articles comply with the requirements
of law and that all required fees have been paid, it is
ORDERED that this CERTIFICATE OF AMENDMENT
be issued, and that this order, together with the articles, be admitted to
record in this office of the Commission; and that the corporation have the
authority conferred on it by law in accordance with the articles, subject to the
conditions and restrictions imposed by law, effective May 12, 1988.
Upon the completion of such recordation, this order and the articles shall be
forwarded for recordation in the office of the Clerk of the Circuit Court, City
of Alexandria.
STATE CORPORATION COMMISSION
By: /s/ Elizabeth B. Lacy
Commissioner
<PAGE> 3
ARTICLES OF INCORPORATION
OF
SKYLINE OPTICAL, INC.
We hereby associate to form a stock corporation under the provisions of
Chapter 1 of Title 13.1, Code of Virginia and to that end, set forth the
following:
1. The name of the Corporation is SKYLINE OPTICAL, INC.
2. The purpose for which the Corporation is organized is as follows:
(a) To engage in and carry on the business of making and
supplying lenses and glasses to optometrists or opticians; to carry on said
business only through officers, employees, and agents who are duly authorized,
or otherwise, in the Commonwealth of Virginia; to at all times comply with the
provisions of Chapter 1, Title 13.1 of the Code of Virginia, as amended.
(b) In addition, the corporation may engage in any business in
which a corporation organized under the laws of the Commonwealth of Virginia may
engage, except any business that is required to be specifically set forth in the
Articles of Incorporation. In carrying out its objectives and purposes, the
Corporation shall have and exercise all powers necessary and convenient to
effect any or all of the purposes for which the Corporation is organized. The
purposes and powers specifically enumerated in Section (2)(a) above shall be
construed to be in furtherance of and not in limitation of the powers conferred
by law.
3. The number of shares which the Corporation shall have the authority
to issue and the par value per share are, as follows:
CLASS NUMBER OF SHARES PAR VALUE
<PAGE> 4
Common 1,000 $1.00
4. The Corporation under the provisions of Section 13.1-3 of Chapter 1
of Title 13.1 of the Code of Virginia, as amended, reserves to itself the power
to enter into partnership agreements with other corporations or with any
individual or individuals.
5. The post office address of the initial registered office is 526 King
Street, Suite 211, Post Office Box 1079, Alexandria, Virginia 22313.
6. The name of the City in which the initial registered office is
located is Alexandria, Virginia. The name of its registered agent, at the above
address, is Herbert S. Rosenblum, who is a resident of the Commonwealth of
Virginia, and a member of the Virginia State Bar.
7. The number of directors constituting the initial Board of Directors
is three (3) and the names and addresses of the persons to serve as the initial
Board of Directors are:
Robert A. Samit 2316 39th Street, N.W.
Washington, DC 20002
Howard Budner 1604 Guston Court
Silver Spring, MD 20906
Michael Davidson 8625 Burlingwood Drive
Springfield, VA 22152
8. No contract or other transaction between the Corporation and any
other corporation and no other act of the Corporation shall, in the absence of
fraud, in any way be affected or invalidated by the fact that any of the
directors of the Corporation are pecuniarily or otherwise interested in, or are
directors of or officers of, such other corporation. Any director of the
Corporation, individually, or any firm or association of which any director may
be a member, may be a party to, or may be pecuniarily interested in, any
contract or transaction of the Corporation, provided that the fact that he,
individually, or such firm or association is so
<PAGE> 5
interested, shall be disclosed or shall have been known to the members of the
Board of Directors present at any meeting at which action upon any such contract
or transaction is taken. Any director of the Corporation who is also a director
or officer of such other corporation or who is so interested may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
which shall authorize any such contract or transaction, with like force and
effect as if he were not such director or officer of such other corporation or
not so interested. Any director of the Corporation may vote upon any contract or
other transaction between the Corporation and any subsidiary, affiliated or
related corporation without regard to the fact that he is also a director of
such subsidiary, affiliated, or related corporation.
9. Directors and officers of the Corporation shall be indemnified as of
right to the fullest extent now or hereafter permitted by law in connection with
any actual or threatened civil, criminal, administrative or investigative
action, suit or proceeding (whether brought by or in the name of the Corporation
or otherwise) arising out of their service to the Corporation or to another
organization at the request of the Corporation. Persons who are not directors or
officers of the Corporation may be similarly indemnified in respect of such
service to the extent authorized at any time by the Board of Directors of the
Corporation. The Corporation may purchase and maintain insurance to protect
itself and any such director, officer or other person against any liability
asserted against him and incurred by him in respect of such service whether or
not the Corporation would have the power to indemnify him against such liability
by law or under the provisions of this Paragraph. The provisions of this
Paragraph shall be applicable to actions, suits or proceedings commenced after
the adoption thereof, whether arising from acts or omissions occurring before or
after the adoption thereof, and to directors, officers and other persons who
<PAGE> 6
have ceased to render such service, and shall inure to the benefit of the heirs,
executors and administrators of the directors, officers and other persons
referred to in this Paragraph.
Dated: November 17, 1987
/s/ Herbert S. Rull
--------------------------------
Incorporator
--------------------------------
Incorporator
--------------------------------
Incorporator
<PAGE> 7
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
November 20, 1987
CERTIFICATE OF INCORPORATION
The State Corporation Commission has found the accompanying articles submitted
on behalf of
SKYLINE OPTICAL, INC.
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ordered that this
CERTIFICATE OF INCORPORATION
be issued, and admitted to record with the articles in this office of the
Commission, effective November 20, 1987.
This order and its accompanying articles will be forwarded for filing in the
office of the Clerk of the Circuit Court of City of Alexandria following
admission to the records of the Commission.
STATE CORPORATION COMMISSION
By: /s/ Elizabeth B. Lacy
Commissioner
<PAGE> 1
Exhibit 3.25
AMENDMENT TO BY-LAWS OF SKYLAB OPTICAL, INC. - Effective 1/13/93
By Written Consent in Lieu of Special Meeting, on January 13, 1993 the
Stockholder and Director unanimously amended the By-Laws pursuant to the
following Resolutions:
RESOLVED that ARTICLE II, Section 2 of the By-Laws is deleted
in its entirety and the following substituted in its place:
Section 2. The annual meeting of the Shareholders of the
Corporation shall be held on the first Monday in December in each year.
If that day is a legal holiday, the annual meeting shall be held on the
next succeeding day not a legal holiday.
FURTHER RESOLVED that ARTICLE IX, Section I is deleted in its
entirety and the following substituted in its place:
Section 1. Officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President
(who shall also be the Chief Operating Officer, a Vice President, a
Secretary, a Treasurer (who shall also be the Chief Financial Officer)
and an Assistant Secretary.
FURTHER RESOLVED that ARTICLE IX, Section 6 is deleted in its
entirety and the following substituted in its place:
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer, if one shall have been
elected, shall be a member of the Board of Directors, an officer of the
Corporation, and, if present, shall preside at each meeting of the
Shareholders or the Board of Directors. The Chief Executive Officer
shall advise and counsel with the President, and in the absence of the
President, shall perform such other duties as may from time to time be
assigned by the Board of Directors.
FURTHER RESOLVED that Article IX, Section 7 is deleted in its
entirety and the following substituted in its place:
THE PRESIDENT
Section 7. The President shall, in the absence of the Chief
Executive Officer, or if a Chief Executive Officer shall not have been
elected, preside at each meeting of the Shareholders or Board of
Directors. The President shall perform all duties incident to the
office of the President and such other duties as may from time to time
be assigned to him by the Board of Directors.
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
SKYLAB OPTICAL, INC,
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Alexandria,
Virginia,
Section 2. The corporation may also have offices at such other places
both within and without the State of Virginia as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in Virginia, at such place as may be fixed from time to time by
the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year
1993, shall be held on the first Monday in March if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 10 A.M., at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
date, time and place of the meeting shall be delivered not less than ten nor
more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the
<PAGE> 3
secretary, or the officer or persons calling the meeting to each shareholder of
record entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other than
the election of directors may be held at such time and place within or without
the State of Virginia as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the chairman of the board of directors, the
president, or the board of directors.
Section 3. Written or printed notice of a special meeting stating the
date, time and place of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
Notice of a shareholders' meeting to act on an amendment of the
articles of incorporation, on a plan of merger or share exchange, on a proposed
sale of assets other than in the regular course of business, or on a plan of
dissolution shall be given, in the manner provided herein, not less than
twenty-five nor more than sixty days before the date of the meeting. Any such
notice shall be accompanied by a copy of the proposed amendment, plan of merger,
or share exchange, or plan of proposed sale of assets.
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<PAGE> 4
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF SHARES
Section 1. A majority of the votes entitled to be cast on a matter by a
voting group constitutes a quorum of that voting group for action on that matter
except as otherwise provided by statute or by the articles of incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders present in person or represented by proxy shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 2. If a quorum is present, action on a matter by a voting group
is approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action unless the vote of a greater number of
affirmative votes is required by law or the articles of incorporation.
Section 3. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders unless the articles of incorporation or law provide otherwise. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
In all elections for directors, each outstanding share, regardless of
class, is entitled to one vote for as many persons as there are directors to be
elected, or if the articles of
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<PAGE> 5
incorporation so provide, to cumulate their votes and give one candidate as many
votes as the number of directors multiplied by the number of his shares shall
equal, or to distribute the votes on the same principle among as many candidates
as he may see fit.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be one. Directors need not be
residents of the State of Virginia nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified, The first board of directors shall hold office until the
first annual meeting of shareholders.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be not less than one nor more
than four. The number of directors may be fixed or changed within the minimum or
maximum by the shareholders or by the board of directors, unless shares have
been issued in which case only the shareholders may change the range or switch
to a fixed size board. Directors need not be residents of the State of Virginia
nor shareholders of the corporation. The directors, other than the first board
of directors, shall be elected at the annual meeting of the
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<PAGE> 6
shareholders, and each director elected shall serve until the next succeeding
annual meeting and until his successor shall have been elected and qualified.
The first board of directors shall hold office until the first annual meeting of
shareholders.
Section 2. Any vacancy occurring in the board of directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the shareholders, the board of directors, or if the directors remaining in
office constitute fewer than a quorum of the board, the vacancy may be filled by
the affirmative vote of the directors remaining in office.
Section 3. The business affairs of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these bylaws directed or required to be exercised or done by
the shareholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Virginia, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may
be held either within or without the State of Virginia.
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<PAGE> 7
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the president on one day's notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. One of the directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
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<PAGE> 8
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Any action required or permitted to be taken without a
meeting of the directors may be taken without a meeting if one or more consents
in writing, setting forth the action so taken, shall be signed by each director
entitled to vote with respect to the subject matter thereof and included in the
minutes or filed with the corporate records reflecting the action taken.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. A majority of the number of directors fixed by the bylaws or
otherwise, may create one or more committees and appoint members of the board to
serve on the committee or committees. To the extent provided by the board of
directors or articles of incorporation, each committee shall have and exercise
all of the authority of the board of directors in the management of the
corporation, except as otherwise required by law. Each committee shall have two
or more members who serve at the pleasure of the board of directors, Each
committee shall keep regular minutes of its proceedings and report the same to
the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these bylaws, notice is required to be given to
any director or shareholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by
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<PAGE> 9
mail, addressed to such director or shareholder, at his address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United State mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice whatsoever is required to be given under
the provisions of the statutes or under the provisions of the articles of
incorporation or these bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice-president, a secretary, and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after each
annual meeting of shareholders shall choose a president and one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
- 8 -
<PAGE> 10
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders resolutions of the board of directors
are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
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<PAGE> 11
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other and other valuable effects in the name
- 10 -
<PAGE> 12
and to the credit of the corporation in such depositories as may be designated
by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates or shall be uncertificated. Certificates shall be signed by the
president or a vice-president and the
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<PAGE> 13
secretary or an assistant secretary of the corporation, and may be sealed with
the seal of the corporation or a facsimile thereof.
In addition to the above officers the treasurer or an assistant
treasurer may sign in lieu of the secretary or an assistant secretary.
When the corporation is authorized to issue shares of more than one
class there shall be set forth upon the face or back of each certificate, or
each certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue different series within a class, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers upon a certificate may be
facsimiles, unless otherwise provided in the articles of incorporation. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
uncertificated security to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate or uncertificated security, the
board of directors, in its discretion and as a condition precedent to the
issuance
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<PAGE> 14
thereof, may prescribe such terms and conditions as it deems expedient, and may
require such indemnities as it deems adequate, to protect the corporation from
any claim that may be made against it with respect to any such certificate
alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or any adjournment thereof
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may fix in advance a date as the record date for the determination of
shareholders, such date in any case to be not more than seventy days. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
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<PAGE> 15
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Virginia.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged by
voting group and within each voting group by class or series of shares, with the
address of each and the number of shares held by each, which list, for a period
of ten days prior to such meeting, shall be kept on file at the principal
business office of the corporation and shall be subject to inspection by any
shareholder at any time during usual business hours, Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original share transfer book, or a duplicate thereof, shall be
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<PAGE> 16
prima facie evidence as to who are the shareholders entitled to examine such
list or share transfer book or to vote at any meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in money
or other property subject to any provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
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<PAGE> 17
SEAL
Section 5. The corporation seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Virginia". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be amended or repealed or new bylaws may be
adopted by the affirmative vote of a majority of the board of directors at any
regular or special meeting of the board unless the articles of incorporation or
law reserve this power to the shareholders.
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<PAGE> 1
EXHIBIT 3.26
ARTICLES OF INCORPORATION OF
METROPOLITAN VISION SERVICES, INC.
A VIRGINIA STOCK CORPORATION
This is to certify that the undersigned Incorporator hereby establishes
a stock corporation under by virtue of the provisions of Chapter 9, Title 13.1,
code of Virginia 1950, as amended.
ARTICLE I
The name of the corporation is to be METROPOLITAN VISION SERVICES, INC.
ARTICLE II
The purposes for which the corporation is organized are:
a. To act as a referral and consulting agency of health-related
services, including, but not limited to optometric services,
at no risk to the corporation. Such health-related services
shall be provided by selected trained and qualified
professionals, who are not employees of the corporation, for
the benefit of selected individuals. The corporation shall not
provide professional optometric services.
b. To transact any and all other business not required to be
specifically stated in these Articles.
ARTICLE III
The corporation shall have one class of stock, designated as common
stock, and shall have authority to issue one thousand (1,000) shares to be
issued for such consideration as the Board of Directors determines. Cumulative
voting is not authorized.
<PAGE> 2
ARTICLE IV
The Board of Directors shall consist of not less than one member, nor
more than five members. The initial Director shall be Robert A. Samit, O.D.
whose address is 10951 Martingale Court, Potomac, Maryland.
ARTICLE V
The address of the corporation's initial registered office shall be 324
North Fairfax Street, Alexandria, Virginia 22314, which is within the City of
Alexandria. The name of the initial registered agent for the corporation shall
be Caleb C. Freeman, Esquire, who is a resident of the State of Virginia and a
member of the Virginia State Bar, and whose office address is the same as the
initial registered office set forth herein.
WITNESSETH WHEREOF, the undersigned has set his hand and seal this 14th
day of August, 1990.
/s/ Raymond D. Cotton (SEAL)
RAYMOND D. COTTON, INCORPORATOR
<PAGE> 3
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
August 20, 1990
The State Corporation Commission has found the accompanying articles submitted
on behalf of
METROPOLITAN VISION SERVICES, INC.
to comply with the requirements of law, and confirms payment of all related
fees.
Therefore, it is ORDERED that this
CERTIFICATE OF INCORPORATION
be issued and admitted to record with the articles of incorporation in the
Office of the Clerk of the Commission, effective August 20, 1990.
The corporation is granted the authority conferred on it by law in accordance
with the articles, subject to the conditions and restrictions imposed by law.
STATE CORPORATION COMMISSION
By: /s/ T.H. Morrison, Jr.
--------------------------------
Commissioner
<PAGE> 1
EXHIBIT 3.27
AMENDMENTS TO BY-LAWS OF METROPOLITAN VISION SERVICES, INC.
Effective 1/13/93
By Written Consent in Lieu of Special Meeting, on January 23, 1993 the
Stockholder and Director unanimously amended the By-Laws pursuant to the
following Resolutions:
RESOLVED that ARTICLE II Section 2 of the By-Laws is deleted
in its entirety and the following substituted in its place:
Section 2. The annual meeting of the Shareholders of
the Corporation shall be held on the first Monday in December
in each year. If that day is a legal holiday, the annual
meeting shall be held on the next succeeding day not a legal
holiday.
FURTHER RESOLVED that ARTICLE IX, Section I is deleted in its
entirety and the following substituted in its place:
Section 1. Officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chief
Executive Officer, a President (who shall also be the Chief
Operating Officer, a Vice President, a Secretary, a Treasurer
(who shall also be the Chief Financial Officer) and an
Assistant Secretary.
FURTHER RESOLVED that ARTICLE IX, Section 6 is deleted in its
entirety and the following substituted in its place:
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer, if one shall
have been elected, shall be a member of the Board of
Directors, an officer of the Corporation, and, if present,
shall preside at each meeting of the Shareholders or the Board
of Directors. The Chief Executive Officer shall advise and
counsel with the President, and in the absence of the
President, shall perform such other duties as may from time to
time be assigned by the Board of Directors.
FURTHER RESOLVED that Article IX, Section 7 is deleted in its
entirety and the following substituted in its place:
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THE PRESIDENT
Section 7. The President shall, in the absence of the
Chief Executive Officer, or if a Chief Executive Officer shall
not have been elected, preside at each meeting of the
Shareholders or Board of Directors. The President shall
perform all duties incident to the office of the President and
such other duties as may from time to time be assigned to him
by the Board of Directors.
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AMENDED AND RESTATED
BYLAWS
OF
METROPOLITAN VISION SERVICES, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Alexandria,
Virginia.
Section 2. The corporation may also have offices at such other places
both within and without the State of Virginia as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of
directors shall be held in Virginia, at such place as may be fixed from time to
time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with
the year 1993, shall be held on the first Monday in March if not a legal
holiday, and if a legal holiday, then on the next secular day following, at 10
A.M., at which they shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting
stating the date, time and place of the meeting shall be delivered not less than
ten nor more than sixty days before the date of the meeting, either personally
or by mail, by or at the direction of the president,
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the secretary, or the officer or persons calling the meeting to each shareholder
of record entitled to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose
other than the election of directors may be held at such time and place within
or without the State of Virginia as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the articles
of incorporation, may be called by the chairman of the board of directors, the
president, or the board of directors.
Section 3. Written or printed notice of a special meeting
stating the date, time and place of the meeting and the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail, by or
at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting.
Notice of a shareholders' meeting to act on an amendment of
the articles of incorporation, on a plan of merger or share exchange, on a
proposed sale of assets other than in the regular course of business, or on a
plan of dissolution shall be given, in the manner provided herein, not less than
twenty-five nor more than sixty days before the date of the meeting. Any such
notice shall be accompanied by a copy of the proposed amendment, plan of merger,
or share exchange, or plan of proposed sale of assets.
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Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF SHARES
Section 1. A majority of the votes entitled to be cast on a
matter by a voting group constitutes a quorum of that voting group for action on
that matter except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, action on a matter by a
voting group is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action unless the vote of a greater
number of affirmative votes is required by law or the articles of incorporation.
Section 3. Each outstanding share, regardless of class, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders unless the articles of incorporation or law provide otherwise. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
In all elections for directors, each outstanding share,
regardless of class, is entitled to one vote for as many persons as there are
directors to be elected, or if the articles of
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incorporation so provide, to cumulate their votes and give one candidate as many
votes as the number of directors multiplied by the number of his shares shall
equal, or to distribute the votes on the same principle among as many candidates
as he may see fit.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be one. Directors
need not be residents of the State of Virginia nor shareholders of the
corporation. The directors, other than the first board of directors, shall be
elected at the annual meeting of the shareholders, and each director elected
shall serve until the next succeeding annual meeting and until his successor
shall have been elected and qualified. The first board of directors shall hold
office until the first annual meeting of shareholders.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be not less than one
nor more than four. The number of directors may be fixed or changed within the
minimum or maximum by the shareholders or by the board of directors, unless
shares have been issued in which case only the shareholders may change the range
or switch to a fixed size board. Directors need not be residents of the State of
Virginia nor shareholders of the corporation. The directors, other than the
first board of directors, shall be elected at the annual meeting of the
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shareholders, and each director elected shall serve until the next succeeding
annual meeting and until his successor shall have been elected and qualified.
The first board of directors shall hold office until the first annual meeting of
shareholders.
Section 2. Any vacancy occurring in the board of directors,
including a vacancy resulting from an increase in the number of directors, may
be filled by the shareholders, the board of directors, or if the directors
remaining in office constitute fewer than a quorum of the board, the vacancy may
be filled by the affirmative vote of the directors remaining in office.
Section 3. The business affairs of the corporation shall be
managed by its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the articles of incorporation or by these bylaws directed or required to be
exercised or done by the shareholders.
Section 4. The directors may keep the books of the
corporation, except such as are required by law to be kept within the state,
outside of the State of Virginia, at such place or places as they may from time
to time determine.
Section 5. The board of directors, by the affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
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ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or
special, may be held either within or without the State of Virginia.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be
held upon such notice, or without notice, and at such time and at such place as
shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be
called by the president on one day's notice to each director, either personally
or by mail or by telegram; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
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Section 6. One of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 7. Any action required or permitted to be taken
without a meeting of the directors may be taken without a meeting if one or more
consents in writing, setting forth the action so taken, shall be signed by each
director entitled to vote with respect to the subject matter thereof and
included in the minutes or filed with the corporate records reflecting the
action taken.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. A majority of the number of directors fixed by the
bylaws or otherwise, may create one or more committees and appoint members of
the board to serve on the committee or committees. To the extent provided by the
board of directors or articles of incorporation, each committee shall have and
exercise all of the authority of the board of directors in the management of the
corporation, except as otherwise required by law. Each committee shall have two
or more members who serve at the pleasure of the board of directors. Each
committee shall keep regular minutes of its proceedings and report the same to
the board when required.
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ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the articles of incorporation or of these bylaws, notice is required to be
given to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United State mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice whatever is required to be
given under the provisions of the statutes or under the provisions of the
articles of incorporation or these bylaws, a waiver thereof in writing signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
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Section 2. The board of directors at its first meeting after
each annual meeting of shareholders shall choose a president and one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative vote of
a majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the corporation, shall preside at all meetings of the shareholders and the
board of directors, shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be
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otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the board of directors to some other officer or
agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability
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of the secretary, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence or
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disability of the treasurer, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented
by certificates or shall be uncertificated. Certificates shall be signed by the
president or a vice-president and the secretary or an assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.
In addition to the above officers the treasurer or an
assistant treasurer may sign in lieu of the secretary or an assistant secretary.
When the corporation is authorized to issue shares of more
than one class there shall be set forth upon the face or back of each
certificate, or each certificate shall have a statement that the corporation
will furnish to any shareholder upon request and without charge, a full
statement of the designations, preferences, limitations, and relative rights of
the shares of each class authorized to be issued and, if the corporation is
authorized to issue different series within a class, the variations in the
relative rights and preferences between the shares of each such series so far as
the same have been fixed and determined and the authority of the board of
directors to fix and determine the relative rights and preferences of subsequent
series.
Section 2. The signatures of the officers upon a certificate
may be facsimiles, unless otherwise provided in the articles of incorporation.
In case any officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such
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officer before such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or uncertificated security to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate or uncertificated security, the
board of directors, in its discretion and as a condition precedent to the
issuance thereof, may prescribe such terms and conditions as it deems expedient,
and may require such indemnities as it deems adequate, to protect the
corporation from any claim that may be made against it with respect to any such
certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a date as the record date for the determination
of shareholders, such date in any case to be not more than seventy days. If no
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record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Virginia.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer
books for shares shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged by voting group and within each voting group by class or
series of shares, with the address of each and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be kept
on file at the principal business office of the corporation and shall be subject
to inspection by any shareholder at any time during usual business hours. Such
list shall also be produced and kept
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open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting. The original share
transfer book, or a duplicate thereof, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share transfer book or to
vote at any meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of
incorporation relating thereto, if any, dividends may be declared by the board
of directors at any regular or special meeting, pursuant to law. Dividends may
be paid in money or other property subject to any provisions of the articles of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
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FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 5. The corporation seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal, Virginia". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be amended or repealed or new
bylaws may be adopted by the affirmative vote of a majority of the board of
directors at any regular or special meeting of the board unless the articles of
incorporation or law reserve this power to the shareholders.
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WRITTEN CONSENT IN LIEU OF
JOINT ANNUAL MEETING
OF
STOCKHOLDERS
AND
BOARD OF DIRECTORS
OF
METROPOLITAN VISION SERVICES, INC.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
The undersigned, being the sole Stockholder and the entire Board of
Directors of METROPOLITAN VISION SERVICES, INC., a Virginia corporation
(hereinafter referred to as the "Corporation"), in accordance with
Sections 13.1-657 and 13.1-685 of the Code of Virginia of 1950, as amended,
respectively, do hereby take the actions set forth below, which will be
effective as of December 4, 1995 or such earlier date if provided for below, and
to evidence their waiver of any right to dissent from such actions, hereby
consent as follows:
WHEREAS THE SAMIT GROUP, INC., being the sole Stockholder of the
Corporation, has agreed to ratify and confirm expenditures for the ensuing year
and to take the necessary action to file with the State Corporation Commission
of Virginia and the Treasurer of Virginia such forms as may be necessary to
continue the Corporation in business for the ensuing year.
NOW, THEREFORE, be it unanimously
RESOLVED that the Secretary of the Corporation take the
necessary action to file with the State Corporation Commission such
forms as may be necessary for the accomplishment of the Corporation's
business for the ensuing year.
FURTHER RESOLVED that the Corporation take the necessary
action to expend the necessary corporate funds for payment to the
Treasurer of Virginia such funds as may be necessary to continue the
Corporation's business for the ensuing year.
WHEREAS the Stockholder has agreed to the election of Directors for the
Corporation for the coming year.
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NOW, THEREFORE, be it unanimously
RESOLVED that, for the ensuing year, the following members of
the Board of Directors be elected:
Robert A. Samit, O.D.
WHEREAS Robert A. Samit, O.D., constituting the entire Board of
Directors of the Corporation, has agreed to a slate of officers recommended for
the coming year.
NOW, THEREFORE, be it unanimously
RESOLVED that the officers of the Corporation for the ensuing
year, to serve until their successors are appointed, will be:
Chief Executive Officer - Robert A. Samit, O.D.
President - Robert Brodney
Vice President - Gregory A. Barford
Secretary/Treasurer - Gregory A. Barford
FURTHER RESOLVED that the officers take the necessary action
to file with the State Corporation Commission and the Treasurer of
Virginia any and all forms, and pay any and all corporate fees and
taxes that may be due to continue the Corporation for the ensuing year.
WHEREAS the Corporation has in the past and will continue in the future
to seek expansion;
NOW, THEREFORE, be it unanimously
RESOLVED that the Corporation retain all earnings and pay no
dividends in order to assure that it has adequate capital in order to
continue to expand. WHEREAS The Samit Group, Inc. is providing
management services to the
Corporation;
NOW, THEREFORE, be it unanimously
RESOLVED that the Corporation shall have charged against it,
and shall accrue as a liability, a management fee owed to The Samit
Group, Inc. for 1996 amounting to a
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fixed fee of $50,000.00, plus a variable fee based on the net loss
before taxes of The Samit Group, Inc. minus the fixed fee on 1 times
the percentage of the Corporation's revenue to the total revenue of all
of the entities to which The Samit Group, Inc. is providing management
services (Dr. Samit's Hour Eyes Optometrist, P.C., Hour Eyes, Inc.,
Skylab Optical, Inc. and Metropolitan Vision Services, Inc.) for the
services provided by The Samit Group, Inc. as listed on the attached
Schedule A.
FURTHER RESOLVED that at the end of the fiscal year, the Chief
Financial Officer shall calculate the amount of the management fee due
and provide a summary of the balance owed between the entities.
WHEREAS the Directors agreed to all of the other acts and actions taken
by the officers and Directors of the Corporation for the preceding year.
NOW, THEREFORE, be it unanimously
RESOLVED that all of the other acts and actions of the
officers and Directors of this Corporation are hereby ratified,
confirmed and approved.
Each Stockholder and Director, by signing this consent, waives notice
of the time, place and purpose of the Annual Meeting of the Stockholders and
Board of Directors and agrees to the transaction of the business of the Annual
Meeting by unanimous written consent of the Stockholders and Directors in lieu
of such Annual Meeting. This written consent may be executed in two or more
counterparts.
APPROVED:
THE SAMIT GROUP, INC.
Stockholder
By:
/s/ Robert A. Samit
-------------------
/s/ Robert A. Samit
-------------------
Robert A. Samit, O.D. Director
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SCHEDULE A
SERVICES PROVIDED BY THE SAMIT GROUP, INC.
TO SUBSIDIARIES AND AFFILIATES
1. Hire, manage and terminate staff.
A. All staff employed through The Samit Group, Inc.
2. The custody function of receiving cash, checks and credit card payments and
designating the bank accounts to be used to deposit funds.
3. Selecting vendors to provide products and services for each location,
negotiating various contracts in the corporation's or management company's name.
4. Payment of all vendors and staff.
5. Determine and implement advertising and promotions.
6. Determine and implement how each store is operated, including but not limited
to store hours, products sold, insurance plans accepted, pricing of products and
services and services provided.
7. Borrow money on behalf of the corporation in the name of the corporation or
in the name of the management company.
8. Provide management reports, including financial statements.
9. Prepare any and all local, state and federal tax returns.
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WRITTEN CONSENT IN LIEU OF
JOINT ANNUAL MEETING
OF
STOCKHOLDERS
AND
BOARD OF DIRECTORS
OF
METROPOLITAN VISION SERVICES, INC.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
-----------------------------------
The undersigned, being the sole Stockholder and the entire Board of
Directors of METROPOLITAN VISION SERVICES, INC., a Virginia corporation
(hereinafter referred to as the "Corporation"), in accordance with Section
13.1-657 and Section 13.1-685 of the Code of Virginia of 1950, as amended,
respectively, do hereby take the actions set forth below, and to evidence their
waiver of any right to dissent from such actions, hereby consent as follows:
WHEREAS THE SAMIT GROUP, INC., being the sole Stockholder of the
Corporation, has agreed to ratify and confirm expenditures for the ensuing year
and to take the necessary action to file with the State Corporation Commission
of Virginia and the Treasurer of Virginia such forms as may be necessary to
continue the Corporation in business for the ensuing year.
NOW, THEREFORE, be it unanimously
RESOLVED that the Secretary of the Corporation take the
necessary action to file with the State Corporation Commission such
forms as may be necessary for the accomplishment of the Corporation's
business for the ensuing year.
FURTHER RESOLVED that the Corporation take the necessary
action to expend the necessary corporate funds for payment to the
Treasurer of Virginia such funds as may be necessary to continue the
Corporation's business for the ensuing year. WHEREAS the Stockholder
has agreed to the election of Directors for the Corporation for the
coming year.
<PAGE> 24
NOW, THEREFORE, be it unanimously
RESOLVED that, for the ensuing year, the following members of
the Board of Directors be elected:
Robert A. Samit, O.D.
WHEREAS Robert A. Samit, O.D., constituting the entire Board of
Directors of the Corporation, has agreed to a slate of officers recommended for
the coming year.
NOW, THEREFORE, be it unanimously
RESOLVED that the officers of the Corporation for the ensuing
year, to serve until their successors are appointed, will be:
Chief Executive Office - Robert A. Samit, O.D.
President - Robert Brodney
Vice President - Gregory A. Barford
Secretary/Treasurer - Gregory A. Barford
FURTHER RESOLVED that the officers take the necessary action
to file with the State Corporation Commission and the Treasurer of
Virginia any and all forms, and pay any and all corporate fees and
taxes that may be due to continue the Corporation for the ensuing year.
WHEREAS the Corporation has in the past and will continue in
the future to seek expansion;
NOW, THEREFORE, be it unanimously
RESOLVED that the Corporation retain all earnings and pay no
dividends in order to assure that it has adequate capital in order to
continue to expand.
WHEREAS The Samit Group, Inc. is providing management services to the
Corporation;
NOW, THEREFORE, be it unanimously
RESOLVED that the Corporation shall have charged against it,
and shall accrue as a liability, a management fee owed to The Samit
Group, Inc. for 1997 amounting to
- 2 -
<PAGE> 25
a fixed fee of $50,000.00, plus a variable fee based on the net loss
before taxes of The Samit Group, Inc. minus the fixed fee on 1 times
the percentage of the Corporation's revenue to the total revenue of all
of the entities to which The Samit Group, Inc. is providing management
services (Dr. Samit's Hour Eyes Optometrist, P.C., Hour Eyes, Inc.,
Skylab Optical, Inc. and Metropolitan Vision Services, Inc.) for the
services provided by The Samit Group, Inc. as listed on the attached
Schedule A.
FURTHER RESOLVED that at the end of the fiscal year, the Chief
Financial Officer shall calculate the amount of the management fee due
and provide a summary of the balance owed between the entities.
WHEREAS the Board of Directors has determined the useful life of
certain assets of the corporation;
NOW, THEREFORE, be it unanimously
RESOLVED that the useful life of leasehold improvements is
determined to be ten (10) years; of furniture and fixtures, seven (7)
years; of automobiles, five (5) years; of patient records, six (6)
years; and of good will, twenty (20) years.
WHEREAS the Board of Directors is requiring a review of all corporate
assets to determine if any computers purchased prior to December 31, 1992 are
still in the corporation's possession;
NOW, THEREFORE, be it unanimously
RESOLVED that a review be made of all corporate assets to
determine if any computers purchased prior to December 31, 1992 are
still in the corporation's possession.
FURTHER RESOLVED that any items no longer in existence be
written off the corporation's books.
WHEREAS the Directors agreed to all of the other acts and actions taken
by the officers and Directors of the Corporation for the preceding year.
NOW, THEREFORE, be it unanimously
- 3 -
<PAGE> 26
RESOLVED that all of the other acts and actions of the
officers and Directors of this Corporation are hereby ratified,
confirmed and approved.
Each Stockholder and Director, by signing this consent, waives notice
of the time, place and purpose of the Annual Meeting of the Stockholders and
Board of Directors and agrees to the transaction of the business of the Annual
Meeting by unanimous written consent of the Stockholders and Directors in lieu
of such Annual Meeting. This written consent may be executed in two or more
counterparts.
DATED: December 2, 1996
APPROVED:
THE SAMIT GROUP, INC.
Stockholder
By:
/s/ Robert A. Samit
----------------------------------
/s/ Robert A. Samit, O.D. Director
----------------------------------
Robert A. Samit, O.D. Director
- 4 -
<PAGE> 27
SCHEDULE A
SERVICES PROVIDED BY THE SAMIT GROUP, INC.
TO SUBSIDIARIES AND AFFILIATES
1. Hire, manage and terminate staff.
A. All staff employed through The Samit Group, Inc.
2. The custody function of receiving cash, checks and credit card payments
and designating the bank accounts to be used to deposit funds.
3. Selecting vendors to provide products and services for each location,
negotiating various contracts in the corporation's or management company's name.
4. Payment of all vendors and staff.
5. Determine and implement advertising and promotions.
6. Determine and implement how each store is operated, including but not
limited to store hours, products sold, insurance plans accepted, pricing of
products and services and services provided.
7. Borrow money on behalf of the corporation in the name of the
corporation or in the name of the management company.
8. Provide management reports, including financial statements.
9. Prepare any and all local, state and federal tax returns.
<PAGE> 28
SCHEDULE B
FIXED MANAGEMENT FEES FOR 1997
<TABLE>
<S> <C>
DR. SAMIT'S HOUR EYES OPTOMETRIST, P.C. $250,000.00
HOUR EYES, INC. $100,000.00
SKYLAB OPTICAL, INC. $ 50,000.00
METROPOLITAN VISION SERVICES, INC. $ 50,000.00
</TABLE>
<PAGE> 1
EXHIBIT 3.28
ARTICLES OF INCORPORATION
OF
HOUR EYES OF MARYLAND, INC.
FIRST: That I, ROBERT A. SAMIT, the subscriber, whose post office
address is 10951 Martingale Court, Potomac, Maryland 20854, being of full legal
age, does, under and by virtue of the General Laws of the State of Maryland
authorizing the formation of corporation, do hereby form a corporation.
SECOND: The name of the corporation is: HOUR EYES OF MARYLAND, INC.
THIRD: The purpose or purposes for which the corporation is formed, and
the business or objects to be carried on and promoted by it are as follows: To
engage in and carry on the business of making and supplying lenses and glasses
to optometrists or opticians; To make, manufacture, purchase, exchange or in any
other manner acquire, hold, own, mortgage, pledge, sell, transfer or in any
other manner dispose of, and to deal and trade in goods, wares, merchandise and
personal property of any and every class and description and wherever located.
To acquire in any manner, hold, use, sell, assign, grant rights in, or
in any manner deal with patents inventions, improvements, processes, formulas,
trade marks, trade names, rights and licenses secured under letters patent,
copyrights or other rights issued or authorized by any government, governmental
body, or otherwise.
To acquire in any manner, hold, sell, assign, transfer, mortgage,
pledge, or otherwise deal in or with and guarantee the capital stock, bonds or
other securities or evidences of indebtedness, as well as any dividends,
interest, premiums or profits thereon, of any domestic or foreign, private or
public corporation, and while the holder of such stock or other securities or
indebtedness to exercise all the rights and privileges of ownership, including
the right to vote thereon, and the
<PAGE> 2
right to transfer same unconditionally or otherwise to the same extent as a
natural person might or could do.
To enter into, make and perform contracts of every kind and without
limits as to amount, with any person, firm, association or corporation,
government, county, state, municipality or territory.
To obtain credits or monies in any manner, at any time and in any
amounts for any of the objects of this corporation, and to make, draw, accept,
endorse, execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, other securities and other negotiable or
nonnegotiable instruments and evidences of indebtedness, and to secure the
payment of any thereof and of the interest thereon by mortgage upon or pledge,
conveyance or assignment of any part or the whole of the property, rights, and
interests of this corporation, whether at the time owned or thereafter acquired,
and to sell, pledge or otherwise dispose of such securities and obligations of
this corporation for any of its corporate objects.
To purchase, acquire, hold and reissue the shares of its capital stock
subject to the laws of the State of Maryland.
In general, to engage in and carry on anywhere any other general lawful
business, whether manufacturing or otherwise, and to have and exercise all the
powers conferred by the laws of the State of Maryland upon corporations formed
under the General Laws of the State of Maryland, and alone or with others to do
any or all of the things herein set forth as principal, agent, broker,
contractor, trustee, or otherwise, to the same extent as natural personal might
or could do.
The business, purposes or objects set out in the preceding clauses
shall, except where otherwise expressed, be in no way limited or restricted by
reference to, or inference from, the
2
<PAGE> 3
terms of any other clause in these articles of incorporation but the businesses,
purpose or objects specified in each of the foregoing clauses of these articles
shall be regarded as independent businesses, objects and purposes.
FOURTH: The aggregate number of shares which the corporation is
authorized to issue is One Thousand (1000) with a par value of One Dollar
($1.00) per share.
FIFTH: The post office address of the place at which the registered
office of the corporation in this State will be located is 10951 Martingale
Court, Potomac, Maryland 20854. The registered agent of the corporation is
ROBERT A. SAMIT. Said resident agent is a citizen of the United States and a
resident of the State of Maryland whose post office address is 10951 Martingale
Court, Potomac, Maryland 20854.
SIXTH: The corporation shall have three (3) directors, shall act as
such until the first annual meeting or until their successors are duly chosen
and qualified. the number of directors may be changed in such lawful manner as
the By-Laws may, from time to time, provide. The initial directors are Robert A.
Samit, Howard Budner and Michael Davidson.
SEVENTH: As used in this Article SEVENTH, any word or words that are
defined in Section 2-418 of the Corporations and Associations Article of the
Annotated Code of Maryland (the "Indemnification Section"), as amended from time
to time, shall have the same meaning as provided in the Indemnification Section.
The corporation shall indemnify a present or former director or officer
of the corporation in connection with a proceeding to the fullest extent
permitted by and in accordance with the Indemnification Section.
3
<PAGE> 4
With respect to any corporate representative other than a present or
former director or officer, the corporation may indemnify such corporate
representative in connection with a proceeding to the fullest extent permitted
by and in accordance with the Indemnification Section; provided, however, that
to the extent a corporate representative other than a present or former director
or officer successfully defends on the merits or otherwise any proceeding
referred to in subsections (b) or (c) of the Indemnification Section or any
claim, issue or matter raised in such proceeding, the corporation shall not
indemnify such corporate representative other than a present or former director
or officer under the Indemnification Section unless and until it shall have been
determined and authorized in the specific case by (i) an affirmative vote, at a
duly constituted meeting of a majority of all the votes cast by stockholders who
were not parties to the proceeding, that indemnification of such corporate
representative other than a present or former director or officer is proper in
the circumstances.
EIGHTH: Except as otherwise provided by the Board of Directors of the
corporation, no holder of any shares of the stock of the corporation shall have
any pre-emptive right to purchase, subscribe for or otherwise acquire such
shares.
NINTH: The minimum amount of capital with which the corporation will
commence business is One Thousand Dollars ($1,000.00).
TENTH: The duration of the corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation and
acknowledged the same to be my act and deed this 30th day of June, 1989.
/s/ H. Parker /s/ Robert A. Samit
Witness ROBERT A. SAMIT
4
<PAGE> 5
ARTICLES OF AMENDMENT
OF
HOUR EYES OF MARYLAND, INC.
Hours Eyes of Maryland, Inc., a Maryland corporation, having its
principal office at 11229 New Hampshire Avenue, Silver Spring, Maryland 20906
(hereinafter referred to as the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland (hereinafter referred to as
the "Department") that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect as hereinafter provided. The provisions set forth in these
Articles of Amendment are all of the provisions of the Charter of the
Corporation as currently in effect.
SECOND: The Charter of the Corporation is hereby amended by changing
the resident agent set forth in Article FIFTH and substituting in lieu thereof
the following:
"FIFTH: The post office address of the principal office of the
Corporation in this State is 11299 New Hampshire Avenue, Silver Spring,
Maryland 20906. The name and post office address of the Resident Agent
of the Corporation in this State is Mark Edward Futrovsky, Esquire,
7315 Wisconsin Avenue, Suite 825 West, Bethesda, Maryland 20814. Said
Resident Agent is an individual actually residing in this State.
THIRD: By written action, unanimously taken by the Board of Directors
of the Corporation, pursuant to and in accordance with Section 2-408(c) of the
Corporations and Associations Article of the Annotated Code of Maryland, the
Board of Directors of the
5
<PAGE> 6
Corporation duly advised the foregoing Articles of Amendment, and by written and
formal action unanimously taken by the Stockholders of the Corporation in
accordance with Section 2-505 of the Corporations and Associations Article of
the Annotated Code of Maryland, the Stockholders of the Corporation duly approve
said Articles of Amendment.
IN WITNESS WHEREOF, Hour Eyes of Maryland, Inc., has caused these
presents to be signed in its name and on its behalf by its President and its
Corporate Seal to be hereunder affixed and witnessed on this 22nd day of May,
1992, and its President acknowledges that these Articles of Amendment are the
act and deed of Hour Eyes of Maryland, Inc., and, under the penalties of
perjury, that the matters and facts set forth here with respect to authorization
and approval are true in all material respects to the best of his knowledge,
information, and belief.
WITNESS: HOUR EYES OF MARYLAND, INC.
/s/ By: /s/ Dr. Robert A. Samit
Dr. Robert A. Samit
President
6
<PAGE> 7
ARTICLES OF MERGER
MERGING
M STREET OPTICAL, INC.
(a Corporation of the District of Columbia)
INTO
HOUR EYES OF MARYLAND, INC.
(a Corporation of the State of Maryland)
FIRST: M Street Optical, Inc., a corporation organized under
the laws of the District of Columbia ("M Street") and Hour Eyes of Maryland,
Inc. ("Hour Eyes") agree that M Street shall be merged into Hour Eyes. The terms
and conditions of the merger and the mode of carrying the same into effect are
as herein set forth in these Articles of Merger.
SECOND: Hour Eyes, a corporation organized and existing under
the laws of the State of Maryland, shall survive the merger and shall continue
under the name HOUR EYES OF MARYLAND, INC.
THIRD: The parties to the Articles of Merger are Hour Eyes, a
corporation organized and existing under the laws of the State of Maryland, and
M Street, a corporation incorporated on the fourth day of October, 1991, under
the Business Corporation Act of the District of Columbia.
FOURTH: The total number of shares of stock which M Street has
authority to issue is 10,000 of the par value of $.10 each. The total number of
shares of stock which Hour Eyes has authority to issue is 1,000 of the par value
of $1.00 each.
FIFTH: The number of outstanding shares of M Street is 10,000.
The number of outstanding shares of Hour Eyes is 1,000.
SIXTH: The manner and basis of converting or exchanging issued
stock of M Street into different stock and of dealing with any issued stock of M
Street not to be so converted or exchanged shall be as follows:
All of the issued and outstanding shares of
both Hour Eyes, the surviving corporation, and M Street are
owned by The Samit Group, Inc. ("Samit"). No shares of Hour
Eyes, the surviving corporation, are to be issued or any other
consideration given for shares of M Street, the merged
corporation, but upon the effective date of these Articles of
Merger, the shares of stock of M
7
<PAGE> 8
Street shall be surrendered for cancellation to Samit.
Thereafter, all of the shares of the surviving corporation will
be owned by Samit.
SEVENTH: The principal office of Hour Eyes, organized under the
laws of the State of Maryland, is located in the City of Rockville, State of
Maryland. The principal office of M Street is located in the District of
Columbia. M Street does not own property the title to which could be affected by
the recording of an instrument among the Land Records.
EIGHTH: The merger was duly approved by the entire Board of
Directors and the sole shareholder of Hour Eyes on December 29, 1992.
The merger to be effected by these Articles of Merger was duly
advised and approved by M Street, in the manner and by the vote required by the
District of Columbia, and by the Charter of M Street.
IN WITNESS WHEREOF, Hour Eyes and M Street, the corporations
parties to the merger, have caused these Articles of Merger to be signed in
their respective corporate names and on their behalf by their respective
secretaries, all as of the 29th day of December, 1992.
HOUR EYES OF MARYLAND, INC.
By: /s/
Dr. Robert A. Samit, President
Attest:
/s/
Mr. George A. Barford
Assistant Secretary
M STREET OPTICAL, INC.
By: /s/ Dr. Robert A. Samit
Dr. Robert A. Samit, President
Attest:
/s/ Gregory A. Barford
Mr. Gregory A. Barford
8
<PAGE> 9
Assistant Secretary
The undersigned, President of Hour Eyes of Maryland, Inc., and M Street
Optical, Inc., who executed on behalf of such corporations the foregoing
Articles of Merger, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Articles of Merger to be the corporate act of said corporation and further
certifies that, to the best of his knowledge, information, and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
/s/ Dr. Robert A. Samit
Dr. Robert A. Samit
9
<PAGE> 10
HOUR EYES OF MARYLAND, INC.
ARTICLES OF AMENDMENT
HOUR EYES OF MARYLAND, INC., a Maryland Corporation having its
principal office in Rockville, Maryland (the "Corporation") hereby certifies to
the State Department of Assessments and Taxation of Maryland, that:
FIRST: The charter of the Corporation is hereby amended by changing the
name of the Corporation set forth in Article SECOND of the Articles of
Incorporation and substituting in lieu thereof the following:
"SECOND: The name of the Corporation is Hour Eyes, Inc."
SECOND: The charter of the Corporation is hereby amended by changing
the post office address of the Corporation set forth in Article FIFTH and
substituting in lieu thereof the following:
"FIFTH: The post office address of the principal office of the
Corporation in this state is 11802-B Rockville Place,
Rockville, Maryland 20852. The name and post office address of
the Resident Agent of the Corporation in this State is Mary
Edward Futrovsky, Esquire, 7315 Wisconsin Avenue, Suite 825,
West Bethesda, Maryland 20814. Said Resident Agent is an
individual actually residing in this State."
THIRD: By unanimous written consent pursuant to Section 2-408 of
Corporations and Associations Article of the Annotated Code of Maryland the
Board of Directors of the Corporation on December 30, 1992, duly adopted a
resolution in which was set forth the foregoing amendment to the charter,
declaring that the said amendment of the charter as proposed was advisable and
directing that it be submitted for action thereon by the stockholders of the
Corporation.
10
<PAGE> 11
FOURTH: That the said amendment has been consented to and authorized by
the holders of all the issued and outstanding stock entitled to vote, by a
written consent give in accordance with the provisions of Section 2-505 of
Corporations and Associations Article of the Annotated Code of Maryland, and
filed with the records of stockholders meetings.
IN WITNESS WHEREOF, Hour Eyes of Maryland, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on December 30, 1992.
HOUR EYES OF MARYLAND, INC.
By /s/ Dr. Robert A. Samit, President
Dr. Robert A. Samit, President
/s/ Gregory A. Barford
Mr. Gregory A. Barford, Assistant Secretary
THE UNDERSIGNED, President of Hour Eyes of Maryland, Inc., who executed
on behalf of said corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Amendment to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Dr. Robert A. Samit
Dr. Robert A. Samit
11
<PAGE> 1
EXHIBIT 3.29
AMENDMENTS TO BY-LAWS OF HOUR EYES, INC. - Effective 1/13/93
By Written Consent in Lieu of Special Meeting, on January 13, 1993 the
Stockholder and Director unanimously amended the By-Laws pursuant to the
following Resolutions:
RESOLVED that ARTICLE II, Section 2 of the By-Laws is deleted
in its entirety and the following substituted in its place:
Section 2. The annual meeting of the Shareholders of the
Corporation shall be held on the first Monday in December in each year.
If that day is a legal holiday, the annual meeting shall be held on the
next succeeding day not a legal holiday.
FURTHER RESOLVED that ARTICLE IX, Section 1 is deleted in its
entirety and the following substituted in its place:
Section 1. Officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President
(who shall also be the Chief Operating Officer, a Vice President, a
Secretary, a Treasurer (who shall also be the Chief Financial Officer)
and an Assistant Secretary.
FURTHER RESOLVED that ARTICLE IX, Section 6 is deleted in its
entirety and the following substituted in its place:
THE CHIEF EXECUTIVE OFFICER
Section 6. The Chief Executive Officer, if one shall have been
elected, shall be a member of the Board of Directors, an officer of the
Corporation, and, if present, shall preside at each meeting of the
Shareholders or the Board of Directors. The Chief Executive Officer
shall advise and counsel with the President, and in the absence of the
President, shall perform such other duties as may from time to time be
assigned by the Board of Directors.
FURTHER RESOLVED that Article IX, Section 7 is deleted in its
entirety and the following substituted in its place:
THE PRESIDENT
Section 7. The President shall, in the absence of the Chief
Executive Officer, or if a Chief Executive Officer shall not have been
elected, preside at each meeting of the Shareholders or Board of
Directors. The President shall perform all duties incident to the
office of the President and such other duties as may from time to time
be assigned to him by the Board of Directors.
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
HOUR EYES OF MARYLAND, INC.
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of
Rockville, State of Maryland.
Section 2. The corporation may also have offices at such other
places both within and without the State of Maryland as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders shall be held at the
office of the corporation in Alexandria, State of Virginia, or at any other
place within the United States as shall be designated from time to time by the
board of directors and stated in the notice of meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with
the year 1993, shall be held on the 1st day of March if not a legal holiday, and
if a legal holiday then on the next secular day following, at 10 A.M., or at
such other date and time as shall be fixed by the Board of Directors and stated
in the notice of the meeting, at which they shall elect a board of directors and
may transact any business within the powers of the corporation. Any business of
the corporation may be transacted at the annual meeting without being specially
designated in the notice, except such business as is specifically required by
statute to be stated in the notice.
<PAGE> 3
Section 3. At any time in the interval between annual meetings
special meetings of the stockholders may be called by the board of directors, or
by the president, a vice-president, the secretary or an assistant secretary.
Section 4. Special meetings of stockholders shall be called by
the secretary upon the written request of the holders of shares entitled to not
less than twenty-five per cent of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of such meeting and
the matters proposed to be acted on thereat. The secretary shall inform such
stockholders of the reasonably estimated cost of preparing and mailing such
notice of the meeting, and upon payment to the corporation of such costs the
secretary shall give notice stating the purpose or purposes of the meeting to
all stockholders entitled to notice at such meeting. No special meeting need be
called upon the request of the holders of shares entitled to cast less than a
majority of all votes entitled to be cast at such meeting, to consider any
matter which is substantially the same as a matter voted upon at any special
meeting of the stockholders held during the preceding twelve months.
Section 5. Not less than ten nor more than ninety days before
the date of every stockholders' meeting, the secretary shall give to each
stockholder entitled to vote at such meeting, and to each stockholder not
entitled to vote who is entitled by statute to notice, written or printed notice
stating the time and place of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, either by mail or by
presenting it to him personally or by leaving it at his residence or usual place
of business. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the stockholder at
2
<PAGE> 4
his post-office address as it appears on the record of the corporation, with
postage thereon prepaid.
Section 6. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast one of the votes thereat
shall constitute a quorum; but this section shall not affect any requirement
under the statute or under the charter for the vote necessary for the adoption
of any measure. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 8. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any matter which may properly come before the
meeting, unless more than a majority of the votes cast is required by the
statute or by the charter.
Section 9. Unless the charter provides otherwise, each
outstanding share of stock having voting power shall be entitled to one vote on
each matter submitted to a vote at a meeting of stockholders; but no share shall
be entitled to vote if any installment payable thereon is overdue and unpaid. A
stockholder may vote the shares owned of record by him either in person or by
proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from its date,
unless otherwise provided in the proxy. At all
3
<PAGE> 5
meetings of stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of the
meeting.
At all elections of directors of the corporation each
stockholder having voting power shall be entitled to exercise the right of
cumulative voting as provided in the articles of incorporation.
Section 10. Any action required or permitted to taken at any
meeting of stockholders may be taken without a meeting, if a consent in writing,
setting forth such action, is signed by all the stockholders entitled to vote on
the subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders but not to vote thereat have waived in writing any
rights which they may have to dissent from such action, and such consent and
waiver are filed with the records of stockholders meetings.
ARTICLE III
DIRECTORS
Section 1. The number of directors of the corporation shall be
one. By vote of a majority of the entire board of directors, the number of
directors fixed by the charter or by these bylaws may be increased or decreased
from time to time not exceeding three nor less than one, but the tenure of
office of a director shall not be affected by any decrease in the number of
directors so made by the board. Until the first annual meeting of stockholders
or until successors are duly elected and qualify, the board shall consist of the
persons named as such in the charter. At the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders
4
<PAGE> 6
shall elect directors to hold office until the next annual meeting or until
their successors are elected and qualify. Directors need not be stockholders in
the corporation.
Section 2. Any vacancy occurring in the board of directors for
any cause other than by reason of an increase in the number of directors may be
filled by a majority of the remaining members of the board of directors,
although such majority is less than a quorum. Any vacancy occurring by reason of
an increase in the number of directors may be filled by actions of a majority of
the entire board of directors. If the stockholders of any class or series are
entitled separately to elect one or more directors, a majority of the remaining
directors elected by that class or series or the sole remaining director elected
by that class or series may fill any vacancy among the number of directors
elected by that class or series. A director elected by the board of directors to
fill a vacancy shall be elected to hold office until the next annual meeting of
stockholders or until his successor is elected and qualifies.
Section 3. The business and affairs of the corporation shall
be managed by its board of directors, which may exercise all of the powers of
the corporation, except such as are by law or by the charter or by these bylaws
conferred upon or reserved to the stockholders.
Section 4. At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. Meetings of the board of directors, regular or
special, may be held at any place in or out of the State of Maryland as the
board may from time to time determine.
5
<PAGE> 7
Section 6. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 7. Regular meetings of the board of directors may be
held without notice at such time and place as shall from time to time be
determined by the board of directors.
Section 8. Special meetings of the board of directors may be
called at any time by the board of directors or the executive committee, if one
be constituted, by vote at a meeting, or by the president or by a majority of
the directors or a majority of the members of the executive committee in writing
with or without a meeting. Special meetings may be held at such place or places
within or without Maryland as may be designated from time to time by the board
of directors; in the absence of such designation such meetings shall be held at
such places as may be designated in the call.
Section 9. Notice of the place and time of every special
meeting of the board of directors shall be served on each director or sent to
him by telegraph or by mail, or by leaving the same at his residence or usual
place of business at least 1 day before the date of the meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail
6
<PAGE> 8
addressed to the director at his post-office address as it appears on the
records of the corporation, with postage thereon prepaid.
Section 10. At all meetings of the board one of the entire
board of directors shall constitute a quorum for the transaction of business and
the action of a majority of the directors present at any meeting at which a
quorum is present shall be the action of the board of directors unless the
concurrence of a greater proportion is required for such action by statute, the
articles of incorporation or these bylaws. If a quorum shall not be present at
any meeting of directors, the directors present thereat may by a majority vote
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 11. Any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all members
of the board or of such committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may appoint from among its
members an executive committee and other committees composed of two or more
directors, and may delegate to such committees, any of the powers of the board
of directors except the power to declare dividends or distributions on stock,
recommend to the stockholders any action which requires stockholder approval,
amend the bylaws, approve any merger or share exchange which does not require
stockholder approval or issue stock. However, if the board of directors has
given general authorization for the issuance of stock, a committee of the board,
in accordance with a general
7
<PAGE> 9
formula or method specified by the board of directors by resolution or by
adoption of a stock option plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued. In the absence of any member of any such committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint a
member of the board of directors to act in the place of such absent members.
Section 13. The committees shall keep minutes of their
proceedings and shall report the same to the board of directors at the meeting
next succeeding, and any action by the committees shall be subject to revision
and alteration by the board of directors, provided that no rights of third
persons shall be affected by any such revision or alteration.
COMPENSATION OF DIRECTORS
Section 14. Directors, as such, shall not receive any stated
salary for their services but, by resolution of the board, a fixed sum, and
expenses of attendance if any, may be allowed to directors for attendance at
each regular or special meeting of the board of directors, or of any committee
thereof, but nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. In the case of
stockholders' meetings the notice may be left at the stockholders residence or
usual place of business. Notice to directors may also be given by telegram.
8
<PAGE> 10
Section 2. Whenever any notice of the time, place or purpose
of any meeting of stockholders, directors or committee is required to be given
under the provisions of the statute or under the provisions of the charter or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy, or at the meeting of directors or committee
in person, shall be deemed equivalent to the giving of such notice to such
persons.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The president shall be selected from among the directors. The
board of directors may also choose additional vice-presidents, and one or more
assistant secretaries and assistant treasurers. Two or more offices, except
those of president and vice-president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity, if such instrument is required by law, the charter or these bylaws to
be executed, acknowledged or verified by two or more officers.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president from among the
directors, and shall choose one or more vice-presidents, a secretary and a
treasurer, none of whom need be a member of the board.
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Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall serve for one
year and until their successors are chosen and qualify. Any officer or agent may
be removed by the board of directors whenever, in its judgment, the best
interests of the corporation will be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
If the office of any officer becomes vacant for any reason, the vacancy shall be
filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the corporation; he shall preside at all meetings of the stockholders and
directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board are
carried into effect.
Section 7. He shall execute in the corporate name all
authorized deeds, mortgages, bonds, contracts or other instruments requiring a
seal, under the seal of the corporation, except in cases in which the signing or
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
VICE-PRESIDENTS
10
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Section 8. The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president, and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
for all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall keep in
safe custody the seal of the corporation and, when authorized by the board of
directors, affix the same to any instrument requiring it and, when so affixed,
it shall be attested by his signature or by the signature of an assistant
secretary.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
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Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board for the faithful performance of the duties of
his office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
12
<PAGE> 14
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each stockholder shall be entitled to a certificate
or certificates which shall represent and certify the number and kind and class
of shares owned by him in the corporation. Each certificate shall be signed by
the president or a vice-president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer or an assistant
treasurer and may be sealed with the corporate seal.
Section 2. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of seal. In
case any officer who has signed any certificate ceases to be an officer of the
corporation before the certificate is issued, the certificate may nevertheless
be issued by the corporation with the same effect as if the officer had not
ceased to be such officer as of the date of its issue. Each stock certificate
shall include on its face the name of the corporation, the name of shares
represented by the certificate. If the corporation has authority to issue stock
of more than one class, the stock certificate shall contain on its face or back
a full statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue and if the corporation is
authorized to issue any preferred or special class in series, the differences in
the relative rights and preferences between the shares of each series to the
extent they have been set, and the authority of the board of directors to set
the relative rights and preferences of subsequent series. A summary of such
information included in a registration statement permitted to become effective
under the Federal Securities Act of 1933, as now or hereafter amended, shall
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<PAGE> 15
be an acceptable summary for the purposes of this section. In lieu of such full
statement or summary, there may be set forth upon the face or back of the
certificate a statement that the corporation will furnish to any stockholder
upon request and without charge, a full statement of such information. Every
stock certificate representing shares of stock which are restricted as to
transferability by the corporation shall contain a full statement of the
restriction or state that the corporation will furnish information about the
restriction to the stockholder on request and without charge. A stock
certificate may not be issued until the stock represented by it is fully paid,
except in the case of stock purchased under an option plan as provided by
Section 2-207 of the Corporations and Association Article of Annotated Code of
Maryland.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been stolen, lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be stolen, lost or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such stolen, lost or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and to give the corporation a bond, with sufficient surety, to the corporation
to indemnify it against any loss or claim which may arise by reason of the
issuance of a new certificate.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of
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succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The board of directors may fix, in advance, a date
as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders entitled
to receive payment of any dividend or the allotment of any rights, or in order
to make a determination of stockholders for any other proper purpose. Such date,
in any case, shall be no more than sixty days, and in case of a meeting of
stockholders not less than ten days, prior to the date on which the particular
action requiring such determination of stockholders is to be taken. In lieu of
fixing a record date, the board of directors may provide that the stock transfer
books shall be closed for a stated period but not to exceed, in any case, twenty
days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days immediately preceding such meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
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ARTICLES VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if any,
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in its own
shares, subject to the provisions of the statute and of the articles of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The president or a vice-president or the treasurer
shall prepare or cause to be prepared annually a full and correct statement of
the affairs of the corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which shall be submitted
at the annual meeting and shall be filed within twenty days thereafter at the
principal office of the corporation in the State of Maryland.
CHECKS
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Section 4. All checks, drafts, and orders for the payment of
money, notes and other evidences of indebtedness, issued in the name of the
corporation shall be signed by such officer or officers as the board of
directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
STOCK LEDGER
Section 7. The corporation shall maintain at its office in the
City of Alexandria, State of Virginia, an original stock ledger containing the
names and addresses of all stockholders and the number of shares of each class
held by each stockholder. Such stock ledger may be in written form or any other
form capable of being converted into written form within a reasonable time for
visual inspection.
ARTICLE VIII
AMENDMENTS
Section 1. The board of directors shall have the power, at any
regular meeting or at any special meeting if notice thereof be included in the
notice of such special meeting, to alter
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or repeal any bylaws of the corporation and to make new bylaws, except that the
board of directors shall not alter or repeal any bylaws made by the
stockholders.
Section 2. The stockholders shall have the power, at any
annual meeting or at any special meeting, to alter or repeal any bylaws of the
corporation and to make new bylaws.
I, THE UNDERSIGNED, being the secretary of Hour Eyes of
Maryland, Inc. DO HEREBY CERTIFY the foregoing to be the by-laws of said
corporation, as adopted at a meeting of the directors held on the _ day of
December, 1992.
/s/ Robert A. Samit
-------------------
Dr. Robert A. Samit, Secretary
18
<PAGE> 1
EXHIBIT 4.1
EYE CARE CENTERS OF AMERICA, INC., as Issuer
$125,000,000
_____ % Senior Subordinated Notes due 2008
$25,000,000
Floating Interest Rate Subordinated Term Securities ("FIRSTS")(SM)(1) due 2008
---------------
INDENTURE
Dated as of April , 1998
---------------
, as Trustee
- --------
(1) FIRSTS is a service mark of BT Alex. Brown Incorporated
<PAGE> 2
Footnote continued on next page.
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) ............................................. 7.10
(a)(2) ............................................ 7.10
(a)(3) ............................................ N.A.
(a)(4) ............................................ N.A.
(b) ............................................... 7.8; 7.10
(c) ............................................... N.A.
311(a) ................................................ 7.11
(b) ............................................... 7.11
(c) ............................................... N.A.
312(a) ................................................ 2.5
(b) ............................................... N.A.
(c) ............................................... N.A.
313(a) ................................................ 7.6
(b)(1) ............................................ N.A.
(b)(2) ............................................ 7.6
(c) ............................................... 7.6
(d) ............................................... 7.6
314(a) ................................................ 4.18
4.19; 13.2
(b) ............................................... N.A.
(c)(1) ............................................ 13.4
(c)(2) ............................................ 13.4
(c)(3) ............................................ N.A.
(d) ............................................... N.A.
(e) ............................................... 13.5
(f) ............................................... 4.19
315(a) ................................................ 7.1
(b) ............................................... 7.5; 13.2
(c) ............................................... 7.1
(d) ............................................... 7.1
(e) ............................................... 6.11
316(a)(last sentence) ................................. 13.6
(a)(1)(A) ......................................... 6.5
(a)(1)(B) ......................................... 6.4
(a)(2) ............................................ N.A.
(b) ............................................... 6.7
</TABLE>
<PAGE> 3
Footnote continued on next page.
<TABLE>
<S> <C>
317(a)(1) ............................................. 6.8
(a)(2) ............................................ 6.9
(b) ............................................... 2.4
318(a) ................................................ 13.1
</TABLE>
N.A. means Not Applicable
- ------------
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS
SECTION 1.2. OTHER DEFINITIONS
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT
SECTION 1.4. RULES OF CONSTRUCTION
ARTICLE II
THE SECURITIES
SECTION 2.1. FORM AND DATING
SECTION 2.2. EXECUTION AND AUTHENTICATION
SECTION 2.3. REGISTRAR AND PAYING AGENT
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST
SECTION 2.5. SECURITYHOLDER LISTS
SECTION 2.6. TRANSFER AND EXCHANGE
SECTION 2.7. REPLACEMENT NOTES
SECTION 2.8. OUTSTANDING NOTES
SECTION 2.9. TEMPORARY NOTES
SECTION 2.10. CANCELLATION
SECTION 2.11. DEFAULTED INTEREST
SECTION 2.12. CUSIP NUMBERS
ARTICLE III
REDEMPTION
SECTION 3.1. NOTICES TO TRUSTEE
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED
SECTION 3.3. NOTICE OF REDEMPTION
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE
SECTION 3.6. NOTES REDEEMED IN PART
ARTICLE IV
</TABLE>
<PAGE> 5
COVENANTS
<TABLE>
<S> <C>
SECTION 4.1. PAYMENT OF NOTES
SECTION 4.2. LIMITATION ON LIENS
SECTION 4.3. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS
SECTION 4.4. LIMITATION ON RESTRICTED PAYMENTS
SECTION 4.5. LIMITATION ON DIVIDEND AND OTHER
PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES
SECTION 4.6. LIMITATION ON ASSET SALES
SECTION 4.7. LIMITATION ON TRANSACTIONS WITH
AFFILIATES
SECTION 4.8. CHANGE OF CONTROL
SECTION 4.9. LIMITATION ON INCURRENCE OF SENIOR
SUBORDINATED DEBT
SECTION 4.10. LIMITATION ON PREFERRED STOCK OF
RESTRICTED SUBSIDIARIES
SECTION 4.11. ADDITIONAL SUBSIDIARY GUARANTEES
SECTION 4.12. CONDUCT OF BUSINESS
SECTION 4.13. MAINTENANCE OF OFFICE OR AGENCY
SECTION 4.14. CORPORATE EXISTENCE
SECTION 4.15. PAYMENT OF TAXES AND OTHER CLAIMS
SECTION 4.16. MAINTENANCE OF PROPERTIES AND
INSURANCE
SECTION 4.17. COMPLIANCE WITH LAWS
SECTION 4.18. ADDITIONAL INFORMATION
SECTION 4.19. FURTHER INSTRUMENTS AND ACTS
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.1. MERGER, CONSOLIDATION AND SALE OF
ASSETS
ARTICLE VI DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT
SECTION 6.2. ACCELERATION
SECTION 6.3. OTHER REMEDIES
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
SECTION 6.4. WAIVER OF PAST DEFAULTS
SECTION 6.5. CONTROL BY MAJORITY
SECTION 6.6. LIMITATION ON SUITS
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT
SECTION 6.8. COLLECTION SUIT BY TRUSTEE
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM
SECTION 6.10. PRIORITIES
SECTION 6.11. UNDERTAKING FOR COSTS
ARTICLE VII
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE
SECTION 7.2. RIGHTS OF TRUSTEE
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE
SECTION 7.4. TRUSTEE'S DISCLAIMER
SECTION 7.5. NOTICE OF DEFAULTS
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS
SECTION 7.7. COMPENSATION AND INDEMNITY
SECTION 7.8. REPLACEMENT OF TRUSTEE
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. DISCHARGE OF LIABILITY ON NOTES
SECTION 8.2. LEGAL DEFEASANCE AND COVENANT
DEFEASANCE
SECTION 8.3. CONDITIONS TO DEFEASANCE
SECTION 8.4. APPLICATION OF TRUST MONEY
SECTION 8.5. REPAYMENT TO COMPANY
SECTION 8.6. REINSTATEMENT
</TABLE>
ARTICLE IX
AMENDMENTS
<PAGE> 7
<TABLE>
<S> <C>
SECTION 9.1. WITHOUT CONSENT OF HOLDERS
SECTION 9.2. WITH CONSENT OF HOLDERS
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS AND
WAIVERS
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS
ARTICLE X
SUBORDINATION
SECTION 10.1. AGREEMENT TO SUBORDINATE
SECTION 10.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY
SECTION 10.3. DEFAULT ON SENIOR INDEBTEDNESS
SECTION 10.4. ACCELERATION OF PAYMENT OF NOTES
SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER
SECTION 10.6. SUBROGATION
SECTION 10.7. RELATIVE RIGHTS
SECTION 10.8. SUBORDINATION MAY NOT BE IMPAIRED BY
COMPANY
SECTION 10.9. RIGHTS OF TRUSTEE AND PAYING AGENT
SECTION 10.10. DISTRIBUTION OR NOTICE TO
REPRESENTATIVE
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF
DEFAULT OR LIMIT RIGHT TO
ACCELERATE
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED
SECTION 10.13. TRUSTEE ENTITLED TO RELY
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
SENIOR INDEBTEDNESS
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR
INDEBTEDNESS ON SUBORDINATION
PROVISIONS
ARTICLE XI
SUBSIDIARY GUARANTEE
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
SECTION 11.1. SUBSIDIARY GUARANTEE
SECTION 11.2. UNCONDITIONAL GUARANTEE
SECTION 11.3. SUBORDINATION OF GUARANTEE
SECTION 11.4. SEVERABILITY
SECTION 11.5. RELEASE OF A SUBSIDIARY GUARANTOR
SECTION 11.6. LIMITATION OF SUBSIDIARY GUARANTOR'S
LIABILITY
SECTION 11.7. SUBSIDIARY GUARANTORS MAY
CONSOLIDATE, ETC., ON CERTAIN
TERMS
SECTION 11.8. CONTRIBUTION
SECTION 11.9. WAIVER OF SUBROGATION
SECTION 11.10. WAIVER OF STAY, EXTENSION OR USURY
LAWS
ARTICLE XII
SUBORDINATION OF GUARANTEES
SECTION 12.1. AGREEMENT TO SUBORDINATE
SECTION 12.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY
SECTION 12.3. DEFAULT ON GUARANTOR SENIOR
INDEBTEDNESS
SECTION 12.4. ACCELERATION OF PAYMENT OF NOTES
SECTION 12.5. WHEN PAYMENT OR DISTRIBUTION MUST BE
PAID OVER
SECTION 12.6. SUBROGATION
SECTION 12.7. RELATIVE RIGHTS
SECTION 12.8. SUBORDINATION MAY NOT BE IMPAIRED BY
SUBSIDIARY GUARANTOR
SECTION 12.9. RIGHTS OF TRUSTEE AND PAYING AGENT
SECTION 12.10. DISTRIBUTION OR NOTICE TO
REPRESENTATIVE
SECTION 12.11. ARTICLE XII NOT TO PREVENT EVENTS OF
DEFAULT OR LIMIT RIGHT TO
ACCELERATE
SECTION 12.12. TRUST MONEYS NOT SUBORDINATED
SECTION 12.13. TRUSTEE ENTITLED TO RELY
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
SECTION 12.14. TRUSTEE TO EFFECTUATE SUBORDINATION
SECTION 12.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF
GUARANTOR SENIOR INDEBTEDNESS
SECTION 12.16. RELIANCE BY HOLDERS OF GUARANTOR
SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TRUST INDENTURE ACT CONTROLS
SECTION 13.2. NOTICES
SECTION 13.3. COMMUNICATION BY HOLDERS WITH OTHER
HOLDERS
SECTION 13.4. CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT
SECTION 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION
SECTION 13.6. WHEN NOTES DISREGARDED
SECTION 13.7. RULES BY TRUSTEE, PAYING AGENT AND
REGISTRAR
SECTION 13.8. LEGAL HOLIDAYS
SECTION 13.9. GOVERNING LAW
SECTION 13.10. NO RECOURSE AGAINST OTHERS
SECTION 13.11. SUCCESSORS
SECTION 13.12. MULTIPLE ORIGINALS
SECTION 13.13. VARIABLE PROVISIONS
SECTION 13.14. QUALIFICATION OF INDENTURE
SECTION 13.15. TABLE OF CONTENTS; HEADINGS
</TABLE>
EXHIBITS
EXHIBIT A-1FORM OF INITIAL FIXED RATE NOTE
EXHIBIT A-2FORM OF INITIAL FLOATING RATE NOTE
EXHIBIT B-1FORM OF EXCHANGE FIXED RATE NOTE
EXHIBIT B-1FORM OF EXCHANGE FLOATING RATE NOTE
EXHIBIT CFORM OF GUARANTEE
<PAGE> 10
-2-
INDENTURE dated as of April , 1998, between EYE CARE CENTERS OF AMERICA, INC., a
Texas corporation (the "COMPANY"), as Issuer, each of the Guarantors named
herein, as Guarantors, and [ ], a [ ] chartered trust company, as trustee
(the "TRUSTEE").
The Company has duly authorized the creation of the Company's
Initial % Senior Subordinated Notes due 2008 (the "INITIAL FIXED RATE NOTES")
and the Initial Floating Interest Rate Subordinated Term Securities
("FIRSTS")(SM)(2) due 2008 (the "INITIAL FLOATING RATE NOTES," and together with
the Initial Fixed Rate Notes, the "INITIAL NOTES") and, if and when issued in
exchange for the Initial Notes as provided in the Registration Rights Agreement
(as hereinafter defined), the Company's Exchange % Senior Subordinated Notes
due 2008 (the "EXCHANGE FIXED RATE NOTES") and the Exchange Floating Interest
Rate Subordinated Term Securities due 2008 (the "EXCHANGE FLOATING RATE NOTES"
and, together with the Exchange Fixed Rate Notes, the "EXCHANGE NOTES"). The
Initial Notes and Exchange Notes are collectively referred to as the "NOTES").
All things necessary to make the Notes, when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid and binding
obligations of the Company and to make this Indenture a valid and binding
agreement of the Company have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION .. DEFINITIONS.
- --------
(2) FIRSTS is a service mark of BT Alex. Brown
Incorporated.
<PAGE> 11
-3-
"ACQUIRED INDEBTEDNESS" means Indebtedness (i) of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or (ii) assumed in connection with the acquisition of
assets from such Person, in each case whether or not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness
shall be deemed to have been incurred, with respect to clause (i) of the
preceding sentence, on the date such Person becomes a Restricted Subsidiary of
the Company and, with respect to clause (ii) of the preceding sentence, on the
date of consummation of such acquisition of assets.
"AFFILIATE" means a Person who directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, no Person (other than the
Company or any Subsidiary of the Company) in whom a Receivables Entity makes an
Investment in connection with a Qualified Receivables Transaction shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries solely by
reason of such Investment.
"ALL OR SUBSTANTIALLY ALL" shall have the meaning given such phrase
in the Revised Model Business Corporation Act.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company; or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of
<PAGE> 12
-4-
the assets of such Person, any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
the Company of (a) any Capital Stock of any Restricted Subsidiary of the
Company; or (b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) any transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration of less than $2.0_million, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under Article V, (iii) the sale or
discount, in each case without recourse, of accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof, (iv) the factoring of accounts receivable arising in the
ordinary course of business pursuant to arrangements customary in the industry,
(v) the licensing of intellectual property, (vi) disposals or replacements of
obsolete equipment in the ordinary course of business, (vii) the sale, lease,
conveyance, disposition or other transfer by the Company or any Restricted
Subsidiary of assets or property in transactions constituting Investments that
are not prohibited under Section 4.4, (viii)_leases or subleases to third
persons not interfering in any material respect with the business of the Company
or any of its Restricted Subsidiaries, (ix) the sale of properties (in one
transaction or a series of related transactions) to be acquired by the Company
on or about February 1, 1999 related to the Company's acquisition of Visionworks
<PAGE> 13
-5-
Holdings, Inc., or the capital lease in respect of such properties prior to the
acquisition thereof, to the extent that the consideration to be received by the
Company or any of its Restricted Subsidiaries in any such transaction or series
of related transactions does not exceed $10.0 million, (x) sales of accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" to a Receivables Entity, or (xi) transfers
of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" (or a fractional undivided
interest therein) by a Receivables Entity in a Qualified Receivables
Transaction.
"BANK INDEBTEDNESS" means any and all amounts, whether outstanding
on the Issue Date or thereafter incurred, payable under or in respect of the New
Credit Facility and any related notes, collateral documents, letters of credit
and guarantees, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the relevant contractual rate provided
in the New Credit Facility whether or not a claim for post-filing interest is
allowed in such proceedings), fees, charges, expenses, indemnities,
reimbursement obligations, guarantees and all other amounts payable thereunder
or in respect thereof.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of
<PAGE> 14
-6-
such obligations at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of corporate stock, including each class of common stock
and preferred stock of such Person and (ii) with respect to any Person that is
not a corporation, any and all partnership or other equity interests of such
Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances (or, with respect to foreign
banks, similar instruments) maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $200 million; (v) certificates of deposit
or bankers' acceptances or similar instruments maturing within one year from the
date of acquisition thereof issued by any foreign bank that is a lender under
the New Credit Facility having at the date of acquisition thereof combined
capital and surplus of not less than $500 million; (vi) repurchase
<PAGE> 15
-7-
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) or clause (v) above; and (vii)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (i) through (vi) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons (other than
one or more Permitted Holders) for purposes of Section 13(d) of the Exchange Act
(a "GROUP"), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of this Indenture); (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); (iii) any Person or Group
(other than one or more Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing 50% or more of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"CHANGE OF CONTROL TRIGGERING EVENT" means the occurrence of a
Change of Control and the failure of the Notes to have a Minimum Rating on the
30th day after the occurrence of such Change of Control.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Eye Care Centers of America, Inc., a Texas
corporation.
<PAGE> 16
-8-
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period, (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges and (D) (i) cash charges attributable to the
exercise of employee options vesting upon the consummation of the
Recapitalization and (ii) for any four quarter period that includes one or more
fiscal quarters ending within the period from the Issue Date to the first
anniversary of the Issue Date, cash restructuring or nonrecurring charges
incurred in connection with the Recapitalization; provided, however, that the
cash charges in (i) and (ii) shall not exceed $2.0 million in the aggregate
since the Issue Date.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "TRANSACTION DATE") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence of any
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof) occurring during the Four Quarter Period or
at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter
<PAGE> 17
-9-
Period, (ii) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including pro forma
adjustments for cost savings ("COST SAVINGS ADJUSTMENTS") that the Company
reasonably believes in good faith could have been achieved during the Four
Quarter Period as a result of such acquisition or disposition (provided that
both (A) such cost savings were identified and quantified in an Officers'
Certificate delivered to the Trustee at the time of the consummation of the
acquisition or disposition and (B) with respect to each acquisition or
disposition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company within 90 days
of such acquisition or disposition to effect such cost savings identified in
such Officers' Certificate and with respect to any other acquisition or
disposition, such Officers' Certificate sets forth the specific steps to be
taken within the 90 days after such acquisition or disposition to accomplish
such cost savings) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or
Asset Acquisition (including the incurrence, assumption or liability for any
such Indebtedness or Acquired Indebtedness) occurred on the first day of the
Four Quarter Period, and (iii) with respect to any such Four Quarter Period
commencing prior to the Recapitalization, the Recapitalization (including any
Cost Savings Adjustments), which shall be deemed to have taken place on the
first day of such Four Quarter Period, and (iv) any asset sales or asset
acquisitions (including any Consolidated EBITDA
<PAGE> 18
-10-
(including any Cost Savings Adjustments) attributable to the assets which are
the subject of the asset acquisition or asset sale during the Four Quarter
Period) that have been made by any Person that has become a Restricted
Subsidiary of the Company or has been merged with or into the Company or any
Restricted Subsidiary of the Company during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date that would have constituted Asset Sales or Asset
Acquisitions had such trnsactions occurred when such Person was a Restricted
Subsidiary of the Company or subsequent to such Person's merger into the
Company, as if such asset sale or asset acquisition (including the incurrence,
assumption or liability for any Indebtedness or Acquired Indebtedness in
connection therewith) occurred on the first day of the Four Quarter Period;
provided that to the extent that clause (ii) or (iv) of this sentence requires
that pro forma effect be given to an asset sale or asset acquisition, such pro
forma calculation shall be based upon the four full fiscal quarters, immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed of for which financial information is
available. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
<PAGE> 19
-11-
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of debt issuance costs relating to the
Recapitalization and the financing therefor or relating to retired or existing
Indebtedness and amortization or write-off of customary debt issuance costs
relating to future Indebtedness incurred in the ordinary course of business)
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective consolidated
Federal, state and local tax rate of such Person expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, the sum of, without duplication, (i) the aggregate of all cash
and non-cash interest expense with respect to all outstanding Indebtedness of
such Person and its Restricted Subsidiaries, including the net costs associated
with Interest Swap Obligations, for such period determined on a consolidated
basis in conformity with GAAP, and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted
<PAGE> 20
-12-
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET INCOME" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) gains and losses from Asset
Sales (without regard to the $3.0 million limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related tax
effects according to GAAP, (b)_gains and losses due solely to fluctuations in
currency values and related tax effects according to GAAP, (c) items classified
as extraordinary, unusual or nonrecurring gains and losses, and the related tax
effects according to GAAP, (d) the net income (or loss) of any Person acquired
in a pooling of interests transaction accrued prior to the date it becomes a
Restricted Subsidiary of the Company or is merged or consolidated with the
Company or any Restricted Subsidiary of the Company, (e) the net income of any
Restricted Subsidiary of the Company to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (f) the net loss of
any Person other than a Restricted Subsidiary of the Company, (g)_the net income
of any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to the Company or a Restricted Subsidiary of the
Company by such Person unless (and to the extent), in the case of a Restricted
Subsidiary of the Company who receives such dividends or distributions, such
Restricted Subsidiary is subject to clause (e) above, (h) one time non-cash
compensation charges, including any arising from existing stock options
resulting from the Recapitalization, and (i) bonus payments to be paid to senior
management of the Company in connection with the Recapitalization within 90 days
of the Issue Date in an aggregate amount not to exceed $1.0 million.
Notwithstanding the foregoing, it is understood that the payment
<PAGE> 21
-13-
of dividends on Preferred Stock shall not reduce Consolidated Net Income.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges which require an accrual of or a reserve for cash charges for any future
period).
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i)_was a member of such
Board of Directors on the Issue Date, (ii)_was nominated for election or elected
to such Board of Directors with, or whose election to such Board of Directors
was approved by, the affirmative vote of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election or (iii)_is any designee of a Permitted Holder or was nominated by a
Permitted Holder or any designees of a Permitted Holder on the Board of
Directors.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"DESIGNATED SENIOR INDEBTEDNESS" means (i)_Bank Indebtedness and
(ii)_any other Senior Indebtedness which, at the
<PAGE> 22
-14-
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof, are committed to
lend up to, at least $25 million and is specifically designated by the Company
in the instrument evidencing or governing such Senior Indebtedness or another
writing as "Designated Senior Indebtedness" for purposes of this Indenture.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any event
(other than an event which would constitute a Change of Control Triggering
Event), matures (excluding any maturity as the result of an optional redemption
by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Change of Control
Triggering Event) on or prior to the final maturity date of the Notes; provided
that Capital Stock of the Company that is held by a current or former employee
of the Company subject to a put option and/or a call option with the Company
triggered by the termination of such employee's employment with the Company
and/or the Company's performance shall not be deemed to be Disqualified Capital
Stock solely by virtue of such call option and/or put option.
"EQUITY OFFERING" means a sale of Qualified Capital Stock of the
Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" means, unless otherwise specified, with respect
to any asset or property, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Fair market value shall be determined by the Board
<PAGE> 23
-15-
of Directors of the Company acting reasonably and in good faith and shall be
evidenced by a resolution of the Board of Directors of the Company delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect on the Issue Date, including, without limitation,
those 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 approved by a significant segment of the
accounting profession.
"GUARANTEE" means the guarantee of the Subsidiary Guarantors set
forth in Article XI and any additional guarantee of the Notes executed by any
Subsidiary of the Company as evidenced by a supplemental indenture.
"GUARANTOR" means (i)_each of Enclave Advancement Group, Inc., a
Delaware corporation, ECCA Managed Vision Care, Inc., a Texas corporation,
Visionworks Holdings, Inc., a Florida corporation, Visionworks, Inc., a Florida
corporation, Visionworks Properties, Inc., a Florida corporation, Eyecare
Holdings, Inc., a Delaware corporation, Visionary Retail Management, Inc., a
Delaware corporation, Visionary Properties, Inc., a Delaware corporation,
Visionary MSO, Inc., a Delaware corporation, The Samit Group, Inc., a Delaware
corporation, Hour Eyes, Inc., a Maryland corporation, Skylab Optical, Inc., a
Virginia corporation, and Metropolitan Vision Services, Inc., a Virginia
corporation and (ii) each of the Company's Restricted Subsidiaries that in the
future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of this Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of this Indenture.
"GUARANTOR SENIOR INDEBTEDNESS" means with respect to a Guarantor,
(i) the Bank Indebtedness and (ii) all Indebtedness of
<PAGE> 24
-16-
such Guarantor including interest thereon (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
such Guarantor at the relevant contractual rate provided in the documentation
relating thereto whether or not a claim for post-filing interest is allowed in
such proceedings), whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Guarantee of such Guarantor; provided,
however, that Guarantor Senior Indebtedness shall not include (1) any obligation
of such Guarantor to any Subsidiary of such Guarantor, (2) any liability for
Federal, state, local or other taxes owed or owing by such Guarantor, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Guarantor which is expressly
subordinate in right of payment to any other Indebtedness of such Guarantor,
including any Senior Subordinated Indebtedness and any Subordinated Obligations,
(5) any obligations to repurchase, redeem or make payments owing with respect to
any Capital Stock or (6) that portion of any Indebtedness incurred in violation
of this Indenture provisions set forth under Section 4.3 (but, as to any such
obligation, no such violation shall be deemed to exist for purposes of this
clause (6) if the holder(s) of such obligation or their representative and the
Trustee shall have received an Officers' Certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of this Indenture).
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Note
is registered on the Registrar's books.
<PAGE> 25
-17-
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement (but excluding trade accounts payable arising in
the ordinary course of business), (v) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any lien on any property or asset
of such Person but which obligations are not assumed by such Person, the amount
of such obligation being deemed to be the lesser of the fair market value of
such property or asset or the amount of the obligation so secured, (viii) all
obligations under currency swap agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of sch Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of
<PAGE> 26
-18-
Directors of the issuer of such Disqualified Capital Stock and (y) any transfer
of accounts receivable or other assets which constitute a sale for purposes of
GAAP shall not constitute Indebtedness hereunder.
"INDENTURE" means this Indenture as amended or supplemented from
time to time.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount.
"INVESTMENT" by any Person in any other Person means, with respect
to any Person, any direct or indirect loan or other extension of credit
(including, without limitation, a guarantee) or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, such other Person.
"Investment" shall exclude extensions of trade credit by the Company and its
Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Restricted Subsidiary, as the case
may be. For the purposes of Section 4.4, (i) the Company shall be deemed to have
made an "Investment" equal to the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and the aggregate amount of Investments made on the
Issue Date shall exclude (to the extent the designation as an Unrestricted
Subsidiary was included as a Restricted Payment) the fair market value of the
net assets of any Unrestricted Subsidiary at the time that such Unrestricted
<PAGE> 27
-19-
Subsidiary is designated a Restricted Subsidiary, not to exceed the amount of
the Investment deemed made at the date of designation thereof as an Unrestricted
Subsidiary, and (ii) the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, writedowns or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions (including tax
sharing payments) in connection with such Investment or any other amounts
received in respect of such Investment, provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, 100% (or 80% in the case of
clause (ix) of the defnition of "Permitted Investments") of the outstanding
Common Stock of such Restricted Subsidiary, the Company shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
<PAGE> 28
-20-
"MINIMUM RATING" means (i)_a rating of at least BBB- (or equivalent
successor rating) by S&P and (ii)_a rating of at least Baa3 (or equivalent
successor rating) by Moody's.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Senior
Indebtedness that is required to be repaid in connection with such Asset Sale,
(d) any portion of cash proceeds which the Company determines in good faith
should be reserved for post-closing adjustments, it being understood and agreed
that on the day that all such post-closing adjustments have been determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments payable by the Company or any of its
Subsidiaries shall constitute Net Cash Proceeds on such date; provided that, in
the case of the sale by the Company of an asset constituting an Investment made
after the Issue Date (other than a Permitted Investment), the "Net Cash
Proceeds" in respect of such Asset Sale shall not include the lesser of (x) the
cash received with respect to such Asset Sale and (y) the initial amount of such
Investment, less, in the case of clause (y), all amounts (up to an amount not to
exceed the initial amount of such Investment) received by the Company with
respect to such Investment, whether
<PAGE> 29
-21-
by dividend, sale, liquidation or repayment, in each case prior to the date of
such Asset Sale.
"NEW CREDIT FACILITY" means the credit agreement to be dated as of
the Issue Date, among the Company, the lenders party thereto from time to time
and Bankers Trust Corporation, as administrative agent, and Merrill Lynch
Capital Corporation, as syndication agent, together with the related documents
thereto (including, without limitation, any guarantee agreements, promissory
notes and collateral documents), in each case as such agreements may be amended,
supplemented or otherwise modified from time to time, or refunded, refinanced,
restructured, replaced, renewed, repaid or extended from time to time (whether
in whole or in part and whether with the original agents and lenders or other
agents and lenders or otherwise, and whether provided under the original New
Credit Facility or one or more other credit agreements or otherwise) including,
without limitation, to increase the amount of available borrowings thereunder or
to add Restricted Subsidiaries as additional borrowers or guarantors or
otherwise.
"NOTES CUSTODIAN" means the trustee as custodian for the Depository.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness, without
duplication.
"OFFERING MEMORANDUM" means the Offering Memorandum dated April ,
1998 relating to the Initial Notes; provided that after the issuance of Exchange
Notes, all references herein to "Offering Memorandum" shall be deemed references
to the prospectus relating to the Exchange Notes.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, as applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.
<PAGE> 30
-22-
"OPINION OF COUNSEL" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PERMITTED HOLDER" means and includes (i) the Principal or any of
its Affiliates, (ii) any corporation the outstanding voting power of the capital
stock of which is beneficially owned, directly or indirectly, by the Principal
or any of its Affiliates in substantially the same proportions as their
ownership of the voting power of the capital stock of the Company, or (iii) any
underwriter during the period engaged in a firm commitment underwriting on
behalf of the Company with respect to the shares of capital stock being
underwritten.
"PERMITTED INDEBTEDNESS" means, without duplication, (i) the Notes
and the Guarantees, (ii)_Indebtedness incurred pursuant to the New Credit
Facility in an aggregate outstanding principal amount at any time not to exceed
the amount of the aggregate commitments permitted pursuant to the New Credit
Facility as in effect on the Issue Date (A)_less the amount of all mandatory
principal payments actually made in respect of the Term Loan Facility (excluding
any such repayment to the extent refinanced and replaced at the time of payment)
and (B)_reduced by any required permanent repayments actually made (which are
accompanied by a corresponding permanent commitment reduction) in respect of the
Revolving Credit Facility (excluding any such repayment and commitment
reductions to the extent refinanced and replaced at the time of payment) in each
case pursuant to this clause (B), actually effected in satisfaction of the Net
Cash Proceeds requirement described under Section 4.6 (it being recognized that
a reduction in any borrowing base thereunder in and of itself shall not be
deemed a required permanent repayment), (iii) other Indebtedness of the Company
and its Restricted Subsidiaries outstanding on the Issue Date reduced by the
amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon, (iv)_Interest Swap Obligations of
the Company or any of its
<PAGE> 31
-23-
Restricted Subsidiaries covering Indebtedness of the Company or any of its
Restricted Subsidiaries; provided that any Indebtedness to which any such
Interest Swap Obligations correspond is otherwise permitted to be incurred under
this Indenture; provided, further, that such Interest Swap Obligations are
entered into, in the judgment of the Company, to protect the Company and its
Restricted Subsidiaries from fluctuation in interest rates on their respective
outstanding Indebtedness, (v)_Indebtedness of the Company or any of its
Restricted Subsidiaries under Currency Agreements entered into, in the judgment
of the Company, to protect the Company or such Restricted Subsidiary from
foreign currency exchange rates, (vi) intercompany Indebtedness owed by any
Restricted Subsidiary of the Company to the Company or any Restricted Subsidiary
of the Company or by the Company to any Restricted Subsidiary, (vii) Acquired
Indebtedness of the Company or any Restricted Subsidiary of the Company to the
extent the Company could have incurred such Indebtedness in accordance with
Section 4.3 (without giving effect to the exception for Permitted Indebtedness)
on the date such Indebtedness became Acquired Indebtedness; provided that, in
the case of Acquired Indebtedness of a Restricted Subsidiary of the Company,
such Acquired Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
of the Company, (viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or other similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business; provided that such Indebtedness is extinguished within five business
days of its incurrence, (ix) any refinancing, modification, replacement,
renewal, restatement, refunding, deferral, extension, substitution, supplement,
reissuance or resale of existing or future Indebtedness, including any
additional Indebtedness incurred to pay interest or premiums required by the
instruments governing such existing or future Indebtedness as in effect at the
time of issuance thereof
<PAGE> 32
-24-
("REQUIRED PREMIUMS") and fees in connection therewith; provided that any such
event shall not (1) result in an increase in the aggregate principal amount of
Permitted Indebtedness (except to the extent such increase is a result of a
simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums
and related fees or (B) otherwise permitted to be incurred under this Indenture)
of the Company and its Restricted Subsidiaries and (2) create Indebtedness with
a Weighted Average Life to Maturity at the time such Indebtedness is incurred
that is less than the Weighted Average Life to Maturity at such time of the
Indebtedness being refinanced, modified, replaced, renewed, restated, refunded,
deferred, extended, substituted, supplemented, reissued or resold (except that
this subclause (2) will not apply in the event the Indebtedness being
refinanced, modified, replaced, renewed, restated, refunded, deferred, extended,
substituted, supplemented, reissued or resold was originally incurred in
reliance upon clause (vi) or (xv) of this definition); provided that no
Restricted Subsidiary of the Company may refinance any Indebtedness pursuant to
this clause (ix) other than its own Indebtedness, (x) Indebtedness (including
Capitalized Lease Obligations) incurred by the Company or any Restricted
Subsidiary to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate principal amount
outstanding not to exceed $10.0 million at the time of any incurrence thereof
(which amount may, but shall not be required to be incurred pursuant to the New
Credit Facility, but shall be deemed not to include any such Indebtedness
incurred in whole or in part under the New Credit Facility to the extent
permitted by clause (ii) above or clause (xvi) below or pursuant to the proviso
to Section 4.3), (xi) Indebtedness incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including, without
<PAGE> 33
-25-
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims, (xii) Indebtedness arising
from agreements of the Company or a Restricted Subsidiary of the Company
providing for indemnification, adjustment of purchase price, earn out or other
similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or a Restricted Subsidiary of the Company,
other than guarantees of Indebtedness incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition, provided that the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
actually received by the Company and its Restricted Subsidiaries in connection
with such disposition, (xii) the incurrence by a Receivables Entity of
Indebtedness in a Qualified Receivables Transaction that is not recourse to the
Company or any Restricted Subsidiary of the Company (except for Standard
Securitization Undertakings), (xiv) obligations in respect of performance and
surety bonds and completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business, (xv) Indebtedness
consisting of guarantees (x) by the Company of Indebtedness, leases and any
other obligation or liability permitted to be incurred under this Indenture by
Restricted Subsidiaries of the Company, and (y) by Restricted Subsidiaries of
the Company that are Guarantors of Indebtedness, leases and any other obligation
or liability permitted to be incurred under this Indenture by the Company or
other Restricted Subsidiaries of the Company, and (xvi) additional Indebtedness
of the Company or any Restricted Subsidiary of the Company that is a Guarantor
in an aggregate principal amount not to exceed $10.0 million at any one time
outstanding (which amount may, but shall not be required to, be incurred
pursuant to the New Credit Facility, but should not be deemed to include any
such Indebtedness incurred in whole
<PAGE> 34
-26-
or in part under the New Credit Facility to the extent permitted by clause (ii)
or clause (x) above or pursuant to the proviso to Section 4.3).
"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Restricted Subsidiary of the Company
(whether existing on the Issue Date or created thereafter) and Investments in
the Company by any Restricted Subsidiary of the Company; (ii) cash and Cash
Equivalents; (iii) Investments existing on the Issue Date and Investments made
on the Issue Date pursuant to the Recapitalization Agreement; (iv) loans and
advances to employees, officers and directors of the Company and its Restricted
Subsidiaries not in excess of $3.0 million at any one time outstanding; (v)
accounts receivable owing to the Company or any Restricted Subsidiary created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however that such trade terms
may include such concessionary trade terms as the Company or such Restricted
Subsidiary deems reasonable under the circumstances; (vi) Currency Agreements
and Interest Swap Obligations entered into by the Company or any of its
Restricted Subsidiaries for bona fide business reasons and not for speculative
purposes, and otherwise in compliance with this Indenture; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) guarantees by the Company or any of its
Restricted Subsidiaries of Indebtedness otherwise permitted to be incurred by
the Company or any of its Restricted Subsidiaries under this Indenture; (ix)
Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment (A) such Person becomes a Restricted
Subsidiary of the Company or (B) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or a Restricted
<PAGE> 35
-27-
Subsidiary of the Company; (x) additional Investments having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (x) that are at the time outstanding, not exceeding $5.0 million at the
time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value), plus an amount equal to (A) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date of Qualified Capital
Stock of the Company (including Qualified Capital Stock issued upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or as capital contributions to the Company (other than from a
Subsidiary) ) and (B) without duplicatin of any amounts included in clause (x)
(A) above, 100% of the aggregate net cash proceeds of any equity contribution
received by the Company from a holder of the Company's Capital Stock, that in
the case of amounts described in clause (x) (A) or (x)_(B) are applied by the
Company within 180 days after receipt, to make additional Permitted Investments
under this clause (x) (such additional Permitted Investments being referred to
collectively as "STOCK PERMITTED INVESTMENTS"); (xi) any Investment by the
Company or a Restricted Subsidiary of the Company in a Receivables Entity or any
Investment by a Receivables Entity in any other Person in connection with a
Qualified Receivables Transaction, including investments of funds held in
accounts permitted or required by the arrangements governing such Qualified
Receivables Transaction or any related Indebtedness; provided that any
Investment in a Receivables Entity is in the form of a Purchase Money Note,
contribution of additional Receivables or an equity interest; (xii) Investments
received by the Company or its Restricted Subsidiaries as consideration for
asset sales, including Asset Sales; provided in the case of an Asset Sale, (A)
such Investment does not exceed 25% of the consideration received for such Asset
Sale and (B)
<PAGE> 36
-28-
such Asset Sale is otherwise effected in compliance with Section 4.6; (xiii)
Investments by the Company or its Restricted Subsidiaries in joint ventures in
an aggregate amount not in excess of $5.0_million; and (xiv) that portion of any
Investment where the consideration provided by the Company is Capital Stock of
the Company (other than Disqualified Capital Stock). Any net cash proceeds that
are used by the Company or any of its Restricted Subsidiaries to make Stock
Permitted Investments pursuant to clause (x) of this definition shall not be
included in subclauses (x) and (y) of clause (iii) of the first paragraph of
Section 4.4.
"PERMITTED LIENS" means the following types of Liens:
() Liens securing the Notes;
() Liens securing Acquired Indebtedness incurred in reliance on
clause (vii) of the definition of Permitted Indebtedness; provided that
such Liens do not extend to or cover any property or assets of the Company
or of any of its Restricted Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company;
() Liens existing on the Issue Date, together with any Liens
securing Indebtedness incurred in reliance on clause (x) of the
definition of Permitted Indebtedness in order to refinance the
Indebtedness secured by Liens existing on the Issue Date; provided
that the Liens securing the refinancing Indebtedness shall not
extend to property other than that pledged under the Liens securing
the Indebtedness being refinanced;
() Liens in favor of the Company on the property or assets, or
any proceeds, income or profit therefrom, of any Restricted
Subsidiary of the Company; and
() other Liens securing Senior Subordinated Indebtedness of
the Company or any Restricted Subsidiary that is a Guarantor,
provided that the maximum aggregate
<PAGE> 37
-29-
amount of outstanding obligations secured thereby shall not at any
time exceed $5.0 million.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof or any other entity.
"PLAN" means any employee benefit plan, retirement plan, deferred
compensation plan, restricted stock plan, health, life, disability or other
insurance plan or program, employee stock purchase plan, employee stock
ownership plan, pension plan, stock option plan or similar plan or arrangement
of the Company or any Subsidiary of the Company, or other successor plan
thereof, and "PLANS" shall have a correlative meaning.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" means Thomas H. Lee Company and its Affiliates.
"PRODUCTIVE ASSETS" means assets (including Capital Stock of a
Person that directly or indirectly owns assets) of a kind used or usable in the
businesses of the Company and its Restricted Subsidiaries as, or related to such
business, conducted on the date of the relevant Asset Sale.
"PURCHASE MONEY NOTE" means a promissory note of a Receivables
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note (a) shall be repaid from cash
available to the Receivables Entity, other than (i) amounts required to be
established as reserves pursuant to agreements, (ii) amounts paid to investors
in respect of interest, (iii) principal and other amounts owing to such
investors and (iv) amounts paid in connection with the purchase of newly
generated
<PAGE> 38
-30-
receivables and (b) may be subordinated to the payments described in (a).
"QIB" means any "qualified institutional buyer" (as defined under
the Securities Act).
"QUALIFIED CAPITAL STOCK" means any stock that is not Disqualified
Capital Stock.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series
of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Receivables Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Receivables Entity), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any of its Subsidiaries, and any assets related
thereto, including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable. The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"RECAPITALIZATION" means the transaction contemplated by the
Recapitalization Agreement, together with the financings therefor.
"RECAPITALIZATION AGREEMENT" means the Recapitalization Agreement
dated as of March 6, 1998 by and between ECCA Merger Corp., a Delaware
corporation, and the Company, as in effect on the Issue Date.
"RECEIVABLES ENTITY" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any
<PAGE> 39
-31-
Subsidiary of the Company makes an Investment and to which the Company or any
Subsidiary of the Company transfers accounts receivable and related assets)
which engages in no activities other than in connection with the financing of
accounts receivable, all proceeds thereof and all rights (contractual or other),
collateral and other assets relating thereto, and any business or activities
incidental or related to such business, and which is designated by the Board of
Directors of the Company (as provided below) as a Receivables Entity (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings, (b) with which neither
the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms which the Company
reasonably believes to be no less favorable to the Company or such Subsidiary
than those that might be obtained at the time from Persons that are not
Affiliates of the Company, other than fees payable in the ordinary course of
business in connection with servicing accounts receivable, and (c) to which
neither the Company nor any Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results other than through the contribution
of additiona Receivables, related security and collections thereto and proceeds
of the foregoing. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the
<PAGE> 40
-32-
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"REGISTERED EXCHANGE OFFER" shall have the meaning set forth in the
Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated April , 1998, among the Company, BT Alex. Brown, Incorporated
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Indebtedness; provided
that if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Designated Senior Indebtedness in respect of any Designated
Senior Indebtedness.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"REVOLVING CREDIT FACILITY" means the Revolving Credit Facility
under the New Credit Facility.
"S&P" means Standard & Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SECURED INDEBTEDNESS" means any Indebtedness of the Company or any
Guarantor secured by a Lien.
<PAGE> 41
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"SUBSIDIARY GUARANTOR" means (i) each of the Company's Subsidiaries
existing on the Issue Date that has guaranteed the Indebtedness under the
[________________] and (ii) each of the Company's Subsidiaries that in the
future executes a supplemental indenture in which such Subsidiary agrees to be
bound by the terms of this Indenture as a Subsidiary Guarantor whether pursuant
to the provisions set forth under Section 4.11 or otherwise.
"SECURITYHOLDER" or "HOLDER" means the Person in whose name a Note
is registered in on the Registrar's books.
"SENIOR INDEBTEDNESS" means (i) the Bank Indebtedness and (ii) all
Indebtedness of the Company, including interest thereon (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the relevant contractual rate provided
in the documentation relating thereto whether or not a claim for post-filing
interest is allowed in such proceedings), whether outstanding on the Issue Date
or thereafter incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is expressly provided that such
obligations are not superior in right of payment to the Notes; provided,
however, that Senior Indebtedness shall not include (1) any obligation of the
Company to any Subsidiary of the Company, (2) any liability for Federal, state,
local or other taxes owed or owing by the Company, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of the Company which is expressly subordinate in right of
payment to any other Indebtedness of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations
to repurchase, redeem or make payments owing with respect to any Capital Stock
or (6) that portion of any Indebtedness incurred in violation of this Indenture
provisions set forth under Section 4.3 (but, as to any such obligation, no
<PAGE> 42
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such violation shall be deemed to exist for purposes of this clause (6) if the
holder(s) of such obligation or their representative and the Trustee shall have
received an Officers' Certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of this Indenture).
"SENIOR SUBORDINATED INDEBTEDNESS" means, with respect to the
Company or any Guarantor, the Notes or the Guarantee of such Guarantor, as
applicable, and any other Indebtedness of the Company or such Guarantor, as
applicable, that specifically provides that such Indebtedness is to rank pari
passu with the Notes or the Guarantee of such Guarantor, as applicable, and is
not by its express terms subordinate in right of payment to any Indebtedness of
the Company or such Guarantor, as applicable, which is not Senior Indebtedness
or Guarantor Senior Indebtedness, as applicable.
"SIGNIFICANT SUBSIDIARY" means, as of any date of determination, for
any Person, each Restricted Subsidiary of such Person which (i) for the most
recent fiscal year of such Person accounted for more than 10% of consolidated
revenues or consolidated net income of such Person or (ii) as at the end of such
fiscal year, was the owner of more than 10% of the consolidated assets of such
Person.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which the Company reasonably believes to be customary
in an accounts receivable transaction.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision.
<PAGE> 43
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"SUBORDINATED OBLIGATION" means, with respect to the Company or any
Guarantor, any Indebtedness of the Company or such Guarantor, as applicable
(whether outstanding on the Issue Date or thereafter incurred), which is
expressly subordinate in right of payment to the Notes or the Guarantee of such
Guarantor, as applicable, pursuant to a written agreement.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii)_any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"SUBSIDIARY GUARANTOR" means (i) each of the Company's Subsidiaries
existing on the Issue Date that has guaranteed the Indebtedness under the
[_______________] and (ii)_each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of this Indenture as a Subsidiary Guarantor whether pursuant to the
provisions set forth under Section 4.11 or otherwise.
"TERM LOAN FACILITY" means the Term Loan Facility under the New
Credit Facility.
"THL CO." means Thomas H. Lee Company, a financial investment firm.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
sec.sec._77aaa-77bbbb) as in effect on the date of this Indenture.
"TRANSFER RESTRICTED NOTES" means Notes that bear or are required to
bear the legend set forth in Section 2.6 hereof.
"TRUST OFFICER" means any officer of the Trustee assigned by the
Trustee to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the corporation
trust work of such successor and assigned to administer this Indenture.
<PAGE> 44
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"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided that (x) the
Company certifies to the Trustee that such designation complies with Section 4.4
and (y) each Subsidiary to be so designated and each of its Subsidiaries has not
at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation and
treating all Indebtedness of such Unrestricted Subsidiary as being incurred on
such date, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.3
and (y) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution giving
effect to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America
<PAGE> 45
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for the payment of which the full faith and credit of the United States of
America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (i)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED SUBSIDIARY" means any Restricted Subsidiary of the
Company all the outstanding voting securities of which (other than directors,
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned, directly or indirectly, by
the Company.
SECTION .. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ---------
<S> <C>
"Affiliate Transaction"............................... 4.7
"Agent Member"........................................ 2.1
"Bankruptcy Law"...................................... 6.1
"Blockage Notice"..................................... 10.3
"Change of Control Offer"............................. 4.8
"Change of Control Payment Date"...................... 4.8(b)
"covenant defeasance option".......................... 8.1(b)
"Custodian"........................................... 6.1
"Definitive Notes".................................... 2.1
"Event of Default".................................... 6.1
"Exchange Fixed Rate Notes"........................... Preamble
</TABLE>
<PAGE> 46
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<TABLE>
<S> <C>
"Exchange Floating Rate Notes"........................ Preamble
"Exchange Notes"...................................... Preamble
"Global Note"......................................... 2.1(b)
"incur"............................................... 4.3
"Initial Fixed Rate Notes"............................ Preamble
"Initial Floating Rate Notes"......................... Preamble
"Initial Notes"....................................... Preamble
"legal defeasance option"............................. 8.1(b)
"Legal Holiday"....................................... 13.8
"Net Proceeds Offer".................................. 4.6
"Net Proceeds Offer Amount"........................... 4.6
"Net Proceeds Offer Trigger Date"..................... 4.6
"Non-Global Purchaser"................................ 2.1
"Note Offer Amount"................................... 4.6(a)
"Notes"............................................... Preamble
"Offer"............................................... 4.6
"Other Debt".......................................... 6.1
"pay the Notes"....................................... 10.3
"Paying Agent"........................................ 2.3
"Payment Blockage Period"............................. 10.3
"Reference Date"...................................... 4.4(a)
"Registrar"........................................... 2.3
"Restricted Payment".................................. 4.4
"Rule 144A"........................................... 2.1(b)
"Successor Company"................................... 5.1
"Trustee"............................................. Preamble
</TABLE>
SECTION .. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
<PAGE> 47
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"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION .. RULES OF CONSTRUCTION. Unless the context
otherwise requires:
() a term has the meaning assigned to it;
() an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
() "or" is not exclusive;
() "including" means including without limitation;
() words in the singular include the plural and words in the plural
include the singular;
() unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
() the principal amount of any non interest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
() the principal amount of any Preferred Stock shall be (i) the
maximum liquidation preference of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE
THE SECURITIES
SECTION .. FORM AND DATING. () The Initial Fixed Rate Notes
and the Trustee's certificate of authentication
<PAGE> 48
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shall be substantially in the form of EXHIBIT A-1 and the Initial Floating Rate
Notes and the Trustee's certificate of authentication shall be substantially in
the form of EXHIBITS A-2, which are hereby incorporated in and expressly made a
part of this Indenture. The Exchange Fixed Rate Notes and the Trustee's
certificate of authentication shall be substantially in the form of EXHIBIT B-1
and the Exchange Floating Rate Notes and the Trustee's certificate of
authentication shall be substantially in the form of EXHIBIT B-2, which are
hereby incorporated by reference and expressly made a part of this Indenture.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage, in addition to those set forth on EXHIBITS A-1, A-2, B-1
and B-2. The Company and the Trustee shall approve the forms of the Notes and
any notation, endorsement or legend on them. Each Note shall be dated the date
of its authentication. The terms of the Notes set forth in EXHIBIT A-1, A-2, B-1
and B-2 are part of the terms of this Indenture and, to the extent applicable,
the Company, and the Trustee, by their execution and delivery of this Indenture,
expressly agree to be bound by such terms.
() GLOBAL NOTES. The Initial Notes are being offered and
sold by the Company pursuant to a Purchase Agreement, dated April , 1998,
among the Company, BT Alex. Brown, Incorporated and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "PURCHASE AGREEMENT").
Initial Notes offered and sold to a QIB in reliance on Rule
144A under the Securities Act ("RULE 144A") as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent global
Notes in definitive, fully registered form without interest coupons with the
Global Notes Legend and Restricted Notes Legend set forth in Exhibit A hereto
(each, a "GLOBAL NOTE"), which shall be deposited on behalf of the purchasers of
the Initial Notes represented thereby with the Trustee, at its corporate trust
office, as custodian for the Depository, and registered in the name of the
Depository or a
<PAGE> 49
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nominee of the Depository, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Global
Notes may from time to time be increased or decreased by endorsements made on
such Global Notes by the Trustee, the Notes Custodian or the Depository or its
nominee as hereinafter provided.
() BOOK-ENTRY PROVISIONS. This Section 2.1(c) shall apply only
to Global Notes.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository or by the Trustee as the custodian
of the Depository or under such Global Note, and the Depository may be treated
by the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or an agent
of the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices of
the Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Note.
() CERTIFICATED NOTES. Except as provided in Section 2.6,
owners of beneficial interests in Global Notes will not be entitled to receive
Definitive Notes (as hereinafter defined). Initial Notes offered and sold to
Persons who are not QIBs (referred to herein as the "Non-Global Purchasers"), as
provided in the Purchase Agreement, shall be issued initially to such Persons in
the form of certificated Initial Notes bearing the Restricted Notes Legend set
forth in Exhibit A hereto ("DEFINITIVE NOTES"); provided, however, that upon
transfer of such Definitive Notes to a QIB, such Definitive Notes will, unless
the Global Note has previously been exchanged, be exchanged for an interest in a
Global Note pursuant to the
<PAGE> 50
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provisions of Section 2.6 hereof. Definitive Notes will bear the Restricted
Notes Legend set forth on Exhibit A unless removed in accordance with Section
2.6(f) hereof.
SECTION .. EXECUTION AND AUTHENTICATION. Two Officers shall
sign the Notes for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually authenticates the Note. The signature of the Trustee on a Note
shall be conclusive evidence that such Note has been duly and validly
authenticated and issued under this Indenture.
The Trustee shall authenticate and deliver: (1) Initial Notes for
original issue in an aggregate principal amount of $150 million and (2) Exchange
Notes for issue only in a Registered Exchange Offer pursuant to the Registration
Rights Agreement, and only in exchange for Initial Notes of an equal principal
amount, in each case upon a written order of the Company signed by two Officers
or by an Officer and either an Assistant Treasurer or an Assistant Secretary of
the Company. Such order shall specify the amount of the Notes to be
authenticated and the date on which the original issue of Notes is to be
authenticated and whether the Notes are to be Initial Notes or Exchange Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
$150 million except as provided in Section 2.7.
The Trustee may appoint an agent (the "AUTHENTICATING AGENT")
reasonably acceptable to the Company to authenticate the Notes. Unless limited
by the terms of such appointment, any such Authenticating Agent may authenticate
Notes whenever the Trustee
<PAGE> 51
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may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent.
SECTION .. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "REGISTRAR") and an office or agency where Notes
may be presented for payment (the "PAYING AGENT"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. 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 not a party to this Indenture,
which shall incorporate the terms of the TIA. 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 each such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Company or any of its domestically incorporated Wholly Owned Restricted
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent for the Notes.
SECTION .. PAYING AGENT TO HOLD MONEY IN TRUST. By at least
10:00 A.M. (New York City time) on the date on which any principal of or
interest on any Note is due and payable, the Company shall deposit with the
Paying Agent a sum sufficient to pay such principal or interest when due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that such Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Notes and shall notify the Trustee of
any default by the Company
<PAGE> 52
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in making any such payment. If the Company or a Subsidiary acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent (other
than the Trustee) to pay all money held by it to the Trustee and to account for
any funds disbursed by such Paying Agent. Upon complying with this Section, the
Paying Agent (if other than the Company or a Subsidiary) shall have no further
liability for the money delivered to the Trustee. Upon any bankruptcy,
reorganization or similar proceeding with respect to the Company, the Trustee
shall serve as Paying Agent for the Notes.
SECTION .. 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 furnish to the Trustee, in writing at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION .. TRANSFER AND EXCHANGE.
() TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive
Notes are presented by a Holder to the Registrar or a co-registrar with a
request:
(x) to register the transfer of such Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount
of Definitive Notes of other authorized denominations, the Registrar or
co-registrar shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; provided,
however, that:
() such Definitive Notes shall be duly endorsed
or accompanied by a written instrument of transfer in form
<PAGE> 53
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reasonably satisfactory to the Company and the Registrar or co-registrar, duly
executed by such Holder or his attorney duly authorized in writing; and
() if such Definitive Notes are Transfer Restricted Notes, such
Definitive Notes shall also be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Notes are being delivered to the Registrar
by a Holder for registration in the name of such Holder, without transfer, a
certification from such Holder to that effect (in the form set forth on the
reverse of the Note); or
(B) if such Transfer Restricted Notes are being transferred (x) to the
Company or to a QIB in accordance with Rule 144A under the Securities Act or (y)
pursuant to an effective registration statement under the Securities Act, a
certification from such Holder to that effect (in the form set forth on the
reverse of the Note); or
(C) if such Transfer Restricted Notes are being transferred (w) pursuant
to an exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act; or (x) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification to that
effect from such Holder (in the form set forth on the reverse of the Note) and
(ii) if the Company or the Trustee so requests, an Opinion of Counsel reasonably
acceptable to the Company and to the Trustee to the effect that such transfer is
in compliance with the Securities Act.
() RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Note may not be exchanged
for a beneficial interest in
<PAGE> 54
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a Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
() certification, in the form set forth on the reverse of the
Note, to the effect that such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act; and
() written instructions from the Holder thereof directing the
Trustee to make, or to direct the Notes Custodian to make, an endorsement on the
Global Note to reflect an increase in the aggregate principal amount of the
Notes represented by the Global Note, then the Trustee shall cancel such
Definitive Note and cause, or direct the Notes Custodian to cause, in accordance
with the standing instructions and procedures existing between the Depository
and the Notes Custodian, the aggregate principal amount of Notes represented by
the Global Note to be increased accordingly. If no Global Notes are then
outstanding, the Company shall issue and the Trustee shall authenticate, upon
written order of the Company in the form of an Officers' Certificate, a new
Global Note in the appropriate principal amount. The Trustee shall deliver
copies of each certification and instruction received by it pursuant to clauses
(i) and (ii) above to the Depository and, upon receipt thereof, the Depository
shall make appropriate adjustments to its books and records to reflect exchange
of such Definitive Note for an interest in the Global Note in accordance with
Section 2.6(c).
() TRANSFER AND EXCHANGE OF GLOBAL NOTES.
()__The transfer and exchange of Global Notes or beneficial interests therein
shall be effected through the Depository, in accordance with this Indenture
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depository therefor.
<PAGE> 55
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() A Global Note deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof only if such transfer complies with
this Section 2.6 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for such Global Note or if at any
time such Depository ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by the Company within
90 days of such notice, or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request from the Depository or the
Trustee to issue Definitive Notes.
() Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to the
Trustee to be so transferred, in whole or from time to time in part, without
charge, and the Company shall sign and the Trustee shall authenticate and
deliver, upon such transfer of each portion of such Global Note, an equal
aggregate principal amount of Definitive Notes of authorized denominations. Each
Definitive Note delivered in exchange for any portion of a Global Note
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
shall be registered in such names as the Depository shall direct. Any Definitive
Note delivered in exchange for an interest in the Global Note shall, except as
otherwise provided in Section 2.6(f), bear the Restricted Notes Legend set forth
in Exhibit A hereto.
() The registered Holder of a Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
() In the event of the occurrence of either of the events specified
in Section 2.6(c)(ii), the Company will promptly
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make available to the Trustee a reasonable supply of certificated Notes in
definitive, fully registered form without interest coupons.
() Restriction on Transfer of a Beneficial Interest in a
Global Note for a Definitive Note.
() Any person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a Definitive Note of the
same aggregate principal amount; provided that such request is accompanied by
the information specified below. Upon receipt by the Trustee of written
instructions (or such other form of instructions as is customary for the
Depository) from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Note and, in the case of a Transfer Restricted
Note, the following additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the owner of a beneficial interest
in a Global Note, a certification from such Person to that effect (in the
form set forth on the reverse of the Note); or
(B) if such beneficial interest is being transferred (x) to a QIB in
accordance with Rule 144A under the Securities Act and such QIB does not
desire to hold such transferred interest through beneficial ownership in a
Global Note or (y) pursuant to an effective registration statement under
the Securities Act, a certification from such person to that effect (in
the form set forth on the reverse of the Note); or
(C) if such beneficial interest is being transferred (w) pursuant to
an exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act; or (x) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification to
that effect from the transferee (in the form set forth on
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the reverse of the Note) and (ii) if the Company or the Trustee so
requests, an Opinion of Counsel reasonably acceptable to the Company and
to the Trustee to the effect that such transfer is in compliance with the
Securities Act; then the Notes Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures
existing between the Depository and the Notes Custodian, the aggregate
principal amount of the Global Note to be reduced accordingly and,
following such reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee one or more Definitive Notes in
accordance with clause (ii) below.
() Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.6(d) shall be registered in
such names and in such authorized denominations as the Depository, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee in writing. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Definitive Notes are to be so registered in
accordance with the instructions of the Depository.
() RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (c) of this Section 2.6), a Global Note may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee by the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
() LEGEND.
() Except as permitted by the following paragraph (ii) each
Note certificate evidencing Global Notes and Definitive Notes (and all Notes
issued in exchange therefor or
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substitution thereof) shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B)_IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT)
(AN "ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE
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SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY UCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
() Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note) pursuant
to Rule 144 under the Securities Act or pursuant to an effective registration
statement under the Securities Act:
(A) in the case of any Transfer Restricted Note that is a Definitive
Note, the Registrar shall permit the Holder thereof to exchange such
Transfer Restricted Note for a Definitive Note that does not bear the
legend set forth in paragraph (i)_above and rescind any restriction on the
transfer of such Note; and
(B) in the case of any such Transfer Restricted Note represented by
a Global Note, such Transfer Restricted Note shall not be required to bear
the legend set forth in paragraph (i) above, although it shall continue to
be subject to the provisions of Section 2.6(c) hereof; provided, however,
that with respect to any request for an exchange of a Transfer Restricted
Note, that is represented by a Global Security for a Definitive Security
that does not bear the legend set forth in paragraph (i) above, which
request is made in reliance upon Rule 144, the Holder
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thereof shall certify in writing to the Trustee that such request is being
made pursuant to Rule 144 (such certification to be in the form set forth
on the reverse of the Security).
() CANCELLATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as
all beneficial interests in a Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or canceled, such Global Note shall be
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for Definitive Notes,
redeemed, repurchased or canceled, the principal amount of Notes represented by
such Global Security shall be reduced and an endorsement shall be made on such
Global Security by the Notes Custodian to reflect such reduction.
() Obligations with Respect to Transfers and Exchanges of Notes.
() To permit registrations of transfers and exchanges, the
Company shall, subject to the other terms and conditions of this Article II,
execute and the Trustee shall authenticate Definitive Notes and Global Notes at
the Registrar's or co-registrar's request.
() No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company, Registrar or co-registrar may require
payment of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charges payable upon exchange or transfer
pursuant to Sections 4.6, 4.8 or 9.5 or pursuant to paragraph 5 of the Notes).
() The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article III, except the unredeemed
portion of any Definitive Security being redeemed in part, or (b) any Security
for a period beginning (1) 15 Business Days before the mailing of
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a notice of an offer to repurchase or redeem Notes and ending at the close of
business on the day of such mailing or (2) 15 Business Days before an interest
payment date and ending on such interest payment date.
() Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
() All Notes issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Notes surrendered upon such
transfer or exchange.
() NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Note, a member
of, or a participant in, the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any participant
or member thereof, with respect to any ownership interest in the Notes or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount or delivery of any Notes (or other
security or property) under or with respect to such Notes. All notices and
communications to be given to the Holders and all payments to be made to Holders
in respect of the Notes shall be given or made only to or upon the order of the
registered Holders (which shall be the Depository or its nominee in the case of
a Global Note). The rights of beneficial owners in any Global Note shall be
exercised only through the Depository subject to the applicable
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rules and procedures of the Depository. The Trustee may rely and shall be fully
protected in relying upon information furnished the Depository with respect to
its members, participants and any beneficial owners.
() The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Note (including any transfers between or among Depository
participants, members or beneficial owners in any Global Note other than to
require delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
SECTION .. REPLACEMENT NOTES. If a mutilated Note is
surrendered to the Registrar or if the Holder of a Note claims that the Note has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the requirements of Section
8-405 of the Uniform Commercial Code are met and the Holder satisfies any other
reasonable requirements of the Trustee. If required by the Trustee or the
Company, such Holder shall furnish an indemnity bond sufficient in the judgment
of the Company and the Trustee to protect the Company, the Trustee, the Paying
Agent, the Registrar and any co-registrar from any loss which any of them may
suffer if a Note is replaced. The Company and the Trustee may charge the Holder
for their expenses in replacing a Note. Every replacement Note is an additional
obligation of the Company.
SECTION .. OUTSTANDING NOTES. Notes outstanding at any time are all
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
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If a Note is replaced pursuant to Section 2.7, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the Notes
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Notes (or portions thereof) cease to be outstanding and interest on them
ceases to accrue.
SECTION .. TEMPORARY NOTES. Until Definitive Notes are ready
for delivery, the Company may prepare and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
Definitive Notes but may have variations that the Company considers appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate Definitive Notes. After the preparation of
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at any office or agency maintained by the
Company for that purpose and such exchange shall be without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute, and the Trustee shall authenticate and deliver in
exchange therefor, one or more Definitive Notes representing an equal principal
amount of Notes. Until so exchanged, the Holder of temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as a holder of
Definitive Notes.
SECTION .. CANCELLATION. The Company at any time may deliver Notes
to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or
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payment. The Trustee and no one else shall cancel and destroy (subject to the
record retention requirements of the Exchange Act) all Notes surrendered for
registration of transfer, exchange, payment or cancellation and deliver a
certificate of such destruction to the Company unless the Company directs the
Trustee to deliver canceled Notes to the Company. The Company may not issue new
Notes to replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation.
SECTION .. DEFAULTED INTEREST. If the Company defaults in a payment
of interest on the Notes, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed (or upon the Company's failure to do so the Trustee shall fix)
any such special record date and payment date to the reasonable satisfaction of
the Trustee which specified record date shall not be less than 10 days prior to
the payment date for such defaulted interest and shall promptly mail or cause to
be mailed to each Securityholder a notice that states the special record date,
the payment date and the amount of defaulted interest to be paid. The Company
shall notify the Trustee in writing of the amount of defaulted interest proposed
to be paid on each Note and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when so deposited to be held in
trust for the benefit of the Person entitled to such defaulted interest as
provided in this Section.
SECTION .. CUSIP NUMBERS. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders, provided,
however, that
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any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Notes or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers.
ARTICLE
REDEMPTION
SECTION .. NOTICES TO TRUSTEE. If the Company elects to redeem
Notes pursuant to Paragraph 6 or Paragraph 7 of the Notes, it shall notify the
Trustee in writing of the Redemption Date, the Redemption Price and the
principal amount of Notes to be redeemed. The Company shall give notice of
redemption to the Paying Agent and Trustee at least 45 days but not more than 60
days before the Redemption Date (unless a shorter notice shall be agreed to by
the Trustee in writing), together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
SECTION .. SELECTION OF NOTES TO BE REDEEMED. In the event that less
than all of the Fixed Rate Notes or Floating Rate Notes are to be redeemed at
any time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a PRO RATA basis, by lot or by such method as
the Trustee shall deem fair and appropriate; PROVIDED, HOWEVER, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; and PROVIDED,
FURTHER, that if a partial redemption is made with the net cash proceeds of an
Equity Offering, selection of the Fixed Rate Notes or portions thereof for
redemption shall be made by the Trustee only on a PRO RATA basis or on as nearly
a PRO RATA basis as is practicable (subject to the procedures of the
Depository), unless such method is otherwise prohibited.
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SECTION .. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a Redemption Date, the Company shall mail a notice of redemption
by first class mail, postage prepaid, to each Holder whose Notes are to be
redeemed at its registered address. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Notes to be redeemed and
shall state:
() the Redemption Date;
() the Redemption Price and the amount of accrued interest, if any,
to be paid;
() the name and address of the Paying Agent;
() that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
() that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of
such Notes is to receive payment of the Redemption Price upon surrender to
the Paying Agent of the Notes redeemed;
() if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
aggregate principal amount equal to the unredeemed portion thereof will be
issued;
() if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption; and
() the Paragraph of the Notes pursuant to which the Notes are to be
redeemed.
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The notice, if mailed in a manner herein provided, shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Note designated for redemption in whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Note.
SECTION .. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued interest to the redemption date; provided that if the
redemption date is after a regular record date and on or prior to the interest
payment date, the accrued interest shall be payable to the Securityholder of the
redeemed Notes registered on the relevant record date. Failure to give notice or
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION .. DEPOSIT OF REDEMPTION PRICE. On or before 11:00 a.m New
York time on the Redemption Date, the Company shall deposit with the Paying
Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued
interest, if any, of all Notes to be redeemed on that date.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION .. NOTES REDEEMED IN PART. Upon surrender of a Note
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Note equal in a
principal amount to the unredeemed portion of the Note surrendered.
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ARTICLE
COVENANTS
SECTION .. PAYMENT OF NOTES. The Company shall promptly pay
the principal of (and premium, if any) and interest on the Notes on the dates
and in the manner provided in the Notes and in this Indenture. Principal (and
premium, if any) and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal (and premium, if any) and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Securityholders on that date
pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this
Indenture, the Paying Agent may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION .. LIMITATION ON LIENS. The Company will not, and will
not permit any of its Restricted Subsidiaries to, create, incur, assume or
suffer to exist any Liens (other than Permitted Liens) of any kind against or
upon any of their respective property or assets, or any proceeds, income or
profit therefrom which secure Senior Subordinated Indebtedness or Subordinated
Obligations, unless (i) in the case of Liens securing Subordinated Obligations,
the Notes are secured by a Lien on such property, assets, proceeds, income or
profit that is senior in priority to such Liens and (ii) in the case of Liens
securing Senior Subordinated Indebtedness, the Notes are equally
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and ratably secured by a Lien on such property, assets, proceeds, income or
profit.
SECTION .. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness); provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence of
the incurrence of any such Indebtedness, the Company and its Restricted
Subsidiaries which are Guarantors may incur Indebtedness (including, without
limitation, Acquired Indebtedness) and Restricted Subsidiaries of the Company
may incur Acquired Indebtedness, in each case if on the date of the incurrence
of such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to
1.0.
SECTION .. LIMITATION ON RESTRICTED PAYMENTS. () The Company will
not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock) on or
in respect of shares of Capital Stock of the Company to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock, other than the exchange of such
Capital Stock for Qualified Capital Stock, (c)_make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes, or (d) make any Investment (other than
Permitted Investments) in any other Person
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(each of the foregoing actions set forth in clauses (a), (b), (c) and (d) (other
than the exceptions thereto) being referred to as a "RESTRICTED PAYMENT"), if at
the time of such Restricted Payment or immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred and be continuing, (ii)
the Company is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.3 or (iii) the
aggregate amount of Restricted Payments made subsequent to the Issue Date shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "REFERENCE DATE") (treating such period as a
single accounting period); plus (x) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company (including Qualified
Capital Stock issued upon the conversion of convertible Indebtedness or in
exchange for outstanding Indebtedness but excluding net cash proceeds from the
sale of Qualified Capital Stock to the extent used to repurchase or acquire
shares of Capital Stock of the Company pursuant to clause (2)(ii) of the next
succeeding paragraph); plus (y) without duplication of any amounts included in
clause (iii) (x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock; plus (z) to the extent that any Investment (other than a Permitted
Investment) that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash received with respect
to such sale, liquidation or repayment of such Investment (less the cost of such
sale, liquidation or repayment, if any) and (B) the initial amount of such
Investment, but only to the extent not included in the calculation of
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Consolidated Net Income. Any net cash proceeds included in the foregoing clauses
(iii)(x) or (iii)(y) shall not be included in clause (x)(A) or clause (x)(B) of
the definition of "Permitted Investments" to the extent actually utilized to
make a Restricted Payment under this paragraph.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph will not prohibit: (1) the payment of any
dividend or the consummation of any irrevocable redemption within 60 days after
the date of declaration of such dividend or notice of such redemption if the
dividend or payment of the redemption price, as the case may be, would have been
permitted on the date of declaration or notice; (2) if no Default or Event of
Default shall have occurred and be continuing as a consequence thereof, the
acquisition of any shares of Capital Stock of the Company, either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale (other than
to a Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) so long as no Default or Event of Default shall have occurred or be
continuing, payments for the purpose of and in an amount equal to the amount
required to permit the Company to redeem or repurchase shares of its Capital
Stock or options in respect thereof, in each case in connection with the
repurchase provisions under employee stock option or stock purchase agreements
or other agreements to compensate management employees; provided that such
redemptions or repurchases pursuant to this clause (3) shall not exceed $5.0
million in the aggregate after the Issue Date (which amount shall be increased
by the amount of any cash proceeds to the Company from (x) sales of its Capital
Stock to management employees subsequent to the Issue Date and (y) any "key-man"
life insurance policies which are used to make such redemptions or repurchases);
(4) the payment of fees and compensation as permitted under clause (i) of
paragraph (b) of Section 4.7; (5) repurchases of Capital Stock deemed to occur
upon the exercise of
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stock options if such Capital Stock represents a portion of the exercise price
thereof; (6) Restricted Payments made pursuant to the Recapitalization
Agreement; (7)_so long as no Default or Event of Default shall have occurred or
be continuing, payments in respect of any redemption, repurchase, acquisition,
cancellation or other retirement for value of shares of Capital Stock of the
Company or options, stock appreciation or similar securities, in each case held
by then current or former officers, directors or employees of the Company or any
of its Subsidiaries (or their estates or beneficiaries under their estates) or
by an employee benefit plan, upon death, disability, retirement or termination
of employment, not to exceed $2.5 million in the aggregate in any fiscal year or
$10.0 million in the aggregate since the Issue Date; (8) repurchases of the
Preferred Stock; provided that such repurchases do not exceed $5.0 million in
the aggregate since the Issue Date; (9)_purchases of all (but not less than
all), excluding directors' qualifying shares, of the Capital Stock or other
ownership interests in a Subsidiary of the Company which Capital Stock or other
ownership interests were not theretofore owned by the Company or a Subsidiary of
the Company, such that after giving effect to such purchase such Subsidiary
becomes a Restricted Subsidiary of the Company; and (10)_so long as no Default
or Event of Default shall have occurred or be continuing, payments not to exceed
$100,000 in the aggregate since the Issue Date to enable the Company to make
payments to holders of its Capital Stock in lieu of issuance of fractional
shares of its Capital Stock. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (ii) of the
immediately preceding paragraph, (a) amounts expended (to the extent such
expenditure is in the form of cash or other property other than Qualified
Capital Stock) pursuant to clauses (1), (3), (7) and (8) of this paragraph shall
be included in such calculation, provided that such expenditures pursuant to
clauses (3) or (7) shall not be included to the extent of cash proceeds received
by the Company
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from any "key man" life insurance policies, and (b) amounts expended pursuant to
clauses (2), (4), (5), (6), (9) and (10) shall be excluded from such
calculation.
SECTION .. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on or in respect of its Capital
Stock; (b) make loans or advances or to pay any Indebtedness or other obligation
owed to the Company or any other Restricted Subsidiary of the Company; or (c)
transfer any of its property or assets to the Company or any other Restricted
Subsidiary of the Company, except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) this Indenture; (3)
non-assignment provisions of any contract or any lease entered into in the
ordinary course of business; (4) any instrument governing Acquired Indebtedness,
which encumbrance or restriction is not applicable to the Company or any
Restricted Subsidiary of the Company, or the properties or assets of any such
Person, other than the Person or the properties or assets of the Person so
acquired; provided, however, that such Acquired Indebtedness was not incurred in
connection with, or in anticipation or contemplation of an acquisition by the
Company or the Restricted Subsidiary; (5) agreements existing on the Issue Date
(including, without limitation, the New Credit Facility and the Recapitalization
Agreement); (6) restrictions on the transfer of assets subject to any Lien
permitted under this Indenture imposed by the holder of such Lien; (7)
restrictions imposed by any agreement to sell assets permitted under this
Indenture to any Person pending the closing of such sale; (8) any agreement or
instrument governing Capital Stock of any Person that is acquired after the
Issue Date; (9) Indebtedness or other contractual requirements of a Receivables
Entity in connection with a
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Qualified Receivables Transaction; provided that such restrictions apply only to
such Receivables Entity and such Restricted Subsidiary is engaged in the
Qualified Receivables Transaction; (10)_an agreement effecting a refinancing,
replacement or substitution of Indebtedness issued, assumed or incurred pursuant
to an agreement referred to in clause (2), (4) or (5) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in any
such refinancing, replacement or substitution agreement are no less favorable to
the Company or the Holders in any material respect as determined by the Board of
Directors of the Company in good faith than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4) or (5); or (11) any agreement evidencing, or relating to, any
Indebtedness incurred after the Issue Date which are not more restrictive than
those contained in the New Credit Facility as in effect on the Issue Date.
SECTION .. LIMITATION ON ASSET SALES. The Company will not, and will
not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets sold or otherwise disposed of (as determined in
good faith by the Company's Board of Directors); (ii) at least 75% of the
consideration received by the Company or such Restricted Subsidiary, as the case
may be, from such Asset Sale shall be cash or Cash Equivalents and is received
at the time of such disposition; provided that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) of the Company or such Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Notes) that
are assumed by the transferee of any such assets and from which the Company and
its Restricted Subsidiaries are unconditionally released and (y) any notes or
other obligations
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received by the Company or such Restricted Subsidiary from such transferee that
are promptly, but in no event more than 60 days after receipt, converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents (to the
extent of the cash or Cash Equivalents received) shall be deemed to be cash for
purposes of this provision; and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to apply, the Net
Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof
either (A) to prepay Senior Indebtedness and, in the case of any Senior
Indebtedness under any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility, (B) to reinvest in
Productive Assets, or (C) a combination of prepayment and investment permitted
by the foregoing clauses (iii) (A) and (iii) (B). On the 366th day after an
Asset Sale or such earlier date, if any as the Board of Directors of the Company
or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and
(iii) (C) of the immediately preceding sentence (each, a "NET PROCEEDS OFFER
TRIGGER DATE"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (iii) (A), (iii) (B) and (iii) (C) of the immediately preceding sentence
(each a "NET PROCEEDS OFFER AMOUNT") shall be applied by the Company or such
Restricted Subsidiary to make an offer to purchase for cash (the "NET PROCEEDS
OFFER") on a date (the "NET PROCEEDS OFFER PAYMENT DATE") not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date, from
all Holders on a pro rata basis at least that amount of Notes equal to the Note
Offer Amount at a price in cash equal to 100% of the principal amount of the
Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the
date of purchase; provided, however, that if at any time any non-cash
consideration received by the Company or any Restricted Subsidiary of the
Company, as the case may be, in connection with
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any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. Any offer to purchase with respect to Other Debt shall be made
and consummated concurrently with any Net Proceeds Offer.
"OTHER DEBT" shall mean other Indebtedness of the Company that
ranks pari passu with the Notes and requires that an offer to purchase such
Other Debt be made upon consummation of an Asset Sale.
"NOTE OFFER AMOUNT" means (i) if an offer to purchase Other Debt is
not being made, the amount of the Net Proceeds Offer Amount and (ii) if an offer
to purchase Other Debt is being made, an amount equal to the product of (x) the
Net Proceeds Offer Amount and (y) a fraction the numerator of which is the
aggregate amount of Notes tendered pursuant to such offer to purchase and the
denominator of which is the aggregate amount of Notes and Other Debt tendered
pursuant to such offer to purchase.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is
less than $10_million, the application of the Net Cash Proceeds constituting
such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until
such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $10_million, at
which time the Company or such Restricted Subsidiary shall apply all Net Cash
Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred
to make a Net Proceeds Offer (the first date the aggregate of all such deferred
Net Proceeds Offer Amounts is equal to $10 million or more shall be deemed to be
a "NET PROCEEDS OFFER TRIGGER DATE").
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Notwithstanding the immediately preceding paragraphs of this
covenant, the Company and its Restricted Subsidiaries will be permitted to
consummate an Asset Sale without complying with such paragraphs to the extent
(i) at least 75% of the consideration for such Asset Sale constitutes Productive
Assets and (ii) such Asset Sale is for at least fair market value (as determined
in good faith by the Company's Board of Directors); provided that any
consideration not constituting Productive Assets received by the Company or any
of its Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall to the extent constituting Net Cash
Proceeds, be subject to the provisions of the immediately preceding paragraphs;
provided that at the time of entering into such transaction or immediately after
giving effect thereto, no Default or Event of Default shall have occurred or be
continuing or would occur as a consequence thereof.
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Article V, the successor
corporation shall be deemed to have sold the properties and assets of the
Company and its Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market value
of such properties and assets of the Company or its Restricted Subsidiaries
deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant; provided, however, that this paragraph shall not apply if, both
immediately before and immediately after giving effect to any such transaction,
both the transferor and transferee are obligors under this Indenture.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this
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Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to
tender their Notes in whole or in part in integral multiples of $1,000 in
exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Note Offer Amount, Notes of tendering Holders will be purchased on
a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain
open for a period of 20 business days or such longer period as may be required
by law. To the extent that the aggregate amount of Notes tendered pursuant to a
Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may
use any remaining Net Proceeds Offer Amount for general corporate purposes. Upon
completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall
be reset at zero.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section 4.6
[and Article V], the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.6 [and Article V] by virtue thereof.
SECTION .. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (an "AFFILIATE TRANSACTION"), other than
(x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions entered into on terms that are no less favorable than those that
might be reasonably obtained in a comparable transaction at such time on an
arm's-length basis from a Person
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that is not an Affiliate of the Company or such Restricted Subsidiary; provided,
however, that for a transaction or series of related transactions with an
aggregate value of $5.0 million or more, at the Company's option (i) such
determination shall be made in good faith by a majority of the disinterested
members of the Board of the Directors of the Company or (ii) the Board of
Directors of the Company or any such Restricted Subsidiary party to such
Affiliate Transaction shall have received a favorable opinion from an
independent nationally recognized investment banking firm that such Affiliate
Transaction is fair from a financial point of view to the Company or such
Restricted Subsidiary; provided, further, that for a transaction or series of
related transactions with an aggregate value of $10.0 million or more, the Board
of Directors of the Company shall have received a favorable opinion from an
independent nationally recognized investment banking firm that such Affiliate
Transaction is fair from a financial point of view to the Company or such
Restricted Subsidiary.
(b) The foregoing restrictions shall not apply to (i)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Subsidiary
of the Company as determined in good faith by the Company's Board of Directors;
(ii) transactions exclusively between or among the Company and any of its
Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by this
Indenture; (iii)_transactions effected as part of a Qualified Receivables
Transaction; (iv) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) in any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders in
any material respect than the original agreement as in effect on the Issue Date;
(v) Restricted Payments permitted by this Indenture;
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(vi) any Permitted Investment; (vii) transactions permitted by, and complying
with, the provisions of the covenant described under Article V; (viii) any
payment, issuance of securities or other payments, awards or grants, in cash or
otherwise, pursuant to, or the funding of, employment arrangements and Plans
approved by the Board of Directors of the Company; (ix) the grant of stock
options or similar rights to employees and directors of the Company and its
Subsidiaries pursuant to Plans and employment contracts approved by the Board of
Directors of the Company; (x) loans or advances to officers, directors or
employees of the Company or its Restricted Subsidiaries not in excess of $3.0
million at any one time outstanding; (xi) the granting or performance of
registration rights under a written registration rights agreement approved by
the Board of Directors of the Company; (xii) transactions with Persons solely in
their capacity as holders of Indebtedness or Capital Stock of the Company or any
of itsRestricted Subsidiaries, where such Persons are treated no more favorably
than holders of Indebtedness or Capital Stock of the Company or such Restricted
Subsidiary generally; (xiii) any agreement to do any of the foregoing; (xiv) the
payment, on a quarterly basis, of management fees to THL Co. and/or any
Affiliate of THL Co. in accordance with the management arrangements to be
entered into in April 1998 between THL Co. and/or any Affiliate of THL Co. and
the Company in an aggregate amount (for all such Persons taken together) not to
exceed $125,000 in any fiscal quarter of the Company; provided, however, the
Company or any Restricted Subsidiary may make any such payment greater than
$125,000 but not to exceed $250,000 in any fiscal quarter if, both before and
after giving effect thereto, the Company could incur $1.00 of additional
indebtedness (other than Permitted Indebtedness) in compliance with Section 4.3;
(xv) reimbursement of THL Co. and/or any Affiliate of THL Co. for their
reasonable out-of-pocket expenses incurred by them in connection with performing
management services for the Company and its Subsidiaries; (xvi) the payment of
one time fees to THL
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Co. and/or Affiliates of THL Co. in connection with each acquisition of a
company or a line of business by the Company or its Subsidiaries, such fees to
be payable at the time of each such acquisition and not to exceed 1% of the
aggregate consideration paid by the Company and its Subsidiaries for any such
acquisition; (xvii) the payment of consulting fees to Norman Matthews pursuant
to a consulting arrangement entered into on or prior to the Issue Date in an
aggregate amount not to exceed $50,000 in any fiscal year of the Company; and
(xviii) transactions entered into on the Issue Date in connection with the
Recapitalization and the financing therefor.
SECTION .. CHANGE OF CONTROL. Upon the occurrence of a Change
of Control Triggering Event, each Holder will have the right to require that the
Company purchase for cash all or a portion of such Holder's Notes pursuant to
the offer described below (the "CHANGE OF CONTROL OFFER"), at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued interest to
the date of purchase.
The Indenture will provide that, prior to the mailing of the
notice referred to below, but in any event within 30 days following the date the
Company obtains actual knowledge of any Change of Control Triggering Event, the
Company covenants to (i) repay in full and terminate all commitments under the
Bank Indebtedness or offer to repay in full and terminate all commitments under
all Bank Indebtedness and to repay the Bank Indebtedness owed to each holder of
Bank Indebtedness which has accepted such offer or (ii) obtain the requisite
consents under the New Credit Facility to permit the repurchase of the Notes as
provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase Notes
pursuant to the provisions described below. The Company's failure to comply with
this covenant shall constitute an Event of Default described in clause (iv) and
not in clause (ii) under Section 6.1.
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Within 30 days following the date upon which the Company obtains
actual knowledge that a Change of Control Triggering Event has occurred, the
Company must send, by first class mail, a notice to each Holder. with a copy to
the Trustee, which notice shall govern the terms of the Change of Control Offer.
Such notice shall state, among other things, the purchase date, which must be no
earlier than 30 days nor later than 45 days from the date such notice is mailed,
other than as may be required by law (the "CHANGE OF CONTROL PAYMENT DATE").
Holders electing to have a Note purchased pursuant to a Change of Control Offer
will be required to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
The definition of Change of Control includes a phrase relating to
the sale, lease, exchange or other transfer of "all or substantially all" of the
Company's assets as such phrase is defined in the Revised Model Business
Corporation Act. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise definition of the phrase
under applicable law. Accordingly, in certain circumstances there may be a
degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of the
Company, and therefore it
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may be unclear as to whether a Change of Control has occurred and whether the
Holders have the right to require the Company to repurchase such Notes.
Neither the Board of Directors of the Company nor the Trustee may
waive the covenant relating to a Holder's right to redemption upon a Change of
Control Triggering Event. Restrictions in this Indenture described herein on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness, to grant Liens on their properties, to make Restricted Payments
and to make Asset Sales may also make more difficult or discourage a takeover of
the Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, this Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.8, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.8.
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SECTION .. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED
DEBT. Neither the Company nor any Guarantor will incur or suffer to exist
Indebtedness that is senior in right of payment to the Notes or such Guarantor's
Guarantee and subordinate in right of payment to any other Indebtedness of the
Company or such Guarantor, as the case may be.
SECTION .. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Restricted Subsidiary
of the Company) to own any Preferred Stock of any Restricted Subsidiary of the
Company.
SECTION .. ADDITIONAL SUBSIDIARY GUARANTEES. The Company will not
permit any of its Restricted Subsidiaries that is not a Guarantor (whether
formed or acquired before or after the Issue Date), directly or indirectly, to
guarantee the payment of any Indebtedness under the New Credit Facility, unless
such Restricted Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted Subsidiary's Guarantee of the
Notes pursuant to the terms of this Indenture, such Guarantee to be a senior
subordinated unsecured obligation of such Subsidiary; provided that if any such
Guarantor is released from its guarantee with respect to Indebtedness
outstanding under the New Credit Facility, such Guarantor shall automatically be
released from its obligations as a Guarantor. Nothing in this covenant shall be
construed to permit any Restricted Subsidiary of the Company to incur
Indebtedness otherwise prohibited by Section 4.3.
SECTION .. CONDUCT OF BUSINESS. The Company and its Restricted
Subsidiaries will not engage in any businesses which are not the same, similar,
related or ancillary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date.
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SECTION .. MAINTENANCE OF OFFICE OR AGENCY. The Company shall
maintain the office or agency required under Section 2.3. The Company shall give
prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain 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 13.2.
SECTION .. CORPORATE EXISTENCE. Except as otherwise permitted by
Article V, the Company shall do or cause to be done, at its own cost and
expense, all things necessary to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents of each
such Restricted Subsidiary and the material rights (charter and statutory) and
franchises of the Company and each such Restricted Subsidiary; provided,
however, that the Company shall not be required to preserve, with respect to
itself, any material right or franchise and, with respect to any of its
Restricted Subsidiaries, any such existence, material right or franchise, if the
Board of Directors of the Company shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Subsidiaries, taken as a whole.
SECTION .. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to taxes)
levied or imposed upon it or any of its Restricted Subsidiaries or properties of
it or any of its Restricted Subsidiaries and (ii) any lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien upon the
property of it or any of its Restricted Subsidiaries; provided, however, that
the
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Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted for which adequate reserves, to the extent
required under GAAP, have been taken.
SECTION .. MAINTENANCE OF PROPERTIES AND INSURANCE. () The Company
shall, and shall cause each of its Restricted Subsidiaries to, maintain its
material properties in good working order and condition (subject to ordinary
wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business; provided, however, that nothing in this Section 4.16 shall
prevent the Company or any of its Restricted Subsidiaries from discontinuing the
operation and maintenance of any of its properties, if such discontinuance is,
in the good faith judgment of the Board of Directors of the Company or the
Restricted Subsidiary, as the case may be, desirable in the conduct of their
respective businesses and is not disadvantageous in any material respect to the
Holders.
() The Company shall provide or cause to be provided, for
itself and each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Board of Directors of the Company, are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
of the Company in a prudent manner, with reputable insurers or with the
government of the United States of America or any agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
customary, in the good faith judgment of the Board of Directors of the Company,
for companies similarly situated in the industry.
SECTION .. COMPLIANCE WITH LAWS. The Company shall comply, and
shall cause each of its Restricted Subsidiaries to comply, with all applicable
statutes, rules, regulations,
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orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as are not in the
aggregate reasonably likely to have a material adverse effect on the financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole.
SECTION .. ADDITIONAL INFORMATION. The Company will deliver to the
Trustee within 15 days after the filing of the same with the Commission, copies
of the quarterly and annual reports and of the information, documents and other
reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the
Company may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, the Company will file with the Commission, to the extent
permitted, and provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of TIA
Section 314(a).
SECTION .. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE
SUCCESSOR COMPANY
SECTION .. MERGER, CONSOLIDATION AND SALE OF ASSETS. () The
Company will not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise
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dispose of all or substantially all of its assets to, another Person or Persons
unless:
() either (A) the Company shall be the survivor of such merger
or consolidation or (B) the surviving Person is a corporation existing under the
laws of the United States, any state thereof or the District of Columbia and
such surviving Person shall expressly assume all the obligations of the Company
under the Notes and this Indenture;
() immediately after giving effect to such transaction (on a pro
forma basis, including any Indebtedness incurred or anticipated to be incurred
in connection with such transaction and the other adjustments referred to in the
definition of "Consolidated Fixed Charge Coverage Ratio"), the Company or the
surviving Person is able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.3;
() immediately before and immediately after giving effect to such
transaction (including any Indebtedness incurred or anticipated to be incurred
in connection with the transaction), no Default or Event of Default shall have
occurred and be continuing; and
() the Company has delivered to the Trustee an Officers'
Certificate and Opinion of Counsel, each stating that such consolidation, merger
or transfer complies with this Indenture, that the surviving Person agrees to be
bound thereby and by the Notes and the Registration Rights Agreement, and that
all conditions precedent in this Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and
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assets of the Company. Notwithstanding the foregoing clauses (ii) and (iii)
above, (a) any Restricted Subsidiary of the Company may consolidate with, merge
into or transfer all or part of its properties and assets to the Company and (b)
the Company may merge with an Affiliate that is (x)_a corporation that has no
material assets or liabilities and which was incorporated solely for the purpose
of reincorporating the Company in another jurisdiction or (y)_a Restricted
Subsidiary of the Company so long as all assets of the Company and the
Restricted Subsidiaries immediately prior to such transaction are owned by such
Restricted Subsidiary and its Restricted Subsidiaries immediately after the
consummation thereof.
() Upon any consolidation, combination or merger or any
transfer of all or substantially all of the assets of the Company in accordance
with the foregoing, the surviving entity shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
and the Notes with the same effect as if such surviving entity had been named as
such.
ARTICLE
DEFAULTS AND REMEDIES
SECTION .. EVENTS OF DEFAULT. An "Event of Default" occurs if:
() the failure to pay interest (including additional interest, if
any, under the Registration Rights Agreement) on any Notes when the same
becomes due and payable and the default continues for a period of 30 days
(whether or not such payment shall be prohibited by Article X);
() the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article X);
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() a default in the observance or performance of the covenant set
forth under in Section 5.1;
() a default in the observance or performance of any other covenant
or agreement contained in this Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes;
() the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary (other
than a Receivables Entity) of the Company, or the acceleration of the
final stated maturity of any such Indebtedness if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $10.0 million or more
at any time;
() one or more judgments in an aggregate amount in excess of $10.0
million shall have been rendered against the Company or any of its
Significant Subsidiaries and such judgments remain undischarged, unpaid
and unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable, and in the event such judgment is covered
by insurance, an enforcement proceeding has been commenced by any creditor
upon such judgment, which is not promptly stayed;
() the Company or a Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
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(B) consents to the entry of judgment, decree or order for
relief against it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
(E) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it;
(F) takes any corporate action to authorize or effect any of
the foregoing; or takes any comparable action under any foreign laws
relating to insolvency;
() a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or any similar relief is granted under any
foreign laws and the order, decree or relief remains unstayed and in
effect for 60 days.
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 any judgment, decree or order of
any to court or any order, rule or regulation of any administrative or
governmental body.
() any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null
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and void and unenforceable or any of the Guarantees is found to be invalid or
any of the Guarantors denies its liability under its Guarantee (other than by
reason of release of a Guarantor in accordance with the terms of this
Indenture).
The term "BANKRUPTCY LAW" means Title 11, UNITED STATES CODE,
or any similar Federal or state law for the relief of debtors. The term
"CUSTODIAN" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default.
SECTION .. ACCELERATION. () If an Event of Default (other than
an Event of Default specified in 6.1(7) or (8) with respect to the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of outstanding Notes may declare the principal of and accrued
interest on all the Notes to be due and payable by notice in writing to the
Company and the Trustee specifying the respective Event of Default and that it
is a "notice of acceleration," and upon receipt of such notice the same shall
become due and payable upon the first to occur of an acceleration under any
issue of then outstanding Designated Senior Indebtedness or five Business Days
after receipt by the Company and each Representative of holders of Designated
Senior Indebtedness then outstanding of such notice of acceleration, unless all
Events of Default specified in their respective notice of acceleration have been
cured within said five Business Day period.
() If an Event of Default specified in Sections 6.1(7) and (8)
with respect to the Company occurs and is continuing, then the principal of and
accrued interest on all the Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder of Notes.
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() At any time after a declaration of acceleration with respect to
the Notes as described in Section 6.2(a) or (b) above, the Holders of a majority
in principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
Section 6.1(6), (7) or (8), the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived.
SECTION .. OTHER REMEDIES. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them 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 .. WAIVER OF PAST DEFAULTS. Subject to Sections_6.7
and 9.2, the holders of a majority in principal amount of the Notes may waive
any existing Default or Event of Default under this Indenture, and its
consequences, except (i) a
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default in the payment of the principal of or interest on any Notes or (ii) a
Default or Event of Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected. When a
Default or Event of Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right. This paragraph of this Section_6.4 shall be in lieu of
sec._316(a)(1)(B) of the TIA and such sec._316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Notes, but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION .. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Notes 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,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action. This Section_6.5 shall be in lieu of
sec._316(a)(1)(A) of the TIA, and such sec._316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
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SECTION .. LIMITATION ON SUITS. A Securityholder may not pursue any
remedy with respect to this Indenture or the Notes unless:
() the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
() the Holders of at least 25%; in outstanding principal amount of
the Notes make a written request to the Trustee to pursue the remedy;
() such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
() the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of security or indemnity; and
() the Holders of a majority in principal amount of the Notes do not
give the Trustee a direction inconsistent with the request during such
45-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION .. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Notes held by such
Holder, on or after the respective due dates expressed in the Notes, or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
SECTION .. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
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SECTION .. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries or
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make 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 to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION .. PRIORITIES. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent required by
Article X;
THIRD: to Securityholders for amounts due and unpaid on the Notes
far principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
FOURTH: to the Company or any other obligors on the Notes as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Trustee shall mail to
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each Securityholder and the Company a notice that states the record date, the
payment date and amount to be paid.
SECTION .. 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 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, 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 does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by
Holders of more than 10% in outstanding principal amount of the Notes.
ARTICLE
TRUSTEE
SECTION .. DUTIES OF TRUSTEE. () 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
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
() Except during the continuance of an Event of Default:
() the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
() 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, the Trustee shall examine the
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certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
() 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:
() this paragraph does not limit the effect of paragraph (b) of this
Section;
() 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
() 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 6.5.
() Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b) and
(c) of this Section.
() The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
() Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
() No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
() Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
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SECTION .. RIGHTS OF TRUSTEE. () 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.
() Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or 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
the Officers' Certificate or Opinion of Counsel.
() The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
() 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; provided, however, that the Trustee's conduct does not constitute
willful misconduct or negligence.
() The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
SECTION .. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes 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, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION .. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the
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Notes, and it shall not be responsible for any statement of the Company in this
Indenture or in any document issued in connection with the sale of the Notes or
in the Notes other than the Trustee's certificate of authentication.
SECTION .. NOTICE OF DEFAULTS. If a Default or Event of Default
occurs and is continuing the Trustee shall mail to each Securityholder notice of
the Default or Event of Default within 30 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of or interest on
any Note (including payments pursuant to the optional redemption or required
repurchase provisions of such Note, if any), the Trustee may withhold the notice
if and so long as its board of directors, the Executive Committee of its board
of directors or a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION .. REPORTS BY TRUSTEE TO HOLDERS. As promptly as practicable
after each May 15 beginning with the May 15 following the date of this
Indenture, and in any event prior to July 15 in each year, the Trustee shall
mail to each Securityholder a brief report dated as of such May 15 that complies
with TIA Section_313(a) if such a report is required by that section. The
Trustee also shall comply with TIA Section_313(b). The Trustee shall also
transmit by mail all reports required by TIA Section_313(c).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC if required by law and each stock
exchange (if any) on which the Notes are listed. The Company agrees to notify
promptly the Trustee whenever the Notes become listed on any stock exchange and
of any delisting thereof.
SECTION .. COMPENSATION AND INDEMNITY. The Company shall pay
to the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
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request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, costs of preparing and reviewing reports,
certificates and other documents, costs of preparation and mailing-of notices to
Securityholders and reasonable costs of counsel retained by the Trustee in
connection with the delivery of an Opinion of Counsel or otherwise, in addition
to the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder, including the costs and expenses of
enforcing this Indenture (including this Section 7.7) and of defending itself
against any claims (whether asserted by any Securityholder, the Company or
otherwise). The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Notes. The Trustee's right to receive
payment of any amounts due under this Section 7.7 shall not be subordinate to
any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default
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specified in Section 6.1(7) or (8) with respect to the Company, the expenses are
intended to constitute expenses of administration under any Bankruptcy Law.
SECTION .. REPLACEMENT OF TRUSTEE. The Trustee may resign at
any time by so notifying the Company. The Holders of a majority in principal
amount of the securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
() the Trustee fails to comply with Section 7.10;
() the Trustee is adjudged bankrupt or insolvent;
() a receiver or other public officer takes charge of the Trustee or
its property; or
() the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the
Holders of a majority in principal amount of the Notes and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint 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. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section_7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section_7.7 shall continue for the
benefit of the retiring Trustee.
SECTION .. 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 to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion, consolidation or transfer to the Trustee shall succeed to the trusts
created by this Indenture, any of the Notes shall have been authenticated but
not delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, an successor to the Trustee may authenticate such Notes either in
the name of an predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
SECTION .. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section_310(b); provided, however, that there shall be excluded from the
operation of TIA Section_310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
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the Company are outstanding if the requirements for such exclusion set forth in
TIA Section_310(b)(1) are met.
SECTION .. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section_311(a), excluding an creditor relationship
listed in TIA Section_311(b). A Trustee who has resigned or been removed shal1
be subject to TIA Section_311(a) to the extent indicated.
ARTICLE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION .. DISCHARGE OF LIABILITY ON NOTES. () The Company may
terminate its obligations under the Notes and this Indenture, except those
obligations referred to in Section 8.1(b), if all Notes previously authenticated
and delivered (other than destroyed, lost or stolen Notes which have been
replaced or paid or Notes for whose payment money has theretofore been deposited
with the Trustee or the Paying Agent in trust or segregated and held in trust by
the Company and thereafter repaid to the Company, as provided in Section 8.5)
have been delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder, or if:
() either (A) pursuant to Article III, the Company shall have
given notice to the Trustee and mailed a notice of redemption to each Holder of
the redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice or (B) all Notes have otherwise become due
and payable hereunder;
() the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under the
terms of an irrevocable trust agreement in form and substance satisfactory to
the Trustee, as trust funds in trust solely for the benefit of the Holders for
that purpose, money in such amount as is sufficient without consideration of
reinvestment of such money, to pay principal of, premium on, if any, and
interest on the outstanding Notes to maturity or
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redemption, as the case may be; provided that the Trustee shall have been
irrevocably instructed to apply such money to the payment of said principal,
premium, if any, and interest with respect to the Notes and, provided, further,
that from and after the time of deposit, the money deposited shall not be
subject to the rights of holders of Senior Indebtedness pursuant to the
provisions of Article X;
() no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which it is bound;
() the Company shall have paid all other sums payable by it
hereunder; and
() the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under the
Notes and this Indenture have been satisfied. Such Opinion of Counsel shall also
state that such satisfaction and discharge does not result in a default under
the New Credit Facility (if then in effect) or any other agreement or instrument
then known to such counsel that binds or affects the Company.
() Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.2, 2.5, 2.6, 2.7, 2.8, 4.1, 4.13, 4.14, 4.15, 4.17,
7.7, 8.4, 8.5, and 8.6 shall survive until the Notes are no longer outstanding
pursuant to the last paragraph of Section 2.8. After the Notes are no longer
outstanding, the Company's obligations in Sections 7.7, 8.4, 8.5, and 8.6 shall
survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture except for those surviving obligations
specified above.
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SECTION .. LEGAL DEFEASANCE AND COVENANT DEFEASANCE. () The
Company may, at its option by Board Resolution of the Board of Directors of the
Company, at any time, elect to have either paragraph (b) or (c) below be applied
to all outstanding Notes upon compliance with the conditions set forth in
Section 8.3.
() Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions-set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.4 hereof and the other Sections of this Indenture
referred to in (i) through (iv) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), and the following provisions shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Sections
8.3 and 8.4 hereof, and as more fully set forth in such Sections, payments in
respect of the principal of (and premium, if any, on) and interest on such Notes
when such payments are due, (ii)_the Company's obligations with respect to such
Notes under Article II and Section 4.13 hereof, (iii) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (iv) this Article VIII. The Holders of
the Notes and any amounts deposited under Section 8.3 hereof shall cease to be
subject to any obligations to, or the rights of, any holder of Senior
Indebtedness or Guarantor Senior Indebtedness under Article X or otherwise.
Subject to
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compliance with this Article VIII, the Company may exercise its option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) hereof.
() Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph_(c), the Company shall, subject to the
satisfaction of the conditions set forth in section 8.3 hereof, be released from
its obligations under the covenants contained in Sections 4.2 through 4.12 and
Article V hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"),
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Sections 8.3
and 8.4 hereof shall cease to be subject to any obligations to, or the rights
of, any holder of Senior Indebtedness under Article X or otherwise. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or any reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.1(3)
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby.
SECTION .. CONDITIONS TO DEFEASANCE. The Company may exercise
its Legal Defeasance option or its Covenant Defeasance option only if:
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() the Company irrevocably deposits with the Trustee, in trust, for
the benefit of the holders of the Notes cash in U.S. dollars, non-callable
U.S. Government Obligations, or a combination thereof, in such amounts as
will be 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, premium, if
any, and interest on the Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be; provided that the
Trustee shall have received an irrevocable written order from the Company
instructing the Trustee to apply such cash in U.S. dollars or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Notes;
() in the case of a Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been
a change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
() in the case of a Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Securityholders
will not recognize income, gain or loss for Federal income tax purposes as
a result of such Covenant Defeasance and will be subject to
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Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
() no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default with respect to
this Indenture resulting from the incurrence of Indebtedness, all or a
portion of which will be used to defease the Notes concurrently with such
incurrence) or insofar as Sections 6.1(7) and 6.1(8) hereof are concerned,
at any time in the period ending on the 91st day after the date of such
deposit;
() such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
() the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
() the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes and this Indenture as contemplated
by this Article VIII have been complied with;
() the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company other than the Notes and
(B) assuming no
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intervening bankruptcy of the Company between the date of deposit and the
91st day following the deposit and that no Holder is an insider of the
Company, after the 91st day following the deposit, the trust funds will
not be subject to the effect of an applicable bankruptcy insolvency,
reorganization or similar laws affecting creditors' rights generally; and
() the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article III.
SECTION .. APPLICATION OF TRUST MONEY. The Trustee or Paying
Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations
deposited with it pursuant to this Article VIII, and shall apply the deposited
U.S. Legal Tender and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of, premium, if any, and
interest on the Notes. The Trustee shall be under no Obligation to invest said
U.S. Legal Tender or U.S. Government obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.3 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.3 hereof which, in the opinion of a nationally
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recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION .. REPAYMENT TO COMPANY. Subject to Article VIII, the
Trustee and the Paying Agent shall promptly pay to the Company, upon request any
excess U.S. Legal Tender or U.S. Government Obligations held by them at any time
and thereupon shall be relieved from all liability with respect to such money.
The Trustee and the Paying Agent shall pay to the Company upon request any money
held by them for the payment of principal or interest that remains unclaimed for
two years; provided that the Trustee or such Paying Agent, before being required
to make any payment, may at the expense of the Company cause to be published
once in a newspaper of general circulation in the City of New York or mail to
each Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein which shall be at least 30 days from the
date of such publication or mailing any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person.
SECTION .. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Article VIII until such time as the Trustee or Paying Agent
is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations
in accordance with Article VIII; provided that if the
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Company has made any payment of interest on or principal of any Notes because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE
AMENDMENTS
SECTION .. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Notes without notice to or consent of
any Securityholder:
() to cure any ambiguity, omission, defect or inconsistency;
provided that such amendment does not in the opinion of the Trustee,
adversely affect the rights of any Holder in any material respect;
() to comply with Article V;
() to provide for uncertificated Notes in addition to or in place of
certificated Notes; provided, however, that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
() to make any change in Article X that would limit or terminate the
benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article X;
() to add Guarantees with respect to the Notes or to secure the
Notes;
() to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
() to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
() to make any change that does not adversely affect the rights of
any Securityholder;
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() to provide for the issuance of the Exchange Notes, which will
have terms substantially identical in all material respects to the Initial
Notes (except that the transfer restrictions contained in the Initial
Notes and provisions relating to an increase in interest rates in the
event the Notes are not registered under the Securities Act will be
modified or eliminated, as appropriate), and which will be treated
together with any outstanding Initial Notes, as a single issue of
securities; or
() to secure the Notes pursuant to the requirements of Section_4.2
or otherwise; provided, however, that the Company has delivered to the
Trustee an Opinion of Counsel stating that such amendment or supplement
complies with the provisions of this Section_9.1.
SECTION .. WITH CONSENT OF HOLDERS. Subject to Section_6.7,
the Company, when authorized by a resolution of its Board of Directors, and the
Trustee may amend or supplement this Indenture or the Notes with the written
consent of the Holders of a majority in principal amount of the outstanding
Notes. Subject to Section_6.7, the Holders of a majority in principal amount of
the outstanding Notes may waive compliance by the Company with any provision of
this Indenture or the Notes. However, without the consent of the Holder of each
Note affected, an amendment, supplement or waiver, including a waiver pursuant
to Section_6.4, may not:
() change the maturity of the principal of any such Note;
() reduce the amount of Notes whose Holders must consent to an
amendment;
() reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Note;
() reduce the principal of or change or have the effect of changing
the Stated Maturity of any Note, or change the date on which any Notes may
be subject to
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redemption or repurchase, or reduce the redemption or repurchase price
therefor;
() make any Note payable in money other than that stated in the
Note;
() make an change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of, premium, if any,
and interest on such Note on or after the due date thereof or to bring
suit to enforce such payment or permitting holders of a majority in
principal amount of the Notes to waive Defaults or Events of Default
(other than Defaults or Events of Default with respect to the payment of
principal of, premium, if any, or interest on the Notes);
() amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with
respect thereto; or
() modify Article X or the definitions used in Article X of this
Indenture to adversely affect the Holders in any material respect.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such
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notice to all Securityholders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section.
SECTION .. COMPLIANCE WITH TRUST INDENTURE ACT. Every
amendment to this Indenture or the Notes shall comply with the Trust Indenture
Act of 1939, as amended as then in effect.
SECTION .. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent
to an amendment or a waiver by a Holder of a Note shall bind the Holder and
every subsequent Holder of that Note or portion of the Note that evidences the
same debt as the consenting Holder's Note, even if notation of the consent or
waiver is not made on the Note. However, any such Holder or subsequent Holder
may revoke the consent or waiver as to such Holder's Note or portion of the Note
if the Trustee receives the notice of revocation before the date the amendment
or waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (8) of Section 9.2, in which case, the amendment or waiver
shall bind only each Securityholder who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder; provided that any such waiver shall not impair or affect the
right of any Holder to receive payment of principal of, premium, if any, and
interest on a Note, on or after the respective due dates expressed in such Note,
or to bring suit for the enforcement of any such payment on or after such
respective dates without the consent of such Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously
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given or to take any such action, whether or not such Persons continue to be
Holders after such record date. No such consent shall become valid or effective
more than 120 days after such record date.
SECTION .. NOTATION ON OR EXCHANGE OF NOTES. If an amendment
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.
SECTION .. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment 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 indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
ARTICLE
SUBORDINATION
SECTION .. AGREEMENT TO SUBORDINATE. The Company agrees, and
each Securityholder by accepting a Note agrees, that the Indebtedness evidenced
by the Notes is subordinated in right of payment, to the extent and in the
manner provided in this Article X, to the prior payment of all Senior
Indebtedness and that the subordination is for the benefit of and enforceable by
the holders of Senior Indebtedness. The Notes will also be effectively
subordinated to any Secured Indebtedness of the
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Company to the extent of the value of the assets securing such Indebtedness, and
to all existing and future obligations of the Company's Subsidiaries. The Notes
shall in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company and only Indebtedness of the Company which is Senior
Indebtedness will rank senior to the Notes in accordance with the provisions set
forth herein. All provisions of this Article X shall be subject to Section
10.12.
SECTION .. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment or
distribution of the assets or securities of the Company to creditors upon a
total or partial liquidation or dissolution or reorganization or similar
proceeding of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its properties, or
in an assignment for the benefit of creditors or any marshalling of the assets
and liabilities of the Company, whether voluntary or involuntary:
() holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents of all Senior Indebtedness
before Securityholders shall be entitled to receive any payment of
principal of, premium, if any, or interest on or other amounts with
respect to the Notes; and
() until the Senior Indebtedness is paid in full in cash or Cash
Equivalents, any payment or distribution to which Securityholders would be
entitled but for this Article X shall be made to holders of Senior
Indebtedness as their interests may appear.
SECTION .. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not
pay principal of, premium (if any) or interest on, or any other amount in
respect of, the Notes or make any deposit pursuant to Article VIII and may not
otherwise purchase, redeem or otherwise retire any Notes (collectively, "PAY THE
NOTES") if any amount due in respect of any Senior Indebtedness (including,
without limitation any amount due as a result of
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acceleration of the maturity thereof by reason of default or otherwise) has not
been paid in full in cash or Cash Equivalents unless the default has been cured
or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full in cash or Cash Equivalents. However, the
Company may pay the Notes without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative of
the holders of the Designated Senior Indebtedness with respect to which the
events set forth in the immediately preceding sentence have occurred and are
continuing.
In addition, during the continuance of any default (other than
a payment default described in the first sentence of the immediately preceding
paragraph) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not pay the Notes
for a period (a "PAYMENT BLOCKAGE PERIOD") commencing upon the receipt by the
Trustee (with a copy to the Company) of written notice (a "BLOCKAGE NOTICE") of
such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice and all other defaults with respect to such Designated
Senior Indebtedness shall have been cured or shall have ceased to exist or (iii)
because such Designated Senior Indebtedness has been repaid in full in cash or
Cash Equivalents).
Notwithstanding the provisions described in the immediately
preceding paragraph, unless any payment default described in the first sentence
of the second immediately
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preceding paragraph has occurred and is then continuing, the Company may resume
payments on the Notes after the end of such Payment Blockage Period, including
any missed payments. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period. However, if any Blockage
Notice within such 360-day period is given by or on behalf of any holders of
Designated Senior Indebtedness other than the Bank Indebtedness, a
Representative of holders of Bank Indebtedness may give another Blockage Notice
within such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period.
SECTION .. ACCELERATION OF PAYMENT OF NOTES. If payment of the
Notes is accelerated because of an Event of Default, the Company shall promptly
notify the holders of the Designated Senior Indebtedness or the Representative
of such holders of the acceleration and provide copies of such notices to the
Trustee.
If any Designated Senior Indebtedness is outstanding at the
time of such acceleration, the Company may not pay the Notes until the earlier
of five Business Days after the holder or Representative of such Designated
Senior Indebtedness receives notice of such acceleration or the date of
acceleration of such Designated Senior Indebtedness and, thereafter, may pay the
Notes only if this Article X otherwise permits payments at that time.
SECTION .. WHEN DISTRIBUTION MUST BE PAID OVER. If a payment
or distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and promptly pay it
over to them as their respective interests may appear.
SECTION .. SUBROGATION. After all Senior Indebtedness is paid in
full in cash and until the Notes are paid in full,
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Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article X to holders of Senior Indebtedness which
otherwise would have been made to Securityholders is not, as between the Company
and Securityholders, a payment by the Company of Senior Indebtedness.
SECTION .. RELATIVE RIGHTS. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
() impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms; or
() prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders of Senior Indebtedness to receive distributions
otherwise payable to Securityholders.
SECTION .. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Company or by the failure of the Company to comply with this
Indenture.
SECTION .. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 10.3, the Trustee or Paying Agent may continue to make payments on the
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it specifically stating that payments
may not be made under this Article X. The Company, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness may give the notice.
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The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.7.
SECTION .. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION .. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT RIGHT
TO ACCELERATE. The failure to make a payment in respect of the Notes by reason
of any provision in this Article X shall not be construed as preventing the
occurrence of a Default or Event of Default. Nothing in this Article X shall
have an effect on the right of the Securityholders or the Trustee to accelerate
the maturity of the Notes.
SECTION .. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Legal Tender or U.S. Government Obligations held in trust under Article VIII by
the Trustee for the payment of principal of and interest on the Notes shall not
be subordinated to the prior payment of any Senior Indebtedness or subject to
the restrictions set forth in this Article X, and none of the Securityholders
shall be obligated to pay over any such amount to the Company, any holder of
Senior Indebtedness of the Company or any other creditor of the Company.
SECTION .. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article X, the Trustee and the
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Securityholders shall be entitled to rely (i) upon any order or decree of a
court of competent jurisdiction in which any proceedings of the nature referred
to in Section 10.2 are pending, (ii) upon a certificate of the liquidating
trustee or agent or other Person making such payment or distribution to the
Trustee or to the Securityholders or (iii) upon the Representatives for the
holders of Senior Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of 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 X. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any person as a holder of Senior Indebtedness to participate in any payment
or distribution pursuant to this Article X, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION .. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder
by accepting a Note authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Indebtedness
as provided in this Article X and appoints the Trustee as attorney-in-fact for
any and all such purposes.
SECTION .. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any
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fiduciary duty to the holders of Senior Indebtedness and shall not be liable to
any such holders if it shall mistakenly pay over or distribute to
Securityholders or the Company or any other Person, money or assets to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article X or
otherwise.
SECTION .. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Note acknowledges
and agrees that the foregoing subordination provisions are, and are intended to
be, an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE
SUBSIDIARY GUARANTEE
SECTION .. SUBSIDIARY GUARANTEE. After the Issue Date, the
Company shall cause each Restricted Subsidiary of the Company that guarantees
payment of the Bank Indebtedness to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary shall agree
to the provisions of this Article XI.
SECTION .. UNCONDITIONAL GUARANTEE. Each Subsidiary Guarantor hereby
unconditionally, jointly and severally, guarantees, subject to Article XII, to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, that: (i) the principal of and interest
on the Notes will be promptly paid in full when due, subject to an applicable
grace period, whether at maturity, by acceleration or otherwise and interest on
the overdue principal, if any, and interest on any interest, to the extent
lawful, of
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the Notes and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (ii) in case of any extension
of time of payment or renewal of any Notes or of any such other obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
11.6. Each Subsidiary Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and any demands whatsoever and covenants that this Guarantee
will not be discharged exceeds by complete performance ofthe obligations
contained in the Notes, this Indenture and in this Guarantee. If any Holder or
the Trustee is required by any court or otherwise to return to the Company, any
Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Company or any Subsidiary Guarantor, any
amount paid by the Company or any Subsidiary Guarantor to the Trustee or such
Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Subsidiary Guarantor further agrees
that, as between each Subsidiary Guarantor, on the one hand, and the Holders and
the
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Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article VI for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article VI,
such obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.
SECTION .. SUBORDINATION OF GUARANTEE. The obligations of each
Subsidiary Guarantor to the Holders of Notes and to the Trustee pursuant to the
Guarantee and this Indenture are expressly subordinate and subject in right of
payment to the prior payment in full of all Guarantor Senior Indebtedness of
such Subsidiary Guarantor, to the extent and in the manner provided in Article
XII.
SECTION .. SEVERABILITY. In case any provision of this Guarantee
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 .. RELEASE OF A SUBSIDIARY GUARANTOR. Upon (i) the release
by the lenders under the New Credit Facility, related documents and future
refinancings thereof of all guarantees of a Subsidiary Guarantor and all Liens
on the property or assets of said Subsidiary Guarantor relating to such
Indebtedness or (ii) the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Subsidiary Guarantor (or all or substantially all
its assets) to an entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of this Indenture, such
Subsidiary Guarantor shall be deemed released from all obligations under this
Article XI without any further action required on the part of the Trustee or any
Holder; provided, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor
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under the New Credit Facility and all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, such Indebtedness of
the Company or the Subsidiary Guarantor shall also terminate upon such release,
sale or transfer.
The Trustee shall execute an appropriate instrument delivered
by the Company evidencing such release upon receipt of a request by the Company
accompanied by an Officers' Certificate and Opinion of Counsel certifying as to
the compliance with this Section 11.5. Any Subsidiary Guarantor not so released
remains liable for the full amount of principal of and interest on the Notes as
provided in this Article XI.
SECTION .. LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for 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, the Holders and
such Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Guarantee shall be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor (including, but not limited to, the Guarantor Senior
Indebtedness of such Subsidiary Guarantor) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to Section 11.8, result in the obligations of such
Subsidiary Guarantor under the Guarantee not constituting such fraudulent
transfer or conveyance.
SECTION .. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN
TERMS. () Nothing contained in this Indenture
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or in any of the Notes shall prevent any consolidation or merger of a Subsidiary
Guarantor with or into the Company or another Subsidiary Guarantor that is a
Wholly Owned Restricted Subsidiary of the Company or shall prevent any sale of
assets or conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to the Company or another Subsidiary Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company. Upon any such
consolidation, merger, sale or conveyance, the Guarantee given by such
Subsidiary Guarantor shall no longer have any force or effect.
() Except as set forth in Article IV, Article V and this Article XI,
nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of a Subsidiary Guarantor with or into a
corporation or corporations other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) or
shall prevent any sale of assets or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety, to a
corporation or corporations other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor);
provided, however, that, subject to Sections 11.5 and 11.7(a), (i)
immediately after such transaction and giving effect thereto, such
transaction does not (a) violate an covenants set forth herein or (b)
result in a Default or Event of Default under this Indenture that is
continuing, (ii) upon any such consolidation, merger, sale or conveyance,
the Guarantee of such Subsidiary Guarantor set forth in this Article XI,
and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by such
Subsidiary Guarantor, shall be expressly assumed (in the event that the
Subsidiary Guarantor is not the surviving corporation in the merger), by
supplemental indenture satisfactory in form to the Trustee and in
compliance with Section 9.6, executed and delivered to the Trustee, by the
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corporation formed by such consolidation, or into which the Subsidiary
Guarantor will have merged, or by the corporation that shall have acquired
such property, (iii) in the event that such Subsidiary Guarantor is not
the surviving corporation in the merger, such surviving corporation shall
be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and (iv)
immediately after giving effect to such transaction (on a pro forma basis,
including any Indebtedness incurred or anticipated to be incurred in
connection with such transaction and including adjustments that are (i)
directly attributable to such transaction and (ii) factually supportable),
the Company is able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.3. In the
case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor corporation, by supplemental indenture
executed and delivered to the Trustee and satisfactory in form to the
Trustee of the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Subsidiary Guarantor,
such sucessor corporation shall succeed to and be substituted for the
Subsidiary Guarantor with the same effect as if it had been named herein
as a Subsidiary Guarantor.
SECTION .. CONTRIBUTION. In order to provide for just and
equitable contribution among the Subsidiary Guarantors, the Subsidiary
Guarantors agree, inter se, that in the event any payment or distribution is
made by any Subsidiary Guarantor (a "FUNDING SUBSIDIARY GUARANTOR") under the
Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution
from all other Subsidiary Guarantors in a pro rata amount based on the Adjusted
Net Assets of each Subsidiary Guarantor (including the Funding Subsidiary
Guarantor) for all payments, damages and expenses incurred by that Funding
Subsidiary Guarantor in discharging the Company's obligations with respect to
the Notes
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or any other Subsidiary Guarantor's obligations with respect to the Guarantee.
"ADJUSTED NET ASSETS" of such Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including without
limitation, continent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date and after giving effect
to any collection from any Subsidiary of such Guarantee in respect of the
obligation of such Subsidiary under the Guarantee), but excluding liabilities
under the Guarantee, of such Subsidiary Guarantor at such date and (y) the
present fair saleable value of the assets of such Subsidiary Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Subsidiary Guarantor on its debts including, without limitation, Guarantor
Senior Indebtedness (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Subsidiary Guarantor in respect of the
obligations of such Subsidiary under the Guarantee), excluding debt in respect
of the Guarantee of such Subsidiary Guarantor, as they become absolute and
matured.
SECTION .. WAIVER OF SUBROGATION. Until all Obligations are paid in
full each Subsidiary Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Subsidiary
Guarantor's obligations under the Guarantees 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 Notes against the Company, 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, directly or
indirectly, in cash or other property or by
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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 Subsidiary Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Subsidiary
Guarantor for the benefit of, and held in trust for the benefit of, the Holders
of the Notes, and shall, subject to the provisions of Section 11.3, Article X
and Article XII, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with terms of this Indenture. Each Subsidiary 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 11.9 is knowingly made in contemplation of such benefits.
SECTION .. WAIVER OF STAY, EXTENSION OR USURY LAWS. Each Subsidiary
Guarantor covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive each such Subsidiary Guarantor from performing
its Guarantee as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each such Subsidiary
Guarantor 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
SUBORDINATION OF GUARANTEES
SECTION .. AGREEMENT TO SUBORDINATE. Each Subsidiary Guarantor
agrees, and each Securityholder by accepting
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a Note agrees, that the Indebtedness and other obligations evidenced by the
Guarantees are subordinated in right of payment, to the extent and in the manner
provided in this Article XII, to the prior payment in cash or Cash Equivalents
of all Guarantor Senior Indebtedness and that the subordination is for the
benefit of and enforceable by the holders of Guarantor Senior Indebtedness. The
Guarantee of each Subsidiary Guarantor shall in all respects rank pari passu
with all other Senior Subordinated Indebtedness of such Subsidiary Guarantor and
only Indebtedness of each Subsidiary Guarantor which is Guarantor Senior
Indebtedness shall rank senior to the Guarantee of each Subsidiary Guarantor in
accordance with the provisions set forth herein. All provisions of this Article
XII shall be subject to Section 12.12.
SECTION .. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment or
distribution of the assets or securities of any Subsidiary Guarantor to
creditors upon a total or partial liquidation or a dissolution or reorganization
of or similar proceeding relating to any Subsidiary Guarantor or its property or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to any Subsidiary Guarantor or its property, or in an assignment for
the benefit of creditors or any marshalling of the assets and liabilities of any
Subsidiary Guarantor:
() holders of Guarantor Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents of the Guarantor
Senior Indebtedness before Holders shall be entitled to receive any
payment of principal of, premium, if any, or interest on or any other
amount in respect of the Notes from such Subsidiary Guarantor; and
() until the Guarantor Senior Indebtedness is paid in full in cash
or Cash Equivalents any payment or distribution to which Holders would be
entitled from such
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Subsidiary Guarantor but for this Article XII shall be made to holders of
Guarantor Senior Indebtedness as their interests may appear.
SECTION .. DEFAULT ON GUARANTOR SENIOR INDEBTEDNESS. A
Subsidiary Guarantor may not directly or indirectly pay the principal of,
premium (if any) or interest on or any other amount in respect of the Notes or
make any deposit pursuant to Article VIII and may not repurchase, redeem or
otherwise retire any Notes or make any payments with respect to any obligations
on the Guarantee of such Subsidiary Guarantor (collectively, "PAY THE NOTES") if
(i) any Senior Indebtedness or Guarantor Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness or Guarantor Senior
Indebtedness occurs and the maturity of such Senior Indebtedness or Guarantor
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (x) the default has been cured or waived and any such acceleration
has been rescinded or (y) such Senior Indebtedness or Guarantor Senior
Indebtedness has been paid in full in cash or Cash Equivalents; provided,
however, that each Subsidiary Guarantor may pay the Notes in respect to any
obligations on the Guarantee of such Subsidiary Guarantor without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representatives of the holders of the Senior Indebtedness or
Guarantor Senior Indebtedness with respect to which either of the events set
forth in clause (i) and (ii) above has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the preceding sentence) with respect to any Senior Indebtedness or Guarantor
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
each Subsidiary Guarantor may not pay the Notes during the Payment Blockage
Period (as defined in Section 10.3) commencing upon the receipt
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by the Trustee (with a copy to the Company) of the Blockage Notice (as defined
in Section 10.3) of such default from the Representative of the holders of such
Senior Indebtedness or Guarantor Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because such Senior Indebtedness or Guarantor Senior Indebtedness has been
repaid in full in cash or Cash Equivalents or (iii) because the default giving
rise to such Blockage Notice is no longer continuing). Notwithstanding the
provisions described in the immediately preceding sentence (unless the events
described in the first sentence of this Section 12.3 shall have occurred and be
continuing), such Subsidiary Guarantor may resume payments on the Notes after
the end of such Payment Blockage Period, including any missed payments. Not more
than one Blockage Notice may e given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Senior Indebtedness or
Guarantor Senior Indebtedness during such period; provided, however, that if any
Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than the Bank Indebtedness, a
Representative of holders of Bank Indebtedness may give another Blockage Notice
within such period; provided, further, however, that in no event may the total
number of days during which any Payment Blockage Period or Periods is in effect
exceed 179 days in the aggregate during any 360 consecutive day period.
SECTION .. ACCELERATION OF PAYMENT OF NOTES. If payment of the Notes
is accelerated because of an Event of Default, each Subsidiary Guarantor shall
promptly notify the holders of the Bank Indebtedness of the acceleration and
provide copies of such notices to the Trustee.
If payment of the Notes is accelerated, each
Subsidiary Guarantor shall not pay the Notes with respect to any
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Obligations on the Guarantee of such Subsidiary Guarantor until five Business
Days after such holders (or their Representatives) receive notice of such
acceleration and, thereafter, may pay the Notes only if permitted under this
Article XII.
SECTION .. WHEN PAYMENT OR DISTRIBUTION MUST BE PAID OVER. If
a payment or distribution is made to Holders that because of this Article XII
should not have been made to them, the Holders who receive the payment or
distribution shall hold it in trust for holders of Guarantor Senior Indebtedness
and pay it over to them as their interests may appear.
SECTION .. SUBROGATION. After all Guarantor Senior Indebtedness is
paid in full in cash or Cash Equivalents and until the Notes are paid in full,
Holders shall be subrogated to the rights of holders of Guarantor Senior
Indebtedness to receive distributions applicable to Guarantor Senior
Indebtedness. A distribution made under this Article XII to holders of Guarantor
Senior Indebtedness which otherwise would have been made to Holders is not, as
between each Subsidiary Guarantor and Holders, a payment by each Subsidiary
Guarantor on Guarantor Senior Indebtedness.
SECTION .. RELATIVE RIGHTS. This Article XII defines the relative
rights of Holders and holders of Guarantor Senior Indebtedness. Nothing in this
indenture shall:
() impair, as between each Subsidiary Guarantor and Holders, the
obligation of each Subsidiary Guarantor, which is absolute and
unconditional, to guarantee the payment of principal of and interest on
the Notes in accordance with the terms of the Notes and the Guarantees; or
() prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Guarantor
Senior Indebtedness to receive payments and distributions otherwise
payable to Holders.
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SECTION .. SUBORDINATION MAY NOT BE IMPAIRED BY SUBSIDIARY
GUARANTOR. No right of any holder of Guarantor Senior Indebtedness to enforce
the subordination of the Indebtedness and other obligations evidenced by the
Guarantees shall be impaired by any act or failure to act by any Subsidiary
Guarantor or by its failure to comply with this Indenture.
SECTION .. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 12.3, the Trustee or Paying Agent may continue to make payments on the
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article XII. Each Subsidiary Guarantor, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Guarantor Senior Indebtedness may
give the notice.
The Trustee in its individual or any other capacity may hold
Guarantor Senior Indebtedness with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to al the rights set forth in
this Article XII with respect to any Guarantor Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Guarantor
Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of any
of its rights as such holder. Nothing in this Article XII shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION .. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever
a payment or distribution is to be made or a notice given to holders of
Guarantor Senior Indebtedness, the payment or distribution may be made and the
notice given to their Representative (if any).
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SECTION .. ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Notes and the
Guarantees by reason of any provision in this Article XII shall not be construed
as preventing the occurrence of a Default. Nothing in this Article XII shall
have any effect on the right of the Holders or the Trustee to accelerate the
maturity of the Notes.
SECTION .. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from U.S. Legal Tender or the
proceeds of U.S. Government Obligations held in trust under Article VIII by the
Trustee for the payment of principal of and interest on the Notes shall not be
subordinated to the prior payment of any Guarantor Senior Indebtedness or
subject to the restrictions set forth in this Article XII, and none of the
Holders shall be obligated to pay over any such amount to any Subsidiary
Guarantor or any holder of Guarantor Senior Indebtedness of such Subsidiary
Guarantor or any other creditor of such Subsidiary Guarantor.
SECTION .. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Holders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Holders or (iii) upon the Representatives for the holders of Guarantor Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Guarantor Senior
Indebtedness and other Indebtedness of each Subsidiary Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XII. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Guarantor Senior Indebtedness to
participate in
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any payment or distribution pursuant to this Article XII, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Guarantor Senior Indebtedness held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this
Article XII, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.1 and 7.2 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article XII.
SECTION .. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Holders and the holders of Guarantor Senior
Indebtedness as provided in this Article XII and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION .. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF GUARANTOR SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Holders or any
Subsidiary Guarantor or any other Person, money or assets to which any holders
of Guarantor Senior Indebtedness shall be entitled by virtue of this Article XII
or otherwise.
SECTION .. RELIANCE BY HOLDERS OF GUARANTOR SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Holder by accepting a Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Guarantor Senior
Indebtedness, whether such Guarantor Senior Indebtedness was created or acquired
before or after the issuance of the Notes, to acquire and continue to hold, or
to continue to hold,
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such Guarantor Senior Indebtedness and such holder of Guarantor Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Guarantor Senior Indebtedness.
ARTICLE
MISCELLANEOUS
SECTION .. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION .. NOTICES. Any notice or communication shall
be in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Attention of General Counsel
if to the Trustee:
[ ]
[ ]
[ ]
[ ]
Attention of Corporate Trust Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar
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and shall be sufficiently given IF so 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 is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION .. 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 Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION .. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company, upon request, shall furnish
to the Trustee:
() an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
() an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION .. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
() a statement that the individual making such certificate or
opinion has read such covenant or condition;
() a brief statement as to the nature and scope of the examination
or investigation upon which the statements
<PAGE> 140
-132-
or opinions contained in such certificate or opinion are based;
() a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
() a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION .. WHEN NOTES DISREGARDED. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Notes outstanding at the time shall be considered
in any such determination.
SECTION .. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The Trustee
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION .. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York or in the state in which the corporate trust office of the Trustee
is located. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding lay that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
<PAGE> 141
-133-
SECTION .. GOVERNING LAW. This Indenture and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION .. NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Company shall not have an liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Note, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Notes.
SECTION .. SUCCESSORS. All agreements of the Company and the
Subsidiary Guarantors in this Indenture and the Notes shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION .. MULTIPLE 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. One signed copy is enough to prove this
Indenture.
SECTION .. VARIABLE PROVISIONS. The company initially appoints the
Trustee as Paying Agent and Registrar and custodian with respect to any Global
Notes.
SECTION .. QUALIFICATION OF INDENTURE. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of this Indenture and the Notes and printing this
Indenture and the Notes. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it
<PAGE> 142
-134-
may reasonably request in connection with any such qualification of this
Indenture under the TIA.
SECTION .. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 143
[SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
EYE CARE CENTERS OF AMERICA, INC.
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
ENCLAVE ADVANCEMENT GROUP, INC., as
Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
ECCA MANAGED VISION CARE, INC., as
Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
VISIONWORKS HOLDINGS, INC., as
Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
VISIONWORKS, INC., as Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
VISIONWORKS PROPERTIES, INC., as
Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
Title:
EYECARE HOLDINGS, INC., as
Guarantor
By: /s/ Mark Pearson
--------------------------------
Name: Mark Pearson
<PAGE> 144
Title:
VISIONARY RETAIL MANAGEMENT, INC.,
as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
VISIONARY PROPERTIES, INC., as
Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
VISIONARY MSO, INC., as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
THE SAMIT GROUP, INC., as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
HOUR EYES, INC., as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
SKYLAB OPTICAL, INC., as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
METROPOLITAN VISION SERVICES, INC.,
as Guarantor
By: /s/ Mark T. Pearson
--------------------------------
Name: Mark T. Pearson
Title:
UNITED STATES TRUST COMPANY, OF NEW YORK,
as Trustee
By: /s/ Patricia Stermer
--------------------------------
Name: Patricia Stermer
Title: Assistant Vice President
<PAGE> 145
EXHIBIT A-1
[FORM OF INITIAL FIXED RATE NOTE]
[Global Notes Legend]
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until this Global Note is exchanged in whole or in part
for the individual Notes represented hereby, this Global Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or by a Depository or any
such nominee to a successor Depository or a nominee of a successor Depository.
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B)_IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES
<PAGE> 146
ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
<PAGE> 147
EYE CARE CENTERS OF AMERICA, INC.
9_5/8% Senior Subordinated Note
due October , 2008
CUSIP No.
No. _________ $____________
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to _________ or registered assigns, the principal sum of
$__________ Dollars, on April_ , 2008.
Interest Payment Dates: April_ and October_ , commencing
October , 1998.
Record Dates: March_ and September_ .
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
EYE CARE CENTERS OF AMERICA, INC.
By: ______________________
Name:
Title:
By: ______________________
Name
Title:
<PAGE> 148
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the % Senior Subordinated Notes
due 2008 described in the within-mentioned Indenture.
Dated: [ ],
as Trustee
By____________________________
Authorized Signatory
<PAGE> 149
(REVERSE OF SECURITY)
EYE CARE CENTERS OF AMERICA, INC.
______% Senior Subordinated Note
due October_ , 2008
1. INTEREST.
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. The Company will pay interest semi-annually on
April_ and October_ of each year (the "Interest Payment Date"), commencing
October_ , 1998. Interest on this Note will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance. Interest on this Note will be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by this Note and on overdue installments of
interest (without regard to any applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Notes are canceled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer of Federal funds, or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, [ ] (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
<PAGE> 150
The Company or any of its Subsidiaries may, subject to certain exceptions, act
as Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Notes under an Indenture, dated as of
April , 1998 (the "Indenture"), among the Company, the Guarantors named
therein and the Trustee. This Note is one of a duly authorized issue of Notes of
the Company designated as its % Senior Subordinated Notes due 2008 (the "Fixed
Rate Notes"). The Notes include the Fixed Rate Notes and the Floating Rate Notes
(as defined in the Indenture). The Fixed Rate Notes and the Floating Rate Notes
are treated as a single class of securities under the Indenture unless otherwise
specified in the Indenture. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. sec.sec._77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general obligations of the Company limited in aggregate principal amount to
$150,000,000.
5. SUBORDINATION.
The Notes are subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. OPTIONAL REDEMPTION.
<PAGE> 151
The Fixed Rate Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after April ,
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve-month period commencing on April of the years set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................. %
2004 %
2005............................. %
2006 and thereafter.............. 100.000%
</TABLE>
7. OPTIONAL REDEMPTION UPON EQUITY OFFERING.
At any time, or from time to time, on or prior to
April , 2001, the Company may, at its option, use the net cash proceeds of one
or more Equity Offerings to redeem up to 35% of the aggregate principal amount
of Fixed Rate Notes at a redemption price equal to % of the principal amount
thereof, plus accrued interest to the date of redemption; provided that at least
65% of the original principal amount of Fixed Rate Notes remains outstanding
immediately after any such redemption (excluding any of the Fixed Rate Notes
owned by the Company). In order to effect the foregoing redemption with the net
cash proceeds of any Equity Offering, the Company must mail a notice of
redemption no later than 60 days after the related Equity Offering and must
consummate such redemption within 90 days of the closing of the Equity Offering.
"Equity Offering" means a sale of Qualified Capital Stock of the Company.
8. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's registered address. Notes in denominations of $1,000
may be redeemed only in whole. The Trustee may select for redemption portions
(equal
<PAGE> 152
to $1,000 or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000.
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
9. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
10. LIMITATION ON ASSET SALES.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest, if any, thereon to the date of repurchase with certain net
cash proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
or portions thereof selected for redemption, except the unredeemed portion of
any security being redeemed in part.
12. PERSONS DEEMED OWNERS.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
<PAGE> 153
13. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for one year, the Trustee and the Paying Agent will repay the funds to
the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
14. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Notes and the Guarantees except for certain
provisions thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture, the Notes and the Guarantees, in
each case upon satisfaction of certain conditions specified in the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Notes and
the Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Notes and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes or comply with any requirements of the
Commission in connection with the qualification of the Indenture under the TIA,
or make any other change that does not materially adversely affect the rights of
any Holder of a Note.
16. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge
<PAGE> 154
or sell all or substantially all of its assets or to engage in transactions with
affiliates. The limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
17. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture, the Notes or the Guarantees except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture, the Notes or
the Guarantees unless it has received indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of certain continuing Defaults or Events of Default if
it determines that withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. AUTHENTICATION.
<PAGE> 155
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Note.
21. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN 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 Gifts
to Minors Act).
22. GOVERNING LAW.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby.
23. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Note Identification Procedures, the Company has caused CUSIP numbers to
be printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE> 156
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 157
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, check the
appropriate box:
Section 4.6 [______] Section 4.8 [_______]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state
the amount: $___________
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 158
A-2
EXHIBIT A-2
[FORM OF INITIAL FLOATING RATE NOTE]
[Global Notes Legend]
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until this Global Note is exchanged in whole or in part
for the individual Notes represented hereby, this Global Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or by a Depository or any
such nominee to a successor Depository or a nominee of a successor Depository.
[Restricted Notes Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR
(B)_IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
COMPANY THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES
<PAGE> 159
A-3
ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
<PAGE> 160
A-4
EYE CARE CENTERS OF AMERICA, INC.
FIRSTS(SM)(3) due 2008
CUSIP No.___________
No.______ $__________
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company" which term includes any successor corporation), for value received,
promises to pay to ____________ or registered assigns, the principal sum of
$___________ Dollars, on April_ , 2008.
Interest Payment Dates: April_ and October_ , commencing
October , 1998.
Record Dates: March_ and September_
Reference is made to the further provisions of this
Note contained herein, which will for all purposes have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: EYE CARE CENTERS OF AMERICA, INC.
By:
Name:
Title:
By:
Name:
Title:
- --------
(3) FIRSTS is a service mark of BT Alex. Brown Incorporated
<PAGE> 161
A-5
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Floating Interest Rate Subordinated Term
Securities due 2008 described in the within-mentioned Indenture.
Dated: April , 1998
[ ],
as Trustee
By:
Authorized Signatory
<PAGE> 162
A-6
(REVERSE OF SECURITY)
EYE CARE CENTERS OF AMERICA, INC.
Floating Interest Rate Subordinated Term Securities due 2008
1. INTEREST.
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum, reset semi-annually, equal to LIBOR (as defined below) plus %,
as determined by the Calculation Agent. Interest on this Note will accrue from
the most recent date on which interest has been paid or, if no interest has been
paid, from the date of issuance. The Company will pay interest semi-annually on
each April_ and October_ (each, an "Interest Payment Date"), commencing
October , 1998, for the period commencing on and including the immediately
preceding Interest Payment Date and ending on and including the day next
preceding the Interest Payment Date (an "Interest Period"), with the exception
that the first Interest Period shall commence on and include April , 1998 and
end on and include October , 1998.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by this
Note and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
"LIBOR", with respect to an Interest Period, shall be the rate
(expressed as a percentage per annum) for deposits in United States dollars for
a six-month period beginning on the second London Banking Day (as defined) after
the Determination Date (as defined) that appears on Telerate Page 3750 (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Telerate
Page 3750 does not include such a rate or is unavailable on a Determination
Date, LIBOR for the Interest Period shall be the arithmetic mean of the rates
(expressed as a percentage per annum) for deposits in a Representative Amount
(as defined) in United States dollars for a six-month period beginning on the
second London Banking Day after the Determination Date that appears on Reuters
Screen LIBO Page (as defined) as of 11:00 a.m., London time, on the
Determination Date. If Reuters Screen
<PAGE> 163
A-7
LIBO Page does not include two or more rates or is unavailable on a
Determination Date, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market, as selected
by the Calculation Agent, to provide such bank's offered quotation (expressed as
a percentage per annum), as of approximately 11:00 a.m., London time, on such
Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in United States dollars for a six-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such offered quotations are so provided, LIBOR for the Interest Period
will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Calculation Agent will request each of three
major banks in New York City, as selected by the Calculation Agent, to provide
such bank's rate (expressed as a percentage per annum), as of approximately
11:00 a.m., New York City time, on such Determination Date, for loans in a
Representative Amount in United States dollars to leading European banks for a
six-month period beginning on te second London Banking Day after the
Determination Date. If at least two such rates are so provided, LIBOR for the
Interest Period will be the arithmetic mean of such rates. If fewer than two
such rates are so provided, then LIBOR for the Interest Period will be LIBOR in
effect with respect to the immediately preceding Interest Period.
"Determination Date," with respect to an Interest Period, will be
the second London Banking Day preceding the first day of the Interest Period.
"London Banking Day" is any day in which dealings in United States
dollars are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Representative Amount" means a principal amount of not less
than U.S. $1,000,000 for a single transaction in the relevant market at the
relevant time.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service).
<PAGE> 164
A-8
"Reuters Screen LIBO Page" means the display designated as page
"LIBO" on The Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service).
The amount of interest for each day that this Note is outstanding
(the "Daily Interest Amount") will be calculated by dividing the interest rate
in effect for such day by 360 and multiplying the result by the principal amount
of this Note. The amount of interest to be paid on this Note for each Interest
Period will be calculated by adding the Daily Interest Amounts for each day in
the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar
amounts used in or resulting from such calculations will be rounded to the
nearest cent (with one-half cent being rounded upwards).
The interest rate on this Note will in no event be higher than the
maximum rate permitted by New York law as the same may be modified by United
States law of general application. Under current New York law, the maximum rate
of interest is 25% per annum on a simple interest basis. This limit may not
apply to Floating Rate Notes in which $2,500,000 or more has been invested.
The Calculation Agent will, upon the request of the holder of any
Floating Rate Note, provide the interest rate then in effect with respect to
this Note. All calculations made by the Calculation Agent in the absence of
manifest error shall be conclusive for all purposes and binding on the Company
and the Holders of this Note.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Notes are canceled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying
<PAGE> 165
A-9
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT, REGISTRAR AND CALCULATION AGENT.__________
Initially, [ ] (the "Trustee") will act as Paying Agent,
Registrar and Calculation Agent. The Company may change any Paying Agent,
Registrar, co-Registrar or Calculation Agent without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Notes under an Indenture, dated as of
April , 1998 (the "INDENTURE"), among the Company, each of the Guarantors
named therein and the Trustee. This Note is one of a duly authorized issue of
Notes of the Company designated as its Floating Interest Rate Subordinated Term
Notes due 2008 (the "FLOATING RATE NOTES"). The Notes include the Floating Rate
Notes and the Fixed Rate Notes (as defined in the Indenture). The Floating Rate
Notes and the Fixed Rate Notes are treated as a single class of securities under
the Indenture unless otherwise specified in the Indenture. Capitalized terms
used herein shall have the meanings assigned to them in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. sec.sec._77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the TIA for a statement of them. The Notes are general obligations
of the Company limited in aggregate principal amount to $150,000,000.
<PAGE> 166
A-10
5. SUBORDINATION.
The Notes are subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. OPTIONAL REDEMPTION.
The Floating Rate Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60_days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on October_15 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998 105.000%
1999 104.000%
2000 103.000%
2001 102.000%
2002 101.000%
2003 and thereafter 100.000%
</TABLE>
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000.
<PAGE> 167
A-11
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
9. LIMITATION ON ASSET SALES.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest, if any, thereon to the date of repurchase with certain net
cash proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
or portions thereof selected for redemption, except the unredeemed portion of
any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
12. UNCLAIMED FUNDS.
<PAGE> 168
A-12
If funds for the payment of principal or interest remain
unclaimed for one year, the Trustee and the Paying Agent will repay the funds to
the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Notes and the Guarantees except for certain
provisions thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture, the Notes and the Guarantees, in
each case upon satisfaction of certain conditions specified in the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Notes and
the Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Notes and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes or comply with any requirements of the
Commission in connection with the qualification of the Indenture under the TIA,
or make any other change that does not materially adversely affect the rights of
any Holder of a Note.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in
<PAGE> 169
A-13
transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to the
Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture, the Notes or the Guarantees except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture, the Notes or
the Guarantees unless it has received indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of certain continuing Defaults or Events of Default if
it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
19. AUTHENTICATION.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Note.
<PAGE> 170
A-14
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN 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 Gifts
to Minors Act).
21. GOVERNING LAW.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby.
22. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE> 171
A-15
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 172
A-1
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, check the
appropriate box:
Section 4.6 [______] Section 4.8 [_______]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state
the amount: $___________
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 173
B-2
EXHIBIT B-1
[FORM OF EXCHANGE FIXED RATE NOTE]
[Global Notes Legend]
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until this Global Note is exchanged in whole or in part
for the individual Notes represented hereby, this Global Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or by a Depository or any
such nominee to a successor Depository or a nominee of a successor Depository.
<PAGE> 174
B-3
EYE CARE CENTERS OF AMERICA, INC.
9_5/8% Senior Subordinated Note
due October , 2008
CUSIP No.
No. _________ $____________
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to _________ or registered assigns, the principal sum of
$__________ Dollars, on April_ , 2008.
Interest Payment Dates: April_ and October_ , commencing
October , 1998.
Record Dates: March_ and September_ .
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated:
EYE CARE CENTERS OF AMERICA, INC.
By: ______________________
Name:
Title:
By: ______________________
Name:
Title:
<PAGE> 175
B-4
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the % Senior Subordinated Notes due 2008
described in the within-mentioned Indenture.
Dated: [ ],
as Trustee
By____________________________
Authorized Signatory
<PAGE> 176
B-5
(REVERSE OF SECURITY)
EYE CARE CENTERS OF AMERICA, INC.
______% Senior Subordinated Note
due October_ , 2008
1. INTEREST.
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. The Company will pay interest semi-annually on
April_ and October_ of each year (the "Interest Payment Date"), commencing
October_ , 1998. Interest on this Note will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of issuance. Interest on this Note will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal from time to
time on demand at the rate borne by this Note and on overdue installments of
interest (without regard to any applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Notes are canceled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer of Federal funds, or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, [ ] (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
<PAGE> 177
B-6
The Company or any of its Subsidiaries may, subject to certain exceptions, act
as Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Notes under an Indenture, dated as of
April , 1998 (the "Indenture"), among the Company, the Guarantors named
therein and the Trustee. This Note is one of a duly authorized issue of Notes
of the Company designated as its % Senior Subordinated Notes due 2008 (the
"Fixed Rate Notes"). The Notes include the Fixed Rate Notes and the Floating
Rate Notes (as defined in the Indenture). The Fixed Rate Notes and the Floating
Rate Notes are treated as a single class of securities under the Indenture
unless otherwise specified in the Indenture. Capitalized terms herein are used
as defined in the Indenture unless otherwise defined herein. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S.C.
sec.sec._77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture
until such time as the Indenture is qualified under the TIA, and thereafter as
in effect on the date on which the Indenture is qualified under the TIA.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the TIA for a
statement of them. The Notes are general obligations of the Company limited in
aggregate principal amount to $150,000,000.
5. SUBORDINATION.
The Notes are subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. OPTIONAL REDEMPTION.
<PAGE> 178
B-7
The Fixed Rate Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after April ,
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve-month period commencing on April of the years set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................. %
2004 %
2005............................. %
2006 and thereafter.............. 100.000%
</TABLE>
7. OPTIONAL REDEMPTION UPON EQUITY OFFERING.
At any time, or from time to time, on or prior to
April , 2001, the Company may, at its option, use the net cash proceeds of one
or more Equity Offerings to redeem up to 35% of the aggregate principal amount
of Fixed Rate Notes at a redemption price equal to % of the principal amount
thereof, plus accrued interest to the date of redemption; provided that at least
65% of the original principal amount of Fixed Rate Notes remains outstanding
immediately after any such redemption (excluding any of the Fixed Rate Notes
owned by the Company). In order to effect the foregoing redemption with the net
cash proceeds of any Equity Offering, the Company must mail a notice of
redemption no later than 60 days after the related Equity Offering and must
consummate such redemption within 90 days of the closing of the Equity Offering.
"Equity Offering" means a sale of Qualified Capital Stock of the Company.
8. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's registered address. Notes in denominations of $1,000
may be redeemed only in whole. The Trustee may select for redemption portions
(equal
<PAGE> 179
B-8
to $1,000 or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000.
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
9. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
10. LIMITATION ON ASSET SALES.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest, if any, thereon to the date of repurchase with certain net
cash proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
or portions thereof selected for redemption, except the unredeemed portion of
any security being redeemed in part.
12. PERSONS DEEMED OWNERS.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
<PAGE> 180
B-9
13. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for one year, the Trustee and the Paying Agent will repay the funds to
the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
14. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Notes and the Guarantees except for certain
provisions thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture, the Notes and the Guarantees, in
each case upon satisfaction of certain conditions specified in the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Notes and
the Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Notes and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes or comply with any requirements of the
Commission in connection with the qualification of the Indenture under the TIA,
or make any other change that does not materially adversely affect the rights of
any Holder of a Note.
16. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge
<PAGE> 181
B-10
or sell all or substantially all of its assets or to engage in transactions with
affiliates. The limitations are subject to a number of important qualifications
and exceptions. The Company must annually report to the Trustee on compliance
with such limitations.
17. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture, the Notes or the Guarantees except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture, the Notes or
the Guarantees unless it has received indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of certain continuing Defaults or Events of Default if
it determines that withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. AUTHENTICATION.
<PAGE> 182
B-11
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Note.
21. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN 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 Gifts
to Minors Act).
22. GOVERNING LAW.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby.
23. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Note Identification Procedures, the Company has caused CUSIP numbers to
be printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE> 183
B-12
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 184
B-1
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, check the
appropriate box:
Section 4.6 [______] Section 4.8 [_______]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state
the amount: $___________
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 185
A-2
EXHIBIT B-2
[FORM OF EXCHANGE FLOATING RATE NOTE]
[Global Notes Legend]
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until this Global Note is exchanged in whole or in part
for the individual Notes represented hereby, this Global Note may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or by a Depository or any
such nominee to a successor Depository or a nominee of a successor Depository.
<PAGE> 186
A-3
EYE CARE CENTERS OF AMERICA, INC.
FIRSTS(SM)(4) due 2008
CUSIP No.___________
No.______ $__________
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company" which term includes any successor corporation), for value received,
promises to pay to ____________ or registered assigns, the principal sum of
$___________ Dollars, on April_ , 2008.
Interest Payment Dates: April_ and October_ , commencing
October , 1998.
Record Dates: March_ and September_
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: EYE CARE CENTERS OF AMERICA, INC.
By:
Name:
Title:
By:
Name:
Title:
- --------
(4) FIRSTS is a service mark of BT Alex. Brown Incorporated
<PAGE> 187
A-4
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Floating Interest Rate Subordinated Term
Securities due 2008 described in the within-mentioned Indenture.
Dated: April , 1998
[ ],
as Trustee
By:
Authorized Signatory
<PAGE> 188
A-5
(REVERSE OF SECURITY)
EYE CARE CENTERS OF AMERICA, INC.
Floating Interest Rate Subordinated Term Securities Due 2008
1. INTEREST.
EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum, reset semi-annually, equal to LIBOR (as defined below) plus %,
as determined by the Calculation Agent. Interest on this Note will accrue from
the most recent date on which interest has been paid or, if no interest has been
paid, from the date of issuance. The Company will pay interest semi-annually on
each April_ and October_ (each, an "Interest Payment Date"), commencing
October , 1998, for the period commencing on and including the immediately
preceding Interest Payment Date and ending on and including the day next
preceding the Interest Payment Date (an "Interest Period"), with the exception
that the first Interest Period shall commence on and include April , 1998 and
end on and include October , 1998.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by this
note and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
"LIBOR", with respect to an Interest Period, shall be the rate
(expressed as a percentage per annum) for deposits in United States dollars for
a six-month period beginning on the second London Banking Day (as defined) after
the Determination Date (as defined) that appears on Telerate Page 3750 (as
defined) as of 11:00 a.m., London time, on the Determination Date. If Telerate
Page 3750 does not include such a rate or is unavailable on a Determination
Date, LIBOR for the Interest Period shall be the arithmetic mean of the rates
(expressed as a percentage per annum) for deposits in a Representative Amount
(as defined) in United States dollars for a six-month period beginning on the
second London Banking Day after the Determination Date that appears on Reuters
Screen LIBO Page (as defined) as of 11:00 a.m., London time, on the
Determination Date. If Reuters Screen
<PAGE> 189
A-6
LIBO Page does not include two or more rates or is unavailable on a
Determination Date, the Calculation Agent will request the principal London
office of each of four major banks in the London interbank market, as selected
by the Calculation Agent, to provide such bank's offered quotation (expressed as
a percentage per annum), as of approximately 11:00 a.m., London time, on such
Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in United States dollars for a six-month period
beginning on the second London Banking Day after the Determination Date. If at
least two such offered quotations are so provided, LIBOR for the Interest Period
will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, the Calculation Agent will request each of three
major banks in New York City, as selected by the Calculation Agent, to provide
such bank's rate (expressed as a percentage per annum), as of approximately
11:00 a.m., New York City time, on such Determination Date, for loans in a
Representative Amount in United States dollars to leading European banks for a
six-month period beginning on te second London Banking Day after the
Determination Date. If at least two such rates are so provided, LIBOR for the
Interest Period will be the arithmetic mean of such rates. If fewer than two
such rates are so provided, then LIBOR for the Interest Period will be LIBOR in
effect with respect to the immediately preceding Interest Period.
"Determination Date," with respect to an Interest Period, will be the
second London Banking Day preceding the first day of the Interest Period.
"London Banking Day" is any day in which dealings in United States dollars
are transacted or, with respect to any future date, are expected to be
transacted in the London interbank market.
"Representative Amount" means a principal amount of not less than U.S.
$1,000,000 for a single transaction in the relevant market at the relevant
time.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Dow Jones Telerate Service (or such other page as may replace Page 3750 on that
service).
<PAGE> 190
A-7
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
The Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service).
The amount of interest for each day that this Note is outstanding (the
"Daily Interest Amount") will be calculated by dividing the interest rate in
effect for such day by 360 and multiplying the result by the principal amount of
this Note. The amount of interest to be paid on this Note for each Interest
Period will be calculated by adding the Daily Interest Amounts for each day in
the Interest Period.
All percentages resulting from any of the above calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)) and all dollar
amounts used in or resulting from such calculations will be rounded to the
nearest cent (with one-half cent being rounded upwards).
The interest rate on this Note will in no event be higher than the maximum
rate permitted by New York law as the same may be modified by United States law
of general application. Under current New York law, the maximum rate of interest
is 25% per annum on a simple interest basis. This limit may not apply to
Floating Rate Notes in which $2,500,000 or more has been invested.
The Calculation Agent will, upon the request of the holder of any Floating
Rate Note, provide the interest rate then in effect with respect to this Note.
All calculations made by the Calculation Agent in the absence of manifest error
shall be conclusive for all purposes and binding on the Company and the Holders
of this Note.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Notes (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Notes are canceled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying
<PAGE> 191
A-8
Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Company may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT, REGISTRAR AND CALCULATION AGENT.__________
Initially, [ ] (the "Trustee") will act as Paying Agent,
Registrar and Calculation Agent. The Company may change any Paying Agent,
Registrar, co-Registrar or Calculation Agent without notice to the Holders. The
Company or any of its Subsidiaries may, subject to certain exceptions, act as
Registrar or co-Registrar.
4. INDENTURE.
The Company issued the Notes under an Indenture, dated as of
April , 1998 (the "INDENTURE"), among the Company, each of the Guarantors
named therein and the Trustee. This Note is one of a duly authorized issue of
Notes of the Company designated as its Floating Interest Rate Subordinated Term
Notes due 2008 (the "FLOATING RATE NOTES"). The Notes include the Floating Rate
Notes and the Fixed Rate Notes (as defined in the Indenture). The Floating Rate
Notes and the Fixed Rate Notes are treated as a single class of securities under
the Indenture unless otherwise specified in the Indenture. Capitalized terms
used herein shall have the meanings assigned to them in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. sec.sec._77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the TIA for a statement of them. The Notes are general obligations
of the Company limited in aggregate principal amount to $150,000,000.
<PAGE> 192
A-9
5. SUBORDINATION.
The Notes are subordinated in right of payment, in the manner
and to the extent set forth in the Indenture, to the prior payment in full in
cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding
on the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
6. OPTIONAL REDEMPTION.
The Floating Rate Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, upon not less than 30
nor more than 60_days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on October_15 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998 105.000%
1999 104.000%
2000 103.000%
2001 102.000%
2002 101.000%
2003 and thereafter 100.000%
</TABLE>
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000.
<PAGE> 193
A-10
If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the date of repurchase.
9. LIMITATION ON ASSET SALES.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Notes at 100% of their principal amount, plus accrued
and unpaid interest, if any, thereon to the date of repurchase with certain net
cash proceeds of certain sales or other dispositions of assets in accordance
with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
or portions thereof selected for redemption, except the unredeemed portion of
any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Note shall be treated as the owner
of it for all purposes.
12. UNCLAIMED FUNDS.
<PAGE> 194
A-11
If funds for the payment of principal or interest remain
unclaimed for one year, the Trustee and the Paying Agent will repay the funds to
the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Notes and the Guarantees except for certain
provisions thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture, the Notes and the Guarantees, in
each case upon satisfaction of certain conditions specified in the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Notes and
the Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Notes and the Guarantees to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes or comply with any requirements of the
Commission in connection with the qualification of the Indenture under the TIA,
or make any other change that does not materially adversely affect the rights of
any Holder of a Note.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
of the Company to the Company, to consolidate, merge or sell all or
substantially all of its assets or to engage in
<PAGE> 195
A-12
transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to the
Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable immediately in the
manner and with the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture, the Notes or the Guarantees except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture, the Notes or
the Guarantees unless it has received indemnity satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of certain continuing Defaults or Events of Default if
it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
19. AUTHENTICATION.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Note.
<PAGE> 196
A-13
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN 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 Gifts
to Minors Act).
21. GOVERNING LAW.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to applicable
principles of conflicts of laws to the extent that the application of the laws
of another jurisdiction would be required thereby.
22. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE> 197
A-14
ASSIGNMENT FORM
I or we assign and transfer this Note to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________ agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 198
A-1
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.6 or Section 4.8 of the Indenture, check the
appropriate box:
Section 4.6 [______] Section 4.8 [_______]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.6 or Section 4.8 of the Indenture, state
the amount: $___________
Dated: Signed:
_________________________ ________________________________
(Sign exactly as name
appears on the other
side of this Note)
Signature
Guarantee: ______________________________________
Participant in a recognized Signature
Guarantee Medallion Program (or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 199
B-2
EXHIBIT C
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note in the amounts and at the times when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Note, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture (as defined below) or the Notes, to the Holder
of this Note and the Trustee, all in accordance with and subject to the terms
and limitations of this Note, Article Eleven of the Indenture and this
Guarantee. This Guarantee will become effective in accordance with Article
Eleven of the Indenture and its terms shall be evidenced therein. The validity
and enforceability of any Guarantee shall not be affected by the fact that it is
not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of April , 1998, among Eye
Care Centers of America, Inc., a Texas corporation, as issuer (the "Company"),
the Guarantors named therein and [ ], as trustee (the "Trustee"), as amended
or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. The undersigned Guarantor hereby agrees to submit to the
jurisdiction of the
<PAGE> 200
B-3
courts of the State of New York in any action or proceeding arising out of or
relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
<PAGE> 201
B-4
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be
duly executed.
Date: April , 1998
ENCLAVE ADVANCEMENT GROUP, INC.
By:
Name:
Title:
ECCA MANAGED VISION CARE, INC.
By:
Name:
Title:
VISIONWORKS HOLDINGS, INC.
By:
Name:
Title:
VISIONWORKS, INC.
By:
Name:
Title:
VISIONWORKS PROPERTIES, INC.
By:
Name:
Title:
EYECARE HOLDINGS, INC.
By:
Name:
Title:
VISIONARY RETAIL MANAGEMENT, INC.
By:
Name:
Title:
VISIONARY PROPERTIES, INC.
By:
Name:
Title:
<PAGE> 202
B-5
VISIONARY MSO, INC.
By:
Name:
Title:
THE SAMIT GROUP, INC.
By:
Name:
Title:
HOUR EYES, INC.
By:
Name:
Title:
SKYLAB OPTICAL, INC.
By:
Name:
Title:
METROPOLITAN VISION SERVICES, INC.
By:
Name:
Title:
<PAGE> 1
Ex. 4.5
REGISTRATION RIGHTS AGREEMENT
Dated as of April 24, 1998
Among
EYE CARE CENTERS OF AMERICA, INC.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
BT ALEX. BROWN INCORPORATED
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Initial Purchasers
9_1/8% Senior Subordinated Notes due 2008
and
Floating Interest Rate Subordinated
Footnote continued from previous page.
<PAGE> 2
S-1
Term Securities due 2008
<PAGE> 3
S-1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of April 24, 1998, among EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Company"), as issuer, each of the Company's domestic
subsidiaries listed on the signature pages hereof, as guarantors (the
"Guarantors" and, together with the Company, the "Issuers"), and BT Alex. Brown
Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial
purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of April 17, 1998, among the Issuers and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $100,000,000 aggregate principal amount of
the Company's 9_1/8% Senior Subordinated Notes due 2008 (the "Fixed Rate Notes")
and $50,000,000 aggregate principal amount of the Company's Floating Interest
Rate Subordinated Term Securities due 2008 (the "Floating Rate Notes" and,
together with the Fixed Rate Notes, the "Notes"), in each case guaranteed by the
Guarantors (the "Guarantees"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and any subsequent holder or holders of the Notes. The execution and
delivery of this Agreement is a condition to the Initial Purchasers' obligation
to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
<PAGE> 4
S-1
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Effectiveness Date: The 135th day after the Issue Date;
provided, however, that with respect to any Shelf Registration other than a
Shelf Registration if no Exchange Offer Registration Statement has been filed,
the Effectiveness Date shall be the 60th day after the Filing Date with respect
thereto.
Effectiveness Period: See Section 3(a) hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section_2 hereof.
Exchange Offer Registration Statement: See Section_2
hereof.
Filing Date: With respect to the Exchange Offer Registration
Statement, the 60th day after the Issue Date;
<PAGE> 5
S-1
provided, however, that with respect to any Shelf Registration Statement, (A)_if
no Exchange Offer Registration Statement has been filed by the Issuers pursuant
to this Agreement, the Filing Date shall be the 60th day after the Issue Date
and (B)_in each other case (which may be applicable notwithstanding the
consummation of the Exchange Offer), the Filing Date shall be the 30th day after
the delivery of a Shelf Notice (which shall be no earlier than the 60th day
after the Issue Date).
Fixed Rate Notes: See the introductory paragraphs hereto.
Fixed Rate Exchange Notes: See section 2(a) hereof.
Floating Rate Notes: See the introductory paragraphs hereto.
Floating Rate Exchange Notes: See section 2(a) hereof.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of April 24, 1998, by and
among the Issuers and United States Trust Company of New York, as Trustee,
pursuant to which the Notes and the Guarantees are being issued, as the same may
be amended or supplemented from time to time in accordance with the terms
thereof.
<PAGE> 6
S-1
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: April_24, 1998, the date of original issuance of
the Notes.
Issuers: See the introductory paragraphs hereto.
NASD: See Section 5(s) hereof.
Notes: See the introductory paragraphs hereto.
Offering Memorandum: The final offering memorandum of the
Company dated April_17, 1998, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any
<PAGE> 7
S-1
prospectus subject to completion and a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act and
any term sheet filed pursuant to Rule 434 under the Securities Act), as amended
or supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i)_a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii)_such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws (including, without limitation, the prospectus delivery
requirements under the Securities Act), (iii)_such Note, Exchange Note or
Private Exchange Note, as the case may be, ceases to be outstanding for
<PAGE> 8
S-1
purposes of the Indenture or (iv)_such Note, Exchange Note or Private Exchange
Note, as the case may be, is resold pursuant to Rule 144 under the Securities
Act.
Registration Statement: Any registration statement of the
Company and/or the Guarantors that covers any of the Notes, the Exchange Notes
or the Private Exchange Notes (and the related Guarantees) filed with the SEC
under the Securities Act, including the Prospectus, amendments and supplements
to such registration statement, including post-effective amendments, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule_144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule_144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
<PAGE> 9
S-1
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the
trustee (if any) under any indenture governing the Exchange
Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A
registration in which securities of one or more of the Issuers are sold to an
underwriter for reoffering to the public.
2. Exchange Offer
(1) The Issuers shall file with the SEC, no
later than the Filing Date, a Registration
Statement (the "Exchange Offer Registration
Statement") on an appropriate registration
form with respect to a registered offer (the
"Exchange Offer") to exchange any and all of
the Registrable Notes for senior
subordinated notes of the Company having a
like aggregate principal amount, guaranteed
on a senior subordinated basis by the
Guarantors, that are identical in all
material respects to the Fixed Rate Notes
<PAGE> 10
S-1
and the Floating Rate Notes, as applicable,
except that such notes shall have been
registered pursuant to an effective
Registration Statement under the Securities
Act and shall contain no restrictive legend
thereon (the "Fixed Rate Exchange Notes and
the Floating Rate Exchange Notes,"
respectively, and, together, "Exchange
Notes"), and which are entitled to the
benefits of the Indenture or a trust
indenture which is identical in all material
respects to the Indenture (other than such
changes to the Indenture or any such
identical trust indenture as are necessary
to comply with the TIA) and which, in either
case, has been qualified under the TIA. The
Exchange Offer shall comply with all
applicable tender offer rules and
regulations under the Exchange Act and other
applicable law. The Issuers shall use their
best efforts to (x)_cause the Exchange Offer
Registration Statement to be declared
effective under the Securities Act on or
before the Effectiveness Date; (y)_keep the
Exchange Offer open for at least 30 calendar
days (or longer if required by applicable
law) after the date that notice of the
Exchange Offer is mailed to Holders; and
(z)_consummate the Exchange Offer on or
prior to the 165th day following the Issue
Date. If, after the Exchange Offer
Registration Statement is initially declared
effective by the SEC, the Exchange Offer or
the issuance of the Exchange Notes
<PAGE> 11
S-1
thereunder is interfered with by any stop
order, injunction or other order or
requirement of the SEC or any other
governmental agency or court, the Exchange
Offer Registration Statement shall be deemed
not to have become effective for purposes of
this Agreement.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Company in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section_2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers (as defined), and the
Issuers shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and other than in respect of any Exchange Notes as
to which clause 2(c)(iv) hereof applies) pursuant to Section_3 hereof.
No securities other than the Exchange Notes and Guarantees
shall be included in the Exchange Offer Registration Statement.
<PAGE> 12
S-1
(2) The Issuers shall include within the
Prospectus contained in the Exchange Offer
Registration Statement a section entitled
"Plan of Distribution," reasonably
acceptable to the Initial Purchasers, which
shall contain a summary statement of the
positions taken or policies made by the
staff of the SEC with respect to the
potential "underwriter" status of any
broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange
Act) of Exchange Notes received by such
broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such
positions or policies have been publicly
disseminated by the staff of the SEC or such
positions or policies represent the
prevailing views of the staff of the SEC.
Such "Plan of Distribution" section shall
also expressly permit, to the extent
permitted by applicable policies and
regulations of the SEC, the use of the
Prospectus by all Persons subject to the
prospectus delivery requirements of the
Securities Act, including, to the extent
permitted by applicable policies and
regulations of the SEC, all Participating
Broker-Dealers, and include a statement
describing the means by which Participating
Broker-Dealers may resell the Exchange Notes
in compliance with the Securities Act.
The Issuers shall use their best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to
<PAGE> 13
S-1
permit such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as is necessary to comply with applicable law in connection with any resale of
the Exchange Notes covered thereby; provided, however, that such period shall
not exceed 180 days after the consummation of the Exchange Offer (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
If, prior to consummation of the Exchange Offer, any Initial
Purchaser holds any Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, the Company upon the request of any such Initial Purchaser shall
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to any such Initial Purchaser, in exchange (the "Private
Exchange") for such Notes held by any such Initial Purchaser, senior
subordinated notes of the Company having a like principal amount (the "Private
Exchange Notes") of the Company, guaranteed on a senior subordinated basis by
the Guarantors, that are identical in all material respects to the Fixed Rate
Exchange Notes and the Floating Rate Exchange Notes, as applicable, except for
the placement of a restrictive legend on such Private Exchange Notes. The
Private Exchange Notes shall be issued pursuant to the same indenture as the
Exchange Notes and bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or
<PAGE> 14
S-1
after the date of such exchange and as to which interest will be paid, the date
of such interest payment date or (B) if no interest has been paid on the Notes,
from the date of the original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder
entitled to participate in the Exchange
Offer a copy of the Prospectus forming part
of the Exchange Offer Registration
Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less
than 30 calendar days after the date that
notice of the Exchange Offer is mailed to
Holders (or longer if required by applicable
law);
(3) utilize the services of a depository for the
Exchange Offer with an address in the
Borough of Manhattan, The City of New York
which may be the Trustee or an affiliate
thereof;
(4) permit Holders to withdraw tendered Notes at
any time prior to the close of business, New
York time, on the last business day on which
the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects
with all applicable laws, rules and
regulations.
<PAGE> 15
S-1
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes
validly tendered and not validly withdrawn
pursuant to the Exchange Offer and the
Private Exchange, if any;
(2) deliver to the Trustee for cancellation all
Registrable Notes so accepted for exchange;
and
(3) cause the Trustee to authenticate and
deliver promptly to each Holder of Notes,
Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount
to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i)_the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii)_no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuers and
(iii)_all governmental approvals shall have been obtained, which approvals the
Issuers deem necessary for the consummation of the Exchange Offer or Private
Exchange.
<PAGE> 16
S-1
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and consent together
on all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a separate
class on any matter.
(3) If, (i)_because of any change in law or in
currently prevailing interpretations of the
staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer,
(ii)_the Exchange Offer is not consummated
within 165 days of the Issue Date, (iii)_any
holder of Private Exchange Notes so requests
in writing to the Company, or (iv)_in the
case of any Holder that participates in the
Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange
that may be sold without restriction under
state and federal securities laws (other
than due solely to the status of such Holder
as an affiliate of the Company within the
meaning of the Securities Act), then in the
case of each of clauses (i) to and including
(iv) of this sentence, the Company shall
promptly deliver to the Holders and the
Trustee written notice thereof (the "Shelf
Notice")
<PAGE> 17
S-1
and shall file a Shelf Registration pursuant
to Section_3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section_2(c) hereof, then:
(1) Shelf Registration. The Issuers shall file
with the SEC a Registration Statement for an
offering to be made on a continuous basis
pursuant to Rule 415 covering all of the
Registrable Notes not exchanged in the
Exchange Offer, Private Exchange Notes and
Exchange Notes as to which Section 2(c)(iv)
is applicable (the "Initial Shelf
Registration"). The Issuers shall file with
the SEC the Initial Shelf Registration on or
before the applicable Filing Date. The
Initial Shelf Registration shall be on Form
S-1 or another appropriate form permitting
registration of such Registrable Notes for
resale by Holders in the manner or manners
designated by them (including, without
limitation, one or more underwritten
offerings). The Issuers shall not permit any
securities other than the Registrable Notes
to be included in the Initial Shelf
Registration or any Subsequent Shelf
Registration (as defined below).
The Issuers shall use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the applicable Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is two
years from the Issue Date (the "Effectiveness Period"), or such
<PAGE> 18
S-1
shorter period ending when (i)_all Registrable Notes covered by the Initial
Shelf Registration have been sold in the manner set forth and as contemplated in
the Initial Shelf Registration or (ii)_a Subsequent Shelf Registration covering
all of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration has been declared
effective under the Securities Act; provided, however, that the Effectiveness
Period in respect of the Initial Shelf Registration shall be extended to the
extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule_174 under the Securities Act and as otherwise
provided herein.
(2) Subsequent Shelf Registrations. If the
Initial Shelf Registration or any Subsequent
Shelf Registration ceases to be effective
for any reason at any time during the
Effectiveness Period (other than because of
the sale of all of the securities registered
thereunder), the Issuers shall use their
best efforts to obtain the prompt withdrawal
of any order suspending the effectiveness
thereof, and in any event shall within
45_days of such cessation of effectiveness
amend the Initial Shelf Registration in a
manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or
file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all
of the Registrable Notes covered by and not
sold under the Initial Shelf Registration or
an earlier Subsequent Shelf Registration
(each, a "Subsequent Shelf Registration").
If a Subsequent Shelf Registration is
<PAGE> 19
S-1
filed, the Issuers shall use their best
efforts to cause the Subsequent Shelf
Registration to be declared effective under
the Securities Act as soon as practicable
after such filing and to keep such
subsequent Shelf Registration continuously
effective for the remainder of the
Effectiveness Period. As used herein the
term "Shelf Registration" means the Initial
Shelf Registration and any Subsequent Shelf
Registration.
(3) Supplements and Amendments. The Issuers
shall promptly supplement and amend any
Shelf Registration if required by the rules,
regulations or instructions applicable to
the registration form used for such Shelf
Registration, if required by the Securities
Act, or if reasonably requested by the
Holders of a majority in aggregate principal
amount of the Registrable Notes covered by
such Registration Statement or by any
underwriter of such Registrable Notes.
4. Additional Interest
(1) The Issuers and the Initial Purchasers agree
that the Holders will suffer damages if the
Issuers fail to fulfill their obligations
under Section_2 or Section_3 hereof and that
it would not be feasible to ascertain the
extent of such damages with precision.
Accordingly, the Company agrees to pay, as
liquidated damages, without duplication,
additional interest on the Notes
("Additional Interest") under the
circumstances and to the extent set forth
<PAGE> 20
S-1
below (each of which shall be given
independent effect):
1) if (A) neither the Exchange Offer
Registration Statement nor the Initial Shelf
Registration has been filed on or prior to
the applicable Filing Date or (B)
notwithstanding that the Company has
consummated or will consummate the Exchange
Offer, the Company is required to file a
Shelf Registration and such Shelf
Registration is not filed on or prior to the
Filing Date applicable thereto, then
commencing on the day after any such Filing
Date, Additional Interest shall accrue on
the principal amount of the Notes at a rate
of 0.25% per annum for the first 90 days
immediately following each such Filing Date,
and the rate of such Additional Interest
shall increase by an additional 0.25% per
annum at the beginning of each subsequent
90-day period;
2) or if (A) neither the Exchange Offer
Registration Statement nor the Initial Shelf
<PAGE> 21
S-1
Registration is declared effective by the
SEC on or prior to the Effectiveness Date
applicable thereto or (B) notwithstanding
that the Company has consummated or will
consummate the Exchange Offer, the Company
is required to file a Shelf Registration and
such Shelf Registration is not declared
effective by the SEC on or prior to the
Effectiveness Date applicable thereto, then,
commencing on the day after the applicable
Effectiveness Date, Additional Interest
shall accrue on the principal amount of the
Notes at a rate of 0.25% per annum for the
first 90 days immediately following each
such Effectiveness Date, and the rate of
such Additional Interest shall increase by
an additional 0.25% per annum at the
beginning of each subsequent 90-day period;
or
3) if (A) the Company has not exchanged
Exchange Notes for all Notes validly
tendered in accordance with the terms of the
Exchange Offer on or
<PAGE> 22
S-1
prior to the 30th day after the date on
which the Exchange Offer Registration
Statement relating thereto was declared
effective or (B) if applicable, a Shelf
Registration has been declared effective and
such Shelf Registration ceases to be
effective at any time during the
Effectiveness Period (other than such time
as all Notes have been disposed of
thereunder), then Additional Interest shall
accrue on the principal amount of the Notes
at a rate of 0.25% per annum for the first
90 days commencing on the (x) 31st day after
such effective date, in the case of (A)
above, or (y) the day such Shelf
Registration ceases to be effective in the
case of (B) above, and the rate of such
Additional Interest shall increase by an
additional 0.25% per annum at the beginning
of each such subsequent 90-day period;
provided, however, that the rate of Additional Interest that shall accrue on the
Notes may not exceed in the aggregate 1.00% per annum; provided, further,
however, that (1) upon the filing
<PAGE> 23
S-1
of the applicable Exchange Offer Registration Statement or the applicable Shelf
Registration as required hereunder (in the case of clause (i) above of this
Section_4(a)), (2) upon the effectiveness of the applicable Exchange Offer
Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section_4(a)), or
(3)_upon the exchange of the applicable Exchange Notes for all Notes tendered
(in the case of clause (iii)(A) of this Section_4(a)), or upon the effectiveness
of the applicable Shelf Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section_4(a)), Additional Interest on
the Notes in respect of which such events relate as a result of such clause (or
the relevant subclause thereof), as the case may be, shall cease to accrue.
(2) The Company shall notify the Trustee within
four business days after each and every date
on which an event occurs in respect of which
Additional Interest is required to be paid
(an "Event Date"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or
(a)(iii) of this Section_4 will be payable
in cash semiannually on each May_1 and
November_1 (to the holders of record on the
April_15 and October_15 immediately
preceding such dates), commencing with the
first such date occurring after any such
Additional Interest commences to accrue. The
amount of Additional Interest will be
determined by multiplying the applicable
Additional Interest rate by the principal
amount of the Registrable Notes, multiplied
by a fraction, the numerator of which is the
<PAGE> 24
S-1
number of days such Additional Interest rate
was applicable during such period
(determined on the basis of a 360-day year
comprised of twelve 30-day months and, in
the case of a partial month, the actual
number of days elapsed), and the denominator
of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder each
of the Issuers shall:
(1) Prepare and file with the SEC prior to the
applicable Filing Date, a Registration
Statement or Registration Statements as
prescribed by Sections 2 or 3 hereof, and
use its best efforts to cause each such
Registration Statement to become effective
and remain effective as provided herein;
provided, however, that, if (1) such filing
is pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period relating thereto, before filing any
Registration Statement or Prospectus or any
amendments or supplements thereto, the
Issuers shall furnish to and afford the
<PAGE> 25
S-1
Holders of the Registrable Notes included in
such Registration Statement or each such
Participating Broker-Dealer, as the case may
be, their counsel and the managing
underwriters, if any, a reasonable
opportunity to review copies of all such
documents (including copies of any documents
to be incorporated by reference therein and
all exhibits thereto) proposed to be filed
(in each case at least five days prior to
such filing, or such later date as is
reasonable under the circumstances). The
Issuers shall not file any Registration
Statement or Prospectus or any amendments or
supplements thereto if the Holders of a
majority in aggregate principal amount of
the Registrable Notes included in such
Registration Statement, or any such
Participating Broker-Dealer, as the case may
be, their counsel, or the managing
underwriters, if any, shall reasonably
object.
(2) Prepare and file with the SEC such
amendments and post-effective amendments to
each Shelf Registration Statement or
Exchange Offer Registration Statement, as
the case may be, as may be necessary to keep
such Registration Statement continuously
effective for the Effectiveness Period or
the Applicable Period, as the case may be;
cause the related Prospectus to be
supplemented by any Prospectus supplement
required by applicable law, and as so
supplemented to be filed pursuant to Rule
424 (or any
<PAGE> 26
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similar provisions then in force)
promulgated under the Securities Act; and
comply with the provisions of the Securities
Act and the Exchange Act applicable to each
of them with respect to the disposition of
all securities covered by such Registration
Statement as so amended or in such
Prospectus as so supplemented and with
respect to the subsequent resale of any
securities being sold by a Participating
Broker-Dealer covered by any such
Prospectus. The Issuers shall be deemed not
to have used their best efforts to keep a
Registration Statement effective during the
Effectiveness Period or the Applicable
Period, as the case may be, relating thereto
if any Issuer voluntarily takes any action
that would result in selling Holders of the
Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell
Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes
during that period unless such action is
required by applicable law or permitted by
this Agreement.
(3) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period relating thereto from whom the
<PAGE> 27
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Company has received written notice that it
will be a Participating Broker-Dealer in the
Exchange Offer, notify the selling Holders
of Registrable Notes, or each such
Participating Broker-Dealer, as the case may
be, their counsel and the managing
underwriters, if any, promptly (but in any
event within one day), and confirm such
notice in writing, (i)_when a Prospectus or
any Prospectus supplement or post-effective
amendment has been filed, and, with respect
to a Registration Statement or any
post-effective amendment, when the same has
become effective under the Securities Act
(including in such notice a written
statement that any Holder may, upon request,
obtain, at the sole expense of the Issuers,
one conformed copy of such Registration
Statement or post-effective amendment
including financial statements and
schedules, documents incorporated or deemed
to be incorporated by reference and
exhibits), (ii)_of the issuance by the SEC
of any stop order suspending the
effectiveness of a Registration Statement or
of any order preventing or suspending the
use of any preliminary prospectus or the
initiation of any proceedings for that
purpose, (iii)_if at any time when a
prospectus is required by the Securities Act
to be delivered in connection with sales of
the Registrable Notes or resales of Exchange
Notes by Participating Broker-Dealers the
representations and warranties of the
Issuers contained in any
<PAGE> 28
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agreement (including any underwriting
agreement) contemplated by Section_5(m)
hereof cease to be true and correct in all
material respects, (iv)_of the receipt by
any Issuer of any notification with respect
to the suspension of the qualification or
exemption from qualification of a
Registration Statement or any of the
Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer
for offer or sale in any jurisdiction, or
the initiation or threatening of any
proceeding for such purpose, (v)_of the
happening of any event, the existence of any
condition or any information becoming known
that makes any statement made in such
Registration Statement or related Prospectus
or any document incorporated or deemed to be
incorporated therein by reference untrue in
any material respect or that requires the
making of any changes in or amendments or
supplements to such Registration Statement,
Prospectus or documents so that, in the case
of the Registration Statement, it will not
contain any untrue statement of a material
fact or omit to state any material fact
required to be stated therein or necessary
to make the statements therein not
misleading, and that in the case of the
Prospectus, it will not contain any untrue
statement of a material fact or omit to
state any material fact required to be
stated therein or necessary to make the
statements therein, in the light of the
circumstances under which they
<PAGE> 29
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were made, not misleading, and (vi)_of the
Company's determination that a
post-effective amendment to a Registration
Statement would be appropriate.
(4) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period, use its best efforts to prevent the
issuance of any order suspending the
effectiveness of a Registration Statement or
of any order preventing or suspending the
use of a Prospectus or suspending the
qualification (or exemption from
qualification) of any of the Registrable
Notes or the Exchange Notes to be sold by
any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is
issued, to use its best efforts to obtain
the withdrawal of any such order at the
earliest possible moment.
(5) If a Shelf Registration is filed pursuant to
Section_3 and if requested by the managing
underwriter or underwriters (if any), the
Holders of a majority in aggregate principal
amount of the Registrable Notes being sold
in connection with an underwritten offering
or any Participating Broker-Dealer, (i)_as
promptly as practicable incorporate in a
prospectus supplement or post-effective
<PAGE> 30
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amendment such information as the managing
underwriter or underwriters (if any), such
Holders, any Participating Broker-Dealer or
counsel for any of them reasonably request
to be included therein, (ii)_make all
required filings of such prospectus
supplement or such post-effective amendment
as soon as practicable after the Company has
received notification of the matters to be
incorporated in such prospectus supplement
or post-effective amendment, and
(iii)_supplement or make amendments to such
Registration Statement.
(6) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period, furnish to each selling Holder of
Registrable Notes and to each such
Participating Broker-Dealer who so requests
and to their respective counsel and each
managing underwriter, if any, at the sole
expense of the Issuers, one conformed copy
of the Registration Statement or
Registration Statements and each
post-effective amendment thereto, including
financial statements and schedules, and, if
requested, all documents incorporated or
deemed to be incorporated therein by
reference and all exhibits.
<PAGE> 31
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(7) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of
Registrable Notes, or each such
Participating Broker-Dealer, as the case may
be, their respective counsel, and the
underwriters, if any, at the sole expense of
the Issuers, as many copies of the
Prospectus or Prospectuses (including each
form of preliminary prospectus) and each
amendment or supplement thereto and any
documents incorporated by reference therein
as such Persons may reasonably request; and,
subject to the last paragraph of this
Section_5, the Issuers hereby consent to the
use of such Prospectus and each amendment or
supplement thereto by each of the selling
Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any,
and dealers (if any), in connection with the
offering and sale of the Registrable Notes
covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any
amendment or supplement thereto.
(8) Prior to any public offering of Registrable
Notes or any delivery of a Prospectus
contained in the Exchange Offer
<PAGE> 32
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Registration Statement by any Participating
Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its
best efforts to register or qualify, and to
cooperate with the selling Holders of
Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if
any, and their respective counsel in
connection with the registration or
qualification (or exemption from such
registration or qualification) of such
Registrable Notes for offer and sale under
the securities or Blue Sky laws of such
jurisdictions within the United States as
any selling Holder, Participating
Broker-Dealer, or the managing underwriter
or underwriters reasonably request in
writing; provided, however, that where
Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are
offered other than through an underwritten
offering, the Issuers agree to cause their
counsel to perform Blue Sky investigations
and file registrations and qualifications
required to be filed pursuant to this
Section 5(h), keep each such registration or
qualification (or exemption therefrom)
effective during the period such
Registration Statement is required to be
kept effective and do any and all other acts
or things reasonably necessary or advisable
to enable the disposition in such
jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the
<PAGE> 33
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Registrable Notes covered by the applicable
Registration Statement; provided, however,
that no Issuer shall be required to (A)
qualify generally to do business in any
jurisdiction where it is not then so
qualified, (B) take any action that would
subject it to general service of process in
any such jurisdiction where it is not then
so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any
such jurisdiction where it is not then so
subject.
(9) If a Shelf Registration is filed pursuant to
Section_3 hereof, cooperate with the selling
Holders of Registrable Notes and the
managing underwriter or underwriters, if
any, to facilitate the timely preparation
and delivery of certificates representing
Registrable Notes to be sold, which
certificates shall not bear any restrictive
legends and shall be in a form eligible for
deposit with The Depository Trust Company;
and enable such Registrable Notes to be in
such denominations and registered in such
names as the managing underwriter or
underwriters, if any, or Holders may
request.
(10) Use its best efforts to cause the
Registrable Notes covered by the
Registration Statement to be registered with
or approved by such other governmental
agencies or authorities as may be reasonably
necessary to enable the seller or sellers
thereof or the underwriter or underwriters,
if any, to consummate the
<PAGE> 34
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disposition of such Registrable Notes,
except as may be required solely as a
consequence of the nature of such selling
Holder's business, in which case the Issuers
will cooperate in all reasonable respects
with the filing of such Registration
Statement and the granting of such
approvals.
(11) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or
5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section_5(a) hereof)
file with the SEC, at the sole expense of
the Issuers, a supplement or post-effective
amendment to the Registration Statement or a
supplement to the related Prospectus or any
document incorporated or deemed to be
incorporated therein by reference, or file
any other required document so that, as
thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder`
or to the purchasers of the Exchange Notes
to whom such Prospectus will be delivered by
a Participating Broker-Dealer, any such
Prospectus will not contain an untrue
statement of a material fact or omit to
<PAGE> 35
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state a material fact required to be stated
therein or necessary to make the statements
therein, in light of the circumstances under
which they were made, not misleading.
(12) Prior to the effective date of the first
Registration Statement relating to the
Registrable Notes, (i)_provide the Trustee
with certificates for the Registrable Notes
in a form eligible for deposit with The
Depository Trust Company and (ii)_provide a
CUSIP number for the Registrable Notes.
(13) In connection with any underwritten offering
of Registrable Notes pursuant to a Shelf
Registration, enter into an underwriting
agreement as is customary in underwritten
offerings of debt securities similar to the
Notes in form and substance reasonably
satisfactory to the Company and take all
such other actions as are reasonably
requested by the managing underwriter or
underwriters in order to expedite or
facilitate the registration or the
disposition of such Registrable Notes and,
in such connection, (i)_make such
representations and warranties to, and
covenants with, the underwriters with
respect to the business of the Issuers and
the subsidiaries of the Issuers and the
Registration Statement, Prospectus and
documents, if any, incorporated or deemed to
be incorporated by reference therein, in
each case, as are customarily made by
issuers to underwriters in underwritten
offerings of debt securities similar to the
<PAGE> 36
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Notes, and confirm the same in writing if
and when requested in form and substance
reasonably satisfactory to the Company;
(ii)_obtain the written opinions of counsel
to the Issuers and written updates thereof
in form, scope and substance reasonably
satisfactory to the managing underwriter or
underwriters, addressed to the underwriters
covering the matters customarily covered in
opinions reasonably requested in
underwritten offerings and such other
matters as may be reasonably requested by
the managing underwriter or underwriters;
(iii)_use its best efforts to obtain "cold
comfort" letters and updates thereof in
form, scope and substance reasonably
satisfactory to the managing underwriter or
underwriters from the independent public
accountants of the Company (and, if
necessary, any other independent public
accountants of the Company, any subsidiary
of the Company or of any business acquired
by the Company for which financial
statements and financial data are, or are
required to be, included or incorporated by
reference in the Registration Statement),
addressed to each of the underwriters, such
letters to be in customary form and covering
matters of the type customarily covered in
"cold comfort" letters in connection with
underwritten offerings of debt securities
similar to the Notes and such other matters
as reasonably requested by the managing
underwriter or underwriters as permitted by
the Statement on Auditing
<PAGE> 37
S-1
Standards No. 72; and (iv)_if an
underwriting agreement is entered into, the
same shall contain indemnification
provisions and procedures no less favorable
to the sellers and underwriters, if any,
than those set forth in Section_7 hereof (or
such other provisions and procedures
acceptable to Holders of a majority in
aggregate principal amount of Registrable
Notes covered by such Registration Statement
and the managing underwriter or underwriters
or agents, if any). The above shall be done
at each closing under such underwriting
agreement, or as and to the extent required
thereunder.
(14) If (1) a Shelf Registration is filed
pursuant to Section_3 hereof, or (2) a
Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to
Section 2 hereof is required to be delivered
under the Securities Act by any
Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable
Period, make available for inspection by any
selling Holder of such Registrable Notes
being sold, or each such Participating
Broker-Dealer, as the case may be, any
underwriter participating in any such
disposition of Registrable Notes, if any,
and any attorney, accountant or other agent
retained by any such selling Holder or each
such Participating Broker-Dealer, as the
case may be, or underwriter (collectively,
the "Inspectors"), at the offices where
<PAGE> 38
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normally kept, during reasonable business
hours, all financial and other records,
pertinent corporate documents and
instruments of the Issuers and subsidiaries
of the Issuers (collectively, the "Records")
as shall be reasonably necessary to enable
them to exercise any applicable due
diligence responsibilities, and cause the
officers, directors and employees of the
Issuers and any of their subsidiaries to
supply all information reasonably requested
by any such Inspector in connection with
such Registration Statement and Prospectus.
Each Inspector shall agree in writing that
it will keep the Records confidential and
that it will not disclose any of the Records
unless (i)_the disclosure of such Records is
necessary to avoid or correct a material
misstatement or material omission in such
Registration Statement or Prospectus,
(ii)_the release of such Records is ordered
pursuant to a subpoena or other order from a
court of competent jurisdiction, or
(iii)_the information in such Records has
been made generally available to the public
other than as a result of the disclosure or
failure to safeguard by such Inspector;
provided, however, that prior notice shall
be provided as soon as practicable to the
Company of the potential disclosure of any
information by such Inspector pursuant to
clauses (i) or (ii) of this sentence to
permit the Company to obtain a protective
order (or waive the provisions of this
<PAGE> 39
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paragraph (n)) and that such Inspector shall
take such actions as are reasonably
necessary to protect the confidentiality of
such information (if practicable) to the
extent such action is otherwise not
inconsistent with, an impairment of or in
derogation of the rights and interests of
the Holder or any Inspector.
(15) Provide an indenture trustee for the
Registrable Notes or the Exchange Notes, as
the case may be, and cause the Indenture or
the trust indenture provided for in Section
2(a) hereof, as the case may be, to be
qualified under the TIA not later than the
effective date of the first Registration
Statement relating to the Registrable Notes;
and in connection therewith, cooperate with
the trustee under any such indenture and the
Holders of the Registrable Notes, to effect
such changes to such indenture as may be
required for such indenture to be so
qualified in accordance with the terms of
the TIA; and execute, and use its best
efforts to cause such trustee to execute,
all documents as may be required to effect
such changes, and all other forms and
documents required to be filed with the SEC
to enable such indenture to be so qualified
in a timely manner.
(16) Comply with all applicable rules and
regulations of the SEC and make generally
available to its securityholders with regard
to any applicable Registration Statement, a
consolidated earnings
<PAGE> 40
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statement satisfying the provisions of
Section 11(a) of the Securities Act and
Rule_158 thereunder (or any similar rule
promulgated under the Securities Act) no
later than 45 days after the end of any
fiscal quarter (or 90 days after the end of
any 12-month period if such period is a
fiscal year) (i)_commencing at the end of
any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm
commitment or best efforts underwritten
offering and (ii)_if not sold to
underwriters in such an offering, commencing
on the first day of the first fiscal quarter
of the Company after the effective date of a
Registration Statement, which statements
shall cover said 12-month periods.
(17) Upon consummation of the Exchange Offer or a
Private Exchange, obtain an opinion of
counsel to the Company, in a form customary
for underwritten transactions, addressed to
the Trustee for the benefit of all Holders
of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as
the case may be, that the Exchange Notes or
Private Exchange Notes, as the case may be,
and the related Guarantees and the related
indenture constitute legal, valid and
binding obligations of the Company and each
of the Guarantors, enforceable against them
in accordance with their respective terms,
subject to customary exceptions and
qualifications.
<PAGE> 41
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(18) If the Exchange Offer or a Private Exchange
is to be consummated, upon delivery of the
Registrable Notes by Holders to the Company
(or to such other Person as directed by the
Company) in exchange for the Exchange Notes
or the Private Exchange Notes, as the case
may be, the Company shall mark, or cause to
be marked, on such Registrable Notes that
such Registrable Notes are being canceled in
exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be;
in no event shall such Registrable Notes be
marked as paid or otherwise satisfied.
(19) Cooperate with each seller of Registrable
Notes covered by any Registration Statement
and each underwriter, if any, participating
in the disposition of such Registrable Notes
and their respective counsel in connection
with any filings required to be made with
the National Association of Securities
Dealers, Inc. (the "NASD").
(20) Use its best efforts to take all other steps
reasonably necessary to effect the
registration of the Exchange Notes and/or
Registrable Notes covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller so long as
such seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to
<PAGE> 42
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furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the
<PAGE> 43
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Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event that the
Company shall give any such notice, the Applicable Period or the Effectiveness
Period, as applicable, shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Issuers whether or not the
Exchange Offer Registration Statement or any Shelf Registration is filed or
becomes effective or the Exchange Offer is consummated, including, without
limitation, (i)_all registration and filing fees (including, without limitation,
(A)_fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B)_fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x)_where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y)_as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii)_printing expenses, including,
without limitation, expenses of printing
<PAGE> 44
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certificates for Registrable Notes or Exchange Notes in a form eligible for
deposit with The Depository Trust Company and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or in respect of
Registrable Notes or Exchange Notes to be sold by any Participating
Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger,
telephone and delivery expenses, (iv)_fees and disbursements of counsel for the
Company and reasonable fees and disbursements of one special counsel for all of
the sellers of Registrable Notes (exclusive of any counsel retained pursuant to
Section 7 hereof), (v)_fees and disbursements of all independent certified
public accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi)_Securities Act liability
insurance, if the Company desires such insurance, (vii)_fees and expenses of all
other Persons retained by the Issuer, (viii)_internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (ix)_the
expense of any annual audit, (x)_any fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
(xi)_the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, indentures and any other
documents necessary in order to comply with this Agreement, and (xii) the fees
and expenses of the Trustee and any exchange agent and the fees and expenses of
their counsel.
7. Indemnification
<PAGE> 45
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(1) Each of the Issuers, jointly and severally,
agrees to indemnify and hold harmless each
Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange
Notes during the Applicable Period, the
affiliates, officers, directors,
representatives, employees and agents of
each such Person, and each Person, if any,
who controls any such Person within the
meaning of either Section_15 of the
Securities Act or Section_20 of the Exchange
Act (each, a "Participant"), from and
against any and all losses, claims, damages,
judgments, liabilities and expenses
(including, without limitation, the
reasonable legal fees and other reasonable
expenses actually incurred in connection
with any suit, action or proceeding or any
claim asserted) caused by, arising out of or
based upon any untrue statement or alleged
untrue statement of a material fact
contained in any Registration Statement (or
any amendment thereto) or Prospectus (as
amended or supplemented if the Company shall
have furnished any amendments or supplements
thereto) or any preliminary prospectus, or
caused by, arising out of or based upon any
omission or alleged omission to state
therein a material fact required to be
stated therein or necessary to make the
statements therein, in the case of the
Prospectus in light of the circumstances
under which they were made, not misleading,
except insofar as such losses, claims,
<PAGE> 46
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damages or liabilities are caused by any
untrue statement or omission or alleged
untrue statement or omission made in
reliance upon and in conformity with
information relating to any Participant
furnished to the Company in writing by such
Participant expressly for use therein;
provided that the Company shall not be
liable to any such Participant, with respect
to any untrue statement or alleged untrue
statement or omission or alleged omission in
any preliminary Prospectus to the extent
that any such loss, claim, damage, judgment,
liability or expense of any Participant
results from the fact that such Participant
sold Registrable Notes or Exchange Notes to
a person to whom there was not sent or
given, at or prior to the written
confirmation of such sale, a copy of the
final Prospectus as then amended or
supplemented if required by applicable law
and if the Company had previously furnished
copies thereof in accordance with the terms
of this Agreement to such Participant and
the untrue statement or omission of a
material fact contained in the preliminary
Prospectus was corrected in the final
Prospectus and the claims asserted by such
person do not include allegations of other
untrue statements or omissions of material
facts made in the final Prospectus which
allegations are upheld in a final judgment.
Any amounts advanced by the Company to an
indemnified party pursuant to this Section_7
as a result of such losses shall
<PAGE> 47
S-1
be returned to the Company if it shall be
finally determined by such a court in a
judgment not subject to appeal or final
review that such indemnified party was not
entitled to indemnification by the Company.
(2) Each Participant agrees, severally and not
jointly, to indemnify and hold harmless the
Issuers, their respective affiliates,
officers, directors, representatives,
employees and agents and each Person who
controls the Company within the meaning of
Section_15 of the Securities Act or
Section_20 of the Exchange Act to the same
extent (but on a several, and not joint,
basis) as the foregoing indemnity from the
Issuers to each Participant, but only with
reference to information relating to such
Participant furnished to the Company in
writing by such Participant expressly for
use in any Registration Statement or
Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The
liability of any Participant under this
paragraph shall in no event exceed the
proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes
giving rise to such obligations.
(3) If any suit, action, proceeding (including
any governmental or regulatory
investigation), claim or demand shall be
brought or asserted against any Person in
respect of which indemnity may be sought
pursuant to either of the two preceding
paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Persons
<PAGE> 48
S-1
against whom such indemnity may be sought
(the "Indemnifying Persons") in writing, and
the Indemnifying Persons, upon request of
the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person
and any others the Indemnifying Persons may
reasonably designate in such proceeding and
shall pay the fees and expenses actually
incurred by such counsel related to such
proceeding; provided, however, that the
failure to so notify the Indemnifying
Persons will not relieve it from any
liability which it may have hereunder or
otherwise. In any such proceeding, any
Indemnified Person shall have the right to
retain its own counsel, but the fees and
expenses of such counsel shall be at the
expense of such Indemnified Person unless
(i)_the Indemnifying Persons and the
Indemnified Person shall have mutually
agreed to the contrary, (ii)_the
Indemnifying Persons shall have failed
within a reasonable period of time to retain
counsel reasonably satisfactory to the
Indemnified Person or (iii)_the named
parties in any such proceeding (including
any impleaded parties) include both any
Indemnifying Person and the Indemnified
Person or any affiliate thereof and such
Indemnified Person shall have been advised
by counsel that there may be one or more
legal defenses available to it which are
different from or additional to those
available to the Indemnifying Person or
<PAGE> 49
S-1
that representation of both parties by the
same counsel would be inappropriate due to
actual or potential differing interests
between them. It is understood that, unless
there exists a conflict among Indemnified
persons, the Indemnifying Persons shall not,
in connection with such proceeding or
separate but substantially similar related
proceeding in the same jurisdiction arising
out of the same general allegations, be
liable for the fees and expenses of more
than one separate firm (in addition to any
local counsel) for all Indemnified Persons,
and that all such fees and expenses shall be
reimbursed promptly as they are incurred.
Any such separate firm for the Participants
and such control Persons of Participants
shall be designated in writing by
Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold
by all such Participants and shall be
reasonably acceptable to the Company, and
any such separate firm for the Issuers,
their affiliates, officers, directors,
representatives, employees and agents and
the control person of the Company shall be
designated in writing by the Company and
shall be reasonably acceptable to the
representatives of the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the
<PAGE> 50
S-1
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A)_includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(4) If the indemnification provided for in the
first and second paragraphs of this
Section_7 is for any reason unavailable to,
or insufficient to hold harmless, an
Indemnified Person in respect of any losses,
claims, damages or liabilities referred to
therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying
such Indemnified Person thereunder and in
order to provide for just and equitable
contribution, shall contribute to the amount
paid or payable by such Indemnified Person
as a result of such losses, claims, damages
or liabilities in such proportion as is
appropriate to reflect (i) the relative
benefits received by the Indemnifying Person
or Persons on
<PAGE> 51
S-1
the one hand and the Indemnified Person or
Persons on the other from the offering of
the Notes or (ii) if the allocation provided
by the foregoing clause (i) is not permitted
by applicable law, not only such relative
benefits but also the relative fault of the
Indemnifying Person or Persons on the one
hand and the Indemnified Person or Persons
on the other in connection with the
statements or omissions or alleged
statements or omissions that resulted in
such losses, claims, damages or liabilities
(or actions in respect thereof) as well as
any other relevant equitable considerations.
The relative benefits received by the Issuers on the one hand
and the Participants on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (net of discounts and commissions but
before deducting expenses) of the Notes received by the Issuers bears to the
total proceeds received by such Participant from the sale of Registrable Notes
or Exchange Notes, as the case may be. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(5) The parties agree that it would not be just
and equitable if contribution pursuant to
<PAGE> 52
S-1
this Section_7 were determined by pro rata
allocation (even if the Participants were
treated as one entity for such purpose) or
by any other method of allocation that does
not take account of the equitable
considerations referred to in the
immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as
a result of the losses, claims, damages,
judgments, liabilities and expenses referred
to in the immediately preceding paragraph
shall be deemed to include, subject to the
limitations set forth above, any reasonable
legal or other expenses actually incurred by
such Indemnified Person in connection with
investigating or defending any such action
or claim. Notwithstanding the provisions of
this Section_7, in no event shall a
Participant be required to contribute any
amount in excess of the amount by which
proceeds received by such Participant from
sales of Registrable Notes or Exchange
Notes, as the case may be, exceeds the
amount of any damages that such Participant
has otherwise been required to pay or has
paid by reason of such untrue or alleged
untrue statement or omission or alleged
omission. No Person guilty of fraudulent
misrepresentation (within the meaning of
Section_11(f) of the Securities Act) shall
be entitled to contribution from any Person
who was not guilty of such fraudulent
misrepresentation.
<PAGE> 53
S-1
(6) Any losses, claims, damages, liabilities or
expenses for which an indemnified party is
entitled to indemnification or contribution
under this Section 7 shall be paid by the
Indemnifying Person to the Indemnified
Person as such losses, claims, damages,
liabilities or expenses are incurred. The
indemnity and contribution agreements
contained in this Section_7 and the
representations and warranties of the
Issuers set forth in this Agreement shall
remain operative and in full force and
effect, regardless of (i)_any investigation
made by or on behalf of any Holder or any
person who controls a Holder, the Issuers,
their directors, officers, employees or
agents or any person controlling the
Company, and (ii)_any termination of this
Agreement.
(7) The indemnity and contribution agreements
contained in this Section_7 will be in
addition to any liability which the
Indemnifying Persons may otherwise have to
the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time such Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
Notes, make available such information necessary to permit sales pursuant to
Rule 144A under the Securities Act. Each of the Issuers further
<PAGE> 54
S-1
covenants and agrees, for so long as any Registrable Notes remain outstanding
that it will make available to any Holder of Registrable Notes, all to the
extent required from time to time to enable such holder to sell Registrable
Notes without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a)_agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b)_completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(1) No Inconsistent Agreements. The Issuers have
not, as of the date hereof, and the Issuers
shall not, after the date of this Agreement,
enter into any agreement with respect to any
of its securities that is
<PAGE> 55
S-1
inconsistent with the rights granted to the
Holders of Registrable Notes in this
Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict
with and are not inconsistent with the
rights granted to the holders of the
Issuers' other issued and outstanding
securities under any such agreements. The
Issuers will not enter into any agreement
with respect to any of their securities
which will grant to any Person piggy-back
registration rights with respect to any
Registration Statement.
(2) Adjustments Affecting Registrable Notes. The
Issuers shall not, directly or indirectly,
take any action with respect to the
Registrable Notes as a class that would
adversely affect the ability of the Holders
of Registrable Notes to include such
Registrable Notes in a registration
undertaken pursuant to this Agreement.
(3) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified
or supplemented, and waivers or consents to
departures from the provisions hereof may
not be given, otherwise than with the prior
written consent of (I) the Company and
(II)(A)_the Holders of not less than a
majority in aggregate principal amount of
the then outstanding Registrable Notes and
(B)_in circumstances that would adversely
affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not
less than a majority in aggregate
<PAGE> 56
S-1
principal amount of the Exchange Notes held
by all Participating Broker-Dealers;
provided, however, that Section_7 and this
Section_10(c) may not be amended, modified
or supplemented without the prior written
consent of each Holder and each
Participating Broker-Dealer (including any
person who was a Holder or Participating
Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed
of pursuant to any Registration Statement)
affected by any such amendment, modification
or supplement. Notwithstanding the
foregoing, a waiver or consent to depart
from the provisions hereof with respect to a
matter that relates exclusively to the
rights of Holders of Registrable Notes whose
securities are being sold pursuant to a
Registration Statement and that does not
directly or indirectly affect, impair, limit
or compromise the rights of other Holders of
Registrable Notes may be given by Holders of
at least a majority in aggregate principal
amount of the Registrable Notes being sold
pursuant to such Registration Statement.
(4) Notices. All notices and other
communications (including, without
limitation, any notices or other
communications to the Trustee) provided for
or permitted hereunder shall be made in
writing by hand-delivery, registered
first-class mail, next-day air courier or
facsimile:
<PAGE> 57
S-1
1) if to a Holder of the Registrable Notes or
any Participating Broker-Dealer, at the most
current address of such Holder or
Participating Broker-Dealer, as the case may
be, set forth on the records of the
registrar under the Indenture.
2) if to the Issuers, at the address as
follows:
c/o Eye Care Center of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Facsimile No.: (210) 524-6996
Attention: Chief Financial Officer
with a copy to
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Facsimile No.: (617) 951-1295
Attention: James Westra, Esq.
<PAGE> 58
S-1
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(5) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon
the successors and assigns of each of the
parties hereto, the Holders and the
Participating Broker-Dealers.
(6) Subsidiary Guarantors. If any Guarantor
becomes a party to this Agreement and is
subsequently released from its obligations
under the Indenture in accordance with the
terms thereof then such Guarantor shall be
released from its obligations hereunder. If
any Guarantor becomes a party to the
Indenture after the date hereof as a
Guarantor, by becoming a party to the
Indenture, such Guarantor agrees to become a
party to this Agreement as a Guarantor.
(7) Counterparts. This Agreement may be executed
in any number of counterparts and by the
parties hereto in separate counterparts,
each of which when so executed shall be
deemed to be an original and all of which
taken together shall constitute one and the
same agreement.
<PAGE> 59
S-1
(8) Headings. The headings in this Agreement are
for convenience of reference only and shall
not limit or otherwise affect the meaning
hereof.
(9) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED
ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(10) Severability. If any term, provision,
covenant or restriction of this Agreement is
held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions,
covenants and restrictions set forth herein
shall remain in full force and effect and
shall in no way be affected, impaired or
invalidated, and the parties hereto shall
use their best efforts to find and employ an
alternative means to achieve the same or
substantially the same result as that
contemplated by such term, provision,
covenant or restriction. It is hereby
stipulated and declared to be the intention
of the parties that they would have executed
the remaining terms, provisions, covenants
and restrictions without including any of
such that may be hereafter declared invalid,
illegal, void or unenforceable.
(11) Securities Held by the Company or Its
Affiliates. Whenever the consent or approval
of Holders of a specified
<PAGE> 60
percentage of Registrable Notes is required
hereunder, Registrable Notes held by any of
the Issuers or their affiliates (as such
term is defined in Rule 405 under the
Securities Act) shall not be counted in
determining whether such consent or approval
was given by the Holders of such required
percentage.
(12) Third-Party Beneficiaries. Holders of
Registrable Notes and Participating
Broker-Dealers are intended third-party
beneficiaries of this Agreement, and this
Agreement may be enforced by such Persons.
(13) Entire Agreement. This Agreement, together
with the Purchase Agreement and the
Indenture, is intended by the parties as a
final and exclusive statement of the
agreement and understanding of the parties
hereto in respect of the subject matter
contained herein and therein and any and all
prior oral or written agreements,
representations, or warranties, contracts,
understandings, correspondence,
conversations and memoranda between the
Holders on the one hand and the Issuers on
the other, or between or among any agents,
representatives, parents, subsidiaries,
affiliates, predecessors in interest or
successors in interest with respect to the
subject matter hereof and thereof are merged
herein and replaced hereby. [SIGNATURE PAGES
FOLLOW]
<PAGE> 61
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EYE CARE CENTERS OF AMERICA, INC.
/s/ Mark T. Pearson
By: _____________________________________________
Name: Mark T. Pearson
Title:
ENCLAVE ADVANCEMENT GROUP, INC.
ECCA MANAGED VISION CARE, INC.
VISIONWORKS HOLDINGS, INC.
VISIONWORKS, INC.
VISIONWORKS PROPERTIES, INC.
EYE CARE HOLDINGS, INC.
VISIONARY RETAIL MANAGEMENT, INC.
<PAGE> 62
VISIONARY PROPERTIES, INC.
VISIONARY MSO, INC.
THE SAMIT GROUP, INC.
HOUR EYES, INC.
SKYLAB OPTICAL, INC.
METROPOLITAN VISION SERVICES,
INC.
/s/ Mark T. Pearson
By: _____________________________________________
Name: Mark T. Pearson
Title:
<PAGE> 63
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
BT ALEX. BROWN INCORPORATED
By:
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
Name:
Title:
<PAGE> 1
EXHIBIT 5.1
June 10, 1998
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Ladies and Gentlemen:
We have acted as counsel to Eye Care Centers of America, Inc., a Texas
corporation (the "Company"), in connection with the offer to exchange under the
Securities Act of 1933, as amended, $100,000,000 in principal amount of the
Company's 91/8% Senior Subordinated Notes due 2008 and $50,000,000 in principal
amount of the Company's Floating Interest Rate Subordinated Term Securities due
2008 (FIRST(SM)) (collectively, the "Exchange Notes") for $100,000,000 in
principal amount of the Company's outstanding 91/8% Senior Subordinated Notes
due 2008, and $50,000,000 in principal amount of the Company's outstanding
Floating Interest Rate Subordinated Term Securities due 2008 (FIRST(SM)),
respectively, pursuant to a Registration Statement on Form S-4 (File No.
333-________) filed with the Securities and Exchange Commission (the
"Registration Statement"). The Exchange Notes are being issued pursuant to an
Indenture in the form filed as an Exhibit to the Registration Statement (the
"Indenture").
As such counsel, we have examined (i) certain corporate records of the
Company, including its Certificate of Incorporation, as amended, its Bylaws,
stock records and minutes of meetings of its stockholders and Board of
Directors; (ii) a Certificate of the Secretary of the State of Texas as to the
legal existence of the Company; and (iii) such other documents as we have deemed
necessary as a basis for the opinions hereinafter expressed.
Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The Company is a corporation validly existing under the laws
of the State of Texas;
2. The Exchange Notes, when issued under the circumstances
contemplated in the Indenture, (a) will have been duly and
validly issued by the Company, with all requisite authority
and action; and (b) will be the legal, valid and binding
obligations of the Company.
<PAGE> 2
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ Hutchins, Wheeler & Dittmar
HUTCHINS, WHEELER & DITTMAR
A Professional Corporation
<PAGE> 1
EXHIBIT 8.1
June 10, 1998
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Ladies and Gentlemen:
We have acted as counsel to Eye Care Centers of America, Inc., a Texas
corporation (the "Company"), in connection with the offer to exchange under the
Securities Act of 1933, as amended, $100,000,000 in principal amount of the
Company's 91/8% Senior Subordinated Notes due 2008 and $50,000,000 in principal
amount of the Company's Floating Interest Rate Subordinated Term Securities due
2008 (FIRST(SM)) (collectively, the "Exchange Notes") for $100,000,000 in
principal amount of the Company's outstanding 91/8% Senior Subordinated Notes
due 2008, and $50,000,000 in principal amount of the Company's outstanding
Floating Interest Rate Subordinated Term Securities due 2008 (FIRST(SM))
(collectively, the "Initial Notes"), respectively, filed with the Securities and
Exchange Commission (the "Registration Statement"). The Exchange Notes are being
issued pursuant to an Indenture in the form filed as an Exhibit to the
Registration Statement.
As such counsel, we have examined such documents as we have deemed
necessary as a basis for the opinions hereinafter expressed. Based upon the
foregoing, and having regard for such legal considerations as we deem relevant,
we are of the opinion that the description under the heading "Income Tax
Considerations" in the Registration Statement fairly describes, subject to the
assumptions and qualifications set forth therein, the material United States
federal income tax consequences to holders of the Initial Notes and the Exchange
Notes resulting from the exchange of the Initial Notes for the Exchange Notes
and the ownership and disposition of the Exchange Notes under currently
applicable law.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to us under the heading "Income Tax
Considerations" therein.
Very truly yours,
/s/ Hutchins, Wheeler & Dittmar
HUTCHINS, WHEELER & DITTMAR
A Professional Corporation
<PAGE> 1
EXHIBIT 10.1
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
<PAGE> 2
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS ................................................................. 1
ARTICLE II
COVENANTS AND CONDITIONS ................................................... 9
2.1 RESTRICTIONS ON TRANSFERS; RIGHTS OF FIRST REFUSAL .............. 9
2.2 CALL BY THE COMPANY ............................................. 14
2.3 TAG ALONG ....................................................... 15
2.4 DRAG ALONG ...................................................... 17
2.5 PREEMPTIVE RIGHTS ............................................... 17
2.6 CORPORATE GOVERNANCE ............................................ 19
2.7 WITHHOLDING OF TAXES ............................................ 21
ARTICLE III
REGISTRATION RIGHTS ......................................................... 21
3.1 DEMAND REGISTRATIONS .............................................. 21
3.2 PIGGYBACK REGISTRATION ............................................ 22
3.3 OBLIGATIONS OF THE COMPANY ........................................ 22
3.4 FURNISH INFORMATION ............................................... 24
3.5 EXPENSES OF REGISTRATION .......................................... 24
3.6 UNDERWRITING ...................................................... 24
3.7 INDEMNIFICATION ................................................... 25
3.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934 ..................... 27
3.9 NO INCONSISTENT AGREEMENTS ........................................ 28
3.10 STOCK SPLIT ....................................................... 28
3.11 LOCK-UP AGREEMENTS ................................................ 28
ARTICLE IV
MISCELLANEOUS ............................................................... 28
4.1 REMEDIES .......................................................... 28
4.2 ENTIRE AGREEMENT; AMENDMENT ....................................... 29
4.3 SEVERABILITY ...................................................... 29
4.4 NOTICES ........................................................... 29
4.5 BINDING EFFECT; ASSIGNMENT ........................................ 30
<PAGE> 3
4.6 GOVERNING LAW ..................................................... 30
4.7 TERMINATION ....................................................... 30
4.8 RECAPITALIZATIONS, EXCHANGES, ETC ................................. 30
4.9 STOCKHOLDER REPRESENTATIVES ....................................... 31
4.10 ACTION NECESSARY TO EFFECTUATE THE AGREEMENT ...................... 32
4.11 PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE .................... 32
4.12 EFFECTIVENESS OF TRANSFERS ........................................ 33
4.13 ADDITIONAL STOCKHOLDERS ........................................... 33
4.14 NO WAIVER ......................................................... 33
4.15 COUNTERPARTS ...................................................... 33
4.16 HEADINGS .......................................................... 34
4.17 CONSENT TO JURISDICTION ........................................... 34
4.18 WAIVER OF RIGHT TO JURY TRIAL ..................................... 34
<PAGE> 4
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "AGREEMENT") is entered into as of
the 24th day of April, 1998, by and among Eye Care Centers of America, Inc., a
Texas corporation (the "COMPANY"), those persons listed as Management Holders on
the signature pages hereof (the "MANAGEMENT HOLDERS"), those persons listed as
Lee Holders on the signature pages hereof (the "LEE HOLDERS"), and those persons
listed as Continuing Holders on the signature pages hereof (the "CONTINUING
HOLDERS"). The Management Holders, the Lee Holders, and the Continuing Holders
are sometimes collectively referred to herein as the "STOCKHOLDERS."
WHEREAS, a certain Stockholders' Agreement dated October 7, 1993, was
entered into by the Company, the Continuing Holders, certain Management Holders
and other parties named therein (the "1993 STOCKHOLDERS' AGREEMENT");
WHEREAS, upon consummation of the transactions contemplated by the
Recapitalization Agreement and by those certain subscription and stock purchase
agreements of even date (the "STOCK SUBSCRIPTION AGREEMENTS"), the Stockholders
will own shares of Common Stock and Preferred Stock;
WHEREAS, the 1993 Stockholders' Agreement is terminated pursuant to its
terms upon the consummation of the transactions contemplated by the
Recapitalization Agreement as the Desai Holders will then hold less than fifteen
percent (15%) of the capital stock of the Company, on a fully-diluted basis;
WHEREAS, it is a condition precedent to the obligations of the
Stockholders to purchase shares of Common Stock and Preferred Stock under the
Stock Subscription Agreements that this Agreement be executed and delivered by
the Company and each of the other Stockholders; and
WHEREAS, all of the Stockholders desire to enter into this Agreement
for the purpose of regulating certain aspects of the relationships of the
Stockholders with regard to each other and to the Company.
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties to this
Agreement, intending to be legally bound, mutually agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms shall be
defined as follows:
The "1933 ACT" shall mean the Securities Act of 1933, as amended, or
any successor statute.
<PAGE> 5
The "1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor statute.
An "AFFILIATE" of a specified person, corporation or other entity shall
mean a person, corporation or other entity which, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the person, corporation or other entity specified and, when
used with respect to the Company or any Subsidiary of the Company, shall include
any holder of capital stock or any officer or director of the Company or any
Subsidiary of the Company.
"AGREEMENT" shall mean this Stockholders' Agreement, as amended or
supplemented from time to time.
An "ASSOCIATE" shall mean, when used to indicate a relationship with
any Person, (a) any corporation or organization of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar fiduciary capacity and (c) any
relative of such Person who has the same home as such Person, is a parent, aunt
or uncle, sibling, spouse, in-law, child, niece or nephew or grandchild of such
Person, or the spouse of any of them, or is a director or officer of the Company
or any Subsidiary of the Company. Neither the Company nor any of its
Subsidiaries shall be deemed an Associate of any Stockholder.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday or legal
holiday on which commercial banks are authorized to be closed in Boston,
Massachusetts.
"CALL EVENT" shall have the meaning given to such term in
Section 2.2(a).
"CALL GROUP" shall have the meaning given to such term in
Section 2.2(a).
"CALL NOTICE" shall have the meaning given to such term in
Section 2.2(a).
"CALL OPTION" shall have the meaning given to such term in
Section 2.2(a).
"CALL PRICE" shall have the meaning given to such term in
Section 2.2(b).
"CALL SECURITIES" shall have the meaning given to such term in
Section 2.2(a).
"CAUSE" shall have the meaning set forth below, except with respect to
any Management Holder who is employed by the Company or one of its Subsidiaries
pursuant to an effective written employment agreement between the Company and/or
one of its Subsidiaries and such Management Holder, in which event the
definition of "Cause" set forth in such employment
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agreement shall be deemed to be the definition of "Cause" herein solely for such
Management Holder and only for so long as such employment agreement remains
effective.
In all other events, the term "Cause" shall mean that the Board of
Directors of the Company has determined, in its reasonable judgment, that any
one or more of the following has occurred:
(i) The Management Holder shall have been convicted of, or shall
have pleaded guilty or NOLO CONTENDERE to, any felony or a crime
involving dishonesty or moral turpitude;
(ii) The Management Holder shall have committed any fraud,
embezzlement, misappropriation of funds, breach of fiduciary duty or
other act of dishonesty;
(iii) The Management Holder shall have failed to perform in any
material respect (other than by reason of disability) his duties and
responsibilities to the Company and its Affiliates;
(iv) The Management Holder shall have breached in any material
respect any of the provisions of this Agreement;
(v) The Management Holder shall have engaged in conduct
reasonably likely to make the Company or any of its Affiliates subject
to civil or criminal liabilities other than those arising from the
Company's normal business activities; or
(vi) A failure by the Management Holder to take or refrain from
taking any material action as specified in written directions of the
Board of Directors of the Company within a reasonable time following
receipt by the Management Holder of such written directions.
"CHANGE OF CONTROL" shall mean a transaction, or series of related
transactions, which results in holders of ten percent (10%) or less of the
Company's Common Stock (including shares of Common Stock issuable upon exercise
of Vested Stock Options and upon conversion of all securities then convertible
into shares of Common Stock) immediately prior to such transaction or series of
related transactions, holding in excess of fifty percent (50%) of the Company's
Common Stock (including shares of Common Stock issuable upon exercise of Vested
Stock Options and upon conversion of all securities then convertible into shares
of Common Stock) immediately following such transaction, or series of related
transactions.
"COMMON STOCK" shall mean the Company's Common Stock, par value $.01,
that the Company may be authorized to issue from time to time and any stock into
which such Common Stock may hereafter be changed or for which such Common Stock
may be exchanged after giving effect to the terms of such change or exchange (by
way of reorganization, recapitalization,
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merger, consolidation or otherwise) and shall also include any common stock of
the Company hereafter authorized and any capital stock of the Company of any
other class hereafter authorized which is not preferred as to dividends or
distribution of assets in liquidation over any other class of capital stock of
the Company or which has ordinary voting power for the election of directors of
the Company.
"COMPANY" shall mean Eye Care Centers of America, Inc., a Texas
corporation, and its successors and assigns.
"COMPETITOR OF THE COMPANY" shall mean any person that is engaged in,
or who controls any person that is engaged in, any business involving the
manufacture, provision or sale through any distribution channel of eye wear
and/or contact lenses.
"CONTINUING HOLDERS" shall have the meaning given to such term in the
introductory paragraph of this Agreement.
"DEEMED OFFER DATE" shall have the meaning given to such term in
Section 2.1(d)(iii).
"DESAI AFFILIATE" shall have the meaning given such term in
Section 2.6(f).
"DESAI HOLDERS" shall mean those Stockholders of the Company that are
Affiliates of Desai Capital Management Incorporated.
"DESIGNATED EMPLOYEE" shall have the meaning given to such term in
Section 2.2(d).
"DISABILITY" shall mean permanent disability within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, unless
otherwise defined in a separate written employment agreement between the Company
and/or one of its Subsidiaries and the person whose disability is in question.
"FAIR MARKET VALUE" shall mean the fair value of the applicable Shares
as of the applicable date on the basis of a sale of such Shares in an arms
length private sale between a willing buyer and a willing seller, neither acting
under compulsion (or, in the case of a Vested Stock Option, the fair value of
the Shares that may then be purchased by the holder of such Vested Stock Option
upon exercise thereof, determined as described below, minus the exercise price
applicable thereto). In determining such Fair Market Value, no discount shall be
taken for constituting a minority interest and no upward adjustment or discount
shall be taken relating to the fact that the Shares in question are subject to
the restrictions and entitled to the rights provided hereunder. Such Fair Market
Value shall be determined in good faith by the Board of Directors of the
Company. The parties hereto agree that the Fair Market Value per share of Common
Stock and Preferred Stock, respectively, as of the date of the consummation of
the Recapitalization and until the first anniversary of the closing date under
the Recapitalization Agreement, shall be deemed to equal the purchase price per
share of Common Stock and
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Preferred Stock, respectively, paid by the Lee Holders in connection with the
Recapitalization (subject to appropriate adjustments for stock splits,
recapitalizations and the like).
"HOLDER" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"INITIATING STOCKHOLDER" shall have the meaning given to such term in
Section 2.3(a).
"INVESTMENT PRICE" shall mean with respect to the purchase of Shares
held by a Management Holder under Section 2.2, an amount per Share equal to the
greater of (i) the per share price paid for such Shares by such Management
Holder at the time of the initial purchase thereof or (ii) the purchase price
per Share paid by the Lee Holders in connection with the Recapitalization
(subject to appropriate adjustments for stock splits, recapitalizations and the
like).
"INVOLUNTARY TRANSFER" shall mean any involuntary sale, transfer,
encumbrance or other disposition by or in which any Stockholder shall be
deprived or divested of any right, title or interest in or to any Shares,
including without limitation, any levy of execution, transfer in connection with
divorce or other marital dissolution proceedings, transfer in connection with
bankruptcy, reorganization, insolvency or similar proceedings, transfer in
connection with foreclosure upon a pledge, or any transfer to a public officer
or agency pursuant to any abandoned property or escheat law.
"LEE HOLDERS" shall have the meaning given to such term in the
introductory paragraph of this Agreement.
"LEE HOLDERS DESIGNEES" shall have the meaning given such term in
Section 2.6(a).
"LEE HOLDER REPRESENTATIVE" shall have the meaning given to such term
in Section 4.9(c).
"MANAGEMENT HOLDERS" shall have the meaning given to such term in the
introductory paragraph of this Agreement.
"NEW SECURITIES" shall mean any equity security of the Company, whether
now authorized or not, and any rights, options or warrants to purchase any
equity security of the Company, which the Company proposes to issue or sell to
any person; PROVIDED, HOWEVER, that the term "NEW SECURITIES" does not include
(i) securities issued as a stock dividend to all holders of a particular class
of equity securities of the Company PRO RATA or upon any subdivision or
combination thereof; (ii) shares of Common Stock purchased after the date hereof
by the Company from Management Holders and reissued to new or existing
Management Holders; (iii) options to purchase shares of Common Stock granted to
one or more Management Holders pursuant to a stock option plan approved by the
Company's directors and stockholders; (iv) shares of Common Stock issued upon
the exercise of Vested Stock Options pursuant to their
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<PAGE> 9
terms; (v) securities of the Company issued in connection with a Public Offering
or a merger; (vi) shares of Common Stock issued to employees of, or consultants
to, the Company or any of its Subsidiaries, or any of their respective designees
who would constitute Permitted Transferees hereunder; and (vii) debt securities
or preferred stock of the Company, including such securities which are
convertible into or exchangeable for shares of Common Stock.
"NON-LEE HOLDERS" shall have the meaning given to such term in
Section 2.1(c).
"OFFERED SHARES" shall have the meaning given to such term in
Section 2.1(c)(i).
"OFFER PRICE" shall have the meaning given to such term in
Section 2.1(c)(i).
"PARTICIPATING OFFEREE" shall have the meaning given to such term in
Section 2.3(a).
"PARTICIPATION NOTICE" shall have the meaning given to such term in
Section 2.3(a).
"PARTICIPATION SECURITIES" shall have the meaning given to such term in
Section 2.3(a).
A "PERMITTED TRANSFER" shall mean:
(a) a Transfer of Shares between any Stockholder who is a natural
person and such Stockholder's spouse, children, parents or siblings or a trust
for the benefit of any of them, provided that with respect to any such Transfer,
the Stockholder retains, as trustee or by some other means, the sole authority
to vote such Shares and to direct their disposition;
(b) a Transfer of Shares by a Lee Holder to the partners,
stockholders, officers, employees or consultants of such Lee Holder or to an
investment partnership affiliated with the Lee Holders;
(c) a Transfer of Shares between or among the Lee Holders;
(d) a Transfer of Shares by a Lee Holder following the Company's
initial Public Offering;
(e) a Transfer of Shares between any Stockholder who is a natural
person and such Stockholder's guardian or conservator; and
(f) a BONA FIDE pledge of Shares by a Stockholder to a bank or
financial institution.
A "PERMITTED TRANSFEREE" shall mean any person or entity who shall have
acquired and who shall hold Shares pursuant to a Permitted Transfer and who has
executed a counterpart of this Agreement.
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<PAGE> 10
"PERSON" or "PERSON" means an individual, corporation, partnership,
trust, unincorporated association, or government (or any agency or political
subdivision thereof).
"PREFERRED STOCK" means the Company's preferred stock, par value $0.01
per share which the Company may be authorized to issue from time to time.
"PUBLIC FLOAT DATE" shall mean the date on which shares of Common Stock
shall have been sold pursuant to one or more Public Offerings in which the
aggregate gross proceeds to the Company of such shares equal or exceed $50
million.
A "PUBLIC OFFERING" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the 1933
Act, excluding registration statements on Form S-4, S-8 or similar limited
purpose forms.
"RECAPITALIZATION" shall mean the transactions contemplated by the
Recapitalization Agreement.
"RECAPITALIZATION AGREEMENT" shall mean the Recapitalization Agreement
dated March 6, 1998, among ECCA Merger Corp., Eye Care Centers of America, Inc.
and the sellers named therein, as amended from time to time.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act and applicable state securities laws for the
purpose of effecting a public sale of securities.
"REGISTRATION EXPENSES" shall mean all expenses (other than Selling
Expenses) incurred by the Company in compliance with Sections 3.1 or 3.2 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration, the reasonable fees and disbursements of one counsel for all the
selling Holders and, if requested by the Lee Holders, the reasonable fees and
disbursements of one counsel for the Lee Holders as a group.
"REGISTRABLE SECURITIES" shall mean (i) all shares of Common Stock held
by any party hereto as of the date hereof, (ii) all shares of Common Stock
hereinafter acquired by any Stockholder, and (iii) any other common equity
securities of the Company issued in exchange for, upon a reclassification of, or
in a distribution with respect to, such Common Stock. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a registration statement (other than a registration statement on Form
S-8) with respect to the sale of such securities shall have become effective
under the 1933 Act and such securities shall have been disposed of in accordance
with such registration statement, (b) a registration statement on Form S-8 with
respect to such securities shall have become effective under the 1933 Act, (c)
such securities shall have been sold in a Rule 144 Transaction (or any successor
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provision) under the 1933 Act, (d) such securities shall have been otherwise
transferred and new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company or (e) such securities
shall have been issued and then ceased to be outstanding.
"RULE 144 TRANSACTION" means a Transfer of Shares (A) complying with
Rule 144 under the 1933 Act as such Rule 144 or a successor thereto is in effect
on the date of such Transfer, provided such Transfer is made pursuant to a
"broker's transaction" as defined in clauses (i) and (ii) of paragraph (g) of
Rule 144 as in effect on the date hereof, and (B) occurring at a time when
shares of any class of Common Stock are registered pursuant to Section 12 of the
1934 Act.
"SALE REQUEST" shall have the meaning given such term in
Section 2.4(a).
"SEC" means the Securities and Exchange Commission.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities.
"SHARES" shall mean all (i) shares of Common Stock held by the
Stockholders from time to time, (ii) shares of Preferred Stock held by the
Stockholders from time to time, (iii) shares of Common Stock or Preferred Stock
subsequently held by Permitted Transferees who acquire them in one or more
Permitted Transfers, and (iv) securities of the Company or any of its
Subsidiaries issued in exchange for, upon reclassification of, or as a
distribution in respect of, any of the foregoing.
"STOCKHOLDER" shall mean any party hereto other than the Company,
including, without limitation, Permitted Transferees.
"STOCK SUBSCRIPTION AGREEMENT" shall have the meaning given such term
in the recitals to this Agreement.
"SUBSIDIARY" with respect to any entity (the "PARENT") shall mean any
corporation, firm, association or trust of which such parent, at the time in
respect of which such term is used, (i) owns directly or indirectly more than
fifty percent (50%) of the equity or beneficial interest, on a consolidated
basis, and (ii) owns directly or indirectly through one or more Subsidiaries, or
controls with power to vote, shares of capital stock or beneficial interest
having the power to cast at least a majority of the votes entitled to be cast
for the election of directors, trustees, managers or other officials having
powers analogous to those of directors of a corporation. Unless otherwise
specifically indicated, when used herein the term Subsidiary shall refer to a
direct or indirect Subsidiary of the Company.
"TAKE ALONG GROUP" shall have the meaning given such term in
Section 2.4(a).
"THIRD PARTY" means any Person other than the Company or any of the
Stockholders.
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"THL FUND IV" shall have the meaning given such term in Section 2.6(a).
"TRANSFER" shall mean to transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting or
otherwise), assign or in any other way encumber or dispose of, directly or
indirectly and whether or not by operation of law or for value, any Shares.
"TRANSFER NOTICE" shall have the meaning given such term in
Section 2.1(c)(i).
"VESTED STOCK OPTIONS" shall mean fully vested stock options which have
been granted to Management Holders pursuant to a stock option plan approved by
the Company's directors and stockholders.
"VOLUNTARY TERMINATION" shall include any voluntary termination of
employment with the Company by a Management Holder.
ARTICLE II
COVENANTS AND CONDITIONS
2.1 RESTRICTIONS ON TRANSFERS; RIGHTS OF FIRST REFUSAL.
Except as provided in Section 2.1(d) and 2.1(e), no Stockholder shall
Transfer all or any part of the Shares owned by him or it to any Person unless
such Stockholder first complies with the applicable terms and conditions set
forth below:
(a) TRANSFERS BY MANAGEMENT HOLDERS. Until the fifth
anniversary of the closing date under the Recapitalization Agreement, none of
the Management Holders shall Transfer any Shares except for Permitted Transfers
to Permitted Transferees. On and after the fifth anniversary of the closing date
under the Recapitalization Agreement, none of the Management Holders shall
Transfer any Shares except for (1) Transfers pursuant to Section 2.1(c) or (2)
Permitted Transfers to a Permitted Transferee. Any such Permitted Transferee
shall be required to execute and deliver to the Company a counterpart of this
Agreement, which shall evidence such Permitted Transferee's agreement that the
Shares being transferred shall continue to be subject to this Agreement and that
as to such Shares the Transferee shall be bound by the restrictions of this
Agreement (i) in the case of any Transferee other than a Stockholder, as a
Management Holder, and (ii) in the case of a Stockholder, as such Stockholder is
bound hereunder.
(b) TRANSFERS BY CONTINUING HOLDERS.
(i) Until the fifth anniversary of the closing date under
the Recapitalization Agreement, none of the Continuing Holders shall Transfer
any shares except for Permitted Transfers to Permitted Transferees. On and after
the fifth anniversary of the closing
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date under the Recapitalization Agreement, none of the Continuing Holders shall
Transfer any Shares except for (1) Transfers pursuant to Section 2.1(c), or (2)
Permitted Transfers to a Permitted Transferee, who shall be required to execute
and deliver to the Company a counterpart of this Agreement, which shall evidence
such Permitted Transferee's agreement that the Shares being transferred shall
continue to be subject to this Agreement and that as to such Shares the
Permitted Transferee shall be bound by the restrictions of this Agreement (A) in
the case of any Permitted Transferee other than a Stockholder, as a Continuing
Holder, and (B) in the case of a Stockholder, as such Stockholder is bound
hereunder. Notwithstanding clause (A) of the immediately preceding sentence, in
no event shall a Transferee of Shares (other than a Permitted Transferee and as
provided in Section 2.1(b)(ii)) from a Continuing Holder, or Permitted
Transferee thereof, be entitled to the benefit of any rights or privileges set
forth in Section 2.3, Section 2.5 or Section 2.6, including without limitation
Section 2.6(f), of this Agreement; PROVIDED, HOWEVER, that any such Transferee
shall be required to vote his or its Shares in accordance with, and take all
actions required to be taken pursuant to, the provisions of Section 2.6 of this
Agreement other than the provisions of Section 2.6(f).
(ii) In the event of a Transfer of Shares by a Desai
Holder pursuant to Section 2.1(e)(iv), the Transferee shall be entitled to the
benefit of the rights and privileges set forth in Section 2.3, Section 2.5 and
Section 2.6(f) as a Desai Holder, and shall be bound by all the restrictions of
this Agreement as a Desai Holder. In the event of a Transfer of Shares by a
Desai Holder pursuant to Section 2.1(e)(viii), the Transferee (1) shall be
entitled to the benefits of the rights and privileges set forth in Section 2.3
as a Continuing Holder, and shall be bound by all the restrictions of this
Agreement as a Continuing Holder, (2) shall not be entitled to the benefit of
any of the rights or privileges set forth in Section 2.5 or Section 2.6,
including without limitation Section 2.6(f), and (3) shall be required to vote
its Shares in accordance with, and take all actions required to be taken
pursuant to, the provisions of Section 2.6 other than the provisions of Section
2.6(f). No Transferee of Shares from a Desai Holder pursuant to Section
2.1(e)(viii) shall be entitled to Transfer (other than pursuant to a Permitted
Transfer) any of the benefits of any of the rights or privileges set forth in
Section 2.3.
(c) RIGHTS OF FIRST REFUSAL.
(i) None of the Management Holders or Continuing Holders
(collectively, the "NON-LEE HOLDERS"), shall Transfer any Shares except for
Permitted Transfers to a Permitted Transferee, or pursuant to the provisions of
this Section 2.1(c). If a Non-Lee Holder proposes to Transfer Shares to anyone
other than a Permitted Transferee, such Non-Lee Holder shall give notice of such
proposed Transfer to the Company and the Lee Holders. Such notice (the "TRANSFER
NOTICE") shall state that it is being delivered under this Section 2.1(c) and
that such offer is a BONA FIDE offer to purchase such Shares. The Transfer
Notice also shall set forth the terms and conditions of such offer, including
the name of the prospective purchaser, the proposed purchase price per share of
such Shares (the "OFFER PRICE"), the payment terms (including a description of
any proposed non-cash consideration), the type of disposition and the number of
such Shares to be Transferred (the "OFFERED SHARES"). The Transfer Notice shall
state
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further (A) that the Company and the Lee Holders (collectively the "OFFEREES")
may acquire, in accordance with the provisions of this Agreement, any of the
Offered Shares for the price and upon the other terms and conditions, including
deferred payment and non-cash consideration (in each case if applicable), set
forth therein, (B) that, if all or part of the consideration to be paid by the
prospective purchaser consists of securities of another entity, the Offerees may
elect to acquire the portion of the Offered Shares to be sold for such
securities of another entity by the payment of cash with a comparable value, (C)
that the Offerees may not purchase any of such Offered Shares unless
collectively the Offerees purchase all of such Offered Shares, and (iv) that if
all such Offered Shares are not purchased by the Offerees, the Offerees may
exercise their rights provided pursuant to Section 2.4 hereof.
(ii) For a period of 30 days following the last date on
which an Offeree receives the Transfer Notice (the "OPTION PERIOD"), the Company
may, by notice in writing to the Non-Lee Holder delivering such Transfer Notice,
elect in writing to purchase all or any portion of the Offered Shares. To the
extent that the Company elects to purchase less than all the Offered Shares,
each of the Lee Holders may by notice in writing to the Non-Lee Holder
delivering such Transfer Notice elect in writing to purchase at the Offer Price
their respective pro rata portions of any Offered Shares which the Company has
not elected to purchase. Such PRO RATA allocation shall be based on the number
of shares of Common Stock each of the Lee Holders owns in relation to the total
number of shares of Common Stock owned by all of the Lee Holders; PROVIDED that
if any Lee Holder does not elect to purchase the Offered Shares which such Lee
Holder may purchase pursuant to this Section 2.1(c), then the other Lee Holders
may make an overallotment election to purchase the remaining Offered Shares. The
right to purchase any such remaining Offered Shares shall be allocated PRO RATA
to the Lee Holders making such overallotment election based on the number of
shares of Common Stock owned by each of them compared to the total number of
shares of Common Stock owned by all Lee Holders making such overallotment
election.
(iii) The closing of the purchase of any Offered Shares
pursuant to Section 2.1(c)(ii) hereof shall take place at the principal office
of the Company on the 60th day following the last day on which an Offeree
receives the Transfer Notice. At such closing, each purchaser of Offered Shares
shall deliver the Offer Price, on the same terms as set forth in the Transfer
Notice (including any non-cash consideration described therein), payable in
respect of the Offered Shares being purchased by such purchaser to the Non-Lee
Holder thereof who delivered the Transfer Notice, against delivery of original
stock certificates, and stock powers duly endorsed in favor of each such
purchaser, representing the Offered Shares being acquired by such purchaser. All
of the foregoing deliveries will be deemed to be made simultaneously and none
shall be deemed completed until all have been completed.
(iv) If the Offerees do not collectively purchase all of
the Offered Shares, or if the Offerees fail to purchase all of the Offered
Shares in accordance with Section 2.1(c)(ii), then all, but not less than all of
the Offered Shares may be Transferred, but only in accordance with
Section 2.1(c)(v) and the terms of the Transfer Notice, within 240 days after
the
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last date on which an Offeree receives the Transfer Notice, after which, if the
Offered Shares have not been Transferred, all restrictions contained herein
shall again be in full force and effect.
(v) Any Shares Transferred pursuant to this
Section 2.1(c) shall remain subject to the Transfer restrictions of this
Agreement and if a Transferee is not a Stockholder prior to such Transfer then
such Transferee shall execute and deliver to the Company a counterpart of this
Agreement, which shall evidence such Transferee's agreement that the Shares
being Transferred shall continue to be subject to this Agreement and that as to
such Shares the Transferee shall be bound by the restrictions of this Agreement
as a Management Holder, if the Transferee was a Management Holder, or as a
Continuing Holder, if the Transferee was a Continuing Holder.
(d) INVOLUNTARY TRANSFERS.
(i) Any Involuntary Transfer of Shares owned by a
Stockholder shall be subject to the prior rights of the Company and Stockholders
hereunder and any such Involuntary Transfer shall be deemed to be an offer made
by the Stockholder who is the subject of such Involuntary Transfer to sell said
Shares at the Fair Market Value to the Company.
(ii) Any Stockholder whose Shares are the subject of an
Involuntary Transfer shall notify the Company in writing within ten (10) days of
such Involuntary Transfer, but the failure to give such notice shall not affect
the rights of the parties hereunder. Upon the Company's receipt of such notice
(or if no notice is received, upon the senior management of the Company becoming
aware that such Involuntary Transfer has occurred or is about to occur), the
Company forthwith will notify the Lee Holders of such receipt. The Company shall
act upon the deemed offer under this Section within the time periods and
following the applicable procedures set forth in this Section 2.1(d).
(iii) The Company may elect to purchase any or all of the
Shares subject to an Involuntary Transfer by delivering a written notice to the
Stockholder who is the subject of such Involuntary Transfer of the Company's
intent to purchase such Shares on or before the 90th day following the later to
occur of the date of the Company's receipt of written notice setting forth the
existence of such an Involuntary Transfer and the date of such Involuntary
Transfer (the later of such dates is referred to herein as the "DEEMED OFFER
DATE"). The closing of the purchase by the Company of any Shares pursuant to
this Section 2.1(d) shall take place at the principal office of the Company on
the 180th day following the Deemed Offer Date. At such closing, the Company
shall deliver to the Stockholder who is the subject of such Involuntary Transfer
the Fair Market Value of the Shares being acquired, against delivery of original
stock certificates and stock powers duly endorsed in favor of the Company
representing the Shares being acquired by the Company. The Company, at is
option, may pay the Fair Market Value of such Shares in the form of company
check, wire transfer, or delivery of a promissory note bearing interest at the
applicable federal rate and having a maturity date not later than five years
from the date of issuance thereof. All of the foregoing deliveries will be
deemed to have been made simultaneously and none shall be deemed completed until
all have been completed. All Shares which the Company does not elect to purchase
pursuant to this Section 2.1(d) may be Transferred pursuant to an Involuntary
Transfer.
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(e) EXCLUSIONS. The restrictions on Transfer and rights of
first refusal set forth in this Section 2.1 shall not apply to any of the
following:
(i) a Permitted Transfer of Shares (provided that the
Permitted Transferee executes and delivers a counterpart of this Agreement
agreeing to be bound hereby as set forth in this Section 2.1);
(ii) a Transfer of Shares pursuant to Sections 2.2, or
2.4;
(iii) a Transfer of Shares by Participating Offerees
pursuant to Section 2.3, and a Transfer of Shares by an Initiating Stockholder
pursuant to Section 2.3 who has complied with the applicable provisions of
Section 2.1; provided that the five year prohibitions on Transfers by Management
Holders and Continuing Holders set forth in Sections 2.1(a) and 2.1(b),
respectively, shall not impair their ability to sell Participation Securities
pursuant to and in accordance with Section 2.3 as a Participating Offeree (but
not as an Initiating Stockholder);
(iv) a Transfer of Shares by a Desai Holder to one or
more investment partnerships that are Affiliates of such Desai Holder;
(v) a PRO RATA distribution, without consideration, by a
Desai Holder to its limited partners after the expiration of six months
following the closing date under the Recapitalization Agreement;
(vi) a Transfer of Shares pursuant to a Public Offering;
(vii) a Transfer of shares of Common Stock by any
Stockholder other than a Management Holder after the expiration of 180 days
following a Public Offering pursuant to a Rule 144 Transaction;
(viii) a Transfer of Shares by a Desai Holder on one
occasion, after the expiration of six months following the closing under the
Recapitalization Agreement, to no more than one financial institution which is
not a Competitor of the Company; or
(ix) a Transfer of shares of Common Stock by a Management
Holder after the expiration of 180 days following a Public Offering pursuant to
a Rule 144 Transaction, subject to the following volume limitations:
The number of shares of Common Stock and Preferred Stock
which each Management Holder is permitted, at any time, to Transfer pursuant to
clause (ix) of this Section 2.1(e) shall not exceed the difference between
(A) the product of (x) the number of shares of
Common Stock or Preferred Stock, as the case may be, then owned by such
Management Holder multiplied by (y) a fraction, the numerator of which is the
aggregate number of shares of Common Stock or Preferred Stock, as the case may
be, which have been Transferred (other than pursuant to
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Permitted Transfers) by all the Lee Holders at any time following consummation
of the Company's initial Public Offering, and the denominator of which is the
aggregate number of shares of Common Stock or Preferred Stock, as the case may
be, which are owned by all the Lee Holders immediately following consummation of
the Company's initial Public Offering, less
(B) the aggregate number of shares of Common Stock
or Preferred Stock, as the case may be, which such Management Holder has
Transferred (other than Permitted Transfers) at any time following consummation
of the Company's initial Public Offering.
(f) ASSIGNMENT OF PURCHASE RIGHTS. The Company, by action of
its Board of Directors, may assign its rights to purchase Shares pursuant to
Section 2.1(c) and/or Section 2.1(d) to one or more Stockholders or members of
management of the Company or any of its Subsidiaries.
2.2 CALL BY THE COMPANY.
(a) If the employment of a Management Holder by the Company
or any of its Subsidiaries shall terminate (a "CALL EVENT") for any reason prior
to the earlier to occur of (i) the initial Public Offering or (ii) a Change of
Control, then the Company shall have the right to purchase (the "CALL OPTION"),
by delivery of a written notice (the "CALL NOTICE") to such terminated
Management Holder no later than ninety (90) days after the date of such Call
Event, and such Management Holder and such Management Holder's Permitted
Transferees (the "CALL GROUP") shall be required to sell all (but not less than
all) of the Shares and Vested Stock Options which are owned by the members of
the Call Group on the date of such Call Event (collectively, the "CALL
SECURITIES") at a price per share equal to the Call Price (as defined in
Section 2.2(b) below) of such Shares as of the date the Call Notice is
delivered.
(b) For purposes of this Section 2.2, the term "CALL PRICE"
shall mean,
(i) with respect to Shares of Common Stock,
(A) in the event of a termination of a Management
Holder without Cause or by reason of death or Disability, the Fair Market Value
of such shares of Common Stock; and
(B) in the event of a termination of a Management
Holder for Cause, in the event of the Voluntary Termination by a Management
Holder, or in the event of a termination for any reason other than those
expressly provided in subparagraph (A) above, the lower of (x) the Investment
Price of such shares of Common Stock or (y) the Fair Market Value of such shares
of Common Stock; and
(ii) with respect to any Vested Stock Option, the
difference between (x) the Call Price, as determined above, payable in respect
of shares of Common Stock minus (y) the exercise price of such Vested Stock
Option.
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(c) The closing of any purchase of Call Securities by the
Company pursuant to paragraph 2.2(a) shall take place at the principal office of
the Company no later than the 180th day after the Call Event. At such closing,
the Company shall deliver to the Call Group consideration in an amount equal to
the aggregate Call Price payable in respect of such Call Securities, against
delivery of (i) original stock certificates and stock powers duly endorsed in
favor of the Company representing the Call Securities and (ii) the delivery of
an executed agreement, in form reasonably satisfactory to the Company,
evidencing the cancellation of any Vested Stock Options. The Company, at its
option, may pay the consideration for such Call Securities in the form of
company check or wire transfer, PROVIDED, HOWEVER, that if at the time of such
closing, the Company is then prohibited from redeeming with immediately
available funds all or a portion of the Call Securities pursuant to the terms of
any credit facility, indenture or similar agreement or instrument then binding
on the Company, then the Company may deliver a promissory note bearing interest
at the applicable federal rate and with a maturity date not later than five
years from the date of issuance thereof with respect to the Call Price or the
portion thereof not able to be paid in immediately available funds, and such
promissory note shall require the Company to make prepayments on the principal
amount thereof when and if permitted by the Company's credit facilities from
time to time. All of the foregoing deliveries will be deemed to be made
simultaneously and none shall be deemed completed until all have been completed.
(d) Notwithstanding anything set forth in this Section 2.2 to
the contrary, prior to the exercise by the Company of its Call Option to
purchase Call Securities pursuant to this Section 2.2, one or more new or
existing employees of the Company or any Subsidiary may be designated by the
Board of Directors of the Company (individually a "DESIGNATED EMPLOYEE" and
collectively, "DESIGNATED EMPLOYEES") who shall have the right, but not the
obligation, to exercise the Call Option and to acquire, in lieu of the Company,
some or all (as determined by the Company) of the Call Securities that the
Company is entitled to purchase from the Call Group hereunder, on the same terms
and conditions as set forth in Section 2.2(c) which apply to the repurchase of
Call Securities by the Company, except that the Designated Employees shall not
be entitled to deliver a promissory note for all or any portion of the Call
Price. Concurrently with any such purchase of Call Securities by any such
Designated Employee, such Designated Employee shall execute a counterpart of
this Agreement, whereupon such Designated Employee shall be deemed a "Management
Holder" and shall have the same rights and be bound by the same obligations as
the other Management Holders hereunder.
(e) If neither the Company nor any Designated Employee elects
to exercise the Call Option and deliver a Call Notice within 90 days of a Call
Event, then the Call Option provided in this Section 2.2 shall terminate with
respect to the Shares then owned by the Call Group, but the members of the Call
Group shall continue to hold such Call Securities pursuant to all of the other
provisions of this Agreement and other applicable agreements (including without
limitation, any restrictions on the vesting of stock options).
2.3 TAG ALONG. Except as provided in Section 2.3(d), no Stockholder
shall Transfer any Shares to a Third Party without complying with the following
terms and conditions set forth in Sections 2.3(a) and 2.3(b); PROVIDED, that
this Section 2.3 shall not in any way limit or affect the restrictions of
Section 2.1 and any Stockholder may be an Initiating Stockholder (as defined
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below) under this Section 2.3 only if such Transfer is made in accordance with
the applicable provisions of Section 2.1:
(a) After complying with the applicable provisions of
Section 2.1, the Stockholder (the "INITIATING STOCKHOLDER") desiring to Transfer
any Shares shall give not less than thirty (30) days' prior written notice of
such intended Transfer to each other Stockholder ("PARTICIPATING OFFEREE") and
to the Company. Such notice (the "PARTICIPATION NOTICE") shall set forth the
terms and conditions of such proposed Transfer, including the name of the
prospective Transferee, the number and class of Shares proposed to be
Transferred (the "PARTICIPATION SECURITIES") by the Initiating Stockholder, the
purchase price per Share proposed to be paid therefor and the payment terms and
type of Transfer to be effectuated. The Participation Notice shall state further
that the Initiating Stockholder complied with, or obtained waivers with respect
to compliance with, the applicable provisions of Section 2.1 hereof with respect
to such proposed Transfer and, if applicable, that the Offered Shares were
offered and not purchased pursuant to the right of first refusal provisions of
Sections 2.1(c). Within 20 days following the delivery of the Participation
Notice by the Initiating Stockholder to each Participating Offeree and to the
Company, each Participating Offeree shall, by notice in writing to the
Initiating Stockholder and to the Company, have the opportunity and right to
sell to the purchasers in such proposed Transfer (upon the same terms and
conditions as the Initiating Stockholder) up to that number of shares of the
same class of stock as the Participation Securities as shall equal the PRODUCT
OF (x) a fraction, the numerator of which is the number of shares of the same
class of stock as the Participation Securities which are owned by such
Participating Offeree as of the date of such Participation Notice and the
denominator of which is the sum of (A) the aggregate number of shares of the
same class of stock as the Participation Securities which are owned as of the
date of such Participation Notice by each Initiating Stockholder and by all
Participating Offerees plus (B) to the extent the Participation Securities are
comprised of shares of Common Stock, the aggregate number of shares of Common
Stock issuable pursuant to Vested Stock Options as of the date of such
Participation Notice by each Initiating Stockholder and by all Participating
Offerees, MULTIPLIED BY (y) the number of Participation Securities. The amount
of Participation Securities to be sold by any Initiating Stockholder shall be
reduced to the extent necessary to provide for such sales of Shares by
Participating Offerees. All allocations of Shares pursuant to this Section 2.3
shall be made on a class by class basis.
(b) At the closing of any proposed Transfer in respect of which
a Participation Notice has been delivered, the Initiating Stockholder, together
with all Participating Offerees electing to sell Shares, shall deliver to the
proposed Transferee certificates evidencing the Shares to be sold with stock
powers duly endorsed in favor of the proposed Transferee and shall receive in
exchange therefor the consideration to be paid or delivered by the proposed
Transferee in respect of such Shares as described in the Participation Notice.
(c) The Company agrees not to consummate any repurchase of
Shares from any Lee Holder or Permitted Transferee thereof unless the Company
makes a concurrent pro rata repurchase of Shares from all Stockholders.
(d) The provisions of this Section 2.3 shall not apply to (i) a
Permitted Transfer of Shares, (ii) a Transfer of Shares pursuant to a Public
Offering, (iii) a Transfer of
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Shares pursuant to a Rule 144 Transaction, (iv) a Transfer of Shares pursuant to
or permitted by Sections 2.1, 2.2 or 2.4 hereof or (v) a Transfer of Shares
completed after the Public Float Date.
2.4 DRAG ALONG.
(a) Except as provided in Section 2.4(b), if fifteen (15%)
percent in interest of the Lee Holders (referred to in this Section 2.4
collectively as the "TAKE ALONG GROUP") shall determine jointly to sell or
exchange (pursuant to a sale or transfer of Shares, merger, consolidation,
recapitalization or any similar transaction) any of their Shares in one or a
series of BONA FIDE arms-length transactions to a Third Party who is not an
Affiliate or an Associate of the Take Along Group, then, upon ten (10) days
written notice from the Take Along Group, which notice shall include reasonable
details of the proposed sale or exchange including the proposed time and place
of closing and the consideration to be received by the Stockholders (such notice
being referred to as the "SALE REQUEST"), each other Stockholder shall be
obligated to, and shall (i) sell, transfer and deliver, or cause to be sold,
transferred and delivered, to such Third Party, in the same transaction at the
closing thereof the same percentage of such Stockholder's shares of Common Stock
as is equal to the percentage of the shares of Common Stock owned by the Take
Along Group as of the date of the Sale Request that are being sold by the Take
Along Group in such transaction or transactions, (ii) deliver certificates for
all of his or its shares of Common Stock at the closing, free and clear of all
claims, liens and encumbrances, (iii) upon request, consent to the cancellation
of all Vested Stock Options for an amount per underlying share of Common Stock
equal to the difference between the consideration per share of Common Stock
referenced in the preceding clause (i) and the exercise price of such Vested
Stock Options, (iv) if stockholder approval of the transaction is required, vote
his or its Shares in favor thereof, and (v) approve, execute and deliver any and
all documents, certificates and instruments, related to the consummation of the
contemplated transaction, which documents, certificates and instruments are on
terms and conditions substantially the same as those being executed and
delivered by the Take Along Group. Each Stockholder (including the members of
the Take Along Group) shall receive the same consideration per share of Common
Stock upon any sale pursuant to this Section 2.4.
(b) In the event that any of the Stockholders fail to comply
with the provisions of Section 2.4(a), each of the other Stockholders hereby (i)
irrevocably appoints the Lee Holder Representative as his, her or its
attorney-in-fact (with full power of substitution) to execute all agreements,
instruments and certificates and take all actions necessary or desirable to
effectuate any transaction hereunder; and (ii) grants to the Lee Holder
Representative a proxy (which shall be deemed to be coupled with an interest and
irrevocable) to vote the Shares held by such Stockholder and exercise any
consent rights applicable thereto in favor of any transaction hereunder.
(c) The provisions of this Section 2.4 shall not apply to (i)
any Transfer pursuant to a Public Offering or pursuant to a Rule 144
Transaction, or (ii) any Transfer completed after the Public Float Date.
2.5 PREEMPTIVE RIGHTS
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(a) PREEMPTIVE RIGHTS ON ISSUANCES TO THIRD PARTIES.
(i) NOTICE FROM THE COMPANY. If the Company proposes to
issue or sell New Securities at any time prior to consummation of its initial
Public Offering, the Company shall give each Lee Holder written notice of such
proposal, describing the type of New Securities and the price and the terms upon
which the Company proposes to issue the same. For a period of twenty (20) days
following the delivery of such notice by the Company, the Company shall be
deemed to have irrevocably offered to sell all of such New Securities to the Lee
Holders, as a group, for the price and upon the terms specified in the notice.
Each Lee Holder may exercise his or its right to purchase his or its PRO RATA
portion of such New Securities by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased by such Lee
Holder. A Lee Holder's PRO RATA portion, for purposes of this Section 2.5(a)(i),
is the ratio of the number of outstanding shares of Common Stock which such Lee
Holder then owns to the total number of shares of Common Stock then owned by all
Lee Holders. As used herein, "issue" (and variations thereof) includes sales or
transfers by the Company of treasury shares.
(ii) RIGHT OF OVER-ALLOTMENT. Each Lee Holder shall have
a right of over-allotment such that if any Lee Holder fails to exercise his or
its right hereunder to purchase his or its PRO RATA portion of New Securities,
the other Lee Holders may purchase the non-purchasing Lee Holder's portion on a
PRO RATA basis (determined on the basis of the total number of shares which such
Lee Holder then owns as compared to all shares of Common Stock owned by all Lee
Holders who elect to purchase an over-allotment share pursuant to this Section
2.5(a)(ii)); such right of overallotment shall expire if not exercised within
five (5) days from the date such non-purchasing Lee Holder fails to exercise his
or its right hereunder to purchase his or its PRO RATA share of New Securities.
(b) RIGHT TO PARTICIPATE IN ISSUANCES TO LEE HOLDERS.
(i) NOTICE. If any Lee Holder elects to purchase any New
Securities pursuant to Section 2.5(a), then the Company shall give each Non-Lee
Holder who then owns any shares of Common Stock written notice of such proposed
sale or issuance to the Lee Holders, describing the type of New Securities, the
number of New Securities proposed to be issued to the Lee Holders (the
"ALLOCATED NEW SECURITIES") and the price and terms upon which the Company
proposes to issue the Allocated New Securities to the Lee Holders. For a period
of twenty (20) days following the delivery of such notice by the Company, the
Company shall be deemed irrevocably to have offered to sell to each Non-Lee
Holder his or its PRO RATA share of the Allocated New Securities for the price
and upon the terms specified in the notice. A Non-Lee Holder's PRO RATA portion,
for purposes of the immediately preceding sentence shall be the ratio of the
number of outstanding shares of Common Stock which such Non-Lee Holder then owns
of record to the total number of shares of Common Stock then outstanding. Each
Non-Lee Holder may exercise his or its preemptive rights hereunder by giving
written notice to the Company and stating therein the quantity of Allocated New
Securities to be purchased. Each Non-Lee Holder who has a preemptive right under
this Section 2.5(b) shall have a right of over-allotment such that if any
Non-Lee Holder fails to exercise his or its right hereunder to purchase his or
its PRO RATA portion of Allocated New Securities, the other Non-Lee Holders may
purchase the non- purchasing Non-Lee Holder's portion on a PRO RATA basis
determined on the basis of the total
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number of shares of Common Stock owned by such Non-Lee Holder as compared to all
shares of Common Stock owned by all Non-Lee Holders who elect to purchase an
over-allotment share pursuant to this sentence; such right of over-allotment
shall expire if not exercised within five (5) business days from the date such
non-purchasing Non-Lee Holder fails to exercise his or its right hereunder to
purchase his or its PRO RATA share of Allocated New Securities.
(c) SALE BY THE COMPANY. If any Stockholder who has a
preemptive right under this Section 2.5 fails to exercise in full his or its
preemptive right within the allotted time day periods, the Company shall have
six (6) months thereafter to sell the New Securities with respect to which the
preemptive right was not exercised, at a price and upon terms no more favorable
to the purchasers thereof than specified in the Company's notices given pursuant
to Section 2.5(a) and (b).
(d) CLOSING. The closing of any issuance or sale pursuant to
this Section 2.5 shall take place as proposed by the Company with respect to the
New Securities to be issued, at which closing the Company shall deliver
certificates for the New Securities in the respective names of the purchasing
Stockholders against receipt of the consideration therefor.
2.6 CORPORATE GOVERNANCE. Until the tenth anniversary of the date
hereof:
(a) ELECTION OF DIRECTORS. The Company and the Stockholders
shall take all actions, including but not limited to (i) instructing their
director designees provided herein to take such actions and (ii) voting their
Shares, so that the Company's Board of Directors shall be solely comprised of
members designated as follows: (x) while any Shares are owned by Thomas H. Lee
Equity Fund IV, L. P. ("THL Fund IV"), then one (1) member shall be designated
by THL Fund IV; and (y) all other members shall be designated by the Lee Holders
(the "Lee Holders Designees").
(b) DESIGNATION OF LEE HOLDERS DESIGNEES. The Lee Holders
Designees shall be designated by the vote or consent of a majority in interest
of the shares of Common Stock held by the Lee Holders. THL Fund IV and the Lee
Holders also shall be entitled to request that the director or directors
designated by THL Fund IV and the Lee Holders pursuant to this Section 2.6 be
removed or replaced and the other Stockholders hereby agree to take any action,
including the voting of their Shares, to effectuate such request.
(c) RESTRICTIONS ON OTHER AGREEMENTS. No Stockholder shall
grant any proxy or enter into or agree to be bound by any voting trust with
respect to the Shares nor shall any Stockholder enter into any stockholders'
agreement or arrangement of any kind with any Person with respect to the Shares
on terms that are inconsistent with or which violate or conflict with the
provisions of this Agreement including, but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of Shares;
PROVIDED, HOWEVER, that the provisions of Section 4.9 with respect to action by
stockholder representatives shall not be deemed inconsistent with this Section
2.6(c).
(d) STOCKHOLDER ACTION. Each Stockholder agrees that, in his or
its capacity as a stockholder of the Company, such Stockholder will vote, or
grant proxies relating to such
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Shares to vote, all of his or its Shares in favor of any merger, consolidation,
sale or transfer of Shares or any similar transaction pursuant to Section 2.4
hereof to the extent that approval of the Company's stockholders is required in
order to effect such transaction and such transaction complies with Section 2.4.
(e) CORPORATE OPERATIONS. Each of the Stockholders will, upon
request of the Lee Holders, vote all shares of Common Stock owned by them in
favor of any one or more of the following matters approved by the Company's
board of directors:
(i) any merger, consolidation, recapitalization,
liquidation or sale of all (or substantially all) of the assets of the Company
or any Subsidiary; provided that this clause (i) shall not limit the provisions
of Section 2.4 and such transaction shall comply with Section 2.4;
(ii) any payment by the Company or any Subsidiary of
dividends or redemption of capital stock (other than as required or permitted
pursuant to this Agreement or the Company's articles of incorporation), provided
that if the Company proposes to pay dividends on or repurchase any shares of
Common Stock held by any Lee Holder or any Permitted Transferee thereof, then
the Company shall, as the case may be, pay concurrent pro rata dividends on all
shares of Common Stock held by the Stockholders or make concurrent pro rata
repurchases of shares of Common Stock from all Stockholders that own Common
Stock;
(iii) the issuance by the Company or any Subsidiary of any
debt or equity security through public or private financing; and
(iv) any acquisition by the Company or any Subsidiary.
(f) BOARD OBSERVATION RIGHTS. The Desai Holders shall be
entitled to designate one representative (the "BOARD OBSERVER") to observe the
meetings of the Company's Board of Directors. The Board Observer at any meeting
may be one of the following: (i) Rohit M. Desai; (ii) Timothy R. Kelleher; or
(iii) Frank J. Pados, Jr. The Company shall provide the Board Observer with
copies of the monthly financial statements of the Company. The Desai Holders are
prohibited from assigning their right to designate the Board Observer to any
Person (including without limitation any Permitted Transferee) except in
connection with a Transfer of all Shares held by the Desai Holders to one or
more investment partnerships that are Affiliates of such Desai Holder (a "DESAI
AFFILIATE") Transferring Shares pursuant to such Transfer. The rights of the
Desai Holders pursuant to this Section 2.6(f) shall terminate automatically when
neither the Desai Holders nor any Desai Affiliate owns at least ten percent
(10%) of the shares of Common Stock held by the Desai Holders immediately
following the closing of the Recapitalization (after giving effect to any stock
splits, stock dividends, reverse stock splits, reclassifications or the like
with respect to the Common Stock).
(g) In the event that any of the Stockholders fail to comply
with the provisions of Section 2.6(a), (b), (d) or (e), each of the Stockholders
hereby (i) irrevocably appoints the Lee Holder Representative as his, her or its
attorney-in-fact (with full power of substitution) to execute all agreements,
instruments and certificates and take all actions necessary or desirable to
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effectuate any action hereunder; and (ii) grant to the Lee Holder Representative
a proxy (which shall be deemed to be coupled with an interest and irrevocable)
to vote the Shares held by such Stockholder and exercise any consent rights
applicable thereto in favor of any action hereunder.
2.7 WITHHOLDING OF TAXES. The Company shall have the right to withhold
(or cause one of the Company's subsidiaries to withhold) from any amounts
payable under this Agreement to any Management Holder or any amounts otherwise
payable by the Company to such Management Holder, or require such Management
Holder to remit to the Company, an amount sufficient to satisfy all federal,
state and local withholding tax requirements, whether arising on account of the
matters contemplated by this Agreement, any other agreement between such
Management Holder and the Company or otherwise.
ARTICLE III
REGISTRATION RIGHTS
3.1 DEMAND REGISTRATIONS.
(a) Subject to paragraph (b) hereof, if the Company shall
receive a written request (specifying that it is being made pursuant to this
Section 3.1) from a majority in interest of the Lee Holders, or Transferees
thereof who have become parties to this Agreement, that the Company file a
registration statement under the 1933 Act, then the Company shall (i) promptly
(at least thirty (30) days prior to the filing date) give written notice to all
other Holders of such request, (ii) with reasonable promptness, and in any case
not later than ninety (90) days after receipt by the Company of such written
request for a demand registration, file a registration statement with the SEC
relating to such Registrable Securities as to which such request for a demand
registration relates and (iii) use its commercially reasonable efforts to cause
to be registered under the 1933 Act all Registrable Securities of the same class
that Holders have requested be registered.
(b) If the total amount of Registrable Securities that all
Holders request to be included in an offering exceeds the amount of securities
that the underwriters reasonably believe compatible with the success of the
offering, then the Company will include in such registration only the number of
securities which, in the good faith opinion of such underwriters, can be sold,
selected PRO RATA based on the number of Registrable Securities which each of
the Holders requesting to be included owns, or has the right to acquire pursuant
to the exercise of Vested Stock Options. Only to the extent that the
underwriters reasonably believe that the amount of securities compatible with
the success of the offering exceeds the total amount of Registrable Securities
that all Holders request to be included in the offering, may the Company
participate in such offering.
(c) The Lee Holders, as a group, shall be entitled to request,
and the Company shall be obligated to effect, not more than five (5)
registrations of Registrable Securities pursuant to this Section 3.1. A
registration shall not be deemed effected until the registration statement
relating thereto has been declared effective, the securities covered thereby
have been sold, and the proceeds therefrom have been received by the selling
Holders.
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3.2 PIGGYBACK REGISTRATION. If, at any time, the Company determines
to register any of its equity securities (including securities convertible into
equity securities) for its own account or for the account of others under the
1933 Act in connection with the public offering of such securities (including
registrations pursuant to Section 3.1), the Company shall, at each such time,
promptly give each Holder written notice of the filing of a registration
statement with the SEC; PROVIDED, HOWEVER, that registrations relating solely to
securities to be offered by the Company (or other person for whose account the
registration is made) in connection with any acquisition, merger, employee stock
option or employee stock purchase or savings plan on Form S-4 or S-8 (or
successor forms) under the 1933 Act shall not be subject to this Section 3.2.
Upon the written request of any Holder received by the Company within ten (10)
Business Days after the giving of any such notice by the Company, the Company
shall use its commercially reasonable efforts to cause to be registered under
the 1933 Act all of the Registrable Securities of such Holder that each Holder
has requested be registered. If the total amount of Registrable Securities that
are to be included by either the Company for its own account and at the request
of Holders thereof exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, then the Company
will include in such registration only the number of securities which in the
opinion of such underwriters can be sold, in the following order:
(i) first, the equity securities of the Company, unless
the registration is pursuant to Section 3.1, in which event the provisions
relating to allocation of Registrable Shares set forth in Section 3.1(b) shall
be controlling; and
(ii) then, the Registrable Securities requested to be
included by the Holders PRO RATA based on the number of Registrable Securities
which each of them owns, or has the right to acquire pursuant to the exercise of
Vested Stock Options.
3.3 OBLIGATIONS OF THE COMPANY.
(a) Whenever required under Section 3.1 hereof to use its
commercially reasonable efforts to effect the registration of any Registrable
Securities, the Company shall:
(i) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such registration statement to become and remain
effective, including, without limitation, filing of pre-effective and
post-effective amendments and supplements to any registration statement or
prospectus necessary to keep the registration statement current;
(ii) as expeditiously as reasonably possible, prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement and, if
necessary for the effective disposition of the Registrable Securities covered
thereby, to keep each registration statement effective (and in compliance with
the 1933 Act) by such actions as may be necessary or appropriate for a period of
120 days after the effective date of such registration statement;
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(iii) as expeditiously as reasonably possible, furnish to
the Holders such numbers of copies of a prospectus, including any preliminary
prospectus, in conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them;
(iv) as expeditiously as reasonably possible, use its
commercially reasonable efforts to register and qualify the securities covered
by such registration statement under such securities or "blue sky" laws of such
jurisdictions as may be requested by the underwriters of said offering or, if
none, by the Holders; PROVIDED, HOWEVER, that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such jurisdiction, and
further provided that (anything in this Agreement to the contrary
notwithstanding with respect to the bearing of expenses) if any jurisdiction in
which the securities shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in that jurisdiction be
borne by selling stockholders, then such expenses shall be payable by selling
stockholders PRO RATA, to the extent required by such jurisdiction;
(v) use its commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the disposition
or such Registrable Securities;
(vi) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such seller
promptly prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(vii) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act;
(viii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
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(ix) use its commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any securities
exchange or automated inter-dealer quotation system on which any class of
Registrable Securities is then listed, and if not then listed on any such
exchange or system, use its best efforts to list all Registrable Securities
covered by such registration statement on either the New York Stock Exchange or
the Nasdaq National Market;
(x) use its commercially reasonable efforts to obtain a
"cold comfort" letter from the Company's independent public accountants in
customary form, addressed to each Holder participating in the registration, and
covering such matters of the type customarily covered by "cold comfort" letters
as the Holders of a majority (by number of shares) of the Registrable Shares
being sold or the underwriters retained by such Holders reasonably request; and
(xi) use its commercially reasonable efforts to obtain an
opinion of counsel to the Company addressed to the underwriters of the sale of
Registrable Securities being registered covering such matters as are customarily
covered by such an opinion.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under this Agreement,
the Company will give the Holders of Registrable Securities on whose behalf such
Registrable Securities are to be so registered and their underwriters, if any,
and their respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements, as shall be necessary, in the opinion of such Holders or such
underwriters or their respective counsel, in order to conduct a reasonable and
diligent investigation within the meaning of the 1933 Act. Without limiting the
foregoing, each registration statement, prospectus, amendment, supplement or any
other document filed with respect to a registration under this Agreement shall
be subject to review and reasonable approval by the Holders registering
Registrable Securities in such registration and by their counsel.
3.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Article III that the
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
3.5 EXPENSES OF REGISTRATION. All Selling Expenses shall be borne by
the Holders of securities registered under this Article III PRO RATA on the
basis of the number of their shares so registered. All Registration Expenses
incurred in connection with a registration pursuant to Sections 3.1 or 3.2
hereof shall be borne by the Company.
3.6 UNDERWRITING.
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(a) In connection with any registration of Registrable
Securities under this Agreement, the Company will, if requested by the
underwriters for any Registrable Securities included in such registration, enter
into an underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions relating to indemnification and contribution. The Holders
on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement, and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall be also made to and
for the benefit of such Holders of Registrable Securities. Such underwriting
agreement shall comply with Section 3.7.
(b) Such underwriters shall be selected as follows: (i) in the
case of a registration pursuant to Section 3.1, by agreement of a majority in
interest of the Lee Holders if the Lee Holders are selling Registrable
Securities in such registration, or (ii) in all other cases, by the Company.
3.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Article III:
(a) To the fullest extent permitted by law, the Company will
indemnify and hold harmless each Holder requesting or joining in a registration,
any underwriter (as defined in the 1933 Act) for it, and each person, if any,
who controls such Holder or such underwriter within the meaning of the 1933 Act,
from and against any losses, claims, damages, expenses (including reasonable
attorneys' fees and expenses and reasonable costs of investigation) or
liabilities, joint or several, to which they or any of them may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of any material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or arise out of any violation by the Company of any rule or
regulation promulgated under the 1933 Act applicable to the Company and relating
to action or inaction required of the Company in connection with any such
registration; and the Company will promptly reimburse each Holder, each person
controlled by such Holder and any underwriter for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 3.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company(which consent shall
not be unreasonably withheld), nor shall the Company be liable to anyone for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an untrue statement or omission made in connection with such
registration statement, preliminary prospectus, final prospectus or amendments
or supplements thereto in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, underwriter or control
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person. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder, underwriter or control person
and shall survive the transfer of such securities by such Holder.
(b) To the fullest extent permitted by law, each Holder
requesting or joining in a registration will severally and not jointly indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the 1933 Act, and each agent and any underwriter
for the Company and any person who controls any such agent or underwriter and
each other Holder and any person who controls such Holder (within the meaning of
the 1933 Act) against any losses, claims, damages or liabilities to which the
Company or any such director, officer, control person, agent, underwriter, or
other Holder may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon an untrue statement of any material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or omission was made in such registration statement, preliminary or
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder with respect to
such Holder expressly for use in connection with such registration; and such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, control person, agent, underwriter, or
other Holder in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED HOWEVER, the indemnity obligation of each
such Holder hereunder shall be limited to and shall not exceed the net proceeds
actually received by such Holder upon a sale of Registrable Securities pursuant
to a registration statement hereunder; and PROVIDED further that the indemnity
agreement contained in this Section 3.7(b) shall not apply to amounts paid in
settlements effected without the consent of such Holder (which consent shall not
be unreasonably withheld). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer, Holder, underwriter or control person and shall survive the
transfer of such securities by such Holder.
(c) Any person seeking indemnification under this Section 3.7
will (i) give prompt notice to the indemnifying party of any claim with respect
to which it seeks indemnification (but the failure to give such notice will not
affect the right to indemnification hereunder, unless the indemnifying party is
materially prejudiced by such failure) and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim, permit such
indemnifying party, and other indemnifying parties similarly situated, jointly
to assume the defense of such claim with counsel reasonably satisfactory to the
parties. In the event that the indemnifying parties cannot mutually agree as to
the selection of counsel, each indemnifying party may retain separate counsel to
act on its behalf and at its expense. The indemnified party shall in all events
be entitled to participate in such defense at its expense through its own
counsel. If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably
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withheld). No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect of such claim or litigation. An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the reasonable fees and expenses of such additional counsel.
(d) If for any reason the foregoing indemnification is
unavailable to any party or insufficient to hold it harmless as and to the
extent contemplated by the preceding paragraphs of this Section 3.7, then each
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage, expense or liability
in such proportion as is appropriate to reflect the relative benefits received
by the Company, on the one hand, and the applicable indemnified party, as the
case may be, on the other hand, and also the relative fault of the Company and
any applicable indemnified party, as the case may be, as well as any other
relevant equitable considerations.
3.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders and their Permitted Transferees the benefits of
Rule 144 and Rule 144A promulgated under the 1933 Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company agrees to use its
best efforts to take all action that may be required as a condition to the
availability of Rule 144, Rule 144A or such other rules or regulations,
including, without limitation, to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to ninety (90)
days after the effective date of the first registration statement covering an
underwritten public offering of shares of Common Stock filed by the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
(including, without limitation, under Section 13 or Section 15 of the 1934 Act
after the effective date of the first registration statement covering an
underwritten public offering of shares of Common Stock filed by the Company);
and
(c) furnish to any Holder forthwith upon request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 (at any time after ninety (90) days after the effective date of said
first registration statement of shares of Common Stock filed by the Company),
and of the 1933 Act and the 1934 Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as may be
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reasonably requested in availing any Holder of any rule or regulation of the SEC
permitting the selling of any such securities without registration.
3.9 NO INCONSISTENT AGREEMENTS. The Company agrees that it has not
entered into, and it will not hereafter enter into, any Agreement with respect
to the registration of its securities that is inconsistent with (or superior to)
the rights granted to the Holders of Registrable Securities in this Agreement.
3.10 STOCK SPLIT. If, on or after the receipt by the Company of a
request for registration of a public offering pursuant to Section 3.1 hereof,
the proposed managing underwriter or underwriters of such offering reasonably
believes that the number of shares to be registered is less than the minimum
number necessary for the success of such offering, the Company will promptly
prepare and submit to its Board of Directors, use its best efforts to cause to
be adopted by its Board of Directors and stockholders, and, if so adopted, file
and cause to become effective, an amendment to its certificate of incorporation
so as to cause each share of its outstanding Common Stock to be converted into
such number of shares of such Common Stock so that the number of shares of
Registrable Securities to be registered is equal to the minimum number which
such managing underwriter or underwriters reasonably believes is necessary for
the success of such offering. Each Stockholder, together with his or its
Permitted Transferees, hereby agrees to vote the Shares held by him or it in
favor of adopting such amendment.
3.11 LOCK-UP AGREEMENTS. Each of the parties to this Agreement agrees
to enter into customary lock-up agreements with respect to all of their Shares
with a duration of 180 days following the closing of an initial Public Offering
and with a duration of 90 days following the closing of any subsequent Public
Offering.
ARTICLE IV
MISCELLANEOUS
4.1 REMEDIES.
(a) Each of the parties to this Agreement hereby acknowledges
that, in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party will be without an adequate remedy at law. Each
of the parties therefore agrees that, in the event of a breach of any material
provision of this Agreement, the aggrieved party will be entitled to institute
and prosecute proceedings to enforce specific performance of such provision or
to enjoin the continuing breach of such provision, as well as to obtain damages
for breach of this Agreement. By seeking or obtaining any such relief, the
aggrieved party will not be precluded from seeking or obtaining any other relief
to which it may be entitled. In addition, any transfers of Shares in violation
of this Agreement are void.
(b) In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is successfully
asserted as a defense, the prevailing party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
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4.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with the
Exhibits hereto, sets forth the entire understanding of the parties, and
supersedes all prior agreements and all other arrangements and communications,
whether oral or written, with respect to the subject matter hereof. Permitted
Transfers, Transfers permitted under Article II hereof, or issuances of capital
stock permitted under Article II hereof, including, without limitation, the
issuances of securities that do not constitute New Securities, shall become
effective when a copy of the Agreement as executed by any new Transferee or
holder of capital stock is filed with the Company. Transfers pursuant to waivers
under Article II hereof shall become effective when the waivers as executed by
all required parties, and a copy of this Agreement as executed by any new
Transferee or holder of capital stock, are filed with the Company and also filed
with the Lee Holder Representative. Any other amendment, revision or termination
of this Agreement shall require the prior written consent of the Management
Holder Representative, the Continuing Holder Representative, and the Lee Holder
Representative.
4.3 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision were omitted.
4.4 NOTICES. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given three business days after mailing by certified
mail, when delivered by hand, or when delivered by telecopier upon confirmation
of receipt, or one day after sending by an overnight delivery service that
guarantees next-day delivery, to the respective addresses of the parties set
forth below:
(a) for notices and communications to the Company:
EYE CARE CENTERS OF AMERICA, INC.
11103 West Avenue
San Antonio, Texas 78213
FAX: (210) 524-6996
ATTN: Corporate Secretary
With a copy to each of:
THOMAS H. LEE COMPANY
75 State Street
Boston, Massachusetts 02109
Attention: Anthony J. DiNovi
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<PAGE> 33
and
HUTCHINS, WHEELER & DITTMAR
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: James Westra, Esq.
(b) For notices and communications to the Stockholders, to the
respective addresses set forth in the Schedule of Stockholders.
By notice complying with the foregoing provisions of this Section 4.4, each
party may change the mailing address for future notices and communications to
such party.
4.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and to their respective
transferees, successors, assigns, heirs and administrators; PROVIDED, HOWEVER,
that the rights under this Agreement may not be assigned except as expressly
provided herein. No such assignment shall relieve an assignor of its obligations
hereunder.
4.6 GOVERNING LAW. This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
4.7 TERMINATION. Without affecting any other provision of this
Agreement requiring termination of any rights in favor of any Stockholder,
Permitted Transferee or any other transferee of Shares, the provisions of
Articles II and III of this Agreement shall terminate as to such Stockholder,
Permitted Transferee or other transferee, when, pursuant to and in accordance
with this Agreement, such Stockholder, Permitted Transferee or other transferee,
as the case may be, no longer owns any Shares; PROVIDED, that termination
pursuant to this Section 4.7 shall only occur in respect of a Stockholder after
all Permitted Transferees in respect thereof also no longer own any Shares.
4.8 RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to
Shares, to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Shares, by reason of a stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or otherwise. Upon the occurrence of any such events,
amounts hereunder shall be appropriately adjusted.
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4.9 STOCKHOLDER REPRESENTATIVES.
(a) Each Management Holder hereby designates and appoints (and
each Permitted Transferee of each such Management Holder is hereby deemed to
have so designated and appointed) Bernard W. Andrews with full power of
substitution (the "MANAGEMENT HOLDER REPRESENTATIVE"), as the representative of
each such person to perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by any such person and hereby
acknowledges that the Management Holder Representative shall be the only person
authorized to take any action so required, authorized or contemplated by this
Agreement by each such person. Each such person further acknowledges that the
foregoing appointment and designation shall be deemed to be coupled with an
interest and shall survive the death or incapacity of such person. Each such
person hereby authorizes (and each such Permitted Transferee will be deemed to
have authorized) the other parties hereto to disregard any notice or other
action taken by such person pursuant to this Agreement except for the Management
Holder Representative. The other parties hereto are and will be entitled to rely
on any action so taken or any notice given by the Management Holder
Representative and are and will be entitled and authorized to give notices only
to the Management Holder Representative for any notice contemplated by this
Agreement to be given to any such person. A successor to the Management Holder
Representative may be chosen by a majority in interest of the Shares held by the
Management Holders, provided that notice thereof is given by the new Management
Holder Representative to the Company and to the other Stockholders (or their
representatives established under this Section 4.9).
(b) Each Continuing Holder hereby designates and appoints (and
each Permitted Transferee of each such Continuing Holder is hereby deemed to
have so designated and appointed) Timothy R. Kelleher and Frank J. Pados, Jr.,
and each of them, with full power of substitution (the "CONTINUING HOLDER
REPRESENTATIVE"), as the representative of each such person to perform all such
acts as are required, authorized or contemplated by this Agreement to be
performed by any such person and hereby acknowledges that the Continuing Holder
Representative shall be the only person authorized to take any action so
required, authorized or contemplated by this Agreement by each such person. Each
such person further acknowledges that the foregoing appointment and designation
shall be deemed to be coupled with an interest and shall survive the death or
incapacity of such person. Each such person hereby authorizes (and each such
Permitted Transferee will be deemed to have authorized) the other parties hereto
to disregard any notice or other action taken by such person pursuant to this
Agreement except for the Continuing Holder Representative. The other parties
hereto are and will be entitled to rely on any action so taken or any notice
given by the Continuing Holder Representative and are and will be entitled and
authorized to give notices only to the Continuing Holder Representative for any
notice contemplated by this Agreement to be given to any such person. A
successor to the Continuing Holder Representative may be chosen by a majority in
interest of the Shares held by the Continuing Holders, provided that notice
thereof is given by the new Continuing Holder Representative to the Company and
to the other Stockholders (or their representatives established under this
Section 4.9).
(c) Each Lee Holder hereby designates and appoints (and each
Permitted Transferee of each such Lee Holder is hereby deemed to have so
designated and appointed)
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Anthony J. DiNovi and Warren C. Smith, and each of them, with full power of
substitution (the "LEE HOLDER REPRESENTATIVE"), as the representative of each
such person to perform all such acts as are required, authorized or contemplated
by this Agreement to be performed by any such person and hereby acknowledges
that the Lee Holder Representative shall be the only person authorized to take
any action so required, authorized or contemplated by this Agreement by each
such person. Each such person further acknowledges that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such person. Each such person hereby
authorizes (and each such Permitted Transferee will be deemed to have
authorized) the other parties hereto to disregard any notice or other action
taken by such person pursuant to this Agreement except for the Lee Holder
Representative. The other parties hereto are and will be entitled to rely on any
action so taken or any notice given by the Lee Holder Representative and are and
will be entitled and authorized to give notices only to the Lee Holder
Representative for any notice contemplated by this Agreement to be given to any
such person. A successor to the Lee Holder Representative may be chosen by a
majority in interest of the Shares held by the Lee Holders, provided that notice
thereof is given by the new Lee Holder Representative to the Company and to the
other Stockholders (or their representatives established under this
Section 4.9).
(d) The Stockholders agree that the Management Holder
Representative, the Continuing Holder Representative and the Lee Holder
Representative shall not have any liability arising out of or in connection with
the exercise of his powers or the discharge of his duties hereunder while acting
as a representative under this Agreement, except that such representative shall
be subject to liability for his gross negligence or willful misconduct. Such
representative shall not in any event be liable with respect to any action taken
or omitted to be taken by him in good faith or in accordance with and in
reliance upon the opinion of counsel or independent auditors or upon information
obtained by him from any governmental authority or other specialist.
4.10 ACTION NECESSARY TO EFFECTUATE THE AGREEMENT. The parties hereto
agree to take or cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement. This Agreement
supersedes and replaces the 1993 Stockholders' Agreement which is terminated
upon the consummation of the transactions contemplated in the Recapitalization
Agreement pursuant to Section 6.7 of the 1993 Stockholders' Agreement which
provides that the 1993 Stockholders' Agreement shall be terminated and of no
further force and effect on the first day the Desai Holders hold less than 15%
of the Shares of the Company, on a fully-diluted basis.
4.11 PURCHASE FOR INVESTMENT; LEGEND ON CERTIFICATE. Each of the
parties acknowledges that all of the Shares held by such party are being (or
have been) acquired for investment and not with a view to the distribution
thereof and that no transfer, hypothecation or assignment of Shares may be made
except in compliance with applicable federal and state securities laws. All of
the certificates representing Shares of the Company which are now or hereafter
owned by the Stockholders and which are subject to the terms of this Agreement
shall have endorsed in writing, stamped or printed, thereon the following
legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS, INCLUDING RESTRICTIONS ON TRANSFER, OF A STOCKHOLDERS' AGREEMENT
DATED AS OF APRIL 24, 1998, AS AMENDED FROM TIME TO TIME, AND NONE OF SUCH
SECURITIES, OR ANY INTEREST THEREIN, SHALL BE TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF EXCEPT AS PROVIDED IN THAT AGREEMENT. A COPY OF THE
STOCKHOLDERS' AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY AND WILL BE
MAILED TO ANY PROPERLY INTERESTED PERSON WITHOUT CHARGE WITHIN FIVE (5) DAYS
AFTER RECEIPT OF A WRITTEN REQUEST."
4.12 EFFECTIVENESS OF TRANSFERS. All Shares Transferred by a
Stockholder (other than pursuant to an effective registration statement under
the 1933 Act or a Rule 144 Transaction) shall be held by the transferee thereof
pursuant to this Agreement. Such transferee shall, except as otherwise expressly
stated herein, have all the rights and be subject to all of the obligations of a
Stockholder under this Agreement automatically and without requiring any further
act by such transferee or by any parties to this Agreement. Without affecting
the preceding sentence, if such transferee is not a Stockholder on the date of
such Transfer, then such transferee, as a condition to such Transfer, shall
confirm such transferee's obligations hereunder in accordance with Section 4.13
hereof. No Shares shall be Transferred on the Company's books and records, and
no Transfer of Shares shall be otherwise effective, unless any such Transfer is
made in accordance with the terms and conditions of this Agreement, and the
Company is hereby authorized by all of the Stockholders to enter appropriate
stop transfer notations on its transfer records to give effect to this
Agreement. Any Transfer of Shares in violation of this Agreement shall be void.
4.13 ADDITIONAL STOCKHOLDERS. Subject to the restrictions on Transfers
of Shares contained herein, any person or entity acquiring Shares (except for
transferees acquiring shares of Common Stock (i) in an offering registered under
the 1933 Act or (ii) in a Rule 144 Transaction) shall, on or before the Transfer
or issuance to him or it of Shares, sign a counterpart signature page hereto in
form reasonably satisfactory to the Company and shall thereby become a party to
this Agreement; PROVIDED, HOWEVER, that a transferee which is a Permitted
Transferee under clause (f) of the definition of Permitted Transfer shall not be
obligated to so agree until foreclosure on its pledge, which event shall be
subject to the provisions of Section 2.1(d) of this Agreement.
4.14 NO WAIVER. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
4.15 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and all signatures need
not appear on any one counterpart.
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4.16 HEADINGS. All headings and captions in this Agreement are for
purposes of references only and shall not be construed to limit or affect the
substance of this Agreement.
4.17 CONSENT TO JURISDICTION. The Company and each of the
Stockholders, by its or his execution hereof, (i) hereby irrevocably submit to
the exclusive jurisdiction of the state courts of the Commonwealth of
Massachusetts for the purposes of any claim or action arising out of or based
upon this Agreement or relating to the subject matter hereof, (ii) hereby waive,
to the extent not prohibited by applicable law, and agree not to assert by way
of motion, as a defense or otherwise, in any such claim or action, any claim
that it or he is not subject personally to the jurisdiction of the above-named
courts, that its or his property is exempt or immune from attachment or
execution, that any such proceeding brought in the above-named court is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court, and (iii) hereby agree not to commence any claim
or action arising out of or based upon this Agreement or relating to the subject
matter hereof other than before the above-named courts nor to make any motion or
take any other action seeking or intending to cause the transfer or removal of
any such claim or action to any court other than the above-named courts whether
on the grounds of inconvenient forum or otherwise. The Company and each of the
Stockholders hereby consent to service of process in any such proceeding in any
manner permitted by Massachusetts law, and agree that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 4.4 hereof is reasonably calculated to give actual notice.
4.18 WAIVER OF RIGHT TO JURY TRIAL. THE COMPANY AND EACH OF THE
STOCKHOLDERS, BY ITS OR HIS EXECUTION HEREOF, WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND EACH OF
THE STOCKHOLDERS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND EACH OF THE STOCKHOLDERS
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS OR
HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION
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<PAGE> 38
CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[Remainder of Page Intentionally Left Blank]
35
<PAGE> 39
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
EYE CARE CENTERS OF AMERICA, INC.
By: _____________________________
Name:
Title:
[Signatures continue on following pages]
S-1
<PAGE> 40
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
LEE HOLDERS
THL FUND IV BRIDGE CORP.
By: THL Equity Advisors IV, LLC
its General Partner
By: ___________________________________
Name: Charles A. Brizius
Title: Vice President
S-2
<PAGE> 41
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
MANAGEMENT HOLDERS:
Print full legal name of person or entity
purchasing Shares:
________________________________________________
Signature of person with authorization to sign
on behalf of person or entity purchasing Shares:
________________________________________________
S-3
<PAGE> 42
EYE CARE CENTERS OF AMERICA, INC.
STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
CONTINUING HOLDERS:
EQUITY-LINKED INVESTORS-II
By: ROHIT M. DESAI ASSOCIATES-II,
General Partner
By: ____________________________________
Name:
Title:
INDOSUEZ EYE CARE PARTNERS
By: Indosuez CM II, Inc., its Managing
General Partner
By: ____________________________________
Name:
Title:
_________________________________________
Norman S. Matthews, individually
AGT HOLDINGS, LLC
By: ____________________________________
Name:
S-4
<PAGE> 1
EXHIBIT 10.2
EYE CARE CENTERS OF AMERICA, INC.
1998 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This stock option plan (the "PLAN") is intended to encourage ownership of
the stock of Eye Care Centers of America, Inc. (the "COMPANY") by employees of
the Company and its subsidiaries, to induce qualified personnel to enter and
remain in the employ of the Company or its subsidiaries and otherwise to provide
additional incentive for optionees to promote the success of the Company's
business.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued or
treasury shares of the Common Stock, $.01 par value per share ("Common Stock")
for which options may be granted under the Plan shall not exceed 83,559 shares
of Common Stock, subject to adjustment as provided in Section 12 hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the committee.
3. ADMINISTRATION OF THE PLAN.
(a) At the discretion of the company's Board of Directors, the Plan
shall be administered either (i) by the full Board of Directors of the Company
or (ii) by a committee (the "COMMITTEE") consisting of two or more members of
the Company's Board of Directors, each of whom is a "Non-Employee Director" as
defined from time to time in Rule 16b-3 (or any successor rule) promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 ACT"). In the
event the full Board of Directors is the administrator of the Plan, references
herein to the Committee shall be deemed to include the full Board of Directors.
The Board of Directors may from time to time appoint a member or members of the
Committee in substitution for or in addition to the member or members then in
office and may fill vacancies on the Committee however caused. The Committee
shall choose one of its members as Chairman and shall hold meetings at such
times and places as it shall deem advisable. A majority of the members of the
Committee shall constitute a quorum and any action may be taken by a majority of
those present and voting at any meeting.
<PAGE> 2
(b) Any action may also be taken without the necessity of a meeting
by a written instrument signed by a majority of the Committee. The decision of
the Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement granted. hereunder in the manner and to the
extent it shall deem expedient to carry the Plan into effect and shall be the
sole and final judge of such expediency. No Committee member shall be liable for
any action or determination made in good faith.
4. TYPE OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of the
Board of Directors or Committee and may be designated as either incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code of
1986 (the "CODE") or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee.
5. ELIGIBILITY.
(a) Options may be granted only to employees (including directors and
officers who are key employees) of the Company or of any subsidiary corporation
(herein called "SUBSIDIARY" or "SUBSIDIARIES"), as defined in Section 424 of the
Code and the Regulations. Directors and officers who are not otherwise employees
of the Company or a subsidiary shall not be eligible to be granted an option
pursuant to the Plan. In determining the eligibility of an individual to be
granted an option, as well as in determining the number of shares to be issuable
pursuant to options granted to any individual, the Committee shall take into
account the position and responsibilities of the individual being considered,
the nature and value to the Company or its subsidiaries of his or her service
and accomplishments, his or her present and potential contribution to the
success of the Company or its subsidiaries, and such other factors as the
Committee may deem relevant.
(b) No option designated as an incentive stock option shall be
granted to any employee of the Company or any subsidiary if such employee owns,
immediately prior to the grant of an option, stock representing more than 10% of
the voting power or more than 10% of the value of all classes of stock of the
Company or a parent or a subsidiary, unless the purchase price for the stock
under such option shall be at least 110% of its fair market value at the time
such option is granted and the option, by its terms, shall not be exercisable
more than five years from the date it is granted. In determining the stock
ownership under this paragraph, the provisions of Section 424(d) of the Code
shall be controlling. In determining the fair market value under this paragraph,
the provisions of Section 7 hereof shall apply.
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<PAGE> 3
(c) The maximum number of shares of the Company's Common Stock with
respect to which an option or options may be granted to any employee in any one
taxable year of the Company shall not exceed 83,559 shares (subject to
adjustment for stock dividends, stock splits, and the like) of Common Stock,
taking into account shares granted during such taxable year under options that
are terminated.
6. OPTION AGREEMENT.
Each option shall be evidenced by an option agreement (the "AGREEMENT")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. The date of grant of an option shall be as determined by the
Committee. More than one option may be granted to an individual.
7. OPTION PRICE.
(a) The option price or prices of shares of the Company's Common
Stock for options designated as non-qualified stock options shall be greater
than or equal to 50% of the fair market value of such Common Stock at the time
the option is granted, as determined by the Committee. The option price or
prices of shares of the Company's Common Stock for incentive stock options shall
be the fair market value of such Common Stock at the time the option is granted
as determined by the Committee in accordance with the Regulations promulgated
under Section 422 of the Code.
(b) If such shares are then listed on any national securities
exchange, the fair market value shall be the mean between the high and low sales
prices, if any, on the largest such exchange on the business day immediately
preceding the date of grant of the option or, if none, shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of grant
in accordance with Section 25.2512-2 of the Regulations. If the shares are not
then listed on any such exchange, the fair market value of such shares shall be
the mean between the high and low sales prices, if any, as reported in the
Nasdaq National Market for the business day immediately preceding the date of
grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in accordance with Section
25.2512-2 of the Regulations. If the shares are not then either listed on any
such exchange or quoted in the Nasdaq National Market, the fair market value
shall be the mean between the average of the "Bid" and the average of the "Ask"
prices, if any, as reported in the National Daily Quotation Service for the
business day immediately preceding the date of grant of the option, or, if none,
shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the
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<PAGE> 4
nearest date before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Committee.
8. MANNER OF PAYMENT; MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, or (iii)
any combination of (i) and (ii); provided, however, that payment of the exercise
price by delivery of shares of Common Stock of the Company owned by such
optionee may be made only if such payment does not result in a charge to
earnings for financial accounting purposes as determined by the Committee. The
fair market value of any shares of the Company's Common Stock which may be
delivered upon exercise of an option shall be determined by the Committee in
accordance with Section 7 hereof. With the consent of the Committee, payment may
also be made by delivery of a properly executed exercise notice to the Company,
together with a copy of irrevocable instruments to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.
(b) To the extent that the right to purchase shares under an option
has accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, not more than thirty (30) days
from the date of receipt of the notice by the Company, as shall be designated by
the Company following receipt of such notice, or at such time, place and manner
as may be agreed upon by the Company and the person or persons exercising the
option.
9. EXERCISE OF OPTIONS.
(a) Each option granted under the Plan shall, subject to Section
10(b) and Section 12 hereof, be exercisable at such time or times and during
such period as shall be set forth in the Agreement; provided, however, that no
option granted under the Plan shall have a term in excess often (10) years from
the date of grant.
(b) To the extent that an option to purchase shares is not exercised
by an optionee when it becomes initially exercisable, it shall not expire but
shall be carded forward and
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<PAGE> 5
shall be exercisable, on a cumulative basis, until the expiration of the
exercise period. No partial exercise may be made for less than one share of
Common Stock or whole multiples thereof.
10. TERM OF OPTIONS; EXERCISABILITY.
(a) TERM.
(1) Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
herein provided.
(2) Except as otherwise provided in this Section 10, an option
granted to any employee optionee who ceases to be an employee of the Company or
one of its subsidiaries shall terminate on the 30th day following the date such
optionee ceases to be an employee of the Company or one of its subsidiaries, or
on the date on which the option expires by its terms, whichever first occurs.
(3) If such termination of employment is because the optionee
has become permanently disabled (within the meaning of Section 22(e)(3) of the
Code, or as such term is otherwise defined in the Agreement), such option shall
terminate on the 60th day following the date such optionee ceases to be an
employee, or on the date on which the option expires by its terms, whichever
first occurs.
(4) In the event of the death of any optionee, any option
granted to such optionee shall terminate on the 180th day following the date of
death, or on the date on which the option expires by its terms, whichever first
occurs.
(5) Notwithstanding subparagraphs (2), (3) and (4) above, (i)
the Committee may provide for expiration dates which are different than those
set forth above in any specific Agreement evidencing options granted hereunder,
and (ii) the Committee shall have the authority to extend the expiration date of
any outstanding option in circumstances in which it deems such action to be
appropriate; provided that no such Agreement or extension shall extend the term
of an option beyond the date on which the option would have expired if no
termination of the optionee's employment had occurred.
(b) EXERCISABILITY. Except as otherwise may be provided in Section
12, an option granted to an employee optionee who ceases to be an employee of
the Company or one of its subsidiaries shall be exercisable only to the extent
that the right to purchase shares under such option has accrued and is in effect
on the date such optionee ceases to be an employee of the Company or one of its
subsidiaries.
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11. OPTIONS NOT TRANSFERABLE.
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, and any such option shall be
exercisable during the lifetime of such optionee only by him. Any option granted
under the Plan shall be null and void and without effect upon the bankruptcy of
the optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, divorce, trustee process or similar process,
whether legal or equitable, upon such option.
12. RECAPITALIZATIONS. REORGANIZATIONS AND THE LIKE.
(a) In the event that the outstanding shares of the Common Stock of
the Company are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason of
any reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that
securities issuable upon exercise of any option after such event shall be
equivalent to the securities which would have been issuable in respect of the
shares issued upon exercise of such option had such exercise been completed
prior to such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) In addition, in the case of any sale or conveyance to another
entity of all or substantially all of the assets or stock of the Company
including, without limitation, by way of merger or consolidation, but
specifically excluding any public offering of stock by the Company, (i) the
purchaser(s) of the Company's assets or stock may, in his, her or its
discretion, assume each outstanding option or replace each outstanding option
with a comparable option to purchase shares of capital stock of any successor
corporation or affiliate thereof, or (ii) the Committee may cancel (x) all
outstanding unvested options without any consideration, and (y) all outstanding
vested options in exchange for consideration in cash, shares of stock or other
securities of any such purchaser, which consideration shall be equal in value to
the value of any cash, shares of stock or other securities the optionee would
have received had the option been fully exercised (even if not then fully
exercisable) and no disposition of the shares acquired upon such exercise been
made prior to such sale or conveyance, less the option price therefor. Upon any
such option cancellation by the Committee, all outstanding options (vested or
unvested) shall immediately terminate and be of no further force and effect. The
value of the cash, stock or other securities the optionee would have received if
the option had been exercised shall be determined in good faith by the
Committee, and in the case of shares of the Common Stock of the Company, in
accordance with the provisions of Section 7 hereof.
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(c) In addition, in the case of any Change in Control (as hereinafter
defined) of the Company, the purchaser(s) of the Company's stock may, in his,
her or its discretion, deliver to the optionee the same kind of consideration
that is delivered to the stockholders of the Company as a result of such Change
in Control, or the Committee may, in its discretion, cancel all outstanding
options in exchange for consideration in cash, shares of stock or other
securities of any such purchaser, which consideration in both cases shall be
equal in value to the value of any cash, shares of stock or other securities the
optionee would have received had the option been fully exercised (to the extent
then vested and exercisable) and no disposition of the shares acquired upon such
exercise been made prior to such Change in Control, less the option price
therefor. Upon any such option cancellation by the Committee, all outstanding
options (vested or unvested) shall immediately terminate and be of no further
force and effect. The value of the cash, stock or other securities the optionee
would have received if the option had been exercised shall be determined in good
faith by the Committee, and in the case of shares of the Common Stock of the
Company, in accordance with the provisions of Section 7 hereof. The Committee
shall also have the power and right to accelerate the exercisability of any
options upon such a Change in Control, notwithstanding any limitations in this
Plan or in the Agreement. Upon any acceleration pursuant to this Section 12, any
options or portion thereof originally designated as incentive stock options that
no longer qualify as incentive stock options under Section 422 of the Code as a
result of such acceleration shall be redesignated as non-qualified stock
options. A "CHANGE IN CONTROL" shall be deemed to have occurred if any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned ten percent (10%) or less of the then
outstanding voting stock of the Company, shall acquire, whether by purchase,
exchange, tender offer, merger, consolidation or otherwise, such additional
shares of the Company's voting stock in one or more transactions, or series of
transactions, such that following such transaction or transactions, such person
or group and affiliates beneficially own greater than fifty percent (50%) of the
Company's voting sock outstanding, but shall exclude any sale or conveyance
subject to Section 12(b) hereof.
(d) Except as otherwise provided in this Section 12, upon dissolution
or liquidation of the Company, all options granted under this Plan shall
terminate, but each optionee (if at such time in the employ of or otherwise
associated with the Company or any of its subsidiaries) shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
option to the extent then exercisable.
(e) No fraction of a share shall be purchasable or deliverable upon
the exercise of any option, but in the event any adjustment hereunder of the
number of shares covered by the option shall cause such number to include a
fraction of a share, such fraction shall be adjusted to the nearest smaller
whole number of shares.
13. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option granted under the Plan shall
confer upon any option holder any right with respect to the continuation of his
or her employment by the
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Company (or any subsidiary) or interfere in any way with the right of the
Company (or any subsidiary), subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the option holder from the rate in
existence at the time of the grant of an option. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Committee at the time.
14. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of any option
granted under the Plan or payment of any consideration specified in Section 12
shall be subject to the option holder's satisfaction of all applicable Federal,
state and local income, excise, employment and any other tax withholding
requirements.
15. RESTRICTIONS ON ISSUE OF SHARES.
(a) Notwithstanding the provisions of Section 8, the Company may
delay the issuance of shares covered by the exercise of an option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issuance of such shares effectively
registered or qualified under applicable Federal and state securities
laws now in force or as hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable
Federal and state securities laws now in force or as hereafter
amended.
(b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issuance of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
16. PURCHASE FOR INVESTMENT: RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION.
Unless the shares to be issued upon exercise of an option granted under the
Plan have been effectively registered under the Securities Act of 1933, as now
in force or hereafter amended (the "1933 Act"), the Company shall be under no
obligation to issue any shares covered by any option unless the person who
exercises such option, in whole or in part, shall give a
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written representation and undertaking to the Company which is satisfactory in
form and scope to counsel for the Company and upon which, in the opinion of such
counsel, the Company may reasonably rely, that he or she is acquiring the shares
issued pursuant to such exercise of the option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the 1933 Act, or any other applicable law, and that if
shares are issued without such registration, a legend to this effect may be
endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the 1933 Act, or
other applicable statutes, any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from registration
requirements of the 1933 Act, or other applicable statutes, then the Company may
take such action and may require from each optionee such information in writing
for use in any registration statement, supplementary registration statement,
prospectus, preliminary prospectus or offering circular as is reasonably
necessary for such purpose and may require reasonable indemnity to the Company
and its officers and directors and controlling persons from such holder against
all losses, claims, damages and liabilities arising from such use of the
information so furnished and caused by any untrue statement of any material fact
therein or caused by the omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made.
17. LOANS.
The Company may make loans to optionees to permit them to exercise options.
If loans are made, the requirements of all applicable Federal and state laws and
regulations regarding such loans must be met.
18. MODIFICATION OF OUTSTANDING OPTIONS.
The Committee may authorize the amendment of any outstanding option with
the consent of the optionee when and subject to such conditions as are deemed to
be in the best interests of the Company and in accordance with the purposes of
this Plan.
19. APPROVAL OF STOCKHOLDERS.
The Plan shall be subject to approval by the vote of stockholders holding
at least a majority of the voting stock of the Company present, or represented,
and entitled to vote at a duly held stockholders' meeting, or by written consent
of the stockholders as provided for under applicable state law, within twelve
(12) months after the adoption of the Plan by the Board of Directors and shall
take effect as of the date of adoption by the Board of Directors upon such
approval. The Committee may grant options under the Plan prior to such approval,
but any such options shall become effective as of the date of stockholder
approval only upon such approval and, accordingly, no such option may be
exercisable prior to such approval.
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20. TERMINATION AND AMENDMENT.
The Board of Directors may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
except as provided in this Section 20, the Board of Directors may not, without
the approval of the stockholders of the Company obtained in the manner stated in
Section 19, increase the maximum number of shares for which options may be
granted or change the designation of the class of persons eligible to receive
options under the Plan, or make any other change in the Plan which requires
stockholder approval under applicable law or regulations. The Committee may
terminate, amend or modify any outstanding option without the consent of the
option holder; provided, however, that, except as provided in Section 12,
without the consent of the optionee, the Committee shall not change the number
of shares subject to an option, nor the exercise price thereof, nor extend the
term of such option.
21. RESERVATION OF STOCK.
The Company shall at all times during the term of the Plan reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
22. LIMITATION OF RIGHTS IN THE OPTION SHARES.
An optionee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto, the exercise price therefor
shall have been paid in full, and the optionee has complied with all applicable
provisions of the Plan and the Agreement pursuant to which such options were
granted.
23. NOTICES.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business to the
attention of the Corporate Secretary and, if to an optionee, to the address set
forth on the records of the Company.
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EXHIBIT 10.3
EYE CARE CENTERS OF AMERICA, INC.
DEFERRED STOCK PLAN
(AS AMENDED)
ARTICLE 1
GENERAL
1.1 PURPOSE. The Eye Care Centers of America, Inc. Deferred Stock
Plan (the "Plan") has been established by Eye Care Centers of America, Inc. (the
"Company") to enable key executives of the Company to increase their holdings
of common stock of the Company and to provide flexibility to such individuals
with respect to the compensation received by them from the Company. In so doing,
the Plan will further align the interests of key executives with those of the
Company's stockholders.
1.2 EFFECTIVE DATE. The Plan shall be effective January 1, 1994, or
such later date on which the plan is approved by the Board.
1.3 DEFINITIONS. Capitalized terms shall have the meanings ascribed
to them in this Section 1.3, or as otherwise provided in this Plan:
"Board" means the Board of Directors of the Company.
"Participant" means, as of any date, any executive of the Company or
any of its Subsidiaries, designated by the Board, in its complete discretion, as
a "Participant" eligible to participate in the Plan. "'Participant" shall also
mean any individual for whom a Deferred Stock Account has been established and
has not been fully distributed, regardless of whether the individual remains
eligible to convert Compensation hereunder. "Subsidiary" shall include any
corporation, limited partnership, limited liability company or other entity of
which more than 50% of the ownership interest is beneficially owned, directly or
indirectly, by the Company.
"Stock" or "Shares" means the common stock, par value $.01 per share,
of the Company.
"Compensation" means the base annual salary and bonuses earned and
payable to a Participant.
"Deferred Stock Account" means the Account established for each
Participant to record the amount of Stock credited to such Participant as a
result of such Participant's election to convert Compensation into Stock
hereunder.
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"Deferral Period" means the period during which the Participant has
elected to defer the receipt of the Stock credited to such Participant's
Deferred Stock Account, which shall not end prior to January 1 of the third Plan
Year after the Plan Year during which Compensation is being converted into Stock
pursuant to this Plan (i.e. for Compensation being converted into Stock in 1996,
the Deferral Period may not end prior to January 1, 1999).
"Plan Year" means the calendar year, with 1994 being the initial Plan
Year of the Plan.
"Shareholders Agreement" means that certain Shareholders Agreement
dated as of October 7, 1993, by and among Eye Care Holdings, Inc. and the
Shareholders listed therein.
1.4 ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in the Board. Subject to the
limitations contained herein, the Board shall have the sole and complete
authority: (a) to construe and interpret the Plan and to adopt, amend and
rescind administrative guidelines and other rules and regulations relating to
the Plan; (b) to correct any defect or omission or reconcile any inconsistency
in the Plan or in the payment of any amounts hereunder; and (c) to make all
other determinations and to take all other actions necessary or advisable for
the implementation and administration of the Plan. The Board's decisions on
matters within its authority shall be conclusive and binding upon the Company
and all other persons. All expenses associated with the Plan shall be borne by
the Company.
1.5 SHARES SUBJECT TO THE PLAN. Subject to adjustment as the Board
shall determine to be appropriate in the event of a stock dividend, stock split
or other recapitalization by the Company, the amount of Stock which may be
subject to the Plan shall not exceed 38,500 shares. In the event Participants
elect to defer Compensation in any Plan Year for the crediting of a number of
Shares under the Plan that is in excess of the number of Shares authorized by
the Plan, all Participants' deferrals shall be reduced on a pro rata basis based
on the amount each Participant elects to defer, for that Plan Year so that the
total amount deferred by all Participants for the crediting of Shares does not
exceed the number of Shares authorized by the Plan.
1.6 COMPLIANCE WITH APPLICABLE LAWS. Notwithstanding any other
provision of the Plan, the Company shall have no obligation to deliver any
shares of Stock under the Plan unless such delivery would comply with all
applicable laws and the applicable requirements of any securities exchange or
similar entity. Prior to the delivery of any shares of Stock under the Plan, the
Company may require a written statement that the Participant is acquiring the
Stock for investment and not with a view toward redistribution. The certificates
representing Stock issued pursuant to this Plan, when issued, may bear a legend
referring to applicable restrictions on the resale thereof
1.7 DIRECTOR AND EXECUTIVE STATUS. Nothing in this Plan shall confer
on any Participant the right to continue as a director, executive or employee of
the Company, or any
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right or claim to any benefit under the Plan unless such right or claim has
specifically accrued under the Plan.
1.8 AMENDMENT OR TERMINATION OF PLAN. While the Company expects and
intends to continue the Plan indefinitely, the Company reserves the right at any
time to amend, suspend or terminate the Plan; provided that any such amendment,
suspension or termination shall not affect the rights of the Participants or the
balance of any Deferred Stock Accounts as of the date of such amendment,
suspension or termination. Any amendment, suspension or termination shall be
made by action of the Board.
1.9 APPLICABLE LAW. The Plan shall be construed and administered in
accordance with the laws of the State of Texas.
1.10 GENDER AND NUMBER. Where the context requires, words in any
gender shall include any other gender, words in the singular shall include the
plural and words in the plural shall include the singular.
ARTICLE 2
COMPENSATION CONVERSION AND DEFERRED STOCK ACCOUNT
2.1 ELECTION TO CONVERT COMPENSATION. With respect to each Plan Year,
a Participant may elect, at the time and in the manner prescribed by the Board,
to convert such Participant's Compensation otherwise payable during such Plan
Year into the right to purchase Stock as provided in this Article 2. Such
election shall be made prior to the beginning of the Plan Year during which such
Compensation first becomes earned and payable; provided, that in the event an
individual first becomes a Participant during a Plan Year (whether due to the
effective date occurring after the first day of the Plan Year or otherwise),
then such Participant may make such election within 30 days of becoming a
Participant with respect to Compensation earned and payable during such Plan
Year but after the date of such election. A Participant's conversion election
with respect to base salary may be terminated in full at any time for the
remainder of the Plan Year upon the Participant's demonstration to the Board's
satisfaction that an unforeseen financial hardship exists, such termination to
be effective solely with respect to such Participant's base salary that is
earned and paid for that part of the Plan Year after the date of such
termination. Compensation subject to a conversion election shall not be paid to
the Participant but shall instead be credited to the Participant's Deferred
Stock Account in accordance with Section 2.3.
2.2 MAXIMUM DEFERRAL. The maximum amount that a Participant may elect
to defer pursuant to Section 2.1 shall be 50% of such Participant's bonus and
20% of such Participant's base annual salary.
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2.3 DEFERRED STOCK ACCOUNT. On the last day of each calendar quarter
during the Plan Year, the number of shares of Stock to be credited by the
Company and allocated to the Participant's Deferred Stock Account shall be equal
to:
(a) the amount of Compensation converted during such quarter
pursuant to the Participant's election under Section 2.1 above (net of any
Social Security or other payroll taxes applicable thereto); DIVIDED BY
(b) the Fair Market Value of a share of Stock on the first day
of the Plan Year. For this purpose, the "Fair Market Value" of a share of Stock
for the 1994 Plan Year shall be $31.00. For each Plan Year thereafter, the "Fair
Market Value" shall be (i) the closing price for the Stock on the exchange or
market on which the Stock is listed for trading as of the first trading day
immediately preceding the first day of the Plan Year, or, (ii) if the Stock is
not so listed for trading, the amount determined by the Board, in its sole and
absolute discretion, immediately prior to the first day of such Plan Year.
2.4 DISTRIBUTION OF DEFERRED STOCK ACCOUNT. The number of shares of
Stock credited to the Participant's Deferred Stock Account, together with any
dividends or other amounts paid with respect to such Stock and credited to the
Deferred Stock Account pursuant to Section 2.5, shall be distributed to the
Participant at the end of the Deferral Period. Such distribution shall be made
by the Company by issuing to the Participant a certificate representing the
number of shares of Stock credited to the Deferred Stock Account, provided that
any fractional shares shall be paid in cash. At the time of making the
Compensation conversion election pursuant to Section 2.1, the Participant shall
also elect a Deferral Period with respect to the Stock issued for the
Compensation so converted, which Deferral Period shall be for a period ending
not earlier than January 1 of the third Plan Year after the Plan Year during
which Compensation is being converted into Stock pursuant to this Plan (i.e. for
Compensation being converted into Stock in 1996, the Deferral Period may not end
prior to January 1, 1999). Such election shall be subject to such other terms
and conditions as the Board may establish, including, without limitation, such
terms and conditions as may be required to comply with Section 16 of the
Securities Exchange Act of 1934, as amended, or any other securities law or
regulation.
2.5 DIVIDENDS AND OTHER DISTRIBUTIONS. An amount equal to the
equivalent of any dividends and other distributions, if any, payable on the
number of shares of Stock previously credited to a Participant's Deferred Stock
Account shall then be credited to such Participant's Deferred Stock Account when
paid and applied toward the crediting of additional shares of Stock as if such
amounts were Compensation converted during such quarter.
2.6 FINANCIAL EMERGENCY. The Board, in its sole discretion, may alter
the timing or manner of distribution of the Deferred Stock Accounts in the event
the Participant establishes, to the satisfaction of the Board, severe financial
hardship; provided, however, if the affected
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<PAGE> 5
Participant is a member of the Board, such affected Participant shall not
participate in the financial emergency determination. In the event of a finding
by the Board of severe financial hardship, the Board may direct the distribution
of all or a portion of the Participant's Deferred Stock Account to the
Participant as it deems appropriate under the circumstances. For purposes of
this Section 2.6, severe financial hardship shall mean an unanticipated
emergency that is caused by an event beyond the Participant's control and that
would result in severe financial hardship to the Participant if early withdrawal
were not permitted, including but not limited to, the Participant's impending
bankruptcy, the Participant's or a dependent's long and serious illness, or any
other event whereby the Board determines that distribution of the Deferred Stock
Account is in accordance with the purposes of the Plan and in the best interests
of the Participant. The amount of the severe hardship withdrawal shall be
limited to the amount necessary to satisfy the severe financial hardship. The
Board's decision in passing on the severe financial hardship of the Participant
and the manner in which, if at all, the distribution of the Deferred Stock
Account shall be modified or altered shall be final, conclusive and not subject
to appeal.
2.7 WITHHOLDING TAXES. As a condition to the issuance of Stock in
distribution of the Participant's Deferred Stock Account, the Participant shall
make appropriate arrangements for satisfaction of any applicable federal, state
or local income tax withholding, and the Company shall be authorized to take
such action as may be necessary to ensure payment of such obligations,
including, without limitation, withholding from amounts due to the Participant
from the Company hereunder or otherwise, as the Participant may elect in
accordance with terms and conditions established by the Board, including the
withholding of shares of Stock otherwise distributable from the Participant's
Deferred Stock Account with a value equal to such taxes.
ARTICLE 3
SHAREHOLDER MATTERS
3.1 CERTAIN REPURCHASES; RIGHTS TO COMPEL SALE.
(a) (i) Subject to paragraphs (b) and (c) below, upon
termination of the Participant's employment by reason of death, by the Company
without Cause (as hereinafter defined), or by the Participant for Good Reason
(as hereinafter defined), the Company shall have the right to purchase any or
all of the amount of Stock credited to such Participant's Deferred Stock Account
and/or distributed therefrom, in either case, at a per share price equal to the
quotient of: (A) the amount by which five times the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for the preceding four
fiscal quarters for which financial statements are available exceeds the sum of
(x) the principal and accrued interest on all obligations of the Company
outstanding as of the date of such termination for debt for borrowed money other
than any such debt that is convertible or exchangeable into Shares or Common
Equivalent Shares (as defined below) ("Common Equivalent Debt") (the
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<PAGE> 6
principal and accrued interest on such obligations other than Common Equivalent
Debt being herein referred to as the "Debt") plus (y) the value of the preferred
stock of the Company outstanding as of the date of such termination, if any,
other than convertible, participating or other preferred stock which in the
reasonable judgment of the Board is substantially similar in economic terms to
the Shares ("Common Equivalent Shares") (the value of such preferred stock other
than any Common Equivalent Shares being deemed to be the sum of the liquidation
value and accumulated dividends on such preferred stock (the "Preferred Stock"))
DIVIDED BY (B) the number of Fully Diluted Shares (as defined in the
Shareholders Agreement) as of the date of termination of employment plus, to the
extent not already included in such Fully Diluted Shares, the number of Shares
into which the Common Equivalent Shares (including Common Equivalent Debt which
is convertible or exchangeable into Common Equivalent Shares) are convertible or
exchangeable (or if not convertible or exchangeable, the number of such Common
Equivalent Shares) (such aggregate number of Shares being herein referred to as
the "Share Number").
(ii) Subject to paragraphs (b) and (c) below, if the
Participant voluntarily terminates his employment (other than for Good Reason)
or is terminated by the Company for Cause, the Company shall have the right to
purchase any or all of the shares of Stock credited to his Deferred Stock
Account and/or distributed therefrom at a per share price equal to the quotient
of (A) the amount by which four times EBITDA for the preceding four fiscal
quarters of the Company for which financial statements are available exceeds the
sum of the Debt and Preferred Stock DIVIDED BY (B) the Share Number.
(b) Upon a "Transferability Event" (as defined below), the
right of the Company to purchase Stock hereunder shall be at a share price equal
to the "fair market value" of a Share, or, in the event of a termination
specified in subparagraph (a)(ii) above, at the price specified therein, if
less.
For purposes of this Paragraph (b), a "Transferability Event" shall
mean (1) the Participant is eligible (or would be eligible if then distributed)
to transfer Stock at any time after an underwritten public offering of equity
securities of the Company (other than pursuant to a Form S-4 or S-8 registration
statement, or any offering which is not widely dispersed) (a "Public Offering")
in a transaction which complies with Rule 144 under the Securities Act of 1933,
as amended, or (2) if the Public Offering resulted in net proceeds to the
Company or selling stockholders of at least $25,000,000, with or without regard
to Rule 144.
For purposes of this paragraph (b), the fair market value of a Share
shall mean, with respect to any Share, (I) if the Stock is then listed or
admitted to trading on any securities exchange or quoted by a reputable
quotation service, the average of the "daily market price" of the Stock for the
30 consecutive trading days immediately preceding the day as of which fair
market value is being determined, or (II) if the Stock is not then so listed and
no reported sale or bid and asked prices by a reputable quotation service for
such 30 consecutive trading days are available in respect of such Stock, the
fair market value of such shares as determined in
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<PAGE> 7
accordance with subparagraph (a)(i) or (ii) above, as applicable. The "daily
market price" for each such trading day shall be (A) if the Stock is listed or
admitted to trading on any securities exchange, the closing price, regular way,
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day or (B) if the Stock is not then listed or
admitted to trading on any securities exchange, the last reported sale price on
such day, or if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reputable quotation source
designated by the Company.
(c) Upon termination of the Participant's employment, the
Company shall determine promptly the price at which the Company has the right to
purchase the Stock (the "Purchase Rights") and shall provide prompt written
notice to the Participant of such price. The Purchase Rights shall be
exercisable by the giving of written notice by the Company within 30 days
following such written notice of price and shall terminate upon the expiration
of such 30 day period if not so exercised. In the event that the contractual
restrictions under any financing arrangements of the Company or the financial
well-being of the Company (as determined by the Board in good faith, taking into
account the current and anticipated business, financial position, results of
operations and cash flow of the Company and such other factors as the Board
deems relevant) do not permit the Company to purchase for cash all of the Stock
pursuant to the exercise of any Purchase Rights, the Company shall have the
option (1) to notify the Participant that it is unable to make such purchase at
such time or (2) to purchase such Stock for a promissory note having the terms
specified in paragraph (e) below, if such contractual restrictions and financial
well-being permit. In the event the Company elects option (1) above, the Company
shall notify Participant as soon as such contractual restrictions and the
financial well-being of the Company permit such purchase for cash, whereupon the
Company shall be entitled to exercise its Purchase Rights as if the
Participant's employment had then terminated.
(d) Payment of the Purchase price in connection with any such
purchase of the Stock shall be in the form of cash or, to the extent provided in
paragraph (c) above, may be in the form of a promissory note or in a combination
of cash and a promissory note. Such promissory note shall (i) be subordinate to
and consistent with provisions of any obligations of the Company for debt for
borrowed money, (ii) have a maturity of no more than five years from the date of
issuance, (iii) be payable in no more than five annual installments of principal
and interest, with the first installment of principal and interest to be paid no
later than 12 months from the date of issuance and (iv) bear interest at a rate
equal to the rate then in effect for U.S. Treasury obligations having maturity
comparable to that of such promissory note. To the extent such purchase is made
of Stock held in the Deferred Stock Account, such cash or promissory note shall
be credited to the Deferred Stock Account in lieu of such Stock., and shall be
distributed to the Participant at the end of the Deferral Period. Any such cash
held in the Deferred Stock Account shall be credited with earnings quarterly at
a rate equal to the prime rate of interest published in THE WALL STREET JOURNAL
on the first business day of such quarter.
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(e) For purposes of this Plan:
(i) Termination of the Participant's employment by, the
Company for "Cause" shall mean a Company-initiated termination due to (A)
Participant's willful and continued failure substantially to perform his duties
(other than as a result of total or partial incapacity due to physical or mental
illness), (B) material dishonesty in the performance of Participant's duties,
(C) an act or acts on Participant's part constituting a felony under the laws of
the United States or any state thereof, (D) any other willful act or omission
which is materially injurious to the financial condition or business reputation
of the Company or any of its subsidiaries or affiliates, or (E) violation of the
Company's code of conduct or of any material provision of other Company
employment policies, as such code of conduct and other policies shall be in
effect from time to time.
(ii) Subject to the notification and cure provisions of
this Section 3.1 (e)(ii) termination of Participant's employment with the
Company by the Participant for "Good Reason" shall mean a Participant-initiated
termination following the occurrence of any of the following events without,
where applicable, the prior written consent of Participant: (A) a failure by the
Company to pay compensation and any other amounts vested and due hereunder or
pursuant to any other benefit arrangement maintained by the Company, or (B)
Participant's disability or attainment of age 65.
If Participant proposes to terminate his employment for Good
Reason pursuant to this Section 4(e), he shall give the Company written notice
in accordance with Section 4(e)(iii). Such notice shall be given with sufficient
particularity that the Company will have the opportunity to correct the
situation to the reasonable satisfaction of Participant within 30 days. If such
correction is not so made, Participant may, within 30 days after the expiration
of the time within which the Company had the opportunity to correct such
situation, give written notice to the Company that he is terminating his
employment for Good Reason effective forthwith with the effect stated in this
Section 4(e)(ii).
(iii) Any purported termination of employment by the
Participant for Good Reason shall be communicated by written Notice of
Termination to the Company, in care of its Chairman. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision of this Agreement upon which the Participant
intends to rely and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under the
provision so indicated.
(f) All shares issued pursuant to this Plan shall be subject to
the "Rights to Compel Sale" provisions set forth in Section 2.5 of the
Shareholders Agreement, which is incorporated herein for all purposes. The
Participant and the Participant's transferees, if any, shall be deemed to be
"Management Holders" for purposes of the application of said Section
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2.5 to the Participant or such transferees, but not for any other purpose under
the Shareholders Agreement.
3.2 TRANSFERABILITY. The Participant's interest in the Deferred Stock
Account is nontransferable and may not be sold, assigned, transferred, disposed
of, pledged or otherwise encumbered by the Participant other than by will or the
laws of descent and distribution. Any permitted transferee of any Shares issued
pursuant to this plan (a "Successor") shall take all rights herein granted,
subject to the terms and conditions hereof and the applicable terms and
conditions of the Shareholders Agreement. No such permitted transfer of any
Stock to the Participant's Successor shall be effective to bind the Company
until (i) such Successor shall have executed and become a party to a similar
agreement with such terms as the Company considers appropriate and (ii) the
Company shall have been furnished with written notice thereof and a copy of such
evidence as the Board may deem necessary to establish the validity of the
transfer and the acceptance by the Successor of the terms and conditions hereof.
3.3 SET ASIDE OF FUNDS. Nothing in this Plan shall be construed to
require, either directly or indirectly, the Company to segregate or earmark any
cash or other property or to create any fund or reserve for the payment of any
amounts hereunder, and any Participant's claim to benefits hereunder shall be
solely that of a general creditor of the Company. The Company shall, however,
reserve from its authorized but unissued shares of Stock such number of Shares
set forth in Section 1.5 hereof for issuance hereunder upon distribution of the
Participants' Deferred Stock Accounts.
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of April 24, 1998 by and between Eye Care
Centers of America, Inc., a Texas corporation (the "Company"), and Bernard W.
Andrews ("Executive").
WHEREAS, the Company desires the benefit of the experience, supervision
and services of the Executive and desires to employ Executive as its Chairman
and Chief Executive Officer ("CEO"), upon the terms and conditions hereinafter
set forth;
WHEREAS, the parties intend that Executive shall also be a Director of
the Company;
WHEREAS, the Executive is willing and able to accept such employment on
such terms and conditions;
WHEREAS, the Company and Executive desire to enter into an agreement
(the "Agreement") embodying the terms of such employment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Term of Employment. Executive's employment by the Company shall be
for a period which shall commence on the date hereof and shall terminate on
April 24, 2001; provided that the term of Executive's employment hereunder shall
be automatically extended for successive one-year periods after April 24, 2001,
unless not later than 30 days prior to such automatic extension, the Company or
Executive shall have given notice to the contrary. The period commencing as of
April 24, 1998 and ending on April 24, 2001, or such later date to which the
term of Executive's employment hereunder shall have been extended is herein
referred to as the "Employment Term". Notwithstanding the foregoing, the
Employment Term shall terminate in any and all events upon the termination of
Executive's employment in any manner specifically provided herein.
2. Positions. (a) During the Employment Term, Executive shall serve as
Chairman and CEO of the Company. Executive shall report directly to the Board of
Directors of the Company (the "Board") and shall have such duties and authority
as shall be determined from time to time by the Board; provided that such duties
shall be consistent with the positions and responsibilities assigned to him
pursuant to this Section 2(a). During the Employment Term, Executive shall also
serve on the Board without additional compensation.
(b) During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance of
his duties hereunder and shall not engage in any other business, profession or
occupation for compensation or otherwise.
<PAGE> 2
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of not less than
(i) $500,000 for the first twelve month period of the Employment Term; (ii)
$550,000 for the second twelve month period of the Employment Term; and (iii)
$600,000 for the third twelve month period of the Employment Term, payable in
arrears, in accordance with the usual payment practices of the Company, which,
in any event, shall be not less frequent than once per month. Executive's Base
Salary shall be further subject to review by the compensation committee for
possible increase. In the event of any increase from time to time, the term
"Base Salary" as defined herein shall mean such most recently increased annual
rate paid to Executive.
4. Incentive Compensation. Beginning with calendar year 1998, Executive
shall be eligible to receive, in addition to his Base Salary, a bonus (the
"Bonus") for services rendered during such year as follows:
(a) Except as is provided in Section 4(b) below, no Bonus
shall be paid with respect to any calendar year unless greater than 90% of
Target EBITDA (as defined below) is exceeded for such year. The Bonus shall be
50% of Base Salary if Target EBITDA is achieved for such year and shall be 100%
of Base Salary if 137% of Target EBITDA is achieved or exceeded for such year.
If EBITDA achieved for any calendar year exceeds 90% of Target EBITDA but does
not exceed Target EBITDA, the Bonus shall be such percentage of Base Salary
between 0% and 50%, calculated on a straight line basis, as corresponds to the
relative achievement of Target EBITDA, with 0% corresponding to 90% Target
EBITDA and 50% corresponding to Target EBITDA. If EBITDA achieved for any
calendar year exceeds Target EBITDA but is equal to or less than 137% Target
EBITDA, the Bonus shall be such percentage of Base Salary between 50% and 100%,
calculated on a straight line basis, as corresponds to the relative achievement
of Target EBITDA, with 50% corresponding to Target EBITDA and 100% corresponding
to 137% of Target EBITDA.
(b) "EBITDA" shall mean earnings after the reduction for the
Bonus and all other bonuses payable to all other employees of the Company or its
subsidiaries and before reduction for the following items (without duplication):
(i) interest (including but not limited to acquisition interest and interest
from the credit facility used on an ongoing basis by the Company for working
capital and expansion), (ii) income tax, (iii) depreciation, (iv) amortization,
(v) management, transaction and structuring fees (or the like) paid to Thomas H.
Lee Company or any affiliate thereof (but only to the extent such amounts are
included in Target EBITDA with respect to any fiscal year in question) and (vi)
non-recurring, extraordinary items as defined under generally accepted
accounting principles. "Target EBITDA" shall be established annually by the
Board or, at the discretion of the Board, by the Compensation Committee and
shall be set forth in the management plan approved annually by the Board after
consultation with management. The Target EBITDA for the calendar year 1998 has
been set at $46,453,000.
(c) Each Bonus, if any, shall be paid 30 days following the
rendering of audited financial statements for the relevant fiscal year (with
respect to each such preceding
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<PAGE> 3
fiscal year, the "Payment Date"), subject to Executive's continued employment
with the Company on the Payment Date except to the extent otherwise provided in
Section 9.
5. Employee Benefits. During the Employment Term, Executive shall be
provided employee benefits (the "Employee Benefits") as shall be maintained by
the Company from time to time on the same basis as the other senior executives
of the Company and its subsidiaries provided, Executive shall be entitled to not
less than four weeks of paid vacation per year. In addition, Executive shall be
provided, at the expense of the Company, with term life insurance sufficient to
bring the total coverage on his life at all times during the Employment Term to
three times his then effective Base Salary; provided, however, if the Company is
required under this paragraph to increase the insurance coverage due to an
increase in Executive's Base Salary after the date that the original policy is
issued, Company shall not be required to pay additional premiums due solely to a
change in the Executive's health status after such date (as opposed to
Executive's increased age, which will normally result in a higher premium that
the Company shall be responsible for). Executive shall have the option of
funding this increased premium payment due to a change in his health status.
6. Business Expenses. The Company shall reimburse such of Executive's
travel, entertainment and other business expenses as are reasonably and
necessarily incurred by Executive during the Employment Term in the performance
of his duties hereunder, in accordance with the Company's policies as in effect
from time to time. While Executive is employed hereunder, Executive shall be
furnished with a car allowance in accordance with the Company's policy as in
effect on the date hereof.
7. Securities Investment.
(a) On the date hereof, Executive shall purchase, in addition
to the Retained Shares already held by Executive (as defined below), from the
Company, pursuant to an Executive Subscription and Stock Purchase Agreement, a
form of which is attached hereto as Exhibit A (the "Purchase Agreement"), 8,005
shares, as adjusted for stock dividends, stock splits and the like (the
"Purchased Shares"), of common stock, par value $.01 per share ("Common Stock")
at an aggregate purchase price of $999,904.55 (the "Aggregate Purchase Price").
The Aggregate Purchase Price for the Purchased Shares shall be paid by delivery
of a note by Executive to the Company with an original principal amount equal to
the Aggregate Purchase Price (the "Note"). The repayment of the Note shall be
secured by the Purchased Shares and proceeds received by the Executive upon
disposition of the Purchased Shares as set forth in the Note. The form of the
Note to be executed and delivered by the Executive is attached as Exhibit B
hereto.
(b) For purposes of this Agreement, "Retained Shares" shall
mean and refer to the 8,005 shares of Common Stock, as adjusted for stock
dividends, stock splits and the like, being held by Executive prior to the date
hereof, the minimum aggregate value of such shares being equal to $999,904.55.
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<PAGE> 4
8. Stock Options. On the date hereof, the Company shall grant to
Executive, pursuant to the Company's 1998 Stock Option Plan in the form attached
as Exhibit C (the "Option Plan"), options (the "Options") to purchase in the
aggregate 30,948 shares of Common Stock under the terms and conditions set forth
in the option agreement to be executed and delivered concurrently herewith by
the Company and the Executive in the form attached as Exhibit D hereto (the
"Option Agreement").
9. Termination. Except as provided in this Section 9 and in the Option
Agreement, upon a termination of employment (i) Executive shall be entitled to
no other payment or benefit under this Agreement or any other plan or program of
the Company, (ii) the entitlement described in this Section shall be his
exclusive entitlement in the event of termination of employment, and (iii)
Executive shall not be liable to the Company for damages as a result of any
failure to perform future services after such termination.
(a) For Cause by the Company.
(i) Subject to the notification and cure provisions
of subparagraph (ii) of this Section 9(a), Executive's employment hereunder may
be terminated by the Company for "Cause". For purposes of this Agreement,
"Cause" shall mean (A) Executive's willful and continued failure substantially
to perform his duties hereunder (other than as a result of Disability (as
defined below) or death of the Executive), (B) material dishonesty in the
performance of Executive's duties hereunder, (C) Executive's conviction or
guilty plea to an act or acts which constitute a felony under the laws of the
United States or any State thereof, (D) any other willful act or omission which
is (x) in contravention of one or more specific directions or prohibitions of
the Board (other than financial targets or other financial performance
criteria), and (y) materially injurious to the financial condition or business
reputation of the Company or any of its subsidiaries or affiliates, including
but not limited to breach of the non-competition and confidentiality covenants
set forth in Sections 10 and 11 hereof, (E) Executive's breach of any provisions
of this Agreement, the Stockholders' Agreement (or any successor agreement
thereto) (as defined below), the Purchase Agreement, or the Note or (F) an
intentional violation, which is not immaterial, of the Company's written (x)
code of conduct or (y) employment policies, as such code of conduct and
employment policies shall be in effect from time to time (other than any change
after the date hereof to the Company's written code of conduct or employment
policies which is inconsistent with the terms hereof and not approved by the
Executive).
(ii) If the Company proposes to terminate Executive's
employment hereunder for Cause pursuant to clause (A), (E) or (F) of Section
9(a)(i), the Company shall give Executive written notice in accordance with
Section 9(f). Such notice shall be given with sufficient particularity such that
Executive will have an opportunity to correct the situation to the reasonable
satisfaction of the Company within 30 days. If such correction is not so made,
the Company may, within 30 days after the expiration of the time within which
Executive had the opportunity to correct such situation, give written notice to
Executive that it is terminating his
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<PAGE> 5
employment for Cause effective forthwith with the effect stated in this Section
9(a). If Executive is terminated for Cause, he shall be entitled to receive his
Base Salary through the date of termination and any unreimbursed business
expenses payable pursuant to Section 6, payable promptly following the later of
the date of such termination of employment and the date on which the appropriate
documentation is provided. All other benefits shall lapse following Executive's
termination of employment pursuant to this Subsection 9(a) except to the extent
otherwise provided in any written employee benefit plan of the Company.
(b) Disability or Death.
(i) Executive's employment hereunder shall terminate
upon (A) his death or (B) at the Company's election, if Executive becomes
physically or mentally incapacitated and is therefore unable, for a period of 6
consecutive months or for an aggregate of 6 months in any 24 consecutive month
period, to perform his duties (such incapacity is hereinafter referred to as
"Disability"). Any question as to the existence of the Disability of Executive
as to which Executive and the Company cannot agree shall be determined in
writing by a qualified independent physician mutually acceptable to Executive
and the Company. If Executive and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in writing.
The determination of Disability made in writing to the Company and Executive
shall be final and conclusive for all purposes of the Agreement.
(ii) Upon termination of Executive's employment
hereunder for death, Executive, or his estate, shall receive his Base Salary at
the rate in effect at the time of Executive's death through the date on which
his death occurs. Upon termination of Executive's employment hereunder for
Disability, Executive shall receive his Base Salary through the date on which
Executive is first eligible to receive payment of disability benefits in lieu of
Base Salary under the Company's employee benefit plans as then in effect. In
addition, upon termination of Executive's employment hereunder for either death
or disability, Executive shall receive any unreimbursed business expenses
payable pursuant to Section 6, payable promptly following the later of the date
of such termination of employment and the date on which the appropriate
documentation is provided.
(iii) All other benefits shall lapse following
Executive's termination of employment pursuant to this Subsection 9(b) except to
the extent otherwise provided in any written employee benefit plan of the
Company.
(c) Without Cause by the Company. If Executive's employment is
terminated by the Company without "Cause" (other than by reason of death or
Disability), subject to compliance with the provisions of Sections 10 and 11
below, Executive shall receive as severance (the "Severance") (i) an amount
equal to twice the then applicable Base Salary, payable in monthly installments
over a twelve-month period, (ii) a pro rata potion of any Bonus which is earned
by the Executive for the fiscal year in which such Termination occurs
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<PAGE> 6
(determined as set forth below), and (iii) any unreimbursed business expenses
payable pursuant to Section 6, payable promptly following the later of the date
of such termination of employment and the date on which the appropriate
documentation is provided. The pro rata portion the Bonus referred to in clause
(ii) of the immediately preceding sentence shall be determined after the end of
the fiscal year in which such termination occurs, shall be paid 30 days
following the rendering of audited financial statements for such fiscal year,
and shall be equal to the product of (x) the Bonus, if any, which would have
been payable with respect to such fiscal year pursuant to Section 4 if the
Executive's employment had not been terminated, multiplied by (y) a fraction,
the numerator of which is the number of days during such fiscal year during
which Executive was employed by the Company, and the denominator of which is 365
days. All other benefits shall lapse following Executive's termination of
employment without Cause except to the extent otherwise provided in any written
employee benefit plan of the Company.
(d) Termination by Executive.
(i) Subject to the notification and cure provisions
of this Section 9(d), Executive may terminate his employment for Good Reason
pursuant to this Section 9(d) and thereupon shall be entitled to the same
payments and benefits as described in Section 9(c) above. For purposes of this
Section 9(d), "Good Reason" shall mean the occurrence of any of the following
events without the prior written consent of Executive: (A) removal of Executive
from his position as Chairman and CEO or as a member of the Board of Directors
other than for Cause, death or Disability, (B) a failure by the Company to pay
Base Salary as provided herein or a reduction in Base Salary, (C) a failure by
the Company to pay the Bonus as provided herein, (D) a material breach of this
Agreement by the Company, (E) a failure by the Company to vest Options in
accordance with the terms of the Option Agreement, (F) a failure by the Company
to pay any other amounts vested and due hereunder, (G) a move of the Company's
head office to a location outside of metropolitan San Antonio, Texas or (H) a
material reduction in Executive's duties, responsibilities, or reporting
responsibilities.
(ii) If Executive proposes to terminate his
employment for Good Reason pursuant to this Section 9(d), he shall give the
Company written notice in accordance with Section 9(f). Such notice shall be
given with sufficient particularity such that the Company will have an
opportunity to correct the situation to the reasonable satisfaction of Executive
within 30 days. If such correction is not so made, Executive may, within 30 days
after the expiration of the time within which the Company had the opportunity to
correct such situation, give written notice to the Company that he is
terminating his employment for Good Reason effective forthwith with the effect
stated in this Section 9(d).
(iii) If Executive terminates his employment
hereunder other than for Good Reason (as defined in this Section 9(d)), he shall
be entitled to receive the payments and benefits to which he would be entitled
in the event of a termination of employment by the Company for Cause as set
forth in Section 9(a)(ii).
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<PAGE> 7
(e) Retained Shares.
(i) Put Right.
(A) In the event of the termination of this
Agreement (x) by the Company without Cause; (y) by the Executive for Good
Reason; or (z) in the event the Company fails to offer to extend the Agreement
as provided in Section 1 on terms comparable to those set forth herein, the
Executive shall have the right, by delivery of a written notice to the Company
(the "Put Notice"), within 90 days after such a termination (the period being
referred to herein as a "Put Period"), to cause the Company to purchase, and the
Company shall purchase (subject to the following), the Retained Shares which are
owned by the Executive on the date of termination with an aggregate Fair Market
Value not to exceed $1,000,000 (collectively, the "Put Securities"), at a price
per share equal to the Fair Market Value of the shares. "Fair Market Value"
shall mean and refer to the fair value of the Retained Shares as of the
applicable date determined by the Company and Executive by mutual agreement or,
absent such agreement, it shall be determined by an independent investment
banking firm chosen by the Company and Executive. In determining such Fair
Market Value, no discount shall be taken for constituting a minority interest
and no upward adjustment or discount shall be taken relating to the fact that
the Retained Shares in question are subject to the restrictions set forth in
this Agreement, the Stockholders Agreement, and the Note.
(B) If Executive does not give notice of his
election to sell the Put Securities during the Put Period as provided herein,
all of the rights to sell such Put Securities to the Company pursuant to this
Section 9(e)(i) shall terminate.
(C) The closing of the purchase of any Put
Securities by the Company pursuant to this Section 9(e)(i) shall take place at
the principal office of the Company not later than 90 days after the delivery of
the Put Notice. At any closing pursuant to this Section 9(e)(i), the Company
shall deliver to the Executive consideration in an amount equal to the aggregate
Put Price payable in respect of such Put Securities, but in no event shall the
Company be obligated to purchase Put-Securities with an aggregate Put Price in
excess of $1,000,000, against delivery of original stock certificates and stock
powers duly endorsed in favor of the Company representing the Put Securities.
The Company, at its option, may pay the consideration for such Put Securities
(x) by wire transfer or company check, to the extent the Company has adequate
cash available to make such payments and/or (y) by delivery of a promissory
note.
(D) The Company shall have the right, but
not in any case the obligation, to satisfy its obligations pursuant to this
Section 9(e)(i) by allowing the Principals (as defined below) to purchase their
respective pro rata shares of the Put Securities with rights of over-allotment
should any Principal choose not to purchase any of the Retained Shares
hereunder. Each Principal shall, within 30 days after receipt of the Put Notice
by it, notify the Company if it wishes to purchase all, but not less than all,
of his or of its pro rata share of the Put Securities at the Put Price. At each
closing of the purchase of the Put Securities in accordance
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<PAGE> 8
with this Section 9(e)(i), each Principal shall deliver, against delivery of
certificates duly endorsed and stock powers representing the Retained Shares to
be purchased by it in accordance with this Section 9(e)(i), a certified check or
checks payable to the Executive selling the Put Securities as specified in the
Put Notice, in an aggregate amount equal to the Put Price multiplied by the
number of Put Securities being purchased by such Principal at such closing.
"Principals" shall mean and refer to each of Thomas H. Lee Equity Fund IV, L.P.
and its affiliates.
(E) Notwithstanding anything to the contrary
set forth herein, the Company shall not be required to purchase Put Securities
pursuant to this Section 9(e)(i) to the extent such purchase (x) would violate
applicable law, or (y) would result in a default or violation of any loan,
credit, or investment agreement or promissory note to which the Company or any
subsidiary of the Company is a party or subject; provided that the Company shall
act to purchase said Put Securities on the earliest practicable date after such
legal and/or contractual restriction or violation lapses or is no longer
applicable.
(F) The provisions of this Section 9(e)(i)
shall survive only until the earlier of (x) the Public Float Date (as defined in
the Stockholders Agreement) or (y) a Change of Control (as defined in the
Stockholders' Agreement).
(ii) Call Right.
(A) Upon the termination of this Agreement
by either the Company or Executive for any reason, then the Company shall have
the right to purchase (the "Call Option"), by delivery of a written notice (the
"Call Notice") to Executive no later than 90 days after such termination, and
Executive shall be required to sell all, but not less than all, of the Retained
Shares, Purchased Shares and shares issuable upon exercise of the Options which
are owned by him on such date (the "Call Securities") equal to the Fair Market
Value (as defined above) of such Call Securities as of the date of the Call
Notice (less the exercise price of all shares issuable upon exercise of the
Options).
(B) The closing of any purchase of Call
Securities by the Company pursuant to this Section 9(e)(ii) shall take place at
the principal office of the Company no later than 180 days after the
termination. At such closing, the Company shall deliver to Executive
consideration in an amount equal to the aggregate Fair Market Value payable in
respect of such Call Securities against delivery of original stock certificates
and stock powers duly endorsed in favor of the Company representing the Call
Securities. The Company, at its option, may pay the consideration for such Call
Securities in the form of a company check or wire transfer; provided, however,
that if at the time of such closing the Company is then prohibited from
redeeming with immediately available funds all or a portion of the Call
Securities pursuant to the terms of any credit facility, indenture or similar
agreement or instrument then binding on the Company, then the Company may
deliver a promissory note. All of the foregoing deliveries will be deemed to be
made simultaneously, and none shall be deemed completed until all have been
completed.
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<PAGE> 9
(C) If the Company does not elect to
exercise the Call Option and deliver a Call Notice within 90 days of such a
termination, then the Call Option provided in this Section 9(e)(ii) shall
terminate, but the Executive shall continue to hold such Call Securities
pursuant to all of the other provisions of this Agreement and the Stockholders
Agreement.
(D) The provisions of this Section 9(e)(ii)
shall terminate upon the earlier to occur of (i) the initial Public Offering (as
defined in the Stockholders' Agreement (as defined below)) or (ii) a Change in
Control (as defined in the Stockholders' Agreement).
(f) Notice of Termination. Any purported termination of
employment by the Company or by Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 15(h)
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of employment under the provision so
indicated.
10. Non-Competition. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees as
follows:
(a)(i) During the Employment Term, Executive shall not enter
into any competitive endeavors with and shall not undertake any commercial
activity which is contrary to the best interests of the Company, including
becoming an employee, owner (except for passive investments of not more than 1%
of the outstanding shares of or any other equity interest in, any company or
entity listed or traded on a national securities exchange or in an
over-the-counter securities market), officer, agent or director of any firm or
person which engages in Optical Retailing in any geographic area (for purposes
of this Agreement, "Optical Retailing" shall be defined as any retail company in
which gross sales from the sale of optics and optical related devices (such as
eyeglasses and eye contact lenses) is greater than fifteen (15%) percent of its
total gross sales).
(ii) During the three year period following the date
of the termination of Executive's employment hereunder (the "Restricted
Period"), Executive shall not without the Company's written consent, (A) serve
as an employee, owner (except for passive investments of not more than 1% of the
outstanding shares of, or any other equity interest in, any company or entity
listed or traded on a national securities exchange or in an over-the- counter
securities market), officer, agent or director of any firm or person which
engages in Optical Retailing, or (B) serve as an employee in the capacity of a
primary employee directly responsible for a division of any firm or business if
said division has gross sales from the sale of optics and optical related
devices (such as eyeglasses and eye contact lenses) of greater than fifteen
(15%) percent of said division's total gross sales.
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<PAGE> 10
(iii) If Executive so competes during the Employment Term or
during the Restricted Period, he shall forfeit (A) the balance of his Severance,
if any, and (B) his vested Options if such termination was by the Company for
Cause or by the Executive without Good Reason (as those terms are defined by
this Agreement).
(b) During the Employment Term and the Restricted Period
thereafter, Executive shall not directly or indirectly knowingly, or under
circumstances in which he reasonably should have known, induce any employee of
the Company to engage in any activity in which Executive is prohibited from
engaging by Section 10(a) above or to terminate his employment with the Company
and shall not directly or indirectly knowingly, or under circumstances in which
he reasonably should have known, employ or offer employment to any such person
unless such person shall have ceased to be employed by the Company and such
cessation of employment shall have occurred at least 12 months prior thereto. If
following Executive's termination of employment, he violates the provisions of
this Section 10(b), he shall forfeit (A) the balance of his Severance, if any
and (B) his vested Options if the termination of employment of Executive was by
the Company for Cause or by the Executive without Good Reason (as those terms
are defined in this Agreement).
11. Confidentiality. Executive shall not during the Employment Term or
thereafter, without the prior written consent of the Board, use, divulge,
disclose or make accessible to any other person, firm, partnership or
corporation any Confidential Information, as hereinafter defined, except for
communications or delivery of information by the Executive (i) to any of his
advisers, attorneys or accountants who have need to know such information, (ii)
to his spouse, (iii) while employed by the Company in the business of and for
the benefit of the Company or (iv) when required to do so by a court of law, by
any governmental agency or by any administrative body or legislative body,
including a committee thereof, with jurisdiction to order him to divulge,
disclose or make accessible such Confidential Information; provided, however, t
at in the case of any such requirement or purported requirement Executive shall
provide written notice to the Company prior to producing such Confidential
Information, which notice shall be given at least 10 days prior to the producing
of such Confidential Information, if practicable, so that the Company may seek a
protective order or other appropriate remedy; and, provided, further, that
Executive shall inform the recipients of the information or communication
described in clauses (i) and/or (ii) of the confidential nature of such
information, and Executive shall be responsible for any damages or other
consequences arising out of any communication or delivery of information by any
recipients which would not be permitted hereunder by Executive as if the
Executive himself had made such communication or delivery of information. For
purposes of this Agreement, "Confidential Information" shall mean all non-public
information concerning the business of the Company, including, without
limitation, information relating to its financial products, product development,
managed care and other similar contracts, customer lists, relationships with
customers, relationships with medical services providers, other information
about or provided by customers or medical service providers, financial
information, business and marketing plans and strategies, operating policies and
manuals, securities positions, and current or prospective transactions and their
related legal structures, except for specific items which
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<PAGE> 11
become publicly available information other than through a breach by Executive
of his fiduciary duty or any confidentiality agreement, including without
limitation this Section 11. Executive agrees that upon termination of his
employment hereunder for any reason, he shall return to the Company immediately
all memoranda, books, papers, plans, information, letters and other data, and
all copies thereof or therefrom, in any way relating to the business of the
Company, except that he may retain personal notes, notebooks and diaries.
Executive further agrees that he shall not retain or use for his account at any
time any trade name, trademark, service mark or other proprietary business
designation used or owned in connection with the business of the Company.
12. Specific Performance and Other Remedies. Executive acknowledges and
agrees that the Company has no adequate remedy at law for a breach or threatened
breach of any of the provisions of Section 10(a)(i), 10(a)(ii), 10(b) or 11 and,
in recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company
shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available. Nothing in this
Agreement shall be construed as prohibiting the Company from pursuing any other
remedies at law or in equity that it may have or any other rights that it may
have under any other agreement.
13. Indemnification. Executive shall be entitled to indemnification, in
his capacity as an officer or as a director, by the Company in accordance with
the provisions of the Company's restated articles of incorporation, bylaws or
actions of the Board, as the same shall be in effect from time to time, and
Executive shall be entitled to the protection of any insurance policies the
Company may elect to maintain generally for the benefit of its officers or
directors.
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Company's jurisdiction of
incorporation, as it may be, from time to time, without reference to principles
of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement, the Note, the
Option Agreement, the Purchase Agreement and the Stockholders' Agreement in the
form attached as Exhibit E hereto (the "Stockholders Agreement") contain the
entire understanding of the parties with respect to the employment of Executive
by the Company and supersede any prior agreements between the Company and
Executive. To the extent that there is any conflict between the Stockholders
Agreement, on the one hand, and this Employment Agreement, the Note or the
Option Agreement, on the other, the provisions of the Stockholders Agreement
shall be subordinated to, and modified by, the provisions of this Employment
Agreement, the Note or the Option Agreement, as the case may be. There are no
restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth herein, in the Option Agreement, the Note, the
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<PAGE> 12
Purchase Agreement and the Stockholders Agreement. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties
hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.
(d) Severability. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in
Sections 10 and 11 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory restriction in
Section 10 or any other restriction contained in Section 10 or 11 is an
unenforceable restriction against Executive, such provision shall not be
rendered void but shall be deemed amended to apply to such maximum time and
territory, if applicable, or otherwise to such maximum extent as such court may
judicially determine or indicate to be enforceable Alternatively, if any court
of competent jurisdiction finds that any restriction contained in Section 10 or
11 is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein. In the event that any one or more of the
other provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by
Executive and shall be assignable by the Company, provided that (i) the assignee
or transferee is the successor to all or substantially all of the assets of the
Company, and (ii) such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in such an
event, it shall take whatever action it legally can in order to cause such
assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company hereunder. None of the rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law.
(f) Mitigation. Executive shall not be required to mitigate
the amount of any payment or benefit to be provided to Executive pursuant to
Section 9(c) or 9(d) by seeking other employment. However, anything in this
Agreement to the contrary notwithstanding, if Executive provides services for
other than de minimus pay to anyone other than the Company, its assignees, or
any of its affiliates or subsidiaries ("Third Party Services") during a period
in which he is receiving Severance (the "Severance Period"), the amount of
Severance to be paid to Executive with respect to such Severance Period shall,
beginning on the date such payment for Third Party
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<PAGE> 13
Services is received by Executive, be reduced by the total amount of such
payments received for Third Party Services rendered.
(g) Successors: Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the personal or
legal representatives, executors, administrators, successors, heirs,
distributes, devises and legatees of the parties hereto.
(h) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered in hand, transmitted
by facsimile (receipt confirmed) or by a nationally recognized overnight courier
service (with a written confirmation of receipt):
To the Executive: Bernard W. Andrews
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
With a copy to: Nelson Mullins Riley & Scarborough
2411 North Oak Street, Suite 301
Myrtle Beach, SC 29578
Attn: Thomas F. Moran, Esq.
To the Company: Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Attn: Board of Directors
Secretary of the Company
With a copy to: Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Anthony J. DiNovi
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attn: James Westra, Esq.
or at such other address of which any party may notify the other parties as
provided above. All such notices, requests, demands and other communications
shall be deemed duly given (i) two (2) days following the date on which mailed,
(ii) on the same date if hand delivered or by
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<PAGE> 14
facsimile transmission (receipt confirmed), or (iii) one (1) day following
deposit with a reputable overnight delivery service, as the case may be, and
addressed as aforesaid.
(i) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement and the Option Agreement such Federal,
state and local taxes as may be required to be withheld pursuant to any
applicable law or regulations.
(j) Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment to the
extent necessary to the agreed preservation of such rights and obligations.
(k) Arbitration. Any dispute between the parties to this
Agreement arising from or relating to the terms of this Agreement or the
employment of Executive by the Company shall be submitted to arbitration in
Wilmington, Delaware under the auspices of the American Arbitration Association.
(l) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(m) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
* * * * * *
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of the day and year first above written.
_____________________________________
Bernard W. Andrews
EYE CARE CENTERS OF AMERICA, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
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<PAGE> 1
EXHIBIT 10.5
EYE CARE CENTERS OF AMERICA, INC.
STOCK OPTION AGREEMENT
UNDER 1998 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
--------------------------
AGREEMENT entered into this 24th day of April, 1998 by and between EYE CARE
CENTERS OF AMERICA, INC., a Texas corporation (the "Company"), and the
undersigned employee of the Company (the "Employee"). Capitalized terms used
herein as defined terms which are not otherwise defined herein shall have the
meanings given to them in the Employment Agreement dated as of April 24, 1998
between the Company and the Employee (the "Employment Agreement").
WHEREAS, the Company desires to grant the Employee a non-qualified stock
option under the Company's 1998 Stock Option Plan (the "Plan") to acquire shares
of the Company's common stock, par value $.01 per share ("Common Stock").
WHEREAS, Section 6 of the Plan provides that each option is to be evidenced
by an option agreement, setting forth the terms and conditions of the option.
NOW, THEREFORE, the Company and the Employee hereby agree as follows:
1. GRANT OF OPTION. The Company hereby irrevocably grants under the Plan
and subject to the terms and conditions of the Plan to the Employee a
non-qualified stock option (the "Option") to purchase up to 30,948 shares (the
"Shares") of Common Stock on the terms and conditions hereinafter set forth.
This option shall not be treated as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. VESTING: PURCHASE PRICE.
(a) GENERAL. One-half of the Shares subject to the Option shall vest
based solely upon the passage of time, as set forth below (the "Time Based
Option"). One-half of the Shares subject to the Option shall vest on the tenth
anniversary of the date of grant, subject to acceleration of vesting upon
achievement of certain performance criteria, as set forth below (the
"Performance Option").
(b) PURCHASE PRICE. The purchase price payable upon exercise of the
Option shall be $124.91 per Share.
(c) VESTING OF TIME BASED OPTION. The Time Based Option shall vest in
six equal installments of 2,579 Shares. The first installment shall vest on
October 24, 1998, and each subsequent installment shall vest on the same day of
each sixth month following such initial vesting date until the entire Time Based
Option shall have vested or been terminated pursuant to the provisions hereof.
<PAGE> 2
(d) VESTING OF PERFORMANCE OPTION.
(1) Employee shall not be vested with the right to exercise the
Performance Option until ten (10) years after the grant date, at which time
Employee shall acquire the vested right to exercise the Performance Option.
(2) Notwithstanding the foregoing, on and after the publication
of each written determination by the Board of Directors of the Company (the
"Board"), or a committee thereof which is authorized to do so, that the Company
has met at least ninety percent (90%) of its objective for EBITDA (as defined in
the Employment Agreement) (100% of the Company's objective referred to herein as
the "Performance Goals") for the prior fiscal year, commencing for the fiscal
year ending January 2, 1999 and continuing for each of the two fiscal years
thereafter, then subject to the other restrictions in the Plan and this
Agreement, Employee shall acquire the vested right to exercise this Option to
purchase sixteen and two-thirds percent (16 2/3%) of the Shares subject to the
Performance Option, and for each additional one percent (1%) achievement over
ninety percent (90%) of the Performance Goals for any such fiscal year, as so
determined, Employee shall acquire the vested right to exercise this Option to
purchase an additional one and two-thirds percent (1 2/3%) of the Shares subject
to the Performance Option but no more than thirty-three and one-third percent
(33 1/3%) of the Shares subject to the Performance Option in respect of each
full fiscal year.
(3) Additionally, on and after publication of a written
determination by the Board or a committee thereof which is authorized to do so
that the Company has met at least eighty seven and one half percent (871/2%) of
its Performance Goals for the fiscal year ending December 31, 2000 and at least
ninety percent (90%) of its cumulative Performance Goals for the three fiscal
years ending December 31, 2000 ("Three Year Performance Goals"), then subject to
the other restrictions in the Plan and this Agreement, (i) Employee shall
acquire the vested right to exercise the Performance Option to purchase fifty
percent (50%) of the Shares subject to the Performance Option as to which
Employee had not otherwise acquired the vested right to exercise, and (ii) for
each additional one percent (1%) achievement over ninety percent (90%) of the
Three Year Performance Goals, as so determined, Employee shall acquire the
vested right to exercise the Performance Option to purchase an additional five
percent (5%) of the Shares subject to the Performance Option as to which
Employee has not otherwise acquired the vested right to exercise (such
additional exercise rights pursuant to clauses (i) and (ii) above are referred
to herein as the "Additional Exercise Rights").
(4) Such determinations shall be made by the Board or such
committee within ten (10) days after receipt of audited financial statements for
each fiscal year. The Board's or committee's determination as to whether the
Company has met such objectives shall be final and not subject to dispute. In
addition, the Board or a committee thereof shall have complete discretion to
modify such objectives from time to time for any year or years to reflect
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<PAGE> 3
business combinations or dispositions, fiscal year changes, purchases or sales
of assets or any other circumstances the Board or committee thereof deems
relevant.
(e) ACCELERATION.
(1) SALE.
(A) Notwithstanding any provision to the contrary in this
Section 2, but subject to the other restrictions in the Plan and this Agreement,
in the event of a Sale (as defined below), (i) all unvested Shares subject to
the Time Based Option shall become vested and immediately exercisable in full,
and (ii) a portion of the unvested Shares subject to the Performance Option
shall become vested and immediately exercisable in the event the Lee IRR (as
defined below) is greater than or equal to twenty percent (20%). The portion
thereof which shall become vested and immediately exercisable shall range from
zero percent (0%) to one hundred percent (100%) in proportion to the amount by
which the IRR exceeds twenty (20%) (up to thirty-five percent (35%)) compared to
the difference between twenty percent (20%) and thirty-five percent (35%). The
term "Lee IRR" shall mean the internal rate of return achieved by the Lee
Holders on their aggregate investment in the Company, determined as of
consummation of the Sale; provided that Lee IRR shall not include any
management, transaction or structuring fees (or the like) paid to the Lee
Holders or any affiliate of the Lee Holders.
(B) For purposes hereof, the term "Sale" shall mean:
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of voting securities of (a) the Company or
(b) the surviving entity in any reorganization, merger or consolidation
involving the Company (any such entity referred to herein as the "Corporation")
where such acquisition causes such Person to own more than fifty percent (50%)
of the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors, other than
acquisitions by the Thomas H. Lee Company or its Affiliates (as defined in the
Stockholders Agreement);
(ii) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company; or
(iii) the acquisition by a third party not affiliated
with the Company of all or substantially all of the Company's assets (without
regard to cash or accounts receivable).
(C) The accelerated vesting provided in this Section
2(e)(1) shall take effect immediately prior to but contingent upon the Sale
giving rise to such accelerated vesting. The phrase "immediately prior to the
Sale" shall be understood to mean sufficiently in
3
<PAGE> 4
advance of a Sale to permit the Employee to take all steps reasonably necessary
to permit the Employee to become a shareholder of the Company as of the
consummation of such Sale with respect to the Shares subject to the accelerated
vesting provided in this Section 2(e)(1). The Board or committee thereof may in
good faith shorten the Interim Period or make approximations of EBITDA during
the Interim Period in order to comply with the preceding sentence.
(2) INITIAL PUBLIC OFFERING. Notwithstanding any provision to
the contrary in this Section 2, but subject to the other restrictions in the
Plan and this Agreement, in event of the completion of the Company's initial
Public Offering (as defined below) a fraction of the total Shares subject to the
Option shall become vested and immediately exercisable, such fraction to have a
numerator equal to the aggregate number of shares of Common Stock sold by the
Lee Holders (as such term is defined in the Stockholders' Agreement referred to
in Section 11) pursuant to such Public Offering, and a denominator equal to the
aggregate number of shares of Common Stock owned by the Lee Holders immediately
following consummation of the Recapitalization (as adjusted for stock splits,
stock dividends, reclassifications and the like); PROVIDED, HOWEVER, that to the
extent any of the Shares subject to the Option shall have become exercisable
prior to the Company's initial Public Offering (the "Previously Vested Option
Shares"), then the number of Shares which become vested and exercisable pursuant
to this Section 2(e)(2) shall be reduced by the number of Previously Vested
Option Shares (but not below zero). The term "Public Offering" shall mean the
completion of a sale of Common Stock pursuant to a registration statement which
has become effective under the 1933 Act, excluding registration statements on
Form S-4, S-8 or similar limited purpose forms.
(3) TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR FOR GOOD REASON.
Notwithstanding any provision to the contrary in this Section 2, but subject to
the other restrictions in the Plan and this Agreement, in the event of
termination of the Employee's employment (x) by the Company without Cause, (y)
by the Employee for Good Reason or (z) only at the end of the initial three year
term under the Employment Agreement if the Company delivers a notice of
non-renewal pursuant to Section 1 of the Employment Agreement, then (i) all
unvested Shares subject to the Time Based Option shall become vested and
immediately exercisable in full, and (ii) such number of unvested Shares subject
to the Performance Based Option as would vest in respect of the fiscal year in
which the termination occurs pursuant to Section 2(d)(2) shall become vested and
immediately exercisable. The number of unvested Shares which vest pursuant to
clause (ii) of the immediately preceding sentence shall be calculated using the
Company's annualized EBITDA based on the Company's year-to-date EBITDA generated
during the fiscal year of the Employee's termination of employment; PROVIDED,
HOWEVER, that if within 365 days following the date of such termination of
employment, the Company consummates a Sale or initial Public Offering, then the
number of unvested Shares which become vested and exercisable pursuant to clause
(ii) of the immediately preceding sentence shall be adjusted (upward only) to
such number of Shares (the "Clawback Option Shares") as the Employee would have
been entitled under Section 2(d) if the Employee
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<PAGE> 5
had remained an employee of the Company through consummation of such a Sale or
initial Public Offering.
(4) DEATH. Notwithstanding any provision to the contrary in this
Section 2, but subject to the other restrictions in the Plan and this Agreement,
in the event of termination of Employee's employment as a result of his death,
all Shares subject to the Time Based Option which are scheduled to vest in
accordance with Section 2(c) at the end of the applicable six month period in
which such death occurs shall become vested and immediately exercisable.
3. TERM OF OPTIONS: EXERCISABILITY.
(a) TERM.
(1) Each Option shall expire not more than ten (10) years and
six months from the date of the granting thereof, but shall be subject to
earlier termination as herein provided.
(2) If such termination of employment is by the Company for
Cause, then the Option shall terminate immediately upon termination of
employment.
(3) If such termination of employment is by the Company without
Cause or by the Employee for Good Reason, the Option shall terminate on the 60th
day following the effective day of such termination of employment, or on the
date the Option expires by its terms, whichever first occurs; PROVIDED, HOWEVER,
that the Option shall terminate on the 395th day following the effective date of
such termination of employment with respect to any Clawback Option Shares.
(4) If such termination of employment is because the Employee
has become disabled (as determined in accordance with an employment agreement
between the Employee and the Company (or one of its subsidiaries) or, if there
is no such agreement, as determined in accordance with Section 22(e)(3) of the
Code) the Option shall terminate on the 60th day following the date the Employee
ceases to be an employee, or on the date on which the Option expires by its
terms, whichever first occurs.
(5) In the event of the death of the Employee, the Option
granted to the Employee shall terminate on the 180th day following the date of
death, or on the date on which the Option expires by its terms, whichever first
occurs.
(b) EXERCISABILITY. If the Employee ceases to be an employee of the
Company, the Option granted to the Employee hereunder shall be exercisable only
to the extent that the right to purchase Shares under the Option has accrued and
is in effect on the date such Employee ceases to be an employee of the Company;
PROVIDED, HOWEVER, that with respect to the Clawback
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<PAGE> 6
Option Shares, the Option may be exercised if vested in accordance with the
terms hereof during the periods provided herein.
4. MANNER OF EXERCISE OF OPTION.
(a) To the extent that the right to exercise the Option has accrued
and is in effect, the Option may be exercised in full or in part by giving
written notice to the Company stating the number of Shares to be purchased,
together with payment in full of the purchase price for such Shares. Payment may
be in the form of (i) cash or a check payable to the order of the Company in an
amount equal to the purchase price for the Shares being purchased, (ii) shares
of common stock of the Company owned by the Employee having a fair market value
equal in amount to the purchase price of the Shares being purchased, or (iii)
any combination of (i) and (ii). With the consent of the Committee, payment may
also be made by delivery of a properly executed exercise notice to the Company,
together with a copy of irrevocable instruments to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms. Upon such exercise, delivery of a
certificate for paid-up, non-assessable Shares shall be made at the principal
office of the Company to the person exercising the Option, not more than thirty
(30) days from the date of receipt of such notice and payment by the Company.
(b) The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
5. NON-TRANSFERABILITY. The right of the Employee to exercise the Option
shall not be assignable or transferable by the Employee otherwise than by will
or the laws of descent and distribution, and the Option may be exercised during
the lifetime of the Employee only by him or her. The Option shall be null and
void and without effect upon the bankruptcy of the Employee or upon any
attempted assignment or transfer, except as hereinabove provided, including
without limitation any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition contrary to the provisions
hereof, or levy of execution, attachment, trustee process or similar process,
whether legal or equitable, upon the Option.
6. REPRESENTATION LETTER AND INVESTMENT LEGEND.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the federal
Securities Act of 1933, as amended, when the Option is exercised in whole or in
part, the person exercising the Option shall give a written representation to
the Company in the form attached hereto as Exhibit 1 and the Company shall place
an "investment legend", so-called, as described in Exhibit 1, upon any
certificate for the Shares issued by mason of such exercise.
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<PAGE> 7
(b) The Company shall be under no obligation to qualify Shares or to
cause a registration statement or a post-effective amendment to any registration
statement to be prepared for the purposes of covering the issue of Shares.
7. ADJUSTMENTS ON CHANGES IN RECAPITALIZATION, REORGANIZATION AND THE
LIKE. Adjustments on changes in recapitalization, reorganization and the like
shall be made in accordance with Section 12 of the Plan, as in effect on the
date of this Agreement.
8. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or this
Agreement shall be construed or deemed by any person under any circumstances to
bind the Company (or any of its subsidiaries) to continue the employment of the
Employee for the period within which this Option may be exercised. However,
during the period of the Employee's employment, the Employee shall render
diligently and faithfully the services which are assigned to the Employee from
time to time by the Board of Directors or by the executive officers of the
Company and shall at no time take any action which directly or indirectly would
be inconsistent with the best interests of the Company.
9. RIGHTS AS A STOCKHOLDER. The Employee shall not have any rights as a
stockholder of the Company with respect to any Shares which may be purchased by
exercise of this Option unless and until a stock certificate representing such
Shares is executed and delivered to the Employee. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock certificate is issued.
10. WITHHOLDING TAXES. Whenever Shares are to be issued upon exercise of
this Option, the Company shall have the right to withhold (or to cause one of
the Company's subsidiaries to withhold) from compensation otherwise payable to
the Employee, or to require the Employee to remit to the Company an amount
sufficient to satisfy all federal, state and local withholding tax requirements
in respect of the Shares being purchased by the Employee prior to the issuance
of such Shares and the delivery of any certificate or certificates for such
Shares, and from time to time thereafter.
11. STOCKHOLDERS' AGREEMENT. As a condition to the grant of the Option,
and to any exercise of the Option, the Employee shall join in a Stockholders'
Agreement dated as of April 24, 1998 (the "Stockholders' Agreement") among the
Company, certain affiliates of Thomas H. Lee Company, and certain other
stockholders of the Company. The Option and the Shares issuable upon exercise of
the Option are subject to restrictions on transfer, voting agreements. Co-sale
agreements and other matters more fully described therein.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its corporate seal to be hereto affixed by its officer thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all as of the
day and year first above written.
EYE CARE CENTERS OF AMERICA, INC.
By:
-------------------------------------
Name:
Title:
EMPLOYEE:
/s/ Bernard W. Andrews
----------------------------------------
Name
Address:
--------------------------------
--------------------------------
--------------------------------
Social Security No.:
----------------------------------------
8
<PAGE> 9
EXHIBIT 1
TO STOCK OPTION AGREEMENT
--------------
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
Ladies and Gentlemen:
I hereby exercise my option to purchase _______ shares of common stock, par
value $.01 per share, of Eye Care Centers of America, Inc., a Texas corporation
(the "Company") under the non-qualified stock option dated _________, granted to
me under the Company's 1998 Stock Option Plan. In connection with such exercise,
I am delivering herewith the full exercise price with respect to the shares
being purchased, and I hereby acknowledge and agree to the following:
1. The shares of common stock of the Company to be issued to me pursuant
to the exercise of said option have not been registered under the Securities Act
of 1933, as amended (the "Act"), and accordingly, must be held indefinitely
unless such shares are subsequently registered under the Act, or an exemption
from such registration is available.
2. Routine sales of securities made in reliance upon Rule 144 promulgated
under the Act can be made only after the expiration of the applicable holding
period and only in limited amounts in accordance with the terms and conditions
provided by that Rule. Any sale to which such Rule is not applicable will
require registration or compliance with some other exemption under the Act.
3. The Company is under no obligation to me to register the shares or to
comply with any exemptions from registration under the Act.
4. The availability of Rule 144 is dependent upon the availability of
adequate current public information with respect to the Company. At the time
that I may desire to make a sale pursuant to Rule 144, the Company may not wish
nor be able to comply with such information requirement.
In consideration of the issuance to me of certificates for the shares, I
hereby represent and warrant that I am acquiring such shares for my own account
for investment, and that I will not sell, pledge or transfer such shares in the
absence of an effective registration statement covering the same, except as
permitted by the provisions of Rule 144, if applicable, or some other applicable
exemption under the Act. In view of this representation and warranty, I agree
that
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there may be affixed to the certificates for the shares to be issued to me, and
to all certificates issued hereafter representing such shares (until in the
opinion of counsel, which opinion must be reasonably satisfactory in form and
substance to counsel for the Company, it is no longer necessary or required) a
legend as follows:
"The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold, pledged,
or hypothecated in the absence of an effective registration statement under
the said Act or an opinion of counsel satisfactory to the Company and its
counsel that such registration is not required."
I further agree that the Company may place a stop order with its transfer
agent, prohibiting the transfer of such shares, so long as the legend remains on
the certificates representing the shares.
Very truly yours,
ii
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
effective as of the 1st day of January, 1998, by and between Eye Care Centers of
America, Inc., a Texas corporation (the "Company"), or its assigns, and
("Employee");
WITNESSETH:
WHEREAS, the Company desires to employ executive on the terms and
conditions set forth below; and
WHEREAS, Employee desires to serve in the employment of the Company on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee and Employee hereby
accepts such employment, upon the terms and conditions set forth herein.
2. Term. The term of this Agreement shall commence on the date hereof
(the "Effective Date") and shall terminate on December 31, 1998, subject to
earlier termination and extension as hereinafter provided (the "Term").
Thereafter, and subject to Section 8(d), this Agreement shall automatically
renew for successive one-year terms unless either party gives written notice of
its election not to renew at least thirty (30) days prior to the end of the then
current period. In the event of such extension, all of the terms and conditions
of this Agreement shall remain in full force and effect.
3. Duties. During the Term, employee agrees that he will devote his
full business time, attention and energies to the business of the Company and
its subsidiaries and affiliates, if applicable, and to the performance of his
duties hereunder, and shall not engage in any other business, profession, or
occupation for compensation or otherwise.
4. Compensation.
(a) Base Compensation. During the term of this Agreement, the Company
shall pay to Employee a salary at an annual rate of not less than
$__________(the "Base Salary"). The Base Salary shall be reviewed by the Board
from time to time as the Board deems appropriate. The Base Salary shall be
payable during the Term in substantially equal installments not less frequently
than monthly in accordance with the Company's standard payroll policy or in such
other installments as the parties may mutually agree.
(b) Bonus. Employee shall be eligible to earn a bonus based upon a
bonus plan to be determined from time to time by the Company prior to the
commencement of each calendar year.
<PAGE> 2
(c) Reimbursement of Expenses; Automobile. The Company shall reimburse
Employee, in accordance with the Company's policy in effect from time to time,
for all reasonable travel, entertainment and other business expenses incurred by
Employee in the performance of his duties and responsibilities hereunder.
Employee will receive an automobile allowance of $__________ per month and will
be reimbursed for his reasonable automobile insurance costs.
(d) Stock Option Plan. Employee shall be eligible to participate in the
Eye Care Centers of America, Inc.'s Executive Stock Option Plan, and his rights
with respect to options granted to him thereunder shall be governed solely by
the terms of such plan, as it may be in effect from time to time, and the terms
of the Stock Option Agreement evidencing the grant of such options.
(e) Net Payments. The amount of any gross payments provided for in this
Agreement shall be paid net of any applicable withholding required under
federal, state or local law.
5. Benefits. Employee shall be entitled to receive the benefits made
available or applicable from time to time to the employees of the Company;
provided, however, that the receipt of such benefits by Employee shall be
subject to the Company's eligibility and enrollment requirements pertaining to
such benefit programs.
6. Confidentiality and Competitive Activities.
(a) Confidentiality. Employee acknowledges that during his employment
with the Company, the Company has and will continue to disclose to him the
confidential affairs and proprietary information of the Company and its
subsidiaries and affiliates which is developed by and belongs to the Company and
its subsidiaries and affiliates, including matters of a business nature such as
information about costs, profits, markets, sales, trade secrets, potential
patents and other business ideas, customer lists, supplier and vendor lists,
plans for future developments and/or acquisitions, and information of any other
kind not known within the optical retail industry generally (collectively,
"Confidential Matters"). Employee further acknowledges that the Company would
not hire Employee or disclose these Confidential Matters to Employee without the
promises made by Employee in this Section 6. In light of the foregoing, Employee
agrees:
(i) To keep secret all Confidential Matters of the Company and
of any subsidiaries and affiliates of the Company, and not to disclose them to
anyone outside of the Company or its subsidiaries or affiliates, or otherwise
use them or use his knowledge of them for his own benefit or for the benefit of
any third party, including, without limitation, use of the trade secrets, trade
names or trademarks of the Company, either during or after the Term, except with
the Company's prior written consent; and
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<PAGE> 3
(ii) To deliver promptly to the Company at the termination of
the Term, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to the
business of the Company or any of its subsidiaries or affiliates, including, but
not limited to, Confidential Matters, which he may then possess or have under
his control.
Notwithstanding any of the foregoing, the term "Confidential Matters" does not
include information which (i) is or becomes generally available to the public
other than as a result of any disclosure by Employee or (ii) Employee is
compelled to disclose by judicial or administrative process; provided, that in
the case of any such requirement or purported requirement Employee shall provide
written notice to the Company prior to producing such information, which notice
shall be given at least ten (10) days prior to the producing such information,
if practicable, so that the Company may seek a protective order or other
appropriate remedy.
(b) Competitive Activities. Employee expressly recognizes and
acknowledges that the terms and condition of this Section 6(b) are reasonable as
to time, area and scope of restricted activity, necessary to protect the
legitimate interests of the Company, and are not unduly burdensome to Employee.
For a period commencing on the Effective Date and ending twelve (12) months
following the effective date of a termination of Employee's employment (for any
reason whatsoever other than termination by the Company without Cause or if the
Company elects not to renew the Term as provided in Section 2 hereof, Employee
shall not without the written consent of the Company, directly or indirectly
(whether for compensation or otherwise), alone or as officer, director,
stockholder (excepting not more than 1% stockholdings for investment purposes in
securities of publicly held and traded companies), partner, associate, employee,
agent, principal, trustee, salesman, consultant, capacity, take any action in or
participate with or become interested in or associated with the companies
commonly referred to as Cole/Pearl, Lenscrafter or Walmart (or any successor
thereto). (Such activities are hereinafter referred to as the "Competitive
Activities").
(c) Antisolicitation. Employee agrees that during the Term of this
Agreement, and for a period of two (2) years thereafter, he will not influence
or attempt to influence customers (including customers with respect to managed
care plans), vendors or suppliers of the Company or any of its present or future
direct or indirect subsidiaries or affiliates, either directly or indirectly, to
divert their business from the Company or any of its direct or indirect
subsidiaries or affiliates to any individual, partnership, firm, corporation or
other entity then in competition with the business of the Company or any
subsidiary or affiliate of the Company; provided this prohibition shall not
apply to general advertisements in newspaper or other widely distributed
publications, media, or mail, whether electronic or otherwise.
(d) Soliciting Employees. Employee agrees that during the Term of this
Agreement, and for a period of two (2) years thereafter, he will not directly or
indirectly contact or solicit to employ, or employ, any of the then current or
past employees of the
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<PAGE> 4
Company or any subsidiary or affiliate of the Company unless such person shall
have ceased to be employed by the Company and such cessation of employment shall
have occurred at least twelve (12) months prior thereto; provided this
prohibition shall not apply to general advertisements in newspaper or other
widely distributed publications, media, or mail, whether electronic or
otherwise. .
7. Remedies for Breach. In addition to the rights and remedies provided
in Section 14, and without waiving the same if Employee breaches, or threatens
to breach, any of the provisions of Section 6, the Company shall have the
following rights and remedies, in addition to any others, each of which shall be
independent of the other and severally enforceable:
(i) The right and remedy to have such provisions specifically
enforced by any court having equity jurisdiction together with an accounting for
any benefit or gain by Employee in connection with any such breach. Employee
specifically acknowledges and agrees that any breach or threatened breach of the
provisions of Section 6 will cause irreparable injury to the Company and that
money damages will not provide an adequate remedy to the Company. Such
injunction shall be available without the posting of any bond or other security.
(ii) The right and remedy to require Employee to account for
and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (hereinafter collectively the "Benefits") derived
or received, directly or indirectly. by Employee as a result of any transactions
constituting a breach of any of the provisions of Section 6, Employee hereby
agreeing to account for and pay over the Benefits to the Company.
(iii) The right to terminate Employee's employment pursuant to
Section 8(c).
(iv) Upon discovery by the Company of a breach or immediate
and material threatened breach of Section 6, the right to immediately suspend
payments to Employee under Section 8, pending a resolution of the dispute.
If any covenant contained in Section 6 or any portion thereof is
hereafter construed to be invalid or unenforceable, the same shall not affect
the remainder of the covenant or covenants contained therein, which shall be
given full effect, without regard to the invalid portions, and any court having
jurisdiction shall reform the covenant to the extent necessary to cause the
limitations contained therein as to time, geographical area and scope of
activity to be restrained to be reasonable and to impose a restraint that is not
greater than necessary to protect the goodwill and other business interest of
the Company and to enforce the covenant as reformed. The parties hereto intend
to and hereby confer jurisdiction to enforce the covenants contained in Section
6 upon the courts of any state or other jurisdiction in which any alleged breach
of any such covenant occurs. If the courts of any of one or more of such states
or
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<PAGE> 5
other jurisdictions shall hold such covenants not wholly enforceable by reason
of the scope thereof or otherwise, it is the intention of the parties hereto
that such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other states or jurisdictions as to
breaches of such covenants in such other respective states or jurisdictions, and
the above covenants as they relate to each state or jurisdiction being, for this
purpose, severable into diverse and independent covenants.
8. Termination of Agreement.
(a) Death. This Agreement shall automatically terminate upon the death
of Employee. During the Term, if Employee's employment is terminated due to his
death, Employee's estate shall be entitled to receive the Base Salary set forth
in Section 4 accrued through the date of death; provided, however, Employee's
estate shall not be entitled to any bonus payments (except as otherwise provided
in the applicable bonus plan) or any other benefits (except as provided by law).
(b) Disability. If Employee is unable to perform his services by reason
of mental or physical Disability (as herein defined), the Company may terminate
this Agreement at any time. Upon termination of Employee's employment due to
Disability, Employee shall be entitled to receive the Base Salary set forth in
Section 4 accrued through the date on which Employee is first eligible to
receive payment of disability benefits under the employee benefit plans as then
in effect, and if no such plan is in effect, through the month ending one
hundred eighty (180) days after onset of Disability and Employee shall not be
entitled to any bonus payments (except as otherwise provided in the applicable
bonus plan) or any other benefits (except as provided by law). The term
"Disability" shall mean an infirmity preventing Employee from performing his
duties for a period of more than three (3) consecutive months where no
reasonable accommodation is available or where a reasonable accommodation would
create an undue burden on the Company. Any question as to the existence of the
Disability of Employee as to which Employee and the Company cannot agree shall
be determined in writing by a qualified independent physician mutually
acceptable to Employee and the Company. If the Employee and the Company cannot
agree as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make such
determination in writing. The determination of Disability made in writing to the
Company and Employee shall be final and conclusive for all purposes of the
Agreement.
(c) Termination For Cause. The Company may terminate this Agreement at
any time for "Cause" in accordance with the procedures provided below.
Termination of this Agreement for "Cause" shall mean termination upon (i) the
breach of any material provision of this Agreement by Employee which has not
been rectified or cured within 30 days after notice by the Company to the
Employee containing in reasonably specific detail the violation or breach and
the necessary corrective action to rectify or cure such violation or breach,
(ii) commission of an act punishable by imprisonment, (iii) willful failure to
substantially perform his duties hereunder (other than as a result of total or
partial incapacity due to physical or
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<PAGE> 6
mental illness) which has not been rectified or cured within 30 days after
notice by the Company to the Employee containing in reasonably specific detail
the acts or omissions complained of and the necessary corrective action to
rectify or cure the matters set forth in such notice; provided, however, if the
actions or omissions that are the subject of such notice are substantially
similar to acts or omissions with respect to which the Employee has received
notice hereunder within the prior 12 months and had an opportunity to cure or
rectify, the Employee shall not be entitled to such notice and opportunity to
cure, (iv) the engaging by Employee in conduct that is materially injurious to
the Company, monetarily or otherwise, including, without limitation,
embezzlement, fraud, theft, dishonesty, misfeasance, insubordination,
malfeasance, and neglect of duties, (v) violation of the Company's code of
conduct or any material violation or repeated violations by Employee of the
other policies and procedures promulgated from time to time by the Company, or
(vi) current alcohol or drug abuse by Employee. In the event of termination of
Employee's employment for Cause, Employee shall be entitled to receive only the
Base Salary set forth in Section 4 accrued through the date of termination and
he shall not be entitled to any bonus payments or other benefits (except as
provided by law).
(d) Other Termination by the Company. The Company may terminate this
Agreement at any time without "Cause" by providing written notice to Employee.
If the Company terminates this Agreement at any time without Cause (i.e., other
than pursuant to Section 8(b) or 8(c) above), or the Company elects not to renew
the Term as provided in Section 2 hereof, the Company shall continue to pay
Employee his Base Salary for a period of nine months following the date of
termination of employment, the timing and manner of such payments to be in
accordance with the salary payment arrangements in effect at the time of such
termination. Employee shall be required to comply with Section 6. It shall be a
condition precedent of payment to Employee of such continued payments pursuant
to this subsection (d) that the Employee execute a full and complete release of
the Company, each of its subsidiaries, affiliates and their respective past,
present and future officers, directors, employees, consultants, attorneys,
agents and shareholders, in form and substance reasonably acceptable to the
Company, of any claims Employee may have against any of them, to the extent such
claims arise from Employee's employment hereunder. Notwithstanding any provision
in this Agreement to the contrary, the Company's obligations to make payments
pursuant to this Section 8(d) shall immediately terminate in the event that the
Employee engages in any of the Competitive Activities (even if Section 6(b) is
not applicable due to termination of employment without Cause).
(e) Termination by Employee. Employee may terminate this Agreement upon
thirty (30) days prior written notice to the Company. Termination shall be
effective at the expiration of the notice period. All obligations of the Company
under this Agreement shall end on the effective date of termination and the
Company shall have no further obligations under this Agreement, including, but
not limited to payment of salary, bonuses or any similar compensation or
benefits. Notwithstanding the notice provided by Employee, the Company, in its
sole discretion, may choose to accept Employee's resignation immediately. In
that
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<PAGE> 7
event, the Company's only obligation to Employee will be to pay the Base Salary
Employee would have received during the notice period.
(f) Mitigation. Employee shall not be required to mitigate the amount
of any payment or benefit to be provided pursuant to Section 8(d) ("Severance")
by seeking other employment. However, anything in this Agreement
notwithstanding, if Employee provides services for other than de minimus pay to
anyone other than the Company or any of its subsidiaries or affiliates ("Third
Party Services") during a period in which he is receiving such Severance (the
"Severance Period"), the amount of Severance to be paid to Employee with respect
to such Severance Period shall, beginning on the date such payment for Third
Party Services is received by employee, be reduced by the lesser of (i) fifty
percent (50%) of such Severance payment, or (ii) fifty percent (50%) of such
payment for Third Party Services rendered.
9. Effect of Termination. Upon the termination of this Agreement,
whether by the expiration of the Term specified in Section 2 or pursuant to
Section 8, the rights of Employee which shall have accrued prior to the date of
such termination shall not be affected in any way. Except as provided in Section
8(d), Employee shall not have any rights which have not previously accrued upon
termination of this Agreement.
10. Communications. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the respective addresses set forth below,
or to such other addresses as either party may have furnished to the other in
writing in accordance herewith, except that notice of a change of address shall
be effective only upon actual receipt; to the Company: the Company, at c/o Eye
Care Centers of America, Inc., 11103 West Avenue, San Antonio, Texas 78213-1392,
for the attention of Bernard Andrews, President; and to Employee:__________
11. Amendments or Additions. No amendments or additions to this
Agreement shall be binding unless in writing and signed by all parties hereto.
12. Binding Effect; Assignability. This Agreement shall be binding
upon, and shall inure to the benefit of, Employee; the obligations of Employee
hereunder are personal and this Agreement may not be assigned by Employee. This
Agreement is completely assignable by the Company without notice to or consent
of Employee. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company and shall also bind and inure to the benefit of any
successor of the Company by merger or consolidation or any assignee of all or
substantially all of its properties.
13. Headings; References. The headings used in this Agreement are
included solely for convenience and shall not affect, or be used in connection
with, the interpretation of this
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<PAGE> 8
Agreement. References to a "Section" when used without further attribution shall
refer to the particular sections of this Agreement.
14. Binding Arbitration. Subject to the rights of any party to seek
injunctive relief pursuant to Section 7 above and without waiving the same, the
parties agree that all disputes, controversies or claims that may arise among
them (including their agents and employees), arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be submitted
to, and determined by, binding arbitration. Such arbitration shall be conducted
before a single arbitrator pursuant to the Commercial Arbitration Rules then in
effect of the American Arbitration Association, except to the extent such rules
are inconsistent with this Section 14. The arbitrator shall apply the laws of
the State of Texas (without regard to conflict of law rules) in determining the
substance of the dispute, controversy or claim and shall decide the same in
accordance with applicable usages and terms of trade. The fees of the
arbitration initially shall be paid one-half by the Company and one-half by
Employee; provided, however, that the prevailing party in any such arbitration
shall be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties, and judgment on the
award may be entered in any federal or state court sitting in any court having
jurisdiction. The obligations set forth in this Section 14 shall survive the
termination of this Agreement. THE COMPANY AND EMPLOYEE EACH KNOWINGLY AND
VOLUNTARILY GIVE UP ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE,
CLAIM OR CONTROVERSY WHICH MAY ARISE BETWEEN THEM.
15. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas without regard to its conflicts of law
principles.
16. Surviving Provisions. The obligations of the Company under Section
8, of Employee under Section 6, and of both the Company and Employee under
Section 14 shall survive the expiration of the Term of this Agreement.
17. Entire Agreement. This Agreement shall constitute the entire
agreement between the parties superseding all prior agreements and all other
negotiations, letter of intent, memoranda of understandings, and representations
(if any) made by and among such parties,
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<PAGE> 9
and may not be modified or amended, and no waiver shall be effective, unless by
written document signed by both parties hereto. Notwithstanding its foregoing,
the parties agree that the provisions of Section 6 shall be in addition to, and
shall not supersede, similar provisions contained in the Stock Purchase
Agreement. The Company and Employee have each had an opportunity to consult with
counsel of their choice regarding the terms and conditions of this Agreement,
and each understands the consequences of entering into and complying with the
terms and conditions of the Agreement.
18. Pronouns. In this Agreement, the use of any gender shall be deemed
to include all genders, and the use of the singular shall include the plural,
wherever it appears appropriate from the context.
19. Enforcement Costs. If any legal action or other proceeding,
including arbitration, is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any provisions of this Agreement, the prevailing party or
parties shall be entitled to recover reasonable attorneys' fees, court costs and
all expenses even if not taxable as court costs, incurred in that action or
proceeding, in addition to any other relief to which such party or parties may
be entitled.
20. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. Except
that to the extent any court determines that Section 6 is invalid or
unenforceable, in this event the Company shall be relieved of its payment
obligations to Employee under Section 8.
21. Indemnification. Employee shall be entitled to indemnification, in
has capacity as an officer of the Company in accordance with the provisions of
the Company's certificate of incorporation, bylaws or actions of the Board, as
the same shall be in effect from time to time, and Employee shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its officers or directors.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of tile day and year first above written.
Eye Care Centers of America, Inc.
By:______________________________
Bernard W. Andrews
President & Chief Executive Officer
EMPLOYEE:
__________________________________
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<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated (March 24, 1997) by and between EYE CARE
CENTERS OF AMERICA, INC., a Texas corporation (the "Company") and Michele Benoit
("Executive").
WHEREAS, the Company desires to employ Executive and provide severance
pay in the event of termination without cause as provided in this Agreement;
WHEREAS, the Company has adopted an enhanced Annual Incentive Plan for
Key Management in which Executive shall be permitted to participate upon
execution of this Agreement; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1: Term of Employment. This Agreement shall commence on April 21,1997
("Commencement Date") and shall terminate on the one year anniversary of the
Commencement Date (the "Employment Term") except as otherwise provided in this
Agreement. The Company, at its sole option and discretion, may extend the term
of this Agreement for an additional one year period(s), upon written notice to
Executive on or before thirty (30) days prior to the end of the Employment Term.
(Employment Term also includes any extensions of this Agreement.) If the
Agreement is not specifically renewed, the employment relationship shall become
at-will; however, in this event, if the Company terminates the Executive's
employment without cause, as defined herein, the Executive shall be entitled to
receive the severance as provided for in Section 9(a) of this Agreement, in
accordance with the terms of this Agreement.
<PAGE> 2
2. Duties. During the Employment Term, Executive shall devote
substantially all of her business time and best efforts to the performance of
her duties hereunder and shall not engage in any other business, profession or
occupation for compensation or otherwise.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of not less than
$125,000.00, payable bi-weekly in arrears, in accordance with the usual payment
practices of the Company. Executive's Base Salary shall be subject to annual
review for possible increase at the end of February or in March of each year
during the Employment Term.
4. Incentive Compensation. The Executive shall be permitted to
participate in the Company's Annual Incentive Plan for Key Management, and her
rights are governed solely by the terms of such plan as it may be in effect from
time to time, except that Executive's bonus under such plan for 1997 shall not
be less than $25,000.00 and for purposes of calculating such bonus, the bonus
shall be calculated as if the Executive began working on January 1, 1997.
5. Stock Options. The Executive shall be permitted to participate in
the Company's Executive Stock Option Plan, and her rights are governed solely by
the terms of that plan as it may be in effect from time to time, and her
Executive Stock Option Agreement(s) as in effect from time to time.
6. Employee Benefits. During the Employment Term, Executive shall be
provided employee benefits as shall be maintained by the company from time to
time on the same basis as the other similarly situated executives of the
Company.
7. Business Expenses and Perquisites. The Company shall reimburse such
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<PAGE> 3
of Executive's travel, entertainment and other business expenses as are
reasonably and necessarily incurred by Executive during the Employment Term in
the performance of her duties hereunder, in accordance with the Company's
policies as in effect from time to time. During the Employment Term, Executive
shall be furnished with a car allowance in accordance with the Company's policy
as in effect from time to time.
8. Termination. Notwithstanding Section 1 , this Agreement shall
terminate automatically upon the death or disability of Executive.
9. Severance Payments on Termination.
(a) Without Cause by the Company. If Executive's employment is
terminated by the Company during the Employment Term without "cause," Executive
shall receive in lieu of any other compensation, benefits or payments, continued
periodic payment of Base Salary for nine months following date of termination.
"Cause" shall have the same meaning as set forth in Section 4 (f) (i) (A)
through (E) of the Eye Care Centers of America Executive Stock Option Plan
effective in October, 1993. Severance pay shall cease immediately upon Executive
entering into competition as defined in Section (10) (a) (i) of this Agreement.
(b) Disability. Upon termination of Executive's employment hereunder
for disability, Executive shall receive her Base Salary through the date on
which Executive is first eligible to receive payment of disability benefits
under the Company's employee benefit plans as then in effect, and if no such
plan is in effect, through the month ending 180 days after onset of disability.
"Disability" as used herein shall mean the inability of Executive,
notwithstanding any reasonable accommodation the Company may make, to perform
her
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<PAGE> 4
customary duties due to any condition of physical or mental illness, injury,
disease or other incapacity, which condition has existed or may reasonably be
expected to continue for six consecutive months or for an aggregate of six
months in any 24 consecutive months. Any question as to the existence of the
Disability of Executive as to which Executive and the Company cannot agree shall
be determined in writing by a qualified independent physician mutually
acceptable to Executive and the Company. If Executive and the Company cannot
agree as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make such
determination in writing. The determination of Disability made in writing to the
Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(c) Death. Upon termination of Executive's employment hereunder for
death, Executive shall receive her Base Salary at the rate in effect at the time
of Executive's death through the end of the month in which her death occurs.
(d) Executive shall not be entitled to any payment or benefit upon
termination of her employment, except for payments of Base Salary expressly
provided in this Section 9, any rights under the Company's Executive Stock
Option Plan and Agreement(s), and any statutory rights such as COBRA.
10. Non-Competition. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees as
follows:
(a) (i) During the Employment Term, including any extension(s), and
thereafter while receiving any severance pay under Section 9 (a) of
this Agreement, Executive shall not enter into any competitive
endeavors with and shall not
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<PAGE> 5
undertake any commercial activity which is contrary to the best
interests of the Company, including becoming an employee, owner,
officer, agent or director of any firm or person in any geographic
areas in the United States, Mexico or Canada, which engages
primarily in optical retailing; and
(ii) Except in the event of a termination of employment by the
Company during the Employment Term without cause, Executive shall
not without the Company's prior written consent, for one year
following termination of her employment, serve as an employee,
owner, officer, agent or director of any firm or person in any
geographic areas in the United States, Mexico or Canada which
engages primarily in optical retailing. Nothing in this Section 10
(a) shall prohibit Executive from owning passive investments of not
more than 1% of the outstanding shares of any company or entity
listed or traded on a national securities exchange or in an
over-the-counter securities market.
(b) For one year following termination of her employment, with or
without cause, including any termination upon or after expiration
of the Employment Term. Executive shall not directly or indirectly
induce any employee of the Company to engage in any activity in
which Executive is prohibited from engaging by Section 10 (a) (i)
or (ii) above or to terminate her employment with the Company, and
shall not directly or indirectly employ or offer employment to any
such person unless such person shall have ceased to be
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<PAGE> 6
employed by the Company and such cessation of employment shall
have occurred at least 12 months prior thereto.
11. Confidentiality. Executive shall not, during the Employment Term
(including extensions) or thereafter, without the prior written consent of the
Company, use, divulge, disclose or make accessible to any other person, firm,
partnership or corporation any Confidential Information, as hereinafter defined,
except while employed by the Company in the business of and for the benefit of
the Company or when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative body or legislative body, including a committee thereof, with
jurisdiction to order her to divulge, disclose or make accessible such
Information; provided, that in the case of any such requirement or purported
requirement Executive shall provide written notice to the Company prior to
producing such Information, which notice shall be given at least 10 days prior
to the producing of such Information, if practicable, so that the Company may
seek a protective order or other appropriate remedy. For purposes of this
Agreement, "Confidential Information" shall mean all non-public information
concerning the business of the Company, including, without limitation,
information relating to its product development, customer lists, relationships
with customers, financial information, business and marketing plans and
strategies, operating policies and manuals, and current or prospective
transactions, except for specific items which become publicly available
information other than through a breach by Executive of her fiduciary duty or
any confidentiality agreement, including without limitation this Section 11.
Executive agrees that upon termination of her employment hereunder for any
reason, she shall return to the Company immediately all
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<PAGE> 7
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company,
except that she may retain personal notes, notebooks and diaries. Executive
further agrees that she shall not retain or use for her account at any time any
trade name, trademark, service mark or other proprietary business designation
used or owned in connection with the business of the Company.
12. Specific Performance and Other Remedies. Executive acknowledges and
agrees that the Company has no adequate remedy at law for a breach or threatened
breach of any of the provisions of Sections 10 (a) (i), 10 (a) (ii), 10 (b) or
11 and, in recognition of this fact, Executive agrees that, in the event of such
a breach or threatened breach, in addition to any remedies at law, the Company,
without posting any bond, shall be entitled to obtain equitable relief in the
form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Nothing in this Agreement shall be construed as prohibiting the Company from
pursuing any other remedies at law or in equity that it may have or any other
rights that it may have under any other agreement.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes any prior
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<PAGE> 8
employment agreements between the Company and Executive. This Agreement may not
be altered, modified, or amended except by written instrument signed by the
parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to the term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.
(d) Severability. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in
Sections 10 and 11 to be reasonable, if a final judicial determination is made
by a court of competent jurisdiction that the time or territory restrictions in
Section 10 or any other restriction contained in Section 10 or 11 is an
unenforceable restriction against Executive, such provisions shall not be
rendered void but shall be deemed amended to apply to such maximum time and
territory, if applicable, or otherwise to such maximum extent as such court may
judicially determine or indicate to be enforceable. In the event that any
provision of this Agreement shall nevertheless be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall inure to the benefit of and be binding upon the
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the parties hereto.
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<PAGE> 9
(f) Offset. Anything in this Agreement to the contrary
notwithstanding, if Executive provides services for pay to anyone other than the
Company or any of its affiliates or subsidiaries during a period in which she is
receiving severance pay (the "Severance Period"), the amount of severance paid
or to be paid to Executive with respect to such Severance Period shall be
reduced by the amount of compensation earned by Executive with respect to such
Severance Period as a result of Executive's performing such services.
(g) Communications. For the purpose of this Agreement, notices and
all other communications provided for this Agreement shall be in writing and
shall be deemed to have been duly given when faxed or delivered or two business
days after being mailed by the United States Registered or certified mail,
return receipt requested, postage prepaid, addressed to the Company at its
principal place of business, and to Executive at her last known place of
business or her residence.
(h) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
(i) Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's employment to the
extent necessary to the agreed preservation of such rights and obligations.
(j) Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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<PAGE> 10
(k) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
By: /s/ Bernard W. Andrews
-----------------------------
Bernard W. Andrews
Title: President and Chief Executive Officer
/s/ Michele Benoit
---------------------------------
Michele Benoit
Title:Senior Vice President - Human Resources
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<PAGE> 1
EXHIBIT 10.8
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as of the
24th day of April 1998 by and between Eye Care Centers of America, Inc. (the
"Company") and THL Equity Advisors IV, LLC ("THL").
Whereas, on or about the date hereof the Company has consummated certain
transactions (such transactions being referred to herein as the
"Recapitalization"), pursuant to that certain Recapitalization Agreement dated
as of March 6, 1998 (as amended from time to time, the "Recapitalization
Agreement") among ECCA Merger Corp. ("ECCA"), the Company, and the Sellers named
therein;
Whereas, THL is providing advisory and other services to the Company in
connection with the senior secured financing (the "Senior Financing") being
provided in connection with the Recapitalization pursuant to a Credit Agreement
dated on or about the date hereof among ECCA, the Company, and Bankers Trust
Company, as agent, and the lending institutions from time to time party thereto;
and
Whereas, subject to the terms and conditions of this Agreement, the
Company desires to retain THL to provide certain management and advisory
services to the Company, and THL desires to provide such services;
Now, therefore, In consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Services. THL, in its individual business capacity and for its own account,
and not in its capacity as general partner of Thomas H. Lee Equity Fund IV, L.P.
and Thomas H. Lee Foreign Fund IV, L.P. (the "THL Funds"), hereby agrees that,
during the term of this Agreement (the "Term"), it will:
a. provide the Company with advice in connection with the negotiation and
consummation of agreements, contracts, documents and instruments necessary to
provide the Company with financing from banks or other financial institutions or
other entities on terms and conditions satisfactory to the Company; and
b. provide the Company with financial, managerial and operational advice
in connection with its day-to-day operations, including, without limitation:
i. advice with respect to the investment of funds; and
ii. advice with respect to the development and implementation of
strategies for improving the operating, marketing and
financial performance of the Company.
<PAGE> 2
THL shall devote reasonable time and efforts to the performance of the
services contemplated by this Agreement. However, no precise number of hours is
to be devoted by THL on a weekly or monthly basis. THL may perform services
under this Agreement directly, through its employees or agents, or with such
outside consultants as THL may engage for such purpose.
2. Payment of Fees. The Company hereby agrees to:
a. pay to THL (or its designee) for its services hereunder a fee in the
amount of $6,000,000 in connection with the structuring of the Senior Financing
for the Recapitalization, together with reimbursement of THL's expenses incurred
on behalf of the Company through the Closing Date in connection with the
Recapitalization, such fees and expenses being payable by the Company at the
closing of the Recapitalization;
b. during the Term, pay to THL (or its designee) a management fee in an
amount of $500,000 per annum in exchange for the services provided to the
Company by THL, as more fully described in Section 1 of this Agreement, such fee
being payable by the Company quarterly in advance, the first such payment to be
made at or after the closing of the Recapitalization; and
c. during the Term, allow THL to participate in the negotiation and
consummation of any acquisition of any company or line of business by the
Company or any of its direct or indirect subsidiaries, and pay to THL (or its
designee) a fee in connection therewith equal to one percent (1%) of the gross
purchase price of such acquisition (including all liabilities assumed or
otherwise included therein), such fee to be due and payable for the foregoing
services at the closing of such acquisition.
Each payment made pursuant to this Section 2 shall be paid by wire
transfer of immediately available federal funds to the account specified on
Schedule I hereto, or to such other account(s) as THL may specify to the Company
in writing prior to such payment.
3. Term. This Agreement shall continue in full force and effect, unless and
until terminated by mutual consent of the parties in writing, for so long as THL
(or any successor or permitted assign, as the case may be) continues to carry on
the business of providing services of the type described in Section 1 above;
provided, however, that either party may terminate this Agreement following a
material breach of the terms of this Agreement by the other party hereto and a
failure to cure such breach within 30 days following written notice thereof; and
provided further that each of (a) the obligations of the Company under Section 4
below, (b) any and all accrued and unpaid obligations of the Company owed under
Section 2 above and (c) the provisions of Section 7 shall survive any
termination of this Agreement to the maximum extent permitted under applicable
law.
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<PAGE> 3
4. Expenses; Indemnification.
a. Expenses. The Company agrees to pay on demand all expenses incurred by
THL in connection with this Agreement, the Recapitalization and such other
transactions and operations hereunder incurred in connection with the
Recapitalization or the Company, including but not limited to (i) the fees and
disbursements of: (A) Hutchins, Wheeler & Dittmar, a Professional Corporation
("HWD"), special counsel to THL and (B) any other consultants or advisors
retained by THL or by HWD arising in connection therewith (including but not
limited to the preparation, negotiation and execution of this Agreement and any
other agreement executed in connection herewith or in connection with the
Recapitalization, the Senior Financing or the consummation of the other
transactions contemplated hereby (and any and all amendments, modifications,
restructurings and waivers, and exercises and preservations of rights and
remedies hereunder or thereunder) and the operations of the Company and any of
its subsidiaries), and (ii) any out-of-pocket expenses incurred by THL in
connection with the provision of services hereunder or the attendance at any
meeting of the board of directors (or any committee thereof) of the Company or
any of its affiliates.
b. Indemnity and Liability. In consideration of the execution and delivery
of this Agreement by THL, the Company hereby agrees to indemnify, exonerate and
hold THL, and each of its affiliates, owners, principals, directors, officers,
fiduciaries, employees and agents and each of the partners, shareholders,
affiliates, owners, principals, directors, officers, fiduciaries, employees and
agents of each of the foregoing (collectively, the "Indemnitees") free and
harmless from and against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses in connection therewith, including without
limitation reasonable attorneys' fees and disbursements (collectively, the
("Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to the Recapitalization, the
execution, delivery, performance, enforcement or existence of this Agreement or
the transactions contemplated hereby or thereby except for any such Indemnified
Liabilities arising on account of such Indemnitee's gross negligence or willful
misconduct, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. None of the Indemnitees
shall be liable to the Company or any of its affiliates for any act or omission
suffered or taken by such Indemnitee that does not constitute gross negligence
or willful misconduct.
5. Assignment, etc. Neither party shall have the right to assign this Agreement.
THL acknowledges that its services under this Agreement are unique. Accordingly
any purported assignment by THL shall be void.
6. Amendments and Waivers. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective, unless in writing and executed
by each of THL
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<PAGE> 4
and the Company. No waiver on any one occasion shall extend to or effect or be
construed as a waiver of any right or remedy on any future occasion. No course
of dealing of any person nor any delay or omission in exercising any right or
remedy shall constitute an amendment of this Agreement or a waiver of any right
or remedy of any party hereto.
7. Miscellaneous.
a. Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
b. Consent to Jurisdiction. Each of the parties agrees that all actions,
suits or proceedings arising out of or based upon this Agreement or the subject
matter hereof shall be brought and maintained exclusively in the federal and
state courts of The Commonwealth of Massachusetts. Each of the parties hereto by
execution hereof (i) hereby irrevocably submits to the jurisdiction of the
federal and state courts in The Commonwealth of Massachusetts for the purpose of
any action, suit or proceeding arising out of or based upon this Agreement or
the subject matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that it is
immune from extraterritorial injunctive relief or other injunctive relief that
its property is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in one of the
above-named courts, that any such action, suit or proceeding brought or
maintained in one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than one of the
above-named courts, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be enforced
in or by any of the of above-named courts. Each of the parties hereto hereby
consents to service of process in any such suit, action or proceeding in any
manner permitted by the laws of The Commonwealth of Massachusetts, agrees that
service of process by registered or certified mail, return receipt requested, at
the address specified in or pursuant to Section 9 is reasonably calculated to
give actual notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 9 does not constitute good
and sufficient service of process. The provisions of this Section 7(b) shall not
restrict the ability of any party to enforce in any court any judgment obtained
in a federal or state court of The Commonwealth of Massachusetts.
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<PAGE> 5
c. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANT
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the
parties hereto acknowledges that it has been informed by each other party that
the provisions of this Section 7(c) constitute a material inducement upon which
such party is relying and will rely in entering into this Agreement and the
transactions contemplated hereby. Any of the parties hereto may file an original
counterpart or a copy of this Agreement with any court as written evidence of
the consent of each of the parties hereto to the waiver of its right to trial by
jury.
8. Merger/Entire Agreement. Agreement contains the entire understanding of the
parties with respect to the subject matter hereof and supersedes any prior
communication or agreement with respect thereto.
9. Notice. All notices, demands, and communications of any kind which any party
may require or desire to serve upon any other Party under this Agreement shall
be in writing and shall be served upon such other party and such other party's
copied persons as specified below by personal delivery to the address set forth
for it below or to such other address as such party shall have specified by
notice to each other party or by mailing a copy thereof by certified or
registered mail, or by Federal Express or any other reputable overnight courier
service, postage prepaid, with return receipt requested, addressed to such party
and copied persons at such address. In the case of service by personal delivery,
it shall be deemed complete on the first business day after the date of actual
delivery to such address. In the case of service by mail or by overnight
courier, it shall be deemed complete, whether or not received, on the third day
after the date of mailing as shown by the registered or certified mail receipt
or courier service receipt. Notwithstanding the foregoing, notice to any party
or copied person of change of address shall be deemed complete only upon actual
receipt by an officer or agent of such party or copied person.
If to the Company, to it at:
Eye Care Centers of America, Inc.
1103 West Avenue
San Antonio, TX 78213
Attention: Secretary
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<PAGE> 6
If to THL, to it at:
Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attention: Mr. Warren C. Smith, Jr.
Mr. Anthony J. DiNovi
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: Charles W. Robins
10. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then such
unenforceable provision shall be deemed eliminated from this Agreement for the
purpose of such proceedings to the extent necessary to-permit the remaining
provisions to be enforced. To the full extent, however, that the provisions of
any applicable law may be waived, they are hereby waived to the end that this
Agreement be deemed to be valid and binding agreement enforceable, in accordance
with its terms, and in the event that any provision hereof shall be found to be
invalid or unenforceable, such provision shall be construed by limiting it so as
to be valid and enforceable to the maximum extent consistent with and possible
under applicable law.
11. Counterparts. This Agreement may be executed in any number of counterparts
and by each of the parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
[Remainder of this page intentionally left blank]
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<PAGE> 7
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
THE COMPANY: EYE CARE CENTERS OF AMERICA, INC.
/s/ Mark T. Pearson
By _________________________
Title:
THL: THL EQUITY ADVISORS IV, LLC
By _________________________
Title: Managing Director
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<PAGE> 8
SCHEDULE 1 TO MANAGEMENT AGREEMENT
Wire Transfer Instructions for Thomas H. Lee Company
Bank:
ABA #
For:
Account #
Account Name:
Acct. #
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<PAGE> 1
EXHIBIT 10.17
RETAIL BUSINESS MANAGEMENT AGREEMENT
This Retail Business Management Agreement is made and entered into
effective as of September 30, 1997 by and between Visionary Retail Management,
Inc., a Delaware corporation, ("Retail Business Manager"), and Dr. Samit's Hour
Eyes Optometrist, P.C., a Virginia professional corporation (the "Practice").
RECITALS
A. The Practice is a professional corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia (the "Commonwealth")
which is engaged in the provision of Professional Eye Care Services (as defined
below) and Optical Services (as defined below) to the general public in the
Commonwealth through individual Professionals (as defined below) who are
licensed to practice optometry and/or ophthalmology in the Commonwealth and who
are employed or otherwise retained by the Practice.
B. Retail Business Manager is a business corporation duly organized and
validly existing under the laws of the Commonwealth.
C. The Practice desires to devote substantially all of its energies,
expertise and time to the delivery of Professional Eye Care Services to
patients.
D. The Practice desires to engage Retail Business Manager to provide
facilities, equipment and such management, administrative and business services
as are necessary and appropriate for the day-to-day administration of the retail
optical aspects of the Practice as well as certain personnel and services for
the Practice's professional eye care practice, and Retail Business Manager
desires to provide such, upon the terms and conditions hereinafter set forth,
for the purpose of enhancing the cost-efficiency and quality of services
rendered by the Practice to its patients.
NOW, THEREFORE, for and in consideration of the mutual agreements, terms,
covenants and conditions contained herein and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Retail Business Management Agreement, the
following terms shall have the following meanings ascribed thereto, unless
otherwise clearly required by the context in which such term is used:
1.1 ACCOUNT. The term "Account" shall mean the bank account described in
Sections 3.9 and 3.10.
<PAGE> 2
1.2 ADJUSTED GROSS REVENUE. The term "Adjusted Gross Revenue" shall mean
all revenues for Optical Services, Professional Eye Care Services, or otherwise,
generated by or on behalf of the Practice and/or its Professionals, or other
personnel during the term of this Retail Business Management Agreement,
calculated on an accrual basis under GAAP, including all technical fees from
ancillary services, all proceeds from key person life and disability insurance
policies purchased by Retail Business Manager, in agreement with the Practice,
in accordance with Section 3.14, all amounts paid by third parties for
contractual liabilities, including, but not limited to, payments under
non-shareholder Professionals' non-competition agreements and compensation
payments under any service agreement between the Practice and another entity,
and all consultant, teaching and expert witness fees minus any allowances for
bad debts, uncollectible accounts, Medicare, Medicaid and other payor
contractual adjustments, discounts, workers' compensation adjustments,
reasonable professional courtesies, and other reductions in collectible revenue
that result from activities that do not result in collectible charges.
1.3 ADJUSTED NET REVENUE. The term "Adjusted Net Revenue" shall have the
meaning set forth in Section 5.2 hereof.
1.4 BILL OF SALE. The term "Bill of Sale " shall mean the agreement by and
between Retail Business Manager and the Practice as of even date whereby Retail
Business Manager shall purchase from the Practice substantially all of the
furniture, fixtures, and equipment used in the operation of the Dispensary (as
defined below) prior to execution of this Retail Business Management Agreement.
1.5 BUDGET. The term "Budget" shall mean an operating budget and capital
expenditure budget for each fiscal year as prepared in accordance with Section
3.11(a).
1.6 CAPITATION REVENUES. The term "Capitation Revenues" shall mean all
collections from managed care organizations or third-party payors where such
payment is made periodically on a per member basis for the partial or total
needs of a subscribing patient, less amounts that are payable to other providers
of health care items and services to capitation patients. Capitation Revenues
shall include any co-payments and incentive bonuses received as a result of a
capitation plan.
1.7 CLINICAL DUTIES. The term "Clinical Duties " shall mean those duties
of Non-Professional Personnel (as defined below) which entail directly or
indirectly assisting a Professional (as defined below) in the scheduling,
examination or care of patients in the course of providing Professional Eye Care
Services, regardless of whether the performance of such duties requires
licensure under applicable state law.
1.8 COMMONWEALTH. The term "Commonwealth" shall have the meaning set forth
in the Recitals.
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<PAGE> 3
1.9 CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean any information of Retail Business Manager or the Practice, as appropriate
(whether written or oral), including all business management or economic
studies, patient lists, proprietary forms, proprietary business or management
methods, marketing data, fee schedules, or trade secrets of the Retail Business
Manager or of the Practice, as applicable, whether or not such Confidential
Information is disclosed or otherwise made available to one Party by the other
Party pursuant to this Retail Business Management Agreement. Confidential
Information shall also include the terms and provisions of this Retail Business
Management Agreement and any transaction or document executed by the Parties
pursuant to this Retail Business Management Agreement. Confidential Information
does not include any information that the receiving party can establish (a) is
or becomes generally available to and known by the public or the optometric or
optical communities (other than as a result of an unpermitted disclosure
directly or indirectly by the receiving party or its affiliates, advisors, or
Representatives); (b) is or becomes available to the receiving party on a
nonconfidential basis from a source other than the furnishing party or its
affiliates, advisors or Representatives, provided that such source is not and
was not bound by a confidentiality agreement with or other obligation of secrecy
to the furnishing party of which the receiving party has knowledge; or (c) has
already been or is hereafter independently acquired or developed by the
receiving party without violating any confidentiality agreement with or other
obligation of secrecy to the furnishing party.
1.10 DISPENSARY. The term "Dispensary" shall mean all facilities and
locations, or portions thereof, used by the Practice and all business operations
of the Practice related to the Practice's optical dispensaries or businesses,
which are to be administered by Retail Business Manager under this Retail
Business Management Agreement but excluding all facilities and locations, or
portions thereof, used by the Practice in, and all business operations related
to, the Practice's optometric, clinical and/or therapeutic optometric practice.
1.11 DISPENSARY EXPENSE. The term "Dispensary Expense" shall mean all
operating and non-operating expenses incurred by the Retail Business Manager in
the provision of Management Services (as defined below) to the Practice and
shall include all operating and non-operating expenses incurred by the Practice
relating to the items set forth in this Section. The Retail Business Manager
shall be reimbursed by the Practice for any Dispensary Expense incurred by the
Retail Business Manager in the provision of services to the Practice, upon
request by the Retail Business Manager. Dispensary Expense shall not include any
Retail Business Manager Expense, Practice Expense or Shareholder Expense or any
state, local or federal income or franchise tax. Without limitation, Dispensary
Expense shall include the following expenses:
(a) the salaries, benefits, payroll taxes, and other direct costs of
all employees of Retail Business Manager primarily working at the
DispensaryPractice and the salaries, benefits, payroll taxes, and other direct
costs of the Non-Professional Personnel and non-clinical employees of the
Practice primarily working at the Dispensary, but not the salaries, benefits,
payroll taxes or other direct costs of the Professionals;
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<PAGE> 4
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Dispensary for improved Dispensary
performance, such as management, billing and collections, business office
consultation, and accounting and legal services, but only when such services are
coordinated by Retail Business Manager and/or included in the Budget;
(c) reasonable recruitment costs and out-of-pocket expenses of
Retail Business Manager associated with the recruitment of additional Retail
Business Manager employees primarily located at the Dispensary Practice;
(d) personal property and intangible property taxes assessed against
Retail Business Manager's assets used in connection with the operation of the
Dispensary;
(e) comprehensive general and professional liability insurance
covering the Dispensary, employees of the Practice in connection with the
operation of the Dispensary and employees of Retail Business Manager in
connection with the operation of the Dispensary;
(f) the expense of using, leasing, purchasing or otherwise procuring
and maintaining the Dispensary and maintaining Dispensary related equipment; and
(g) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of the Practice, or reasonable imputed interest on capital
advanced by Retail Business Manager, which shall be equal to the average cost of
borrowing by Retail Business Manager as reflected on its most recent published
financial statements, or in the absence of either of the foregoing, eight
percent (8%)) to finance or refinance obligations of the Practice incurred in
connection with the Dispensary, or to finance new ventures of the Practice in
connection with the Dispensary; in any such case only as such cost of capital is
set forth in the Budget or otherwise approved in advance by the Practice
Advisory Council;
(h) the reasonable travel expenses associated with attending
meetings, conferences, or seminars to benefit the Practice so long as such
expenses are related to individuals located at the Dispensary and the Practice's
pro rata share for individuals who are consultants of or employed by Retail
Business Manager who provide material services to the Dispensary;
(i) the cost of Dispensary supplies, inventory and utilities;
(j) billing and collection costs and expenses;
(k) the Practice's pro-rata share of reasonable corporate overhead
charges or other reasonable expenses (including computer and data processing
costs) which are incurred by Retail Business Manager in connection with
corporate headquarters expenses which relate to the provision of benefits or
services by Retail Business Manager on behalf of the Practice as
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<PAGE> 5
reflected in the Budget including without limitation direct or indirect costs of
the Executive Dispensary Administrator and other Retail Business Manager
personnel;
(l) all other expenses which are set forth in the Budget and which
directly or indirectly benefit the Practice incurred by Retail Business Manager
in carrying out its obligations under this Retail Business Management Agreement;
(m) reasonable costs and expenses (to the extent not covered by
insurance) of lawsuits or claims against the Retail Business Manager or its
personnel (including Clinical Personnel, or the Practice, its Professional(s),
or other personnel related to their performance of duties at the Dispensary or
their interest in the leasehold or other assets used in connection with the
Dispensary, provided that if any of the Retail Business Manager or its
personnel, (including Clinical Personnel), or the Practice, its Professional(s),
or other personnel do not prevail in the lawsuit or claim or settle the matter
with a material payment by the party (the party at "fault"), such costs and
expenses shall be deemed a Retail Business Manager Expense in the event of
Retail Business Manager's fault or the fault of its personnel (including
Clinical Personnel) and a Practice Expense in the event of fault by the
Practice, its Professional(s), or other personnel whereupon the Practice and
such Professional(s) or other personnel shall be jointly responsible for the
immediate reimbursement of the sums advanced by Retail Business Manager;
provided further that Retail Business Manager shall not advance such costs and
expenses from the Account if the Practice Advisory Council concludes that (i) it
is unlikely that the Account will be reimbursed if the party involved will not
prevail in the lawsuit or claim, or (ii) it is reasonable to believe that
obtaining a reimbursement of the advanced sums will be difficult to achieve; and
the Parties acknowledge that nothing in this Section shall create any liability
on the part of a Professional who would otherwise be shielded from personal
liability by the corporate or limited liability structure of the Practice;
(n) key person life and disability insurance premiums related to
policies which the Parties agree to acquire on the life of the Practice's
Shareholders or Professionals, whereupon any proceeds shall be paid to the
Account as Adjusted Gross Revenues, unless the Parties agree to a specific split
of the proceeds. Should only the Practice choose to obtain key person life
insurance, the Practice shall pay all premiums as a Practice Expense and shall
receive all proceeds. Further, if only the Retail Business Manager chooses to
obtain such insurance, Retail Business Manager shall pay all premiums as a
Retail Business Manager Expense and shall receive all proceeds. The Practice
shall cause its Shareholders and Professionals to submit to a medical
examination necessary to obtain such insurance.
In the event that any of the individuals described in Section 1.10(b) devote a
substantial amount of time to serving one or more optometric practices other
than the Practice, which is not prohibited hereunder, or the above described
Dispensary is utilized to a substantial degree by one or more optometric
practices other than the Practice, the Dispensary Expenses shall be allocated
between the Practice and such other optometric practices to reflect each
practice's pro-rata share of any expenses or costs relating to such individuals
or Dispensary (including
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<PAGE> 6
the recruitment costs of such individuals and the comprehensive and general
liability insurance expenses with respect to such individuals). Expenses
contemplated in this paragraph which potentially and primarily relate to
Sections 1.11(b), (c), (d), (e), (f), (g), (h), (k) and (l) shall be in the
Budget or approved by the Practice Advisory Council, and where reasonably
determinable, are intended to be reasonable and customary based upon similar
relationships generally existing between national practice management companies
and practices they manage. The Practice's pro-rata portion of expenses related
to individuals who are consultants of or employed by Retail Business Manager and
who provide services benefiting more than one practice shall be based upon the
actual time expended by the individuals in performing such services as compared
to the time spent by such individuals with other practices managed by the Retail
Business Manager, or, if not reasonably calculable, as determined by Retail
Business Manager, based upon the estimated proportionate revenue size of the
Practice as compared to the aggregate revenue size as estimated in all of the
Budgets of all other practices managed by the Retail Business Manager which are
benefiting from such individual's services. Likewise, other benefits provided by
the Retail Business Manager to several Practices shall be split pro-rata based
upon the use or benefit derived by each Practice, but if not calculable, shall
be based upon the estimated proportionate revenue size as set forth in the
preceding sentence. Notwithstanding anything to the contrary herein, unless an
expense is expressly designated as a Retail Business Manager Expense, a Practice
Expense or a Shareholder Expense in this Retail Business Management Agreement or
any exhibit thereto, all expenses incurred by Retail Business Manager in
providing services pursuant to this Retail Business Management Agreement shall
be considered a Dispensary Expense. Any and all expenses which are incurred by
Retail Business Manager, Professional Business Manager or the Practice shall be
allocated to the appropriate expense category or categories in accordance with
the terms and conditions of the Retail Business Management Agreement and the
Professional Business Management Agreement.
1.12 EXECUTIVE DISPENSARY ADMINISTRATOR. The term "Executive Dispensary
Administrator" shall mean the employee of Retail Business Manager having
executive authority and responsibility for the general and active management of
the Retail Business Manager.
1.13 GAAP. The term "GAAP" shall mean generally accepted United States
accounting principles.
1.14 INFLATION ADJUSTMENT. The term "Inflation Adjustment" shall for any
year be equal to the fraction the numerator of which is the revised Bureau of
Labor Statistics Consumer Price Index for all Items and Major Group Figures for
All Urban Consumers, U. S. City Average (1982-84=100) (the "Index") for December
of the preceding year and the denominator of which is the Index for September,
1997. Appropriate modification to the Inflation Adjustment shall be made if the
Index shall cease to be updated as of the end of each calendar year.
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<PAGE> 7
1.15 MANAGEMENT FEE. The term "Management Fee" shall mean the Retail
Business Manager's compensation established as described in Article V hereof.
1.16 MANAGEMENT SERVICES. The term "Management Services" shall mean the
business, administrative, and management services to be provided for the
Practice and the Dispensary, including, without limitation, the provision of
equipment, inventory and supplies, support services, personnel (excluding
Professionals), management, administration, financial record keeping and
reporting, and other business office services, all as reasonably contemplated by
this Retail Business Management Agreement and which are necessary for the
conduct of the Practice's business.
1.17 NET EARNINGS. The term "Net Earnings" shall mean Adjusted Gross
Revenue MINUS the sum of the following: (i) any refunds owed to patients by the
Practice, (ii) any unpaid or past due compensation owed to Retail Business
Manager pursuant to Section 5.1 hereof and to Professional Business Manager
pursuant to the Professional Business Management Agreement, (iii) all Office
Expenses, (iv) all Dispensary Expenses, (v) all Practice Expenses and (vi) a
Shareholder Expenses, up to an amount equal to One Hundred Thirty Nine Thousand
And No/100 Dollars ($139,000.00) on an annualized basis multiplied in the case
of years ending after December 31, 1998 by the Inflation Adjustment. Net
Earnings associated with an individual Office, Dispensary, or Practice location
shall be determined using the amount of the foregoing items which is
attributable to such individual Offices, Dispensary, or Practice location. To
the extent such amount is not susceptible to precise calculation, it shall be
determined based on the proportion the Adjusted Gross Revenue attributable to
such Office, Dispensary, or Practice location bears to the Adjusted Gross
Revenue of the Practice.
1.18 NEW OFFICE. The term "New Office" shall mean any additional or other
Office, Dispensary or Practice location which commences operation at any time on
or after the date hereof
1.19 NON-PROFESSIONAL PERSONNEL. The term "Non-Professional Personnel"
shall mean those individuals employed primarily at the Practice who are not
Optometrists or Ophthalmologists.
1.20 OFFICE. The term "Office" shall have the meaning set forth in the
Professional Business Management Agreement (as defined below).
1.21 OFFICE EXPENSE. The term "Office Expense" shall have the meaning set
forth in the Professional Business Management Agreement.
1.22 OPTICAL SERVICES. The term "Optical Services" shall mean the filling
of optical prescriptions, dispensing of optical goods, the fitting of eyewear,
all activities related to any of the foregoing, and the direction, supervision,
and control of those who perform these tasks.
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1.23 OPTICAL LABORATORY SERVICES. The term "Optical Laboratory Services"
shall mean the fabrication of optical goods, including the grinding of spectacle
lenses and the fabrication of spectacles.
1.24 OPTOMETRIST. The term "Optometrist" shall mean each individually
licensed Optometrist, if any, who is employed or otherwise retained by or
associated with the Practice, each of whom shall meet at all times the
qualifications described in Section 4.2 and Section 4.3.
1.25 OPHTHALMOLOGIST. The term "Ophthalmologist" shall mean each
individually licensed Ophthalmologist, if any, who is employed or otherwise
retained by or associated with the Practice, each of whom shall meet at all
times the qualifications described in Section 4.2 and Section 4.3.
1.26 PARTIES. The term "Parties" shall mean the Practice and Retail
Business Manager.
1.27 PRACTICE. The term "Practice" shall have the meaning set forth in the
Recitals.
1.28 PRACTICE ADVISORY COUNCIL. The term "Practice Advisory Council" shall
have the meaning set forth in Section 2.6 of this Agreement.
1.29 PRACTICE EXPENSES. The term "Practice Expenses" shall mean (a) all
reasonable nonshareholder Professionals' salaries, benefits, payroll taxes and
other direct costs related to their services to the Practice (including
reasonable and customary professional dues, subscriptions, continuing education
and technical training expenses, and severance payments), (b) the cost of
optometric supplies (including, but not limited to drugs, pharmaceuticals,
products, substances, items, or optometric devices), (c) reasonable and
customary professional liability insurance expenses of Professionals and (d)
travel costs for continuing education, technical training, and necessary
business travel for nonshareholder Professionals, (e) to the extent not covered
by insurance and subject to the advance provisions contained herein, the defense
costs and expenses of any litigation or claims brought against the Practice or
its Professionals or other personnel by any third party in which the Practice,
or its Professionals, or other personnel do not prevail or the matter settles
with a material payment and the Practice or its Professionals or other personnel
are at fault, and any liability judgment or material settlement assessed against
the Practice or its Professionals or other personnel; (f) certain equipment
expenses described in Sections 3.2(c) and 3.2(d) of this Retail Business
Management Agreement and 3.2(c) and 3.2(d) of the Professional Business
Management Agreement; (g) interest on any funds advanced to the Practice by
Professional Business Manager to the extent that Professional Business Manager
is a net lender in accordance with the terms of the Professional Business
Management Agreement; (h) interest on any funds advanced to the Practice by
Retail Business Manager to the extent that Retail Business Manager is a net
lender in accordance with the terms of this Retail Business Management
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Agreement; and (i) any income taxes or franchise taxes of the Practice; and (j)
consulting, accounting, or legal fees which relate solely to the Practice.
Notwithstanding the foregoing, the term Practice Expenses shall specifically
exclude (i) business travel requested by Professional Business Manager, which
shall be an Office Expense; (ii) business travel requested by Retail Business
Manager, which shall be a Dispensary Expense, (iii) any and all compensation or
expenses attributable to Shareholders, which shall be Shareholder Expenses
(except reasonable and customary expenses for malpractice insurance which shall
be a Practice Expense), (iv) "tail" insurance coverage for Shareholders, which
shall be a Shareholder Expense, or (v) such other items agreed to in advance in
writing by the Parties hereto. During this Retail Business Management Agreement,
for so long as a current Shareholder of the Practice is an employee of,
contractor to, or Shareholder of the Practice, such Shareholder shall be deemed
to be a Shareholder for the purposes of this definition. Such expenses are to be
approved annually in the Budget.
1.30 PROFESSIONAL. The term "Professional" shall mean any Optometrist or
Ophthalmologist.
1.31 PROFESSIONAL BUSINESS MANAGEMENT AGREEMENT. The term "Professional
Business Management Agreement" shall mean the instrument made and entered into
as of even date by and between Visionary MSO, Inc. ("Professional Business
Manager") and the Practice whereby Professional Business Manager shall provide
certain facilities, equipment, and management, administrative, and business
services to the Practice in connection with its provision of Professional Eye
Care Services as originally executed and delivered, or, if amended or
supplemented, as so amended or supplemented.
1.32 PROFESSIONAL BUSINESS MANAGER. The term "Professional Business
Manager" shall have the meaning set forth in the Professional Business
Management Agreement.
1.33 PROFESSIONAL EYE CARE SERVICES. The term "Professional Eye Care
Services" shall mean professional health care items and services, including, but
not limited to, the practice of optometry, and all related professional health
care services provided by the Practice through Optometrists, Ophthalmologists,
and other professional health care providers that are retained by or
professionally affiliated with the Practice. The term shall exclude any and all
business whatsoever in connection with any optical businesses owned or operated,
or to be owned or operated in the future, in whole or in part, by the Practice
or any of its Professionals during the terms of this Retail Business Management
Agreement.
1.34 PROFESSIONAL PRACTICE ACCOUNT. The term "Professional Practice
Account" shall mean the bank account described in Section 3.10 of the
Professional Business Management Agreement.
1.35 REPRESENTATIVES. The term "Representatives" shall mean a Party's
officers, directors, managers, employees, or other agents.
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1.36 RETAIL BUSINESS MANAGEMENT AGREEMENT. The term "Retail Business
Management Agreement" shall mean this instrument as originally executed and
delivered, or, if amended or supplemented, as so amended or supplemented.
1.37 RETAIL BUSINESS MANAGER. The term "Retail Business Manager" shall
have the meaning set forth in the Recitals hereto.
1.38 RETAIL BUSINESS MANAGER EXPENSE. The term "Retail Business Manager
Expense" shall mean an expense or cost incurred by the Retail Business Manager,
for which the Retail Business Manager is financially liable and is not entitled
to reimbursement from the Practice. Retail Business Manager Expense shall
specifically include: (a) any income or franchise taxes of the Retail Business
Manager, (b) the expense of providing, leasing, purchasing or otherwise
procuring the Dispensary equipment, including depreciation of furniture and
equipment, and (c) any other expenses or costs that are not reasonable and
customary reimbursements based upon a national practice management company's
usual arrangement with a practice.
1.39 SHAREHOLDER. The term "Shareholder" shall mean any current or future
shareholder of the Practice.
1.40 SHAREHOLDER EXPENSE. The term "Shareholder Expense" shall be limited
to the following expenses: (a) Shareholders' salaries, benefits, payroll taxes,
and other direct costs (including professional dues, subscriptions, continuing
education expenses, severance payments, entertainment, and travel costs for
continuing education or other business travel but excluding business travel
requested by Retail Business Manager, which shall be a Dispensary Expense and
business travel requested by Professional Business Manager which shall be an
Office Expense, and excluding any other expense of a Shareholder approved as a
Dispensary Expense or Office Expense in advance by the Parties); accounting, or
legal fees which relate solely to the Shareholders; (b) "tail" coverage
malpractice insurance expenses for the Shareholders and any malpractice
insurance expenses of any Professional which are in excess of those which are
customary and reasonable; and (c) consulting, accounting, or legal fees which
relate solely to the Shareholders. The Practice shall reimburse the Retail
Business Manager for any Shareholder Expense incurred by the Retail Business
Manager. Unless expressly designated as a Management Fee, a Retail Business
Manager Expense, a Professional Business Manager Expense, a Dispensary Expense,
an Office Expense, or a Practice Expense in this Retail Business Management
Agreement or in any exhibit hereto or in the Professional Business Management
Agreement or in any exhibit thereto or in any written agreement of the Parties,
any expense incurred by the Practice shall be considered a Shareholder Expense.
Notwithstanding the above, the Practice may require certain Professionals to pay
certain expenses incurred for them specifically. Nothing in this Section shall
create personal liability on the part of the Practice's Shareholders.
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1.41 TERM. The term "Term" shall mean the initial and any renewal periods
of duration of this Retail Business Management Agreement as described in Section
6.1.
ARTICLE II
APPOINTMENT OF RETAIL BUSINESS MANAGER
2.1 APPOINTMENT. The Practice hereby appoints Retail Business Manager as
its sole and exclusive agent for the management and administration of the retail
optical aspects of the Practice, including, but not limited to, the operation of
the Dispensary and the provision of Optical Services by the Practice, and Retail
Business Manager hereby accepts such appointment, subject at all times to the
provisions of this Retail Business Management Agreement.
2.2 AUTHORITY. Consistent with the provisions of this Retail Business
Management Agreement, Retail Business Manager shall have the responsibility and
commensurate authority to provide Management Services for the Practice. The
Practice shall give Retail Business Manager thirty (30) days' prior notice of
the Practice's intent to execute any agreement creating a binding legal
obligation on the Practice. The Parties acknowledge and agree that the Practice,
through its Professionals, shall be responsible for and shall have complete
authority, responsibility, supervision, and control over the provision of all
Professional Eye Care Services and other professional health care services
performed for patients, and that all diagnoses, treatments, procedures, and
other professional health care services shall be provided and performed
exclusively by or under the supervision of Professionals as such Professionals,
in their sole discretion, deem appropriate. Retail Business Manager shall have
and exercise absolutely no control, influence, authority or supervision over the
provision of Professional Eye Care Services.
2.3 PATIENT REFERRALS. Retail Business Manager and the Practice agree that
the benefits to the Practice hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Retail Business
Manager to patients of the Practice in any facility, laboratory, center, or
health care operation controlled, managed, or operated by Retail Business
Manager.
2.4 INTERNAL DECISIONS OF THE PRACTICE. Matters involving the Practice's
allocation of professional income among its Shareholders and the Professional
employees of the Practice, tax planning, and pension and investment planning
shall remain the responsibility of the Practice and the Shareholders of the
Practice. The Retail Business Manager may not and shall not directly or
indirectly control or attempt to control, dictate or influence, directly or
indirectly, the professional judgment, including, but not limited to, the level
or type of care or services rendered, the manner of practice, or the practice of
the Practice or any Professional employed by the Practice.
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2.5 PRACTICE OF OPTOMETRY. The Parties acknowledge that Retail Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of optometry. To the extent any
act or service herein required to be performed by Retail Business Manager should
be construed by a court of competent jurisdiction or by the Board of Optometry
to constitute the practice of optometry, the requirement to perform that act or
service by Retail Business Manager shall be deemed waived and unenforceable.
Although Retail Business Manager shall provide Non-Professional Personnel to the
Practice and Professional Business Manager and Retail Business Manager shall
manage the administrative aspects of their employment, all Non-Professional
Personnel in the performance of any and all Clinical Duties and shall be subject
solely to the direction, supervision, and control of the Practice and its
Professionals and, in the performance of Clinical Duties shall not be subject to
any direction or control by, or liability to, Retail Business Manager. Retail
Business Manager may not and shall not control or attempt to control, directly
or indirectly, the professional judgment, the manner of practice, or the
practice of the Practice or any Professional employed by the Practice. In this
regard, Retail Business Manager shall not attempt to dictate, influence, or
control the scope, level, or type of optometric and/or therapeutic optometric
services provided to patients of the Dispensary, the frequency of patient
contacts at the Dispensary, the discipline of any Professionals who are Practice
Employees, the fees charged for professional services provided to patients of
the Dispensary (except to the extent necessary to establish the Budget or
negotiate managed care contracts), or any other matter that impinges on the
professional judgment of the Practice or any Professional employed by the
Practice.
2.6 FORMATION AND OPERATION OF THE PRACTICE ADVISORY COUNCIL. The Parties
hereby establish a Practice Advisory Council which shall be responsible for
advising Retail Business Manager and the Practice with respect to developing the
Dispensary and implementing management and administrative policies for the
overall operation of the Dispensary and for providing dispute resolution on
certain matters. The Practice Advisory Counsel shall consist of six (6) members.
Retail Business Manager shall designate, in its sole discretion, two (2) members
of the Practice Advisory Council or may have one (1) member with two (2) votes.
The Practice shall designate, in its sole discretion, two (2) members of the
Practice Advisory Council or may have one (1) member with two (2) votes.
Professional Business Manager shall designate, in its sole discretion, two (2)
members of the Practice Advisory Council or may have one member with two (2)
votes. The Practice Advisory Council members selected by the Practice shall be
full-time Professional employees of the Practice. Each Party's representatives
to the Practice Advisory Council shall have the authority to make decisions on
behalf of the respective Party. Except as may otherwise be provided, the act of
a majority of the members of the Practice Advisory Council shall be the act of
the Practice Advisory Council, provided that (i) the affirmative vote of the
Practice member(s) shall be required on all votes of the Practice Advisory
Council; (ii) the affirmative vote of the Retail Business Manager shall be
required on all matters relating to Optical Services or the Dispensary; and
(iii) the affirmative vote of the Professional Business Manager shall be
required on a matters relating to the Office. The decisions, resolutions,
actions, or recommendations of the Practice
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Advisory Council shall be implemented by Retail Business Manager, Professional
Business Manager, or the Practice, as appropriate.
2.7 DUTIES AND RESPONSIBILITIES OF THE PRACTICE ADVISORY COUNCIL. The
Practice Advisory Council shall review, evaluate, make recommendations, and
where specifically authorized herein and permitted by law, make decisions with
respect to the following matters:
(a) FACILITY IMPROVEMENTS AND EXPANSION. Any renovation and
expansion plans and capital equipment expenditures with respect to the
Practice's facilities shall be reviewed by the Practice Advisory Council which
shall make recommendations to the Practice with respect to proposed changes
therein. Such renovation and expansion plans and capital equipment expenditures
shall be based upon economic feasibility, optometry support, productivity and
then current market conditions.
(b) MARKETING AND PUBLIC RELATIONS. The Practice Advisory Council
shall review and make recommendations to the Practice with respect to all
marketing and public relations services and programs promoting the Practice's
Professional Eye Care Services, Optical Services and ancillary services.
(c) PATIENT FEES, COLLECTION POLICIES. The Practice Advisory Council
shall review and make recommendations to the Practice concerning the fee
schedule and collection policies for all Professional Eye Care Services, Optical
Services and ancillary services rendered by the Practice.
(d) ANCILLARY SERVICES. The Practice Advisory Council must approve
any new non-professional ancillary services to be rendered by the Practice,
including Optical Services, and the pricing, continuation of, access to, and
quality of such services.
(e) PROVIDER AND PAYOR RELATIONSHIPS. The Practice Advisory Council
shall review and make recommendations to the Practice regarding the
establishment or maintenance of relationships between the Practice and
institutional health care providers and third-party payors, and the Practice
shall review and approve all agreements with institutional health care providers
and third party payors. The Practice Advisory Council shall also make
recommendations to the Practice concerning discounted fee schedules, including
capitated fee arrangements of which the Practice shall be a party, and the
Practice shall review and approve all such capitated fee arrangements.
(f) STRATEGIC PLANNING. The Practice Advisory Council may make
recommendations to the Practice concerning development of long-term strategic
planning objectives for the Practice.
(g) CAPITAL EXPENDITURES. The Practice Advisory Council shall make
recommendations to the Practice concerning the priority of major capital
expenditures and
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shall review and approve any commitment to make any capital expenditures
relating to, the Dispensary or the Office involving amounts in excess of $15,000
individually, or $50,000 in the aggregate, in any one fiscal year, which amounts
may be increased from time-to-time by agreement of the Parties.
(h) FEE DISPUTE RESOLUTION. At the request of Retail Business
Manager or the Practice, the Practice Advisory Council shall make
recommendations to Retail Business Manager with respect to any dispute
concerning a set off or reduction in Management Fees.
(i) GRIEVANCES REFERRALS. The Practice Advisory Council shall
consider and make recommendations to Retail Business Manager and the Practice
regarding grievances pertaining to matters not specifically addressed in this
Retail Business Management Agreement as referred to it by Retail Business
Manager or the Practice's Board of Directors.
(j) TERMINATION OF RETAIL BUSINESS MANAGER'S PERSONNEL. The Practice
Advisory Council shall review and approve any decision by the Retail Business
Manager to terminate any of Retail Business Manager's personnel primarily
located at the Dispensary who are Clinical Personnel or occupy manager or high
level positions.
(k) APPROVAL OF NEW OFFICES OR DISPENSARY. The Practice Advisory
Council shall approve any move of any current Office or Dispensary location or
expansion to an additional Practice location. Additionally, the Practice
Advisory Council shall approve the establishment of any optical business of the
Practice and the move or expansion of any such business.
Except in those specific instances set forth above in which the Practice
Advisory Council has been granted the authority to make decisions binding upon
the Retail Business Manager and the Practice, it is acknowledged and agreed that
recommendations of the Practice Advisory Council are intended for the advice and
guidance of Retail Business Manager and the Practice and that the Practice
Advisory Council does not have the power to bind Retail Business Manager or the
Practice. Where discretion with respect to any matter is vested in Retail
Business Manager or the Practice under the terms of this Retail Business
Management Agreement, Retail Business Manager or the Practice, as the case may
be, shall have ultimate responsibility for the exercise of such discretion
notwithstanding any recommendations of the Practice Advisory Council. Retail
Business Manager and the Practice shall, however, take such recommendations of
the Practice Advisory Council into account in good faith in the exercise of such
discretion.
2.8 PROFESSIONAL HEALTH CARE DECISIONS. Notwithstanding anything herein to
the contrary, all decisions required by applicable law to be made solely by
health care professionals will be made solely by the appropriate Professionals.
The Practice shall have ultimate and exclusive authority concerning issues
related to:
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(a) Types, levels, and scope of Professional Eye Care Services to be
provided (provided, however, that the Practice Advisory Council shall have the
authority set forth in Section 2.7(d) with respect to non-professional ancillary
services);
(b) Recruitment of Professionals to the Practice, including the
specific qualifications and specialties of recruited Professionals;
(c) Any optometric related functions;
(d) Fee schedules;
(e) Frequency and/or volume of patient encounters;
(f) The discipline of any Professionals or Non-Professional
Personnel who are employed by, retained by, or otherwise affiliated with the
Practice with respect to the performance of Professional Eye Care Services or
Clinical Duties, as applicable; and
(g) Any other decisions required by applicable law to be made solely
by Professionals and not by non-Professionals.
2.9 MEETINGS OF THE PRACTICE ADVISORY COUNCIL. The Practice Advisory
Council shall meet on a regular basis as mutually agreed by the Parties. A
special meeting of the Practice Advisory Council may be called by Professional
Business Manager, Retail Business Manager or the Practice upon two (2) weeks'
notice, except in the event of an emergency, in which case a special meeting may
be called by Professional Business Manager, Retail Business Manager or the
Practice upon three (3) business days' notice. Meetings may be held
telephonically or by any other means agreeable to the Parties.
ARTICLE III
OBLIGATIONS AND RESPONSIBILITIES OF RETAIL MANAGER
3.1 MANAGEMENT SERVICES. Retail Business Manager shall provide all
Management Services necessary and appropriate for the day-to-day operation of
the Dispensary and such personnel and services as set forth herein for the
operation of the Office, pursuant to the terms of this Retail Business
Management Agreement. Retail Business Manager shall operate in a reasonable and
customary manner with due consideration to the Practice's past business
practices and shall operate in accordance with all applicable laws, rules and
regulations which are necessary and material to the Retail Business Manager's
performance of the Management Services. Retail Business Manager will provide in
good faith and with due diligence its services consistent with management
services generally provided in operations of an optical dispensary similar in
size, type and operations in the Commonwealth. All costs and expenses related to
Retail Business Manager's duties contained in this Article III shall be
Dispensary
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Expenses unless limited or excluded as a Dispensary Expense pursuant to the
terms of this Retail Business Management Agreement. Retail Business Manager
hereby consents and agrees to provide all Management Services to all Dispensary
facilities and locations; provided, however, that during the Term of this Retail
Business Management Agreement, and except for its obligations pursuant to this
Retail Business Management Agreement, the Practice shall not establish, operate,
or provide Optical Services at any new Dispensary facility or location without
the consent and approval of the Practice Advisory Council; and provided further
that during the Term of this Agreement the Practice shall not engage any
individual or entity other than Retail Business Manager to provide Management
Services to the Practice without the consent and approval of the Practice
Advisory Council.
3.2 DISPENSARY, FACILITIES AND EQUIPMENT.
(a) Retail Business Manager shall procure for or on behalf of the
Practice one or more Dispensaries that are deemed by the Parties to be
reasonable, necessary and appropriate, and the expense associated therewith
shall be a Dispensary Expense. Retail Business Manager shall consult with the
Practice regarding the condition, use and needs of Dispensary facilities,
offices and improvements. The Practice shall pay when due all rents and expenses
of the Dispensary, including without limitation expenses for leasehold or
facility improvements. Such rents and expenses shall be Dispensary Expenses.
(b) Retail Business Manager shall negotiate and administer all
leases of and agreements for Dispensary facilities or locations on behalf of the
Practice, provided, however, that Retail Business Manager shall consult with the
Practice on all professional or clinical matters relating thereto and that the
Practice, in its sole discretion, may reject or otherwise refuse to enter into
any lease negotiated by Retail Business Manager.
(c) Retail Business Manager shall provide all non-optical equipment,
fixtures, office supplies, furniture and furnishings as are reasonable and
approved in the Budget for the operation of the Dispensary and the provision of
Optical Services. If the Practice wishes to choose additional equipment, which
the Retail Business Manager determines not to acquire or lease, the Practice may
acquire or lease such equipment, and the expense related thereto shall be deemed
a Practice Expense.
(d) Retail Business Manager shall provide, finance, or cause to be
provided or financed optical related equipment as reasonably required by the
Practice. The Practice shall have final authority in all healthcare equipment
selections; provided, however, that if the Practice chooses to acquire health
care equipment which is not in the Budget and which Retail Business Manager
reasonably chooses not to acquire, expenses related thereto shall be treated as
a Practice Expense and such equipment shall be owned by the Practice; provided
further that following such acquisition or lease by the Practice, if the
Practice Advisory Council determines after a period of six months of use that
such equipment is reasonably certain to result in material profit to Retail
Business Manager (taking into account the cost or expense
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and anticipated revenues associated with such equipment), then Retail Business
Manager shall acquire such equipment from the Practice by either (at Retail
Business Manager's option), paying cash or by assuming the liability associated
with such equipment, or if such equipment is then being leased by the Practice,
by assuming such lease. In the event of such an acquisition by Retail Business
Manager, it shall reimburse the Practice for previous expenses applied thereto.
Except for equipment which Retail Business Manager elects not to acquire or
lease which are acquired or leased by the Practice pursuant to Section 3.2(b) or
(c), all optical and non-optical equipment, other than Professional-owned
automobiles, acquired for the use of the Practice shall be owned by Retail
Business Manager and the depreciation and related capital charge shall be a
Retail Business Manager Expense. Retail Business Manager may make
recommendations to the Practice on the relationship between its health care
equipment decisions and the overall administrative and financial operations of
the Practice.
(e) Retail Business Manager shall be responsible for the repair and
maintenance of the Dispensary, consistent with the Practice's responsibilities
under the terms of any lease or other use arrangement, and for the prompt
repair, maintenance, and replacement of all equipment other than such repairs,
maintenance and replacement necessitated by the gross negligence or willful
misconduct of the Practice, its Professionals or other personnel employed by the
Practice, the repair or replacement of which shall be a Practice Expense and not
a Dispensary Expense. Replacement equipment shall be acquired where Retail
Business Manager in good faith determines, in consultation with the Practice,
that such replacement is necessary or where the Budget has made allowances for
such replacement.
3.3 OPTICAL SUPPLIES. Retail Business Manager shall order, procure,
purchase and provide on behalf of and as agent for the Practice all reasonable
optical supplies unless otherwise prohibited by federal and/or state law.
Furthermore, Retail Business Manager shall ensure that the Dispensary is at all
times adequately stocked with the optical supplies that are necessary and
appropriate for the operation of the Dispensary and required for the provision
of Optical Services. All costs and expenses relating to such supplies shall be a
Dispensary Expense.
3.4 OPTICAL LABORATORY SERVICES. Retail Business Manager shall procure,
provide, or otherwise obtain for or on behalf of and as agent for the Practice
all Optical Laboratory Services necessary to the operation of the Dispensary.
3.5 SUPPORT SERVICES. Retail Business Manager shall provide or arrange for
all printing, stationery, forms, postage, duplication or photocopying services,
and other support services as are reasonably necessary and appropriate for the
operation of the Dispensary and the provision of Optical Services therein.
3.6 LICENSES AND PERMITS. Retail Business Manager shall, on behalf of and
in the name of the Practice, coordinate all development and planning processes,
and apply for and use reasonable efforts to obtain and maintain all federal,
state and local licenses and regulatory
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permits required for or in connection with the operation of the Dispensary and
the equipment (existing and future) located at the Dispensary. The expenses and
costs associated with obtaining and maintaining permits with respect to the
Dispensary shall be deemed a Dispensary Expense.
3.7 PERSONNEL.
(a) SELECTION AND RETENTION OF RETAIL BUSINESS MANAGER'S PERSONNEL.
Except as specifically provided in Section 4.2 of this Retail Business
Management Agreement, Retail Business Manager shall, in consultation with the
Practice, employ or otherwise retain and shall be responsible for selecting,
hiring, training, supervising, and terminating, all management, administrative,
technical, clerical, secretarial, bookkeeping, accounting, payroll, billing and
collection and other personnel (excluding Professionals) as Retail Business
Manager deems reasonably necessary and appropriate for the operation of the
Dispensary and Office and for Retail Business Manager's performance of its
duties and obligations under this Retail Business Management Agreement.
Consistent with reasonably prudent personnel management policies, Retail
Business Manager shall seek and consider the advice, input, and requests of the
Practice in regard to personnel matters. Retail Business Manager shall have sole
responsibility for determining the salaries and providing fringe benefits, and
for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement. Retail Business Manager reserves the right to
change the number, composition or employment terms of such personnel in the
future at Retail Business Manager's discretion; provided, however, that the
termination of any of Retail Business Manager's personnel who occupy manager or
high level positions, and are primarily located at the Office or Dispensary must
receive the approval of the Practice Advisory Council. Retail Business Manager
and the Practice recognize and acknowledge that Retail Business Manager and
personnel retained by Retail Business Manager may from time-to-time perform
services for persons other than the Practice. This Retail Business Management
Agreement shall not be construed to prevent or prohibit Retail Business Manager
from performing such services for others or restrict Retail Business Manager
from using its personnel to provide services to others. Retail Business Manager
hereby disclaims any liability relating to the effect of its employees on the
qualification of the Practice's retirement plans under the Internal Revenue
Code, and all liabilities for such classification shall be solely the
responsibility of the Practice
(b) TERMINATION OF RETAIL BUSINESS MANAGER'S PERSONNEL. If the
Practice is dissatisfied with the services of any employee of Retail Business
Manager or any personnel under Retail Business Manager's direction, supervision,
and control, the Practice shall consult with Retail Business Manager. Retail
Business Manager shall in good faith determine whether the performance of that
employee could be brought to acceptable levels through counsel and assistance,
or whether such employee should be relocated or terminated. All of Retail
Business Manager's determinations regarding Retail Business Manager's personnel
shall be governed by the overriding principle and goal of providing high quality
Optical Services and
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optometric and/or therapeutic optometric support services. Employee assignments
shall be made to assure consistent and continued rendering of high quality
Optical Services and optometric and/or therapeutic optometric support services.
The Retail Business Manager shall maintain established working relationships
wherever possible, and Retail Business Manager shall make every effort
consistent with sound business practices to honor the specific requests of the
Practice with regard to the assignment of employees. Notwithstanding that which
is contained in this Section 3.7(b), the Practice shall have the right and
obligation to determine the direction, supervision and control of any personnel
while said personnel are involved in the performance of Clinical Duties,
including prohibiting said personnel from being involved in the performance of
Clinical Duties.
3.8 CONTRACT NEGOTIATIONS. Retail Business Manager shall evaluate, assist
in negotiations and administer on behalf of the Practice contracts that do not
relate to the provision of Professional Eye Care Services as set forth in this
Retail Business Management Agreement and/or as approved in the Budget. To the
extent permitted by law, Retail Business Manager shall evaluate, assist in
negotiations, administer and execute on the Practice's behalf, all contractual
arrangements with third parties as are reasonably necessary and appropriate for
the Practice's operation of the Dispensary or the provision of Optical Services.
3.9 BILLING AND COLLECTION. As an agent on behalf of and for the account
of the Practice, Retail Business Manager shall establish and maintain credit and
billing and collection services, policies and procedures, and shall use
reasonable efforts to timely bill and collect all fees for all billable
Professional Eye Care Services and Optical Services provided by the Practice,
the Professionals, or other personnel employed or otherwise retained by the
Practice. In connection with the billing and collection services to be provided
hereunder, and throughout the Term (and thereafter as provided in Section 6.3),
the Practice hereby grants to Retail Business Manager an exclusive special power
of attorney and appoints Retail Business Manager as the Practice's exclusive
true and lawful agent and attorney-in-fact (which shall be deemed revoked in the
event of termination for cause by the Practice), and Retail Business Manager
hereby accepts such special power of attorney and appointment, for the following
purposes:
(a) To bill the Practice's patients, in the Practice's name using
the Practice's tax identification number and on the Practice's behalf, for all
billable Professional Eye Care Services and Optical Services provided by the
Practice to patients.
(b) To bill, in the Practice's name using the Practice's tax
identification number and on the Practice's behalf, all claims for reimbursement
or indemnification from health maintenance organizations, self-insured
employers, insurance companies, Medicare, Medicaid, and all other third party
payors or fiscal intermediaries for all covered billable Professional Eye Care
Services and Optical Services provided by the Practice to patients.
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(c) To collect and receive, in the Practice's name and on the
Practice's behalf, all accounts receivable generated by such billings and claims
for reimbursement, to administer such accounts including, but not limited to,
extending the time of payment of any such accounts; suing, assigning or selling
at a discount such accounts to collection agencies-, or taking other measures to
require the payment of any such accounts; provided, however, that the Practice
shall review and approve (which approval shall not be unreasonably withheld) any
decision by Retail Business Manager to undertake extraordinary collection
measures, such as filing lawsuits, discharging or releasing obligors, or
assigning or selling accounts at a discount to collection agencies. Retail
Business Manager shall act in a professional manner and in compliance with all
federal and state fair debt collection practices laws in rendering billing and
collection services.
(d) To deposit all amounts collected on behalf of the Practice into
the Account which shall be and at all times remain in the Practice's name. The
Practice covenants to transfer and deliver to the Account all funds received by
the Practice from patients or third-party payors for billable Professional Eye
Care Services and Optical Services. Upon receipt by Retail Business Manager of
any funds from patients or third-party payors or from the Practice pursuant
hereto for billable Professional Eye Care Services and Optical Services, Retail
Business Manager shall immediately deposit the same into the Account. On the
first day of each calendar month during the Term of this Retail Business
Management Agreement, Retail Business Manager shall pay to Professional Business
Manager for deposit into the Professional Practice Account all amounts collected
during the previous month on behalf of the Practice for billable Professional
Eye Care Services, less any refunds, adjustments, or reductions in revenue then
owed to, on behalf of, or in connection with the Practice's patients by the
Practice in connection with its provision of Professional Eye Care Services.
Retail Business Manager shall administer, be responsible for, and be obligated
to pay for all Dispensary Expenses; provided, however, that Retail Business
Manager shall only be liable for Dispensary Expenses to the extent of funds in
the Account. Retail Business Manager shall disburse funds from the Account to
creditors and other persons on behalf of the Practice, maintaining records of
such receipt and disbursement of funds.
(e) To take possession of, endorse in the name of the Practice, and
deposit into the Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of accounts receivable of the
Practice.
(f) To sign checks on behalf of the Practice, and to make
withdrawals from the Account for payments specified in this Retail Business
Management Agreement. Upon request of Retail Business Manager, the Practice
shall execute and deliver to the financial institution wherein the Account is
maintained, such additional documents or instruments as may be necessary to
evidence or effect the special power of attorney granted to Retail Business
Manager by the Practice pursuant to this Section 3.9. The special power of
attorney granted herein shall be coupled with an interest and shall be
irrevocable except with Retail Business Manager's written consent. The
irrevocable power of attorney shall expire when this Retail
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Business Management Agreement has been terminated, all accounts receivable
payable to Retail Business Manager pursuant to this Retail Business Management
Agreement have been collected, and all Management Fees due to Retail Business
Manager have been paid. If Retail Business Manager assigns this Retail Business
Management Agreement in accordance with its terms, the Practice shall execute a
power of attorney in favor of the assignee in a form acceptable to Retail
Business Manager.
3.10 MAINTENANCE OF ACCOUNT.
(a) POWER OF ATTORNEY. Retail Business Manager shall have access to
the Account solely for the purposes stated herein. In connection herewith and
throughout the term of this Retail Business Management Agreement, the Practice
hereby grants to Retail Business Manager an exclusive special power of attorney
for the purposes stated herein and appoints Retail Business Manager as the
Practice's exclusive, true, and lawful agent and attorney-in-fact, and Retail
Business Manager hereby accepts such special power of attorney and appointment,
to deposit into the Account all funds, fees, and revenues collected by Retail
Business Manager for billable Professional Eye Care Services and Optical
Services rendered to patients of the Practice, and for all other Practice
services and to make withdrawals from the Account for payments specified in this
Retail Business Management Agreement and as requested from time-to-time by the
Practice. Notwithstanding the exclusive special power of attorney granted to
Retail Business Manager hereunder, the Practice may, upon reasonable advance
notice to Retail Business Manager, draw checks on the Account; provided,
however, that the Practice shall neither draw checks on the Account nor request
Retail Business Manager to do so if the balance remaining in the Account after
such withdrawal would be insufficient to enable Retail Business Manager to pay
on behalf of the Practice any Dispensary Expense attributable to the operations
of the Dispensary or to the provision of Optical Services at the Dispensary,
and/or any other obligations of the Practice. Limits on authority to sign checks
and purchase orders shall be mutually agreed upon by Retail Business Manager and
the Practice.
(b) PAYMENTS FROM THE ACCOUNT. From the funds collected and
deposited by the Retail Business Manager in the Account, the Retail Business
Manager shall pay in the following order of priority and in accordance with
applicable requirements under law or contract:
(i) any refunds owed to patients by the Practice;
(ii) funds to be deposited into the Professional Practice
Account pursuant to Section 3.9(d) hereof;
(iii) any unpaid or past due compensation owed to the Retail
Business Manager pursuant to Section 5.1 hereof,
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<PAGE> 22
(iv) all Dispensary Expenses;
(v) the current Base Management Fee compensation owed to the
Retail Business Manager pursuant to Section 5.1 hereof;
(vi) the current Supplemental Management Fee compensation owed
to Retail Business Manager pursuant to Section 5.2 hereof; and
(vii) all Shareholder Expenses.
(c) ADDITIONAL DOCUMENTS. Upon request of Retail Business Manager,
the Practice shall execute and deliver to the financial institution wherein the
Account is maintained, such additional documents or instruments as may be
necessary to evidence or effect the special power of attorney granted to Retail
Business Manager by the Practice pursuant to this Section 3.10. The special
power of attorney granted herein shall be coupled with an interest and shall be
irrevocable except with Retail Business Manager's written consent. The
irrevocable power of attorney shall expire when this Retail Business Management
Agreement has been terminated, all accounts receivable payable to Retail
Business Manager pursuant to this Retail Business Management Agreement have been
collected, and all Management Fees due to Retail Business Manager have been
paid. If Retail Business Manager assigns this Retail Business Management
Agreement in accordance with its terms, the Practice shall execute a power of
attorney in favor of the assignee in a form acceptable to Retail Business
Manager. Retail Business Manager shall not make any withdrawal from the
Practice's account unless expressly authorized in this Agreement.
3.11 FISCAL MATTERS.
(a) ANNUAL BUDGET. The initial Annual Budget shall be agreed upon by
the parties before the execution of this Retail Business Management Agreement.
Thereafter, annually and at least thirty (30) days prior to the commencement of
each fiscal year of the Practice, the Retail Business Manager, in consultation
with the Practice, shall prepare and deliver to the Practice a proposed Budget,
setting forth an estimate of the Practice's revenues and expenses for the
upcoming fiscal year. The Practice shall review the proposed Budget and either
approve the proposed Budget or request any changes within twenty-one (21) days
after receiving the proposed Budget. Disputes concerning the Budget shall, at
the request of either party hereto, be submitted to the Practice Advisory
Council. In the event the Parties are unable to agree on a Budget by the
beginning of the fiscal year, until an agreement is reached, the Budget for the
prior year shall be deemed to be adopted as the Budget for the current year,
with each line item in the Budget (with the exception of the Management Fee
which shall be established pursuant to the terms of this Retail Business
Management Agreement) increased or decreased by one of the following, whichever
is most appropriate relative to the particular item of income or expense, (i)
the percentage by which the Adjusted Gross Revenue in the current year,
excluding any damages paid by any Professional to the Practice under any
Restrictive
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<PAGE> 23
covenant or otherwise, has increased or decreased compared to the corresponding
period of the prior year; (ii) the increase or decrease from the prior year in
the Consumer Price Index -Health/Medical Services for the relevant region; and
(iii) the proportionate increase or decrease in mutually agreed upon personnel
costs as measured by the increase or decrease in full-time-equivalent personnel.
The Practice Advisory Council may revise or modify the Budget from time to time
during the applicable fiscal year to reflect changing circumstances affecting
the Practice. Additionally, notwithstanding the above, no change in an adopted
Budget shall be contrary to the terms and spirit of this Agreement nor shall it
have any effect on the Management Fee expressly agreed to herein, unless
approved in advance in writing by the Parties hereto.
(b) OBLIGATIONS OF RETAIL BUSINESS MANAGER. Retail Business Manager
shall use commercially reasonable efforts to manage and administer the
operations of the Dispensary as herein provided so that the actual revenues,
costs and expenses of the operation and maintenance of the Dispensary during any
applicable period of the Practice's fiscal year shall be consistent with the
Budget.
(c) ACCOUNTING AND FINANCIAL RECORDS. Retail Business Manager shall
establish and administer accounting procedures, controls, and systems for the
development, preparation, and safekeeping of administrative or financial records
and books of account relating to the business and financial affairs of the
Dispensary and the provision of Optical Services, all of which shall be prepared
and maintained in accordance with GAAP. Retail Business Manager shall prepare
and deliver to the Practice (i) within sixty (60) days of the end of each of the
first three (3) fiscal quarters in each fiscal year, and (ii) within one hundred
twenty (120) days of the end of each fiscal year, a balance sheet and a profit
and loss statement reflecting the financial status of the Practice in regard to
the provision of Optical Services as of the end of such period, all of which
shall be prepared in accordance with GAAP consistently applied. In addition,
Retail Business Manager shall prepare or assist in the preparation of any other
financial statements or records the Practice may reasonably request.
(d) SALES AND USE TAXES. Retail Business Manager and the Practice
acknowledge and agree that to the extent that any of the services to be provided
by Retail Business Manager hereunder may be subject to any state sales and use
taxes, Retail Business Manager may have a legal obligation to collect such taxes
from the Practice and to remit the same to the appropriate tax collection
authorities. The Practice agrees to have applicable state sales and use taxes
attributable to the services to be provided by Retail Business Manager hereunder
treated as a Dispensary Expense.
3.12 REPORTS AND RECORDS.
(a) HEALTH CARE RECORDS. All files and records relating to the
operation of the Dispensary, including without limitation, accounting, billing
and collection, and patient records shall at all times be and remain the
property of the Practice and shall remain under its
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possession, custody, and control. Subject to the foregoing and to the extent
permitted by applicable law, Retail Business Manager shall, in consultation with
the Practice, establish, monitor, and maintain procedures and policies for the
timely, appropriate, and efficient preparation, filing, retrieval, and secure
storage of such records. Patient records shall be located at Dispensary
facilities so that they are readily accessible for patient care. Patient records
shall not be removed from Dispensary premises without the express written
consent of the Practice, except as specified herein. Patient records for
patients not seen within the last three years may be stored in a commercial
storage facility or other location Retail Business Manager shall designate,
provided that Retail Business Manager shall notify the Practice of the location
of said records. All such health care records shall be retained and maintained
by the Practice, and the Retail Business Manager as agent for the Practice in
accordance with all applicable state and federal laws relating to the
confidentiality and retention thereof. In this regard, Retail Business Manager
shall use its best efforts to preserve the confidentiality of patient records
and shall use information contained in such records only as the agent for the
Practice and for the limited purposes necessary to perform the services set
forth herein.
(b) OTHER REPORTS AND RECORDS. Retail Business Manager shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate for the Practice's provision of Optical Services, and
shall be prepared to analyze and interpret such reports and records upon the
request of the Practice.
3.13 CONFIDENTIAL AND PROPRIETARY INFORMATION. Retail Business Manager
agrees that it shall not disclose any Confidential Information of the Practice
to other persons without the Practice's express written authorization, such
Confidential Information shall not be used in any way detrimental to the
Practice, and Retail Business Manager will keep such Confidential Information
confidential and will ensure that its affiliates and advisors who have access to
such Confidential Information comply with these nondisclosure obligations;
provided, however, that Retail Business Manager may disclose Confidential
Information to those of its Representatives who need to know Confidential
Information for the purposes of this Retail Business Management Agreement, it
being understood and agreed by Retail Business Manager that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section, and will be directed by Retail Business
Manager not to disclose to any other person any Confidential Information.
3.14 RETAIL BUSINESS MANAGER'S INSURANCE. Throughout the Term, Retail
Business Manager shall, as a Dispensary Expense, obtain and maintain with
commercial carriers, through self-insurance or some combination thereof,
appropriate workers' compensation coverage for Retail Business Manager's
employed personnel provided pursuant to this Retail Business Management
Agreement, and professional, casualty and comprehensive general liability
insurance covering Retail Business Manager, Retail Business Manager's personnel,
and all of Retail Business Manager's equipment in such amounts, on such basis
and upon such terms and conditions as Retail Business Manager deems appropriate
but which insurance is consistent with the insurance which is maintained by the
Practice pursuant to Section 4.5 of
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<PAGE> 25
this Retail Business Management Agreement. Retail Business Manager shall cause
the Practice to be named as an additional insured on Retail Business Manager's
professional, casualty and comprehensive general liability policy. Upon the
request of the Practice, Retail Business Manager shall provide the Practice,
with a certificate evidencing such insurance coverage. Retail Business Manager,
in agreement with the Practice, may also carry, as a Dispensary expense, key
person life and disability insurance on any Shareholder or Professional employee
of the Practice in amounts determined reasonable and sufficient by the Retail
Business Manager. Retail Business Manager shall be the owner and beneficiary of
any such insurance, although the Parties hereby agree that the proceeds of any
such insurance shall be paid to the Account as Adjusted Gross Revenues unless
the Parties agree to a specific split of the proceeds. Should only the Practice
choose to obtain key person life and disability insurance, the Practice shall
pay all premiums as a Practice Expense and shall receive all proceeds. Further,
if only the Retail Business Manager chooses to obtain such insurance, Retail
Business Manager shall pay all premiums as a Retail Business Manager Expense and
shall receive the proceeds. The Practice shall cause its Professionals to submit
to a medical examination necessary to obtain such insurance.
3.15 NO WARRANTY OR REPRESENTATIONS. The Practice acknowledges that Retail
Business Manager has not made and will not make any express or implied
warranties or representations that the Management Services provided by Retail
Business Manager will result in any particular amount or level of income to the
Practice. Specifically, Retail Business Manager has not represented that its
Management Services will result in higher revenues, lower expenses, greater
profits, or growth in the number of patients receiving Optical Services at the
Dispensary.
3.16 MARKETING AND PUBLIC RELATIONS. Retail Business Manager acknowledges
that the Practice desires a public relations program to enhance its optical
practice and to extend the Dispensary's ability to provide Optical Services to
patients. Subject to the Practice's approval, Retail Business Manager shall
design and implement an appropriate public relations program on behalf of the
Practice, with appropriate emphasis on public awareness of the availability of
Optical Services at the Dispensary. The public relations program shall be
conducted in compliance with applicable laws and regulations governing
advertising by the optical and optometric professions.
3.17 PURCHASE OF THE DISPENSARY ASSETS. Contemporaneous with the execution
of this Retail Business Management Agreement, Retail Business Manager shall
enter into a Bill of Sale whereby Retail Business Manager shall purchase from
the Practice substantially all of the furniture, fixtures, or equipment used in
the operation of the Dispensary prior to execution of this Retail Business
Management Agreement.
3.18 ACQUISITION OF SERVICES AND SUPPLIES. In obtaining services, supplies
and personnel for or on behalf of the Practice pursuant to this Retail Business
Management Agreement, Retail Business Manager shall be authorized to obtain such
services, supplies and
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personnel from an affiliate of Retail Business Manager; provided that the
Dispensary Expenses which are incurred by or on behalf of the Retail Business
Manager shall be consistent with the expenses of optical dispensaries similar in
size, type, and operations in the Commonwealth.
3.19 COORDINATION OF OBLIGATIONS AND RESPONSIBILITIES. Retail Business
Manager shall, in good faith, coordinate all of its obligations and
responsibilities under this Retail Business Management Agreement with
Professional Business Manager's performance of its obligations and
responsibilities under the Professional Business Management Agreement. Any
dispute, conflict or disagreement between Professional Business Manager and
Retail Business Manager regarding their respective obligations and
responsibilities shall be referred to the Practice Advisory Council for
resolution.
ARTICLE IV
OBLIGATIONS AND RESPONSIBILITIES OF THE PRACTICE
4.1 PROFESSIONAL SERVICES. The Practice shall diligently conduct the
business of an optometric and/or therapeutic optometric practice, including
utilizing its capacities to the greatest extent practicable to provide
Professional Eye Care Services and Optical Services to patients of the Office
and the Dispensary. The Practice shall retain that number of Professionals as
are reasonably necessary and appropriate in the sole discretion of the Practice
for the provision of Professional Eye Care Services and Optical Services and
shall determine their assignment and scheduled hours of practice at Office and
Dispensary locations. The Practice shall provide professional services to the
Office's and the Dispensary's patients in compliance at all times with ethical
standards, laws and regulations applying to the optometric and/or therapeutic
optometric and optical professions. The Practice shall ensure that each
Professional associated with or employed by the Practice to provide Professional
Eye Care Services and Optical Services to the Office's and the Dispensary's
patients is licensed by the Commonwealth of Virginia. The Practice shall
establish and implement a program to monitor the quality of Professional Eye
Care Services and Optical Services provided at the Office and the Dispensary
(the "Continuous Quality Improvement Program"). The Continuous Quality
Improvement Program shall be designed to promote and maintain quality care
consistent with accepted practices prevailing from time to time in the area
where each Office and Dispensary facility is situated.
4.2 EMPLOYMENT OF PROFESSIONALS. The Practice shall be responsible for the
hiring, compensation, supervision, evaluation, and termination of all
Professionals. At the request of the Practice, Retail Business Manager shall be
available to consult with the Practice respecting such matters. The Practice
shall be responsible for the payment of such Practice Employees' salaries and
wages, payroll taxes, benefits, and all other taxes and charges now or hereafter
applicable to them. The Practice shall employ and contract only with licensed
Professionals who meet applicable credentialing guidelines established by the
Practice. The Practice shall not in any fiscal year contract in the aggregate
with Professionals for an amount (including the
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cost of associated benefits, payroll expense, and professional liability
coverage) which is greater than the amount provided for such purpose in the
Budget for such fiscal year. The Practice represents, warrants and covenants
that on or before ninety (90) days from the effective date of this Retail
Business Management Agreement it will have obtained, shall in the future obtain,
and shall enforce formal written employment agreements from each of its present
full-time (an average of thirty (30) or more hours per week) Professionals,
except for the President of the Practice, and those employed in the future in
substantially the form attached hereto as Exhibit 4.2A ("Employment Agreement")
and containing a restrictive covenant (the "Restrictive Covenant"). The Practice
further represents, warrants and covenants that the President of the Practice
has entered into an employment agreement substantially in the form attached
hereto as Exhibit 4.2B, (the "President's Employment Agreement") which agreement
is currently and shall remain in force and effect during the term of this
Agreement unless terminated in accordance therewith.
4.3 PROFESSIONAL STANDARDS. As a continuing condition of Retail Business
Manager's obligations hereunder each Professional and any other Professional
personnel retained by the Practice to provide Professional Eye Care Services and
Optical Services must (i) have and maintain a valid and unrestricted license to
practice optometry or ophthalmology in the Commonwealth, (ii) comply with, be
controlled and governed by and provide Professional Eye Care Services and
Optical Services in accordance with applicable federal, state and municipal
laws, rules, regulations, ordinances and orders, and the ethics and standard of
care of the optometric and optical communities wherein the principal Office and
Dispensary of the Practice is located, and (iii) provide on a continual basis,
quality care to its patients.
4.4 PRACTICE'S INSURANCE. The Practice shall, as a Practice Expense,
obtain and maintain with commercial carriers chosen by the Practice appropriate
workers' compensation coverage for the Practice's employed personnel, if any,
and professional and comprehensive general liability insurance covering the
Practice and each of the Professionals involved in the provision of Professional
Eye Care Services. The comprehensive general liability coverage with respect to
each of the Professionals shall be in the minimum amount of One Million Dollars
($1,000,000) and professional liability coverage shall be in the minimum amount
of One Million Dollars ($1,000,000) for each occurrence and One Million Dollars
($1,000,000) annual aggregate. The insurance policy or policies shall provide
for at least thirty (30) days' advance written notice to the Practice from the
insurer as to any alteration of coverage, cancellation, or proposed cancellation
for any cause. Upon the termination of this Retail Business Management Agreement
for any reason, the Practice shall continue to carry professional liability
insurance in the amounts specified herein for the shorter period of (i) the
period set forth in the Commonwealth's statute of repose (or if no statute of
repose exists, the Commonwealth's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10)) years after
termination; or if the Practice dissolves or ceases to practice optometry, the
Practice shall obtain and maintain as a Practice Expense "tail" professional
liability coverage, in the amounts specified in this Section for the shorter
period of (i) the
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period set forth in the Commonwealth's statute of repose (or if no statute of
repose exists, the Commonwealth's statute of limitations) for bringing
professional malpractice claims based upon injuries which are not immediately
discoverable plus any applicable tolling periods, or (ii) ten (10)) years. The
Practice shall be responsible for paying all premiums for Shareholder "tail"
insurance coverage and such coverage shall be a Shareholder Expense; provided,
however, that the Practice may cause its Professionals to be responsible for
paying the premiums for such "tail" insurance coverage.
4.5 CONFIDENTIAL AND PROPRIETARY INFORMATION. The Practice agrees that it
shall not disclose any Confidential Information of the Retail Business Manager
to other persons without Retail Business Manager's express written
authorization, such Confidential Information shall not be used in any way
detrimental to Retail Business Manager, and the Practice will keep such
Confidential Information confidential and will ensure that its affiliates and
advisors who have access to such Confidential Information comply with these
nondisclosure obligations; provided, however, that the Practice may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Retail Business Management
Agreement, it being understood and agreed by the Practice that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by the
Practice not to disclose to any other person any Confidential Information.
4.6 NON-COMPETITION. The Practice hereby recognizes, acknowledges, and
avers that Retail Business Manager will incur substantial costs in providing the
equipment, support services, personnel, management, administration, and other
items and services that are the subject matter of this Retail Business
Management Agreement and that in the process of providing services under this
Retail Business Management Agreement, the Practice will be privy to financial
and Confidential Information, to which the Practice would not otherwise be
exposed. The Parties also recognize that the services to be provided by Retail
Business Manager will be feasible only if the Practice operates an active
practice to which the Professionals associated with the Practice devote their
full time and attention. The Practice agrees, acknowledges, and avers that the
non-competition covenants described hereunder are necessary for the protection
of Retail Business Manager, and that Retail Business Manager would not have
entered into this Retail Business Management Agreement without the following
covenants.
(a) Except as specifically agreed to by Retail Business Manager in
writing, the Practice covenants and agrees that during the Term of this Retail
Business Management Agreement and for a period of one (1) year from the date
this Retail Business Management Agreement is terminated, other than if
terminated by the Practice for cause, or expires the Practice shall not directly
or indirectly own (excluding ownership of less than one percent (1%) of the
equity of any publicly traded entity and excluding ownership of the common stock
of Retail Business Manager), manage, operate, control, contract with, lend funds
to, lend its name to, maintain any interest whatsoever in, or be employed by,
any enterprise (i) having to
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do with the provision, distribution, promotion, or advertising of any type of
management or administrative services or products to third parties in
competition with Retail Business Manager, within a 10 mile radius of any
Dispensary of the Practice; and/or (ii) offering any type of service(s) or
product(s) to third parties substantially similar to those offered by Retail
Business Manager to the Practice in competition with Retail Business Manager
within a 10 mile radius of any Dispensary of the Practice; and/or (iii)
providing Optical Services in competition with Retail Manager within a ten (10)
mile radius of any Dispensary of the Practice.
(b) RESTRICTIVE COVENANTS BY OPTOMETRISTS. Under the Restrictive
Covenant, the non-shareholder Professionals agree not to practice optometry
and/or therapeutic optometry or provide Optical Services within a certain
radius, as set forth in Exhibit 4.6A of the primary Dispensary location at which
such non-Shareholder Professionals were originally assigned to perform
Professional Eye Care Services and Optical Services and any other Dispensary
location at which such Professionals performed services on a regular basis for
sixteen (16) or more hours per week or one thousand (1,000) hours during the
last twelve months of such non-Shareholder Professionals' employment with the
Practice. for a period of at least six (6) months during the period of such
Professionals' employment with the Practice. The Restrictive Covenant shall be
effective for a period of one (1) year following termination of employment, with
the Practice and may be subject to a liquidated damages provision as authorized
hereafter. A list of non-Shareholder Professionals the Practice has required to
execute Employment Agreements as of the effective date of this Retail Business
Management Agreement is attached hereto as Exhibit 4.6B.
(c) LIQUIDATED DAMAGES. The Practice represents, warrants and
covenants that the Restrictive Covenant described above contains a liquidated
damages provision, consistent with the laws of the Commonwealth, mandating the
payment of $25,000.00 in liquidated damages. Any liquidated damage amount
collected by the Practice through enforcement of the Restrictive Covenant shall
be delivered immediately to Retail Business Manager for deposit in the Account
and included in the Adjusted Gross Revenue. The Practice hereby stipulates and
agrees that Retail Business Manager will suffer severe harm if the Practice
fails or refuses to obtain and enforce the Restrictive Covenant, including the
aforesaid liquidated damages provision. The Practice further stipulates and
agrees that the parties may be unable to quantify such severe harm, and,
accordingly, the Practice shall pay to Retail Business Manager the amount of
$25,000.00, as agreed upon stipulated damages in the event of such failure or
refusal to obtain and enforce the Restrictive Covenant. Any liquidated damage
amount collected from the Practice as a result of its failure or refusal to
enforce the Restrictive Covenant shall be immediately paid to Retail Business
Manager and shall not be included in the Adjusted Gross Revenue for the
Practice.
(d) The Practice understands and acknowledges that Retail Business
Manager shall suffer severe harm in the event that the foregoing non-competition
covenants in Section 4.6 are violated, and accordingly, if the Practice breaches
any obligation of Section
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4.6, in addition to any other remedies available under this Retail Business
Management Agreement, at law or in equity, Retail Business Manager shall be
entitled to enforce this Retail Business Management Agreement by injunctive
relief and by specific performance of the Retail Business Management Agreement,
such relief to be without the necessity of posting a bond, cash or otherwise.
Additionally, nothing in this Section 4.6(d) shall limit Retail Business
Manager's right to recover any other damages to which it is entitled as a result
of the Practice's breach. The time period for which the non-competition covenant
is effective shall be extended day for day for the time period the Practice is
in violation of the non-competition covenant. If any provision of the covenants
is held by a court of competent jurisdiction to be unenforceable due to an
excessive time period, geographic area, or restricted activity, the covenant
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable. Following termination of
this Retail Business Management Agreement pursuant to Section 6.2(b) hereof, the
Practice shall not amend, alter or otherwise change any term or provision of the
Restrictive Covenants or liquidated damages provisions of the Employment
Agreements or the President's Employment Agreement with the Professionals.
Following termination of this Agreement pursuant to Section 6.2(a) hereof the
Practice and the Professionals shall be relieved of the restrictions imposed by
this Section 4.6.
4.7 NAME, TRADEMARK. The Practice represents and warrants that on and
after sixty (60) days from the effective date of this Retail Business Management
Agreement, the Practice shall conduct its professional practice under the name
of, and only under the name of "Hour Eyes Optometrist, P. C." and that such name
is duly registered, qualified, or licensed under the laws of the Commonwealth,
and that, to the Practice's knowledge, the Practice is the sole and absolute
owner of the name in the Commonwealth. The Practice covenants and promises that,
without the prior written consent of the Retail Business Manager, the Practice
will not:
(a) take any action that is reasonably likely to result in the loss
of registration, qualification or licensure of the name;
(b) fail to take any reasonably necessary action that will maintain
the registration, qualification, or licensure current;
(c) license, sell, give, or otherwise transfer the name or the right
to use the name to any optometry practice, Optometrist, professional
corporation, optical dispensary or any other entity; or
(d) cease conducting the professional practice of the Practice under
the name.
4.8 BILLING INFORMATION AND ASSIGNMENTS, ESTABLISHMENT OF FEES. The
Practice shall promptly provide the Retail Business Manager with all billing and
other information reasonably requested by the Retail Business Manager to enable
it to bill and collect the Dispensary's fees and other charges and reimbursement
claims pursuant to Section 3.9, and
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the Practice shall use its best efforts to procure consents to assignments and
other approvals and documents necessary to enable the Retail Business Manager to
obtain payment or reimbursement from third parties for such fees, other charges
and claims.
4.9 PROVIDER AGREEMENTS. The Practice shall have ultimate authority with
regard to all contractual arrangements with third parties for the Practice's
provision of Optical Services, and the Practice may at its sole discretion
reject or otherwise refuse to enter into any such contractual arrangement.
4.10 TAX MATTERS. The Practice shall prepare or arrange for the
preparation by an accountant selected by the Practice of all appropriate
corporate tax returns and reports required of the Practice including such
returns and reports required with respect to the Account. All costs and expenses
relating to the preparation of such returns and reports shall be deemed a
Practice Expense.
4.11 SHAREHOLDERS' UNDERTAKING TO ENFORCE CERTAIN PROVISIONS OF AGREEMENT.
The Practice shall cause to be executed by all Shareholders of the Practice an
undertaking in the form of EXHIBIT 4. 11 by such Shareholders to ensure that the
covenants not to compete described in Section 4.6 of this Retail Business
Management Agreement are enforced by the Practice against any individuals
violating such covenants.
4.12 LIMITATIONS ON ACTIONS OF THE PRACTICE. The Practice shall not take
any of the following actions without the express prior written consent of Retail
Business Manager:
(a) Any action leading to or intended to result in the merger,
combination or consolidation of the Practice or Dispensary with, or acquisition
of the Practice, the Dispensary, or their businesses by, any other entity;
(b) Mortgage or encumber any of the Practice's real, personal or
mixed property as security for any indebtedness which is not contemplated by the
Budget;
(c) Pay any dividend or make any other distribution, whether in cash
or in kind, to Shareholders of the Practice, if any compensation owed by the
Practice to Retail Business Manager hereunder has not been paid in full, and if
any and all monetary obligations of the Practice to Retail Business Manager have
not been fully paid in accordance with the terms of any and all documents
governing such obligations; or
(d) Dissolve or liquidate the Practice, or take any action with a
view to or likely to have the result of the dissolution or liquidation of the
Practice.
(e) Authorize the provision of professional services such that the
income derived therefrom is not owned by the Practice; provided that no such
consent is necessary for (i) professional services performed by Professionals
during said Professionals' vacation time,
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or (ii) professional services performed in connection with duties and
responsibilities as a member of the Reserves or National Guard.
4.13 LEASES OF DISPENSARY LOCATIONS. The Practice shall maintain and
fulfill all of its obligations under leases of Dispensary facilities or
locations.
ARTICLE V
RETAIL MANAGERS COMPENSATION
5.1 BASE MANAGEMENT FEE. The Practice and Retail Business Manager agree to
the compensation set forth herein as being paid to Retail Business Manager in
consideration of a substantial commitment made by Retail Business Manager
hereunder and that such fees are fair and reasonable. Each month Retail Business
Manager shall be paid that percentage set forth in Exhibit 5.1 of Adjusted Gross
Revenue.
5.2 SUPPLEMENTAL MANAGEMENT FEE. In consideration of the improved
efficiencies expected to be effected by Retail Business Manager, as an incentive
to Retail Business Manager to effect those efficiencies, and as additional
compensation for the services provided by Retail Business Manager, Retail
Business Manager shall be paid each month, during the Term of this Retail
Business Management Agreement, that percentage set forth in Exhibit 5.2 of
Adjusted Net Revenue. Adjusted Net Revenue shall be calculated as the amount
remaining after subtracting from Adjusted Gross Revenue (i) Dispensary Expenses,
(ii) Office Expenses, (iii) Practice Expenses, and (iv) Shareholder Expenses up
to an amount equal to One Hundred Thirty Nine Thousand Dollars ($139,000.00),
multiplied in the case of years ending after December 31, 1998 by the Inflation
Adjustment.
5.3 LIMITATIONS ON MANAGEMENT FEE. The Management Fee (both the Base
Management Fee and the Supplemental Management Fee) to be paid pursuant to this
Article V, provided, however, that such Supplemental Management Fee shall be
reduced if and to the extent that the payment of same results in an pursuant to
Section 3. 1 0(b) hereof the amount remaining in the Account for Shareholder
Expenses which is will not be less than Thirty-Seven Thousand Five Hundred
Dollars ($37,500.00) on an annualized basis during the first year of the Term
and Forty Five Thousand Dollars ($45,000.00) on an annualized basis during the
second year of the Term plus the amount of the and is insufficient to make
scheduled interest payments on any funds borrowed by any Shareholder to purchase
Shareholder's shares of the Practice.
5.4 ADJUSTMENTS TO MANAGEMENT FEES FOR NEW OFFICES. Notwithstanding
anything in this Retail Business Management Agreement to the contrary, in
calculating the Base Management Fee pursuant to Section 5.1 hereof, the
following provisions shall govern:
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(a) The calculation of the Base Management Fee and Supplemental
Management Fee shall not include the revenues and expenses associated with any
New Office during its first twelve (12) months of operation (the "Initial
Period") if the Net Earnings associated with such New Office during such Initial
Period is less than or equal to zero.
(b) In the event that Net Earnings for such New Office exceeds zero,
the Base Management Fee to be paid to Retail Business Manager with respect to
such New Office shall be equal to such Net Earnings but shall not exceed the
Base Management Fee as applied to the New Office and as calculated pursuant to
Section 5.1 of the Agreement.
5.5 REASONABLE VALUE. Payment of the Management Fee is not intended to be
and shall not be interpreted or applied as permitting Retail Business Manager to
share in the Practice's fees for Professional Eye Care Services and Optical
Services or any other services, but is acknowledged as the Parties' negotiated
agreement as to the reasonable fair market value of Retail Business Manager's
commitment to pay all Dispensary Expenses and the fair market value of the
equipment, contract analysis and support, other support services, purchasing,
personnel, management, administration, strategic management and other items and
services furnished by Retail Business Manager pursuant to the Retail Business
Management Agreement, considering the nature and volume of the services required
and the risks assumed by Retail Business Manager. The Practice and Retail
Business Manager recognize and acknowledge that Retail Business Manager will
incur substantial costs and business risks in undertaking to pay all Dispensary
Expenses and in providing the support services, personnel, marketing,
management, administration, and other items and services that are the subject
matter of this Retail Business Management Agreement. It is the intent of the
Parties that the Management Fee reasonably compensate Retail Business Manager
for the value to the Practice of Retail Business Manager's administrative
expertise, given the considerable business risk to Retail Business Manager in
providing the Management Services that are the subject of this Retail Business
Management Agreement.
5.6 PAYMENT OF MANAGEMENT FEE. To facilitate the payment of the Management
Fee as provided in Section 5.1 hereof, the Practice hereby expressly authorizes
Retail Business Manager to make withdrawals of the Management Fee from the
Account as such fee becomes due and payable during the Term in accordance with
Section 3.10(a) and after termination as provided in Section 6.3. Retail
Business Manager shall deliver to the Practice an invoice for the Management Fee
accompanied by a reasonably detailed statement of the information upon which the
Management Fee calculation is based.
5.7 DISPUTES REGARDING FEES.
(a) It is the Parties' intent that any disputes regarding
performance standards of the Retail Business Manager be resolved to the extent
possible by good faith negotiation. To that end, the Parties agree that if the
Practice in good faith believes that Retail Business Manager has failed to
perform its obligations, and that as a result of such failure, the Practice
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is entitled to a set-off or reduction in its Management Fees, the Practice shall
give Retail Business Manager notice of the perceived failure and request in the
notice a set-off or reduction in Management Fees. Retail Business Manager and
the Practice shall then negotiate the dispute in good faith, and if an agreement
is reached, the Parties shall implement the resolution without further action.
At the request of Retail Business Manager or the Practice, the Practice Advisory
Council shall make recommendations to Retail Business Manager with respect to
any dispute concerning a set off or reduction in Management Fees.
(b) If the Parties cannot reach a resolution within a reasonable
time, the Parties shall submit the dispute to mediation to be conducted in
accordance with the American Arbitration Association's Commercial Mediation
Rules.
(c) if the mediation process fails to resolve the dispute, the
dispute shall be submitted by either Party to binding arbitration under Section
8.7.
ARTICLE VI
TERM AND TERMINATION
6.1 INITIAL AND RENEWAL TERM. The Term of this Retail Business Management
Agreement will be for an initial period of forty (40) years after the effective
date, and shall be automatically renewed for successive five (5) year periods
thereafter, provided that neither Retail Business Manager nor the Practice shall
have given notice of termination of this Retail Business Management Agreement at
least one hundred twenty (120) days before the end of the initial term or any
renewal term, or unless otherwise terminated as provided in Section 6.2 of this
Retail Business Management Agreement.
6.2 TERMINATION.
(a) TERMINATION BY THE PRACTICE. The Practice may immediately
terminate this Retail Business Management Agreement at its discretion, upon
written notice pursuant to Section 8.3, as follows:
(i) If Retail Business Manager becomes insolvent by reason of
its inability to pay its debts as they mature; is adjudicated bankrupt or
insolvent; files a petition in bankruptcy, reorganization or similar proceeding
under the bankruptcy laws of the United States or shall have such a petition
filed against it which is not discharged within thirty (30) days; has a receiver
or other custodian, permanent or temporary, appointed for its business, assets
or property; makes a general assignment for the benefit of creditors; has its
bank accounts, property or accounts attached; has execution levied against its
business or property; or voluntarily dissolves or liquidates or has a petition
filed for corporate dissolution and such petition is not dismissed with thirty
(30) days;
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(ii) If the Retail Business Manager fails to comply with any
material provision of this Agreement, and does not correct such failure within
ninety (90) days after written notice of such failure to comply is delivered by
the Practice specifying the nature of the breach in reasonable detail;
(iii) Retail Business Manager commits any act of fraud,
misappropriation or embezzlement, or any other felony and as a result the Retail
Business Manager is unable to substantially perform under the terms of this
Retail Business Management Agreement.
(b) TERMINATION BY RETAIL BUSINESS MANAGER Retail Business Manager
may immediately terminate this Retail Business Management Agreement at its
discretion, upon written notice pursuant to Section 8.3, as follows:
(i) The revocation, suspension, cancellation or restriction of
any Shareholder's license to practice optometry in the Commonwealth if, in the
reasonable discretion of the Retail Business Manager, the Practice will not be
financially viable after such revocation, suspension, cancellation, or
restriction.
(ii) If the Practice becomes insolvent by reason of its
inability to pay its debts as they mature; is adjudicated bankrupt or insolvent;
files a petition in bankruptcy, reorganization or similar proceeding under the
bankruptcy laws of the United States or shall have such a petition filed against
it which is not discharged within thirty (30) days; has a receiver or other
custodian, permanent or temporary, appointed for its business, assets or
property; makes a general assignment for the benefit of creditors; has its bank
accounts, property or accounts attached; has execution levied against its
business or property; or voluntary dissolves or liquidates or has a petition
filed for corporate dissolution and such petition is not dismissed with thirty
(30) days;
(iii) If the Practice fails to comply with any material
provision of this Agreement, or any other agreement with Retail Business
Manager, and does not correct such failure within ninety (90) days after written
notice of such failure to comply is delivered by Retail Business Manager
specifying the nature of the breach in reasonable detail;
(iv) The Practice or any of the Practice Professionals commit
any act of fraud, misappropriation or embezzlement, or any other felony and as a
result the Practice is unable to substantially perform under the terms of this
Retail Business Management Agreement;
(v) Any of the material representations of the Practice are
false or incorrect when made or hereafter become materially false or incorrect
or any warranty of the Practice is materially breached.
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(c) Termination by Agreement. In the event the Practice and Retail
Business Manager shall mutually agree in writing, this Retail Business
Management Agreement may be terminated on the date specified in such written
agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
there shall be a change in the Medicare or Medicaid statutes, federal statutes,
state statutes, case law, administrative interpretations, regulations or general
instructions, the adoption of new federal or state legislation, or a change in
any third-party reimbursement system, or any finding, ruling, or decree of any
regulatory body concerning this Retail Business Management Agreement, any of
which are reasonably likely to materially and adversely affect the manner in
which either Party may perform or be compensated for its services under this
Retail Business Management Agreement or which shall make this Retail Business
Management Agreement or any related agreements unlawful or unenforceable, or
which would be reasonably likely to subject either Party to this Retail Business
Management Agreement, or any member, shareholder, officer, director, employee,
agent or affiliated organization to any civil or criminal penalties or
administrative sanctions, the Parties shall immediately use their best efforts
to enter into a new service arrangement or basis for compensation for the
services furnished pursuant to this Retail Business Management Agreement that
complies, with the law, regulation, policy, finding, ruling, or decree, or which
minimizes the possibility of such penalties, sanctions or unenforceability, and
that approximates as closely as possible the economic position of the Parties
prior to the change. If the Parties are unable to reach a new agreement within
sixty (60) days, this Retail Business Management Agreement shall be terminated
upon ninety (90) days written notice by either Party to the other.
6.3 EFFECTS OF TERMINATION.
(a) OBLIGATION AFTER TERMINATION. Upon termination of this Retail
Business Management Agreement, as hereinabove provided, neither Party shall have
any further obligations hereunder except for
(i) obligations accruing prior to the date of termination,
including, without limitation, payment of the Management Fee relating to
services provided prior to the termination of this Retail Business Management
Agreement;
(ii) obligations, promises, or covenants set forth herein that
are expressly made to extend beyond the Term, including, without limitation,
insurance, indemnities and non-competition provisions, which provisions shall
survive the expiration or termination of this Retail Business Management
Agreement;
(iii) the obligation of the Practice described in Section 6.4;
and
(iv) the obligation of the Practice to repay amounts advanced
by Retail Business Manager to the Practice.
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(b) RECEIPT OF COLLECTIONS AFTER TERMINATION. In effectuating the
provisions of this Section 67.3, the Practice specifically acknowledges and
agrees that if this Retail Business Management Agreement terminates pursuant to
Sections 76.2(b) or (d), Retail Business Manager shall continue for a period not
to exceed ninety (90) days to exclusively collect and receive on behalf of the
Practice all cash collections from accounts receivable in existence at the time
this Retail Business Management Agreement is terminated, it being understood
that
(i) such cash collections will represent compensation to
Retail Business Manager to the extent of any outstanding obligations to Retail
Business Manager by the Practice pursuant to this Retail Business Management
Agreement for Management Services already rendered;
(ii) Retail Business Manager shall not be entitled to collect
accounts receivable after the termination date if this Agreement is terminated
pursuant to Section 67.2(a); and
(iii) the Retail Business Manager shall deduct from such cash
collections any other amounts owed to Retail Business Manager under this Retail
Business Management Agreement, including, without limitation, ten percent (10%)
of such cash collections as its Management Fee during any period after the
termination of this Retail Business Management Agreement while such collections
are taking place and any reasonable costs incurred by Retail Business Manager in
carrying out the post termination procedures and transactions contemplated
herein.
(iv) Retail Business Manager shall remit remaining amounts
from such collection activities, if any, to the Practice.
(c) SURRENDER OF BOOKS AFTER TERMINATION. Upon the expiration or
termination of this Retail Business Management Agreement for any reason or cause
whatsoever, Retail Business Manager shall surrender to the Practice all books
and records pertaining to the Dispensary.
6.4 PURCHASE OBLIGATION. Upon expiration of this Retail Business
Management Agreement in accordance with Section 6.1 or termination of this
Retail Business Management Agreement by Retail Business Manager, as set forth in
Sections 6.2(b) or 6.2(d) above, the Practice shall upon Retail Business
Manager's demand:
(a) to the extent requested by Retail Business Manager, purchase
from Retail Business Manager at book value all of the assets, including
inventory and supplies, listed in the Bill of Sale whereby Retail Business
Manager acquired from the Practice substantially all of the furniture, fixtures,
and equipment used in the operation of the Dispensary prior to execution of this
Retail Business Management Agreement, including all
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replacements and additions thereto made by Retail Business Manager pursuant to
the performance of its obligations under this Retail Business Management
Agreement, as adjusted in accordance with GAAP to reflect operations of the
Dispensary, depreciation, amortization, and other adjustments through the last
day of the month most recently ended prior to the date of such termination.
(b) Assume all contracts and leases and the Practice's pro rata
share of all debts and payables that are obligations of Retail Business Manager
and that relate principally to the performance of Retail Business Manager's
obligations under this Retail Business Management Agreement; provided, however,
that the Practice shall only be obligated to assume such contracts and leases if
the Practice will be able to enjoy the benefits of the contracts and leases
following such assumption;
(c) Purchase from Retail Business Manager at book value all of the
assets, tangible and intangible, including inventory and supplies NOT listed in
said Bill of Sale but used in the operations of the Dispensary, including all
replacements and additions thereto made by Retail Business Manager pursuant to
the performance of its obligations under this Retail Business Management
Agreement, set forth on the books of Retail Business Manager as adjusted through
the last day of the month most recently ended prior to the date of such
termination in accordance with GAAP to reflect operations of the Dispensary,
depreciation, amortization, and other adjustments of assets shown on the books
of Retail Business Manager; and
(d) Cause to be executed by Shareholders of the Practice such
security agreements reasonably required by Retail Business Manager in connection
with the purchase described in this Section 6.4. All current Shareholders of the
Practice shall on or before the effective date of this Retail Business
Management Agreement, and all individuals who become Shareholders of the
Practice after the effective date of commencement of this Retail Business
Management Agreement shall upon becoming a Shareholder of the Practice, execute
and deliver to Retail Business Manager an undertaking to comply, with this
Section 6.4 which shall be in the form of EXHIBIT 6.4.
6.5 CLOSING OF PURCHASE. When the Practice purchases the assets pursuant
to Section 6.4, the Practice shall pay cash or deliver a note payable in equal
monthly installments over five (5) years at an interest rate not to exceed
"prime" plus one (1%) percent ("prime" being the commercial lending rate of
NationsBank, N.A.) per annum for the purchased assets. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of Retail
Business Manager, if any, assumed by the Practice, by any payment the Retail
Business Manager has failed to make under this Retail Business Management
Agreement, and by any unpaid portion of any promissory notes payable by Retail
Business Manager to any Shareholder of the Practice. The Practice and all
Shareholders of the Practice shall execute such documents as may be required to
assume the liabilities set forth in Section 6.4(b) and to remove Retail Business
Manager from any liability with respect to such purchased asset. The
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closing date for the purchase shall be determined by the Parties, but shall in
no event occur later than the expiration date of this Retail Business Management
Agreement if this Agreement expires in accordance with Section 6. 1, or sixty
(60) days from the date of the notice of termination for cause. The termination
of this Retail Business Management Agreement shall become effective upon the
closing of the sale of the assets if the assets are purchased, and all Parties
shall be released from any restrictive covenants provided for in Section 4.6 on
the closing date. From and after any termination, each Party shall provide the
other Party with reasonable access to the books and records then owned by it to
permit such requesting Party to satisfy reporting and contractual obligations
that may be required of it.
6.6 LIMITATION OF LIABILITY. In no event shall Retail Business Manager be
liable to the practice for any indirect, special or consequential damages or
lost profits, arising out of or related to this Agreement or the performance or
breach thereof, even if Retail Business Manager has been advised of the
possibility thereof.
ARTICLE VII
INDEMNIFICATION; THIRD PARTY CLAIMS
7.1 INDEMNIFICATION BY THE PRACTICE. The Practice shall indemnify and hold
harmless Retail Business Manager and Retail Business Manager's shareholders,
directors, officers, agents and employees, from and against all claims, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, resulting in any manner, directly or indirectly, from the
negligent or intentional acts or omissions of the Practice or its members,
Shareholders, directors, officers, employees, agents or independent contractors,
including but not limited to any such claims, demands, liabilities, losses,
damages, costs and expenses which accrued or arose prior to the date of
execution of this Retail Business Management Agreement.
7.2 INDEMNIFICATION BY RETAIL BUSINESS MANAGER. Retail Business Manager
shall indemnify and hold harmless the Practice, and the Practice's members,
Shareholders, directors, officers, agents and employees, from and against any
and all claims, demands, liabilities, losses, damages, costs and expenses,
including reasonable attorneys' fees, resulting in any manner, directly or
indirectly, from the negligent or intentional acts or omissions of Retail
Business Manager or its shareholders, directors, officers, employees, agents or
independent contractors.
7.3 NOTICE OF CLAIM FOR INDEMNIFICATION. No claims for indemnification
under this Retail Business Management Agreement relating to claims solely
between the Parties shall be valid unless notice of such claim is delivered to
the Practice (in the case of a claim by Retail Business Manager) or Retail
Business Manager (in the case of a claim by the Practice) within one (1) year
after the Party making such claim first obtained knowledge of the facts upon
which such claim is based. Any such notice shall set forth in reasonable detail,
to the extent
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known by the Party giving such notice, the facts on which such claim is based
and the resulting estimated amount of damages.
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If the Practice or Retail Business Manager receives notice or
acquires knowledge of any matter which may give rise to a claim by another
person and which may then result in a claim for indemnification under this
Retail Business Management Agreement, then: (i) if such notice or knowledge is
received or acquired by the Practice, the Practice shall promptly notify Retail
Business Manager; and ii) if such notice or knowledge is received or acquired by
Retail Business Manager, the Retail Business Manager shall promptly notify the
Practice; except that no delay in giving such notice shall diminish any
obligation under this Retail Business Management Agreement to provide
indemnification unless (and then solely to the extent) the Party from whom such
indemnification is sought is prejudiced.
(b) Any Party from whom such indemnification (the "Indemnifying
Party") is sought shall have the right to defend the Party seeking such
indemnification (the "Indemnified Party") against such claim by another person
(the "Third Party Claim") with counsel of the Indemnifying Party's choice
reasonably satisfactory to the Indemnified Party so long as: (i) within fifteen
(15) days after the Indemnified Party has given notice of the Third Party Claim
to the Indemnifying Party, the Indemnifying Party notifies the Indemnified Party
that the Indemnifying Party will indemnify the Indemnified Party from and
against all adverse consequences the Indemnified Party may suffer caused by,
resulting from, arising out of or relating to such Third Party Claim; (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
satisfactory to the Indemnified Party that the Indemnifying Party has the
financial resources necessary to defend against the Third Party Claim and
fulfill its indemnification obligations; (iii) the Third Party Claim seeks money
damages; (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim (other than an optometric malpractice claim) is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party; and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.4(b): (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (ii) the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior consent of the Indemnifying
Party- and (iii) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior consent of the Indemnified Party.
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(d) If any of the conditions specified in Section 7.4(b) is not
satisfied, however, (i) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem advisable (and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith); (ii) the Indemnifying Party shall reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' and accountants' fees and
expenses); and (iii) the Indemnifying Party shall remain responsible for any
adverse consequences the Indemnified Party may suffer caused by, resulting from,
arising out of or relating to such Third Party Claim to the fullest extent
provided in this Agreement.
7.5 SETTLEMENT. Except as permitted by Section 7.4, a Party shall not
compromise or settle any claim for which the other Party is obligated to
indemnify it without the written consent of such Party.
7.6 COOPERATION. The Indemnified Party shall make available all
information and assistance that the Indemnifying Party may reasonably request in
conjunction with assessing, defending and settling said claim.
ARTICLE VIII
MISCELLANEOUS
8.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Retail Business
Management Agreement is intended or shall be construed to allow Retail Business
Manager to exercise control, authority or direction over the manner or method by
which the Practice and its Professionals perform Professional Eye Care Services
or other professional health care services. The rendition of all Professional
Eye Care Services, including, but not limited to, the prescription or
administration of medicine and drugs, shall be the sole responsibility of the
Practice and its Professionals, and Retail Business Manager shall not interfere
in any manner or to any extent therewith. Nothing contained in this Retail
Business Management Agreement shall be construed to permit Retail Business
Manager to engage in the practice of optometry, it being the sole intention of
the Parties hereto that the services to be rendered to the Practice by Retail
Business Manager are solely for the purpose of providing non-optometric
management and administrative services to the Dispensary so as to enable the
Practice to devote its full time and energies to the professional conduct of its
professional eye care practice and provision of Professional Eye Care Services
to its patients.
8.2 STATUS OF INDEPENDENT CONTRACTOR. It is expressly acknowledged that
the Parties hereto are "independent contractors," and nothing in this Retail
Business Management Agreement is intended and nothing shall be construed to
create an employer/employee, partnership, or joint venture relationship, or to
allow either to exercise control or direction over the manner or method by which
the other performs the services that are the subject matter
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of this Retail Business Management Agreement; provided always that the services
to be provided hereunder shall be furnished in a manner consistent with the
standards governing such services and the provisions of this Retail Business
Management Agreement. Each Party understands and agrees that (i) the other will
not be treated as an employee for federal tax purposes, (ii) neither will
withhold on behalf of the other any sums for income tax, unemployment insurance,
social security, or any other withholding pursuant to any law or requirement of
any governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the Party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, "withholdings," and benefits, if any.
8.3 NOTICES. Any notice, demand, or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when in writing
and personally delivered or mailed by prepaid certified or registered mail,
return receipt requested, addressed as follows:
The Practice: Dr. Samit's Hour Eyes Optometrist, P.C.
5568 General Washington Drive
Suite A-215 Alexandria, Virginia 22312
Attention: Daniel Poth, O.D.
Retail Business Manager: Visionary Retail Management, Inc.
5568 General Washington Drive
Suite A-215
Alexandria, Virginia 22312
Attention: Robert Brodney
with a copy to: Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Attention: James B. Smith, Jr.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
8.4 GOVERNING LAW. This Retail Business Management Agreement shall in all
respects be governed, interpreted and construed in accordance with the laws of
the Commonwealth without giving effect to principles of comity or conflicts of
laws thereof
8.5 JURISDICTION AND VENUE. Retail Business Manager and the Practice
hereby consent to the personal jurisdiction and venue of the state and federal
courts in the judicial
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circuit where the Practice has its principal corporate office, and do hereby
waive all questions of personal jurisdiction and venue, including, without
limitations the claim or defense that such courts constitute an inconvenient
forum.
8.6 ASSIGNMENT. Except as may be herein specifically provided to the
contrary, this Retail Business Management Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that the Practice
may not assign this Retail Business Management Agreement without the prior
written consent of Retail Business Manager, which consent may be withheld.
Retail Business Manager may assign or transfer its rights and obligations under
this Retail Business Management Agreement only in the following situations: (a)
pursuant to a merger of Retail Business Manager into another entity or the sale
of substantially all of the assets of Retail Business Manager; (b) pursuant to
the sale and/or assignment of this Retail Business Management Agreement with the
Practice's consent, which shall not be unreasonably withheld; (c) pursuant to a
transfer or assignment of this Agreement to one of Retail Business Manager's
subsidiaries; or (d) pursuant to any transfer or assignment to or by any
financial lender of the Retail Business Manager, and this Retail Business
Management Agreement is subordinate to the rights of such lender. After such
assignment and transfer, the Practice agrees to look solely to such assignee or
transferee for performance of this Retail Business Management Agreement.
8.7 ARBITRATION. Any and every dispute of any nature whatsoever that may
arise between the Parties, whether sounding in contract, statute, tort, fraud,
misrepresentation, discrimination or any other legal theory, including, but not
limited to, disputes relating to or involving the construction, performance or
breach of this Agreement or any other agreement between the Parties, whether
entered into prior to, on, or subsequent to the date of this Agreement, or those
arising under any federal, state or local law, regulation or ordinance, shall be
determined by binding arbitration in accordance with the then-current commercial
arbitration rules of the American Arbitration Association, to the extent such
rules do not conflict with the provisions of this paragraph. If the amount in
controversy in the arbitration exceeds Two Hundred Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. Otherwise, the
arbitration shall be conducted by a single neutral arbitrator. The Parties shall
endeavor to select neutral arbitrators by mutual agreement. If such agreement
cannot be reached within thirty (30) calendar days after a dispute has arisen
which is to be decided by arbitration, any Party or the Parties jointly shall
request the American Arbitration Association to submit to each Party an
identical panel of fifteen (15) persons. Alternate strikes shall be made to the
panel, commencing with the Party bringing the claim, until the names of three
(3) persons remain, or one (1) person if the case is to be heard by a single
arbitrator. The Parties may, however, by mutual agreement, request the American
Arbitration Association to submit additional panels of possible arbitrators. The
person(s) thus remaining shall be the arbitrator(s) for such arbitration. If
three (3) arbitrators are selected, the arbitrators shall elect a chairperson to
preside at all meetings and hearings. The arbitrator(s), or a majority of them,
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<PAGE> 44
shall have the power to determine all matters incident to the conduct of the
arbitration, including without limitation all procedural and evidentiary matters
and the scheduling of any hearing. The award made by a majority of the
arbitrators shall be final and binding upon the Parties thereto and the subject
matter. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. sec.sec. 1-16, and judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof the
arbitrators shall have no authority to award punitive or exemplary damages or
any statutory multiple damages, and shall only have the authority to award
compensatory damages, arbitration costs, attorney's fees declaratory relief, and
permanent injunctive relief, if applicable. Unless otherwise agreed by the
parties, the arbitration shall be held in Atlanta, Georgia. This Section 8.7
shall not prevent either Party from seeking a temporary restraining order or
temporary or preliminary injunctive relief from a court of competent
jurisdiction in order to protect its fights under this Agreement. In the event a
Party seeks such injunctive relief pursuant to this Agreement, such action shall
not constitute a waiver of the provisions of this Section 8.7, which shall
continue to govern any and every dispute between the Parties, including without
limitation the right to damages, permanent injunctive relief and any other
remedy, at law or in equity.
8.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE WHATSOEVER THAT MAY ARISE
BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO, THOSE DISPUTES RELATING TO, OR
INVOLVING IN ANY WAY, THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT
OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, THE PROVISIONS OF ANY FEDERAL, STATE
OR LOCAL LAW, REGULATION OR ORDINANCE NOTWITHSTANDING. By execution of this
Agreement, each of the parties hereto acknowledges and agrees that it has had an
opportunity to consult with legal counsel and that he/she/it knowingly and
voluntarily waives any right to a trial by jury of any dispute pertaining to or
relating in any way to the transactions contemplated by this Agreement, the
provisions of any federal, state or local law, regulation or ordinance
notwithstanding.
8.9 WAIVER OF BREACH. The waiver by either Party of a breach or violation
of any provision of this Retail Business Management Agreement shall not operate
as, or be construed to constitute, a waiver of any subsequent breach of the same
or another provision hereof.
8.10 ENFORCEMENT. In the event either Party resorts to legal action to
enforce or interpret any provision of this Retail Business Management Agreement,
the prevailing Party shall be entitled to recover the costs and expenses of such
action so incurred, including, without limitation, reasonable attorneys' fees.
8.11 GENDER AND NUMBER. Whenever the context of this Retail Business
Management Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
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<PAGE> 45
8.12 ADDITIONAL ASSURANCES. Except as may be herein specifically provided
to the contrary, the provisions of this Retail Business Management Agreement
shall be self-operative and shall not require further agreement by the Parties;
provided, however, at the request of either Party, the other Party shall execute
such additional instruments and take such additional acts as are reasonable and
as the requesting Party may deem necessary to effectuate this Retail Business
Management Agreement.
8.13 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever this Retail
Business Management Agreement requires any consent or approval to be given by
either Party, or either Party must or may exercise discretion, and except where
specifically set forth to the contrary, the Parties agree that such consent or
approval shall not be unreasonably withheld or delayed, and that such discretion
shall be reasonably exercised.
8.14 FORCE MAJEURE. Neither Party shall be liable or deemed to be in
default for any delay or failure in performance under this Retail Business
Management Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either Party's employees,
or any other similar cause beyond the reasonable control of either Party unless
such delay or failure in performance is expressly addressed elsewhere in this
Retail Business Management Agreement. Notwithstanding the same, the Parties
hereto agree to continue this Retail Business Management Agreement to the best
degree they can so long as reasonably possible and the Practice shall not be
excused from its obligations under Sections 4.1, 6.4 and 6.5 pursuant to this
Section 8.14.
8.15 SEVERABILITY. The Parties hereto have negotiated and prepared the
terms of this Retail Business Management Agreement in good faith with the intent
that each and every one of the terms, covenants and conditions herein be binding
upon and inure to the benefit of the respective Parties. Accordingly, if any one
or more of the terms, provisions, promises, covenants or conditions of this
Retail Business Management Agreement or the application thereof to any person or
circumstance shall be adjudged or rendered to any extent invalid, unenforceable,
void or voidable for any reason whatsoever by a court of competent jurisdiction,
an arbitration tribunal, a regulatory agency, or statute such provision shall be
reformed, construed and enforced as if such unenforceable provision had not been
contained herein, and each and all of the remaining terms, provisions, promises,
covenants and conditions of this Retail Business Management Agreement or their
application to other persons or circumstances shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law. To the
extent this Retail Business Management Agreement is in violation of applicable
law, then the Parties agree to negotiate in good faith to amend the Retail
Business Management Agreement, to the extent possible consistent with its
purposes, to conform to law.
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<PAGE> 46
8.16 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Except as otherwise required
by law or by applicable rules of any securities exchange or association of
securities dealers, neither the Practice nor the Retail Business Manager shall
issue any press release, make any public announcement or otherwise disclose any
information for the purpose of publication by any print, broadcast or other
public media, relating to the transactions contemplated by this Agreement,
without the prior approval of the other Party.
8.17 DIVISIONS AND HEADINGS. The division of this Retail Business
Management Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith are solely for convenience and
shall not affect in any way the meaning or interpretation of this Retail
Business Management Agreement.
8.18 AMENDMENTS AND EXECUTION. This Retail Business Management Agreement
and any amendments hereto shall be in writing and executed in multiple copies on
behalf of the Practice by its President, and on behalf of Retail Business
Manager by its President. Each multiple copy shall be deemed an original, but
all multiple copies together shall constitute one and the same instrument.
8.19 LICENSES, PERMITS AND CERTIFICATES. Retail Business Manager and the
Practice shall each obtain and maintain in effect, at all times during the term
of this Retail Business Management Agreement, all licenses, permits and
certificates required by law which are applicable to the performance of their
respective obligations pursuant to this Retail Business Management Agreement.
8.20 NO THIRD PARTY BENEFICIARIES. Except as otherwise provided herein,
this Retail Business Management Agreement shall not confer any rights or
remedies upon any person other than Retail Business Manager and the Practice and
their respective successors and permitted assigns.
8.21 COMPLIANCE WITH APPLICABLE LAWS. Retail Business Manager and the
Practice shall comply with all applicable federal, state and local laws,
regulations, rules and restrictions in the conduct of their obligations under
this Retail Business Management Agreement.
8.22 LANGUAGE CONSTRUCTION. The Practice and Retail Business Manager
acknowledge that each Party hereto and its counsel have reviewed and revised
this Retail Business Management Agreement and agree that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting Party shall not be employed in the interpretation of this Retail
Business Management Agreement.
8.23 ENTIRE RETAIL BUSINESS MANAGEMENT AGREEMENT. With respect to the
subject matter of this Retail Business Management Agreement, this Retail
Business Management Agreement supersedes all previous contracts and constitutes
the entire agreement between the Parties. Neither Party shall be entitled to
benefits other than those specified herein. No prior
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<PAGE> 47
oral statements or contemporaneous negotiations or understandings or prior
written material not specifically incorporated herein shall be of any force and
effect, and no changes in or additions to this Retail Business Management
Agreement shall be recognized unless incorporated herein by amendment as
provided herein, such amendment(s) to become effective on the date stipulated in
such amendment(s). The Parties specifically acknowledge that, in entering into
and executing this Retail Business Management Agreement, the Parties rely solely
upon the representations and agreements contained in this Retail Business
Management Agreement and no others.
8.24 AUTHORITY. Retail Business Manager and the Practice hereby warrant
and represent to each other that they have the requisite corporate authority to
execute and deliver this Retail Business Management Agreement in their
respective name.
(The remainder of this page is intentionally left blank)
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<PAGE> 48
IN WITNESS WHEREOF, the Practice and Retail Business Manager have caused
this Retail Business Management Agreement to be executed by their duly
authorized representatives, all as of the day and year first above written.
Dr. SAMIT'S HOUR EYES OPTOMETRIST,
P.C. "The Practice"
By: /s/ Daniel Poth
--------------------------
Daniel Poth, O.D., Vice President
VISIONARY RETAIL MANAGEMENT,
INC. "Retail Business Manager"
By: /s/ Mark Pearson
--------------------------
Mark Pearson Vice President
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<PAGE> 49
EXHIBIT 4.2A
EMPLOYMENT AGREEMENT (PROFESSIONAL)
SEE ATTACHED
<PAGE> 50
EXHIBIT 4.2B
EMPLOYMENT AGREEMENT (PRESIDENT OF PRACTICE)
SEE ATTACHED
<PAGE> 51
EXHIBIT 4.6A
COVENANT NOT TO COMPETE
<TABLE>
<CAPTION>
Radius From Miles
- ----------- -----
<S> <C>
Virginia Offices 3.0
Washington D.C. Offices 0.5
Maryland Offices 3.0
All Other Offices 3.0
</TABLE>
<PAGE> 52
EXHIBIT 4.6B
PROFESSIONALS EXECUTING EMPLOYMENT AGREEMENTS
Janna Angeles, O.D.
Melissa Barbor, O.D.
Scott Baron, O.D.
William Bauscher, O.D.
Cathy Berwald, O.D.
Neil Bleakley, O.D.
Amy Chu, O.D.
John Cochran, O.D.
James Gomez, O.D.
Kathryn Parn, O.D.
Eric Ruta, O.D.
Heloi Stark, O.D.
<PAGE> 53
EXHIBIT 4.11
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
CORPORATE EXISTENCE AND ENFORCEMENT OF COVENANTS
NOT TO COMPETE
As an inducement to the Retail Business Manager to enter into this Retail
Business Management Agreement with the Practice or as required in the Retail
Business Management Agreement, each of the undersigned person(s), having an
ownership interest in the Practice, irrevocably and unconditionally covenants
and agrees to maintain in good standing the corporate existence of the Practice
under the laws of the Commonwealth and to cause the Practice to use its best
efforts to enforce employment agreements (including the Restrictive Covenant
described in Section 4.6) against any individuals violating such employment
agreements. The undersigned persons further unconditionally covenant and agree
to indemnify and hold harmless Retail Business Manager from and against any and
all claims requirements, demands, liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees, resulting in any manner from the
failure of the Practice to remain in good standing under the laws of the
Commonwealth or the failure of the Practice to use its best efforts to enforce
the aforesaid employment agreements and the Restrictive Covenants described in
Section 4.6 of such Retail Business Management Agreement, a copy of which has
been delivered to the undersigned for his review. This Undertaking may be
assumed by a successor Shareholder or Shareholders, whereupon the undersigned
shall be released to the extent of such assumption, provided that any such
successor Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: __________, 1997 ______________________________
<PAGE> 54
EXHIBIT 5.1*
*Indicates information has been omitted and separately filed with the Securities
and Exchange Commission pursuant to an application for an order declaring
confidential treatment thereof.
<PAGE> 55
EXHIBIT 5.2*
*Indicates information has been omitted and separately filed with the Securities
and Exchange Commission pursuant to an application for an order declaring
confidential treatment thereof.
<PAGE> 56
EXHIBIT 4.2A
EMPLOYMENT AGREEMENT (PROFESSIONAL)
SEE ATTACHED
<PAGE> 57
EXHIBIT 4.2A
EMPLOYMENT AGREEMENT (PROFESSIONAL)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the ______ day of _______,
199__, by and between ____________________O.D. ("Employee"), and Dr. Samit's
Hour Eyes Optometrist, P.C., a Virginia professional corporation ("Employer").
WITNESSETH:
WHEREAS, Employee is duly licensed to practice optometry in the
Commonwealth of Virginia and desires to accept employment to practice optometry
as an employee of Employer;
WHEREAS, Employer is engaged in the practice of optometry and desires to
employ Employee; and
WHEREAS, Employer has offered Employee employment in consideration for the
compensation and the other benefits herein provided, and Employee is willing to
accept employment on such terms;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, it is agreed as
follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment from Employer, upon the terms and conditions herein provided.
2. QUALIFICATIONS. Employee shall maintain a valid and unrestricted
license to practice optometry in each jurisdiction in which Employee provides
optometry services. In addition, Employee shall at all times during the term of
this Agreement maintain at least those qualifications and credentials set forth
in Exhibit "A" attached hereto.
3. TERM. The term of this Agreement shall begin on the date first above
written and shall continue for a period ending on __________ (the "Initial
Term"), unless sooner terminated as herein provided. At the end of the Initial
Term or the Renewal Term (as herein defined), this Agreement, unless otherwise
terminated, shall automatically renew for a period of one (1) year (the "Renewal
Term") unless either party gives written notice of non-renewal of this Agreement
to the other party sixty (60) days prior to the end of the current term.
4. COMPENSATION. For all services rendered by Employee under this
Agreement (and in addition to other monetary or other benefits specifically set
forth herein), compensation shall be paid to Employee as set forth in Exhibit
"B".
<PAGE> 58
5. DUTIES. Employee is employed to exclusively and actively practice
optometry on behalf of Employer, and shall have those duties, and
responsibilities set forth in Exhibit "A". Employee shall devote Employee's
entire time and attention to the duties of Employer, and shall not engage in the
practice of optometry except as an employee of Employer, unless otherwise
authorized in writing by the Board of Directors of Employer. Employer shall have
the authority to determine the assignment of patients to Employee and Employee
must perform services for patients assigned to Employee. Employer shall have the
authority to designate the days as well as the hours during the day Employee
shall perform Employee's duties, except as otherwise mutually agreed between
Employee and Employer. The authority to direct, control and supervise the
duties, the responsibilities and the means, manner and time of performing such
duties shall be exercised by Employer, provided, however, that Employer shall
not impose duties or constraints which would require Employee to infringe the
ethics of Employee's profession, or violate any federal, state or municipal
laws, regulations or ordinances. Employee agrees to follow and abide by the
ethics of Employee's profession, and all applicable federal, state and municipal
laws, regulations and ordinances.
6. OPTOMETRIC RECORDS. Employee shall, in accordance with Employer's
policies, cause to be properly prepared and filed reports of all examinations,
procedures and other professional services performed by Employee. It being
understood and agreed that all reports, records and supporting documents which
relate to the care and treatment of optometric patients by Employee are
maintained by Employer, and the ownership and right of control of all such
reports, records and supporting documents belong to Employer. Employee waives
any and all rights in and claims to said records and hereby conveys and
transfers to Employer all right, title and interest which Employee may have, if
any, in the reports, records and supporting documents which relate to the care
and treatment of optometric patients by Employee. In addition, Employee shall
promptly submit such additional records as Employer deems to be required by any
third party payors.
7. WORKING FACILITIES. Employer shall furnish Employee with administrative
support, supplies, equipment and such other facilities and services suitable to
Employee's position and adequate for the performance of Employee's duties and
responsibilities.
8. FEES. Employer shall have the exclusive authority to determine the
amount and nature of all fees and the procedure for establishing the fees to be
charged patients of Employer.
9. OWNERSHIP OF FEES AND INCOME. All income generated by Employee for
Employee's professional services and all activities related thereto shall belong
to Employer, whether paid directly to Employer or to Employee. Employee may be
required (and agrees upon request of Employer so to do) to render a true
accounting of all transactions relating to Employee's practice during the course
of Employee's employment.
10. PROFESSIONAL LIABILITY INSURANCE. Employer shall pay for and carry
professional liability insurance, insuring Employer and Employee for
professional errors, omissions,
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<PAGE> 59
negligence, incompetence, and malfeasance in such amounts and pursuant to such
terms as Employer, in its sole discretion, deems acceptable.
11. BENEFITS AND PERGUISITES. During the term of this Agreement, Employee
shall be entitled to participate in those health, accident and other benefit
plans or programs from time to time in effect for other similarly situated
employees or classes of employees, and shall be entitled to the specific
benefits and perquisites set forth in Exhibit "B".
12. TERMINATION. This Agreement shall terminate and the employment
relationship between Employee and Employer automatically and immediately shall
be severed upon the death of Employee, in which event Employer shall pay to the
estate of Employee the compensation which otherwise would be payable to Employee
up to the end of the month in which Employee's death occurs. Additionally, at
any time during the Initial Term or any Renewal Term of this Agreement, this
Agreement may be terminated and the employment relationship between Employee and
Employer automatically and immediately severed upon written notice by Employer
to Employee following the occurrence of any of the following:
(a) Upon the disability of Employee, such being Employee's inability to
perform one or more of the essential functions of Employee's position as
required by this Agreement, due to an illness, injury or incapacity exceeding a
period of ninety (90) days within a period of twelve consecutive months,
provided such termination shall be in accordance with federal, state and local
laws to the extent applicable to the employment of Employee;
(b) The suspension, revocation or cancellation of Employee's right to
practice optometry in any state, district or commonwealth;
(c) The imposition of any restrictions or limitations by any governmental
authority having jurisdiction over Employee or Employer to such an extent that
Employee cannot engage in the professional practice for which he or she was
employed;
(d) Upon a material breach by Employee of this Agreement, provided such
breach is not cured within thirty (30) days after the Employer provides written
notice of the breach to the Employee and within three (3) days after such notice
if such breach has been the subject of a written notice within two (2) years
prior to notice of breach hereunder. "Material breach" shall include, but be not
limited to, the following:
(i) Employee fails or refuses, in the determination of Employer, to
faithfully and diligently perform the usual customary duties of
Employee's employment or adhere to the provisions of this Agreement,
including those duties, responsibilities and conditions of
employment set forth in Exhibit "A"; or Employee fails or refuses,
in the determination of Employer, to comply with such policies,
standards and regulations of Employer which from time to time may be
reasonably established by Employer;
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<PAGE> 60
(e) Employee breaches any fiduciary duty owed to Employer, or engages in
unprofessional, unethical, immoral, illegal or fraudulent conduct, or is found
guilty of unprofessional, illegal or unethical conduct by court, any board,
institution, organization or professional society having any privilege or right
to pass upon the conduct of Employee, or Employee's conduct discredits Employer
or is detrimental to the reputation, character and standing of Employer; or
(f) Such other event as is specifically set forth in Exhibit "B" hereto.
13. EARLY TERMINATION. Employee recognizes that failure to complete the
Initial Term or any Renewal Term and to provide appropriate notice to Employer
will cause substantial harm to Employer in terms of loss of business, damage to
business reputation, ability to obtain licensed optometrists to replace
Employee, inconvenience to other employees of Employer, and the costs associated
with finding a replacement. If Employee should terminate this Agreement and
cease to perform hereunder (i) without providing to Employer the required
non-renewal notice or (ii) prior to the end of the term of this Agreement,
Employee shall pay to Employer the sum of Three Thousand Dollars ($3,000), as
reimbursement to Employer of the costs to Employer associated with said early
termination. Employee and Employer agree that it is impossible to determine with
any reasonable accuracy the amount of prospective damages to Employer upon
breach by Employee of the provisions of this paragraph. Employee and Employer
agree that the payment set forth above is reasonable, and not a penalty, based
upon the facts and circumstances of the parties at the time of entering this
Agreement, and with due regard to future expectations.
14. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Employee specifically
agrees to the covenants and provisions governing Confidentiality and Competitive
Activities set forth in Exhibit "B".
15. PATIENT CARE UPON TERMINATION. Upon any termination of this employment
relationship, Employer shall provide duly licensed optometrists to assume the
care and treatment of all patients previously assigned to Employee.
16. RELATIONSHIP BETWEEN THE PARTIES. The parties recognize that the Board
of Directors shall manage the business affairs of Employer and that the
relationship between the parties hereto shall be that of an employer and an
employee. Employee shall be entitled to participate in any plans, arrangements
or distribution of and by Employer pertaining to or in connection with any
pension, profit-sharing, or similar benefits and group life, health, accident
and disability insurance or benefits, or similar fringe benefits for the
employees of Employer, to the extent of and in accordance with the terms and
provisions of any plan, arrangement or distribution, which may be in effect from
time to time during the term of this Agreement. Employee stipulates and agrees
that any and all such fringe benefits may be changed, altered, amended,
discontinued, decreased or increased in the sole discretion of the Board of
Directors of Employer.
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<PAGE> 61
17. REMEDIES AND WAIVER OF BREACH. The waiver by any party hereto of any
of the terms and conditions hereof or any breach of any provision of this
Agreement shall not operate or be construed as a general waiver of any such
terms and conditions or permit a subsequent breach by any party. Additionally,
in the event of any violation of paragraph 14 hereof by Employee, the parties
hereby recognize and acknowledge that a remedy at law will be inadequate and
Employer may suffer irreparable injury. Accordingly, Employee consents to
injunctive relief upon the institution of proceedings therefor by Employer in
order to protect Employer's rights under such paragraph 14. If any covenant
referred to in paragraph 14 or any portion thereof is hereafter construed to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants contained therein, which shall be given full effect,
without regard to the invalid portions, and any court having jurisdiction shall
have the power to reduce the duration and/or area of such covenant and, in its
reduced form, such covenant shall then be enforceable. No delay or omission by
Employer in exercising any right or remedy hereunder, or at law or in equity,
and no payment to Employee of amounts owing him or her subsequent to the breach
of any provision hereof or after the termination hereof, shall operate as a
waiver of any rights or remedies which Employer may have hereunder and no single
or partial exercise thereof shall preclude any other or further exercise thereof
or of the exercise of any other right or remedy. Nothing in this paragraph 17
shall constitute a waiver of any of Employer's rights under paragraph 24 of this
Agreement.
18. ASSIGNMENT. Employee agrees that this Agreement and the rights,
interests and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by Employee. This Agreement shall not be assignable by
Employer except pursuant to a merger, to an affiliate of Employer or to a party
which succeeds to the ownership of all or substantially all of the business and
assets of Employer.
19. NOTICES. Any notice given under this Agreement shall be sufficient if
in writing and mailed by either registered or certified U.S. mail, return
receipt requested, postage prepaid, to Employer at its permanent address and to
Employee at Employee's residence address last known to Employer. Any such notice
shall be effective upon the earlier of actual receipt or five (5) days after
mailing in accordance with the preceding sentence.
20. INVALID PROVISION. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all aspects as if such unenforceable or
invalid provisions were omitted.
21. CONSTRUCTION, VENUE AND BINDING EFFECT. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED IN THE COMMONWEALTH OF VIRGINIA, AND SHALL IN
ALL RESPECTS BE INTERPRETED, CONSTRUED, AND GOVERNED BY AND IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF VIRGINIA. Subject to the
arbitration provisions of this Agreement, and without waiving the same, the
exclusive venue for any dispute between the parties hereto arising under this
Agreement shall be in the federal and state courts sitting in
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<PAGE> 62
Commonwealth of Virginia. The captions used herein as headings of the various
paragraphs hereof are for convenience only and are not to be used in determining
or construing the intent or context of this Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties, their spouses, heirs,
executors, personal representatives, and permitted assigns.
22. BINDING ARBITRATION. Any and every dispute of any nature whatsoever
that may arise between the Parties, whether sounding in contract, statute, tort,
fraud, misrepresentation, discrimination or any other legal theory, including,
but not limited to, disputes relating to or involving the construction,
performance or breach of this Agreement or any other agreement between the
Parties, whether entered into prior to, on, or subsequent to the date of this
Agreement, or those arising under any federal, state or local law, regulation or
ordinance, shall be determined by binding arbitration in accordance with the
then-current commercial arbitration rules of the American Arbitration
Association, to the extent such rules do not conflict with the provisions of
this paragraph. If the amount in controversy in the arbitration exceeds Two
Hundred Fifty Thousand Dollars ($250,000), exclusive of interest, attorneys'
fees and costs, the arbitration shall be conducted by a panel of three (3)
neutral arbitrators. Otherwise, the arbitration shall be conducted by a single
neutral arbitrator. The Parties shall endeavor to select neutral arbitrators by
mutual agreement. If such agreement cannot be reached within thirty (30)
calendar days after a dispute has arisen which is to be decided by arbitration,
any Party or the Parties jointly shall request the American Arbitration
Association to submit to each Party an identical panel of fifteen (15) persons.
Alternate strikes shall be made to the panel, commencing with the Party bringing
the claim, until the names of three (3) persons remain, or one (1) person if the
case is to be heard by a single arbitrator. The Parties may, however, by mutual
agreement, request the American Arbitration Association to submit additional
panels of possible arbitrators. The person(s) thus remaining shall be the
arbitrators for such arbitration. If three (3) arbitrators are selected, the
arbitrators shall elect a chairperson to preside at all. meetings and hearings.
The arbitrators, or a majority of them, shall have the power to determine all
matters incident to the conduct of the arbitration, including without limitation
all procedural and evidentiary matters and the scheduling of any hearing. The
award made by a majority of the arbitrators shall be final and binding upon the
Parties thereto and the subject matter. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. sec.sec. 1- 16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The arbitrators shall have no authority to award punitive
or exemplary damages or any statutory multiple damages, and shall only have the
authority to award compensatory damages, arbitration costs, attorney's fees
declaratory relief, and permanent injunctive relief, if applicable. Unless
otherwise agreed by the parties, the arbitration shall be held in Tyson's
Corner, Fairfax County, Virginia. This Paragraph 22 shall not prevent either
Party from seeking a temporary restraining order or temporary or preliminary
injunctive relief from a court of competent jurisdiction in order to protect its
rights under this Agreement. In the event a Party seeks such injunctive relief
pursuant to this Agreement, such action shall not constitute a waiver of the
provisions of this Paragraph 22, which shall continue to govern any and every
dispute between the Parties, including without limitation the right to damages,
permanent injunctive relief and any other remedy, at law or in equity.
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23. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE WHATSOEVER THAT MAY ARISE
BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO, THOSE DISPUTES RELATING TO OR
INVOLVING, IN ANY WAY THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT
OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, THE PROVISIONS OF ANY FEDERAL, STATE
OR LOCAL LAW, REGULATION OR ORDINANCE NOTWITHSTANDING. By
execution of this Agreement, each of the parties hereto acknowledges and agrees
that it has had an opportunity to consult with legal counsel and that he/she
knowingly and voluntarily waives any right to a trial by jury of any dispute
pertaining to or relating in any way to the transactions contemplated by this
Agreement, the provisions of any federal, state or local law, regulation or
ordinance notwithstanding.
24. SURVIVING PROVISIONS. Notwithstanding the termination of this
Agreement, whether upon the expiration of the term hereof or by earlier
termination in accordance with the terms hereof or otherwise, the provisions of,
and the obligations, rights and remedies of the parties pursuant to, paragraphs
9, 14, 15, 17, 21, 22, 23 and 24 and those sections of Exhibit "B" which so
provide, shall survive the termination of this Agreement and remain in full
force and effect.
25. REPAYMENT. For any sums due to Employer from Employee pursuant to the
terms herein, this Agreement shall serve as a specific written authorization by
Employee to Employer for it to withhold from his or her compensation payments
owed to Employer including deducting all outstanding amounts upon termination or
non-renewal of this Agreement.
26. ENTIRE AGREEMENT.
(a) This Agreement (including all exhibits hereto) constitutes the
entire agreement between the parties and contains all of the agreements between
the parties with respect to the subject matter hereof and supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to all subject matters hereof and all such prior agreements are hereby
terminated. The exhibits referred to herein and attached hereto are incorporated
herein and made a part hereof with the same effect as if set forth at length
herein.
(b) This Agreement may be amended or revoked at any time prior to
the death, retirement or termination of Employee by a written agreement
(including amendment and replacement of any exhibit or addendum hereto) executed
by Employee and a designated officer of Employer. No change of or modification
to this Agreement shall be binding or valid unless the same be in writing and
signed by Employee and Employer.
(The remainder of this page is intentionally left blank.)
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<PAGE> 64
IN WITNESS WHEREOF, the parties have executed this agreement the day and
year first above written.
Dr. Samit's Hour Eyes Optometrist, P.C.
("Employer")
By:_______________________________
Title:____________________________
__________________________________
_____________________, O.D.
("Employee")
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<PAGE> 65
EXHIBIT 4.2B
EMPLOYMENT AGREEMENT (PRESIDENT OF PRACTICE)
SEE ATTACHED
<PAGE> 66
EXHIBIT "A"
(Attached to and incorporated into the foregoing Employment Agreement)
QUALIFICATIONS AND RESPONSIBILITIES
Employee is a optometrist who is qualified by training and experience to perform
the duties of an optometrist with the available facilities, equipment and
supporting technology provided by Employer. Employee is also expected to perform
a number of other administrative and business development duties which further
the goals of Employer. Many of these other items require additional time,
effort, and dedication to long-term goals and objectives of Employer.
At all times during the term of this Agreement, Employee shall, as directed by
Employer from time to time:
1. Work a minimum of ______ (__) hours each week.
2. When scheduled, be available by telephonic access for purposes of
optometric call coverage and consultation.
<PAGE> 67
EXHIBIT "B"
(Attached to and incorporated into the foregoing Employment Agreement)
COMPENSATION, BENEFITS, PERQUISITES
AND OTHER TERMS AND CONDITIONS OF EMPLOYMENT
A. COMPENSATION. For all services rendered by Employee under this Agreement
(and in addition to other monetary or other benefits referred to in this
Agreement), compensation shall be paid by Employer to Employee as follows:
(1) Employer shall pay Employee, during the Initial Term of this
Agreement, a regular salary in the annualized amount of
____________________ Dollars ($_______.00), payable in equal
periodic installments in accordance with Employer's payroll
practices and policies in effect from time to time. The regular
salary of Employee shall be adjusted at the beginning of a renewal
term by an amount equal to the sum total obtained by multiplying the
then current regular annual salary by the CPI Adjustment Factor
(defined below). As used herein, the term "CPI Adjustment Factor"
shall mean the amount derived by dividing the CPI (as herein
defined) most recently published as of the first day of the calendar
year of the beginning of the subsequent term by the CPI most
recently published as of the first day of the calendar year of the
beginning of the current term. For purposes hereof "CPI" means the
Consumer Price Index of Urban Consumers - For All Urban Consumers
(all items 1982 - 1984 = 100), published by the United States
Department of Labor, Bureau of Labor Statistics (the "Bureau"). If
the CPI should ever cease to be published by the Bureau during the
term of this Agreement, the CPl Adjustment Factor shall be computed
by using an economic index selected by Employer, of generally
recognized standing, that reflects the increase or decrease of the
purchasing power of the dollar.
(2) In addition to the regular salary, Employee may receive a bonus
pursuant to a bonus program established by Employer. The amount and
time of payment of such bonus and requirements to obtain such bonus
shall be as set forth on Attachment B-1.
B. PAID TIME OFF. Each calendar year (which shall be defined as January I
through December 31), Employee shall be entitled paid time off, during
which time Employee's compensation shall continue to be paid in full, in
the following amounts:
<PAGE> 68
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEARS OF FULL-TIME PAID TIME-OFF
EMPLOYMENT PER CALENDAR YEAR
- --------------------------------------------------------------------------------
<S> <C>
During the 1st calendar year Equivalent of 1 day per full month worked
- --------------------------------------------------------------------------------
12 days if employed less than 6 months in
In the 2nd calendar year 1st calendar year
14 days if employed 6 months or more in
the 1st calendar year
- --------------------------------------------------------------------------------
In the 3rd calendar year and 17 days
thereafter
- --------------------------------------------------------------------------------
</TABLE>
The scheduling of time off shall be subject to the prior approval of Employer.
Paid time off is to include time absent from work (i) for vacation, (ii) due to
illness or injury or (iii) for the purpose of attending continuing education
conferences and meetings. Once Employee has used all paid time off for a
calendar year, any additional time taken off by Employee during the same
calendar year shall be without pay. Paid time-off not used in one Calendar Year
may not be accrued and used in the subsequent Calendar Year. All unused paid
time-off at the time of termination of employment shall be forfeited. If
Employee is currently employed by Employer a parent, subsidiary or affiliate of
Employer at the time of the execution of this Agreement, when determining the
number of years of employment for purposes of this section, Employee shall be
given credit for all years of employment during Employee's current period of
employment by Employer.
In addition to the above referenced paid time off, Employee shall be entitled to
the following paid holidays: New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
C. DISABILITY. If Employee is unable to perform Employee's duties by reason
of illness, injury, or any other disability, Employee shall be entitled to
receive compensation during the period of such inability as follows:
(1) If Employee is unable to perform Employee's duties by reason of a
disability, including illness, injury, or other incapacity
(including pregnancy), then for the period of such disability up to
a period of forty-five (45) days, including the use of any and all
accrued and unused paid time-off, Employee shall be entitled to
receive
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<PAGE> 69
Employee's regular salary as specified in this Agreement but in no
event shall Employee be entitled to receive compensation under such
circumstances for more than forty-five (45) continuous days, or any
forty-five (45) days during a period of one (1) year, including the
use of any and all accrued and unused paid time off, provided that
the compensation under this section C shall cease the date Employee
is first eligible to receive payment of disability benefits under
any disability insurance coverage provided by Employer.
(2) While Employee is receiving compensation pursuant to this section C,
Employee shall be eligible to participate in all employee benefits
provided by Employer to the extent allowed under each of the benefit
programs.
(3) All accrued and unused used paid time-off of Employee for the
current calendar year shall first be used in connection with
time-off for a disability and shall be deducted from Employee's
forty-five (45) days of paid disability pursuant to this section C.
(4) If a controversy shall arise concerning the existence, cause,
duration, or extent of disability claimed by Employee, the matter
shall be resolved by a qualified independent physician mutually
acceptable to Employee and Employer, who will make his determination
in writing. If the parties can not agree as to a qualified
independent physician, Employer shall appoint one physician and
Employee shall appoint one physician, and the two physicians shall
appoint a qualified independent physician who shall make a
determination in writing. The determination of disability pursuant
to this section C shall be final and binding on the parties.
D. INDEMNIFICATION. Employer agrees to, and shall hereby, hold harmless and
fully indemnify Employee of and from any and all liability, damage, cost
or expense whatsoever incurred, relating to, or by reason of, acts and/or
omissions of Employee in the course of employment pursuant to this
Agreement, except to the extent that such liability, damage, cost, or
expense is the result of the gross negligence or willful misconduct of
Employee.
E. EDUCATION AND LICENSES. Following the completion of the first six (6)
months of the Initial Term of this Agreement, Employer shall pay for or
reimburse Employee for approved expenses related to Employee's continuing
education and licenses, up to a maximum of $500.00 per calendar year if
Employee is licensed to dispense or prescribe diagnostic pharmaceutical
agents or to a maximum of $750.00 per calendar year if Employee is
licensed to dispense or prescribe therapeutic pharmaceutical agents and
Employee uses said license in providing services pursuant to this
Agreement.
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<PAGE> 70
F. DISCLOSURE OF CONFIDENTIAL INFORMATION.
1. DEFINITION. "Confidential Information" shall mean all patient lists,
patient account information, patient examination records, and any
other records and books relating in any manner to the patients and
business records of Employer (whether such records, books or lists
are prepared by Employee or otherwise come into the possession or
use of Employee). "Confidential Information" shall also mean any
accounting, sales, advertising, vision insurance plan information,
marketing or management information, methods or techniques, any
business plans such as refractive and photo-refractive surgery plans
and information, any computer programs and routines of Employer and
any other information of any kind whatsoever, whether written or
not, concerning, directly or indirectly, Employer, its plans,
programs or operations, which information is not generally known in
the industry or business in which Employer is or may become engaged
during Employee's employment with Employer.
2. PROTECTION OF CONFIDENTIAL INFORMATION, ETC. Employee shall not, at
any time either during or after employment with Employer, in any
manner, directly or indirectly, divulge, disclose, or communicate to
any person, firm, corporation, association, or any other business
entity, or use for personal benefit or for any other purpose than
the exclusive benefit of Employer, its subsidiaries, successors, or
assigns, Confidential Information or any information whatsoever
concerning matters affecting or relating to the business of Employer
which Employee knows or has reason to know would be valuable to
competitors or potential competitors of Employer. Furthermore, but
not by way of limitation to the foregoing, Employee shall not (i)
make known to any person or business entity the names or addresses
of any of the patients of Employer or any other information
pertaining to such patients or (ii) call on, or solicit, or attempt
to call on, or solicit any of the patients of Employer with whom
Employee became acquainted or was assigned to examine during
Employee's employment with Employer; provided that this prohibition
shall not apply to advertisements in newspapers of general
circulation or telephone directories, including the Yellow Pages.
3. BOOKS AND RECORDS. Employee shall not, other than as necessary in
the ordinary course of business, make copies of any books,
documents, records or other written or printed, photographic,
encoded, taped, electrostatically or electromagnetically encoded
date or information of whatever nature (hereinafter the "documents")
of Employer. Employee shall not, without the prior written approval
of Employer, remove any of the foregoing documents or copies thereof
from the premises of the Company, and shall not, without the prior
written approval of Employer, make available to third parties access
to said Employer documents. Employee agrees that all records and
books relating in any manner whatsoever to the patients, whether
prepared by Employee or otherwise in the possession of Employee
shall be exclusive
4
<PAGE> 71
property of Employer. All such books and records shall be
immediately returned to Employer by Employee upon any termination of
employment.
4. PRESCRIPTIONS. Except as otherwise may be provided by law, lens
prescriptions that may be written by Employee during the term of
this agreement shall be and remain the exclusive property of
Employer and Employee shall not use the same in any manner for any
purpose whatever upon termination of the employment relationship
without the prior written consent of Employer.
G. COMPETITIVE ACTIVITIES. During the term of employment with Employer and
for a period of one (1) year thereafter, Employee shall not, directly or
indirectly (whether for compensation or otherwise), alone or as officer,
director, shareholder (excepting not more than 1% stockholdings for
investment purposes in securities of publicly held and traded companies),
partner, associate, employee, agent, principal, trustee, co-venturer,
consultant or owner, own, manage, operate, join, control, advise or
otherwise participate with or become interested in or associated with any
person, firm, partnership, corporation or other entity which intends to
engage, or is engaged, in the business of providing or rendering
optometric services at, or within the Radius (as herein after defined) of
any office or store of Employer in which Employee has provided services on
a regular basis for sixteen (16) or more hours per week or one thousand
(1,000) hours during the last twelve (12) months of this Agreement. The
provisions of this section G shall survive the termination of this
Agreement. For the purposes of this Agreement, the "Radius" shall mean (i)
three (3) miles of any office or store of Employer which is not within the
District of Columbia or (ii) one-half (1/2) mile of any office or store in
Washington, D.C. Employee hereby stipulates and agrees that Employer will
suffer severe harm if Employee violates the restrictive covenant set forth
in this Section G. Employee further stipulates and agrees that the parties
may be unable to quantify the severe harm to Employer and, accordingly,
Employee shall pay to Employer the amount of $25,000.00 in the event
Employee violates this Section G.
H. SOLICITATION OF EMPLOYEES. Employee agrees that during the term of this
Agreement, and for a period of one (1) year thereafter, without the
written consent of Employer, Employee will not directly or indirectly
contact or solicit to employ, or employ, any of the then current or past
employees of Employer, any subsidiary or affiliate of Employer or any
employees of any company which is providing management services to
Employer or said company's subsidiaries or affiliates, unless such person
shall have ceased to be employed by Employer (or its subsidiary or
affiliate or the company managing Employer or said company's subsidiary or
affiliate, as the case may be) and such cessation of employment shall have
occurred at least twelve (12) months prior thereto; provided this
prohibition shall not apply to general advertisements in newspaper or
other widely distributed publications, media, or mail, whether electronic
or otherwise.
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<PAGE> 72
ATTACHMENT "B-1"
(Attached to and incorporated into the foregoing Employment Agreement)
BONUS
Employee shall be entitled to participate in a performance based bonus
plan as established by Employer, which bonus plan may be amended, revised or
terminated, in the discretion of Employer.
Dated: __________, 199_.
Dr. Samit's Hour Eyes Optometrist, P.C.
("Employer")
By: _______________________________
Title: ____________________________
___________________________________
____________________, O.D.
("Employee")
6
<PAGE> 73
EXHIBIT 4.2B
EMPLOYMENT AGREEMENT (President of Practice)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of
the ____ day of September, 1997, by and between Dr. Samit's Hour Eyes
Optometrist, P.C., a Virginia professional corporation (the "Company"), or its
assigns, and Daniel Poth, O.D. ("Executive" or "Dr.
Poth");
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as of
September ___, 1997 (the "Stock Purchase Agreement"), by and among Dr. Poth, Dr.
Robert A. Samit and Dr. Michael Davidson, Dr. Poth purchased all of the capital
stock of the Company (the "Acquisition"); and
WHEREAS, Employee is duly licensed to practice optometry in the
Commonwealth of Virginia and desires to accept employment to practice optometry
as an employee of Employer;
WHEREAS, in connection with the Acquisition and the other transactions
related thereto, Executive is required to enter into this Agreement concurrent
with the consummation of the Acquisition; and
WHEREAS, Executive desires to serve in the employment of the Company on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve as President
of the Company, and Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
2. TERM. The term of this Agreement shall commence on the date hereof (the
"Effective Date") and shall terminate on December 31, 2002, subject to earlier
termination and extension as hereinafter provided (the "Term"). Thereafter, this
Agreement shall automatically renew for successive five-year terms unless either
party gives written notice of its election not to renew at least thirty (30)
days prior to the end of the then current period. In the event of such
extension, all of the terms and conditions of this Agreement shall remain in
full force and effect.
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<PAGE> 74
3. DUTIES, QUALIFICATIONS AND OPTOMETRIC RECORDS. (a) During the Term,
Executive shall serve as the President of the Company with such title, duties
and responsibilities as established from time to time by the Board of Directors
of the Company (the "Board"), or such person who may be appointed by the Board
to oversee the operations of the Company. Such duties and responsibilities shall
include, but not be limited to, the management of the other optometrists
employed by the Company and the operations of the Company in Virginia and such
other states as the Company has operations. Executive agrees that he will devote
substantially all of his full business time, attention and energies to the
business of the Company, and to the performance of his duties hereunder.
Executive shall devote his time and attention to the duties of the Company, and
shall not engage in the practice of optometry except as an employee of the
Company or with respect to the stores of Hour Eyes, Inc. pursuant to that
certain optometric director agreement between Executive, an entity owned by
Executive, and Hour Eyes, Inc. Executive will at all times report to the board
of directors of the Company or such person who may be appointed by the Board to
oversee the operations of the Company and its direct and indirect subsidiaries
and affiliates. Executive shall abide by all of the Company's policies and
procedures, as may be adopted from time to time by the Company. Executive shall
maintain a valid and unrestricted license to practice optometry in each state or
other jurisdiction in which the Company provides optometry services.
(b) Executive shall, in accordance with the Company's policies, cause to
be properly prepared and filed reports of all examinations, procedures and other
professional services performed by himself and the other employees of the
Company. The ownership and right of control of all reports, records and
supporting documents prepared for and/or maintained by the Company belongs to
the Company. In addition, Executive shall promptly submit such additional
records as the Company deems to be required by any third party payers. In the
event that the Executive's employment with the Company is terminated, to the
extent that Executive has any rights in such patient records, Executive agrees
that such rights will be transferred to, and the records shall remain with, the
Company, and Executive shall have no ongoing rights with respect thereto.
4. COMPENSATION.
(a) BASE COMPENSATION. During the term of this Agreement, the Company
shall pay to Executive a salary at an annual rate of $125,000 multiplied, in the
case of years ending after December 31, 1998, by the Inflation Adjustment (the
"Base Salary"). The Base Salary shall be payable during the Term in
substantially equal installments not less frequently than monthly in accordance
with the Company's standard payroll policy or in such other installments as the
parties may mutually agree.
The "Inflation Adjustment" for any year shall be equal to the
fraction the numerator of which is the revised Bureau of Labor Statistics
Consumer Price Index for all Items and Major Group Figures for All Urban
Consumers, U.S. City Average (1982-84=100) (the "Index") for December of the
preceding year and the denominator of which is the Index for September, 1997. If
the Inflation Adjustment or another amount cannot be calculated when any of the
Base Salary is due, an estimated Base Salary amount shall be paid and an
appropriate adjusting payment shall be
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<PAGE> 75
made as soon as such adjustment can be calculated. Appropriate modification to
the Inflation Adjustment shall be made if the Index shall cease to be updated as
of the end of each calendar year.
(b) REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive, in
accordance with the Company's policy in effect from time to time, for all
reasonable travel, entertainment and other business expenses incurred by
Executive in the performance of his duties and responsibilities hereunder.
(c) NET PAYMENTS. The amount of any gross payments provided for in this
Agreement shall be paid net of any applicable withholding required under
federal, state or local law.
5. BENEFITS. Executive shall be entitled to receive the benefits made
available or applicable from time to time to the employees of the Company;
provided, however, that the receipt of such benefits by Executive shall be
subject to the Company's eligibility and enrollment requirements pertaining to
such benefit programs. Executive shall be eligible for four weeks paid vacation
per year in accordance with the Company's vacation policy.
6. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES.
(a) CONFIDENTIALITY. Executive acknowledges that during his employment
with the Company, the Company has and will continue to disclose to him the
confidential affairs and proprietary information of the Company and its
subsidiaries and affiliates which is developed by and belongs to the Company and
its subsidiaries and affiliates, including matters of a business nature such as
information about costs, profits, markets, sales, trade secrets, potential
patents and other business ideas, customer lists, supplier and vendor lists,
plans for future developments and/or acquisitions, and information of any other
kind not known within the optical retail industry generally (collectively,
"Confidential Matters"). Executive further acknowledges that the Company would
not hire Executive or disclose these Confidential Matters to Executive without
the promises made by Executive in this Section 6. In light of the foregoing,
Executive agrees:
(i) To keep secret all Confidential Matters of the Company and of
any affiliates of the Company, and of any third party to whom the Company is
bound by a confidentiality agreement, and not to disclose them to anyone outside
of the Company or its affiliates, or otherwise use them or use his knowledge of
them for his own benefit or for the benefit of any third party, including,
without limitation, use of the trade secrets, trade names or trademarks of the
Company, either during or after the Term, except with the Company's prior
written consent; and
(ii) To deliver promptly to the Company at the termination of the
Term, or at any time the Company may request, all memoranda, notices, records,
reports and other documents (and all copies thereof) relating to the business of
the Company or any of its subsidiaries or affiliates, including, but not limited
to, Confidential Matters, which he may then possess or have under his control.
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<PAGE> 76
Notwithstanding any of the foregoing, the term "Confidential Matters" does
not include information which (i) is or becomes generally available to the
public other than as a result of any disclosure by Executive or (ii) Executive
is compelled to disclose by Judicial or administrative process, provided, that
in the case of any such requirement or purported requirement Executive shall
provide written notice to the Company prior to producing such information, which
notice shall be given at least ten (10) days prior to the producing such
information, if practicable, so that the Company may seek a protective order or
other appropriate remedy.
(b) COMPETITIVE ACTIVITIES. Executive expressly recognizes and
acknowledges that the terms and condition of this Section 6(b) are reasonable as
to time, area and scope of restricted activity, necessary to protect the
legitimate interests of the Company, and are not unduly burdensome to Executive.
For a period commencing on the Effective Date and ending twenty-four (24) months
following the effective date of a termination of Executive's employment (for any
reason whatsoever), Executive shall not, directly or indirectly (whether for
compensation or otherwise), alone or as officer, director, stockholder
(excepting not more than 1% stockholdings for investment purposes in securities
of publicly held and traded companies), partner, associate, employee, agent,
principal, creditor, guarantor, trustee, salesman, consultant, or any other
capacity, take any action in or participate with or become interested in or
associated with any person, firm, partnership, corporation or other entity
whatsoever that is engaged in the business of the retail sale of optical goods
in any of the geographic areas consisting of each county or parish or district
(with respect to the District of Columbia) and each county, parish or district
contiguous thereto, in which (i) a store is located that is owned, operated or
managed by the Company as of the date of termination of employment or (ii) the
Company has affirmative plans (evidenced by documentation) to commence
operations as of the date of termination of employment and Executive has
actively participated in such plans (such activities are hereinafter referred to
as the "Competitive Activities" and the restricted area is hereinafter referred
to as the "Restricted Area"). Notwithstanding the foregoing, Executive shall be
permitted to:
(A) own and operate a single store location for the purpose selling
optical goods and providing optometric services provided that such
store is not affiliated with any national, regional or local optical
retailer and such store location is not within a one and one-half (1
1/2)three mile radius (one-half (1/2) mile with respect to stores in
Washington D.C. and three (3) miles with respect to the store
located in South Lakes, Virginia) of (i) a store location that is
owned, operated or managed by the Company as of the date of
termination of employment or (ii) a location in which the Company
has affirmative plans (evidenced by documentation) to commence
operations as of the date of termination of employment and Executive
has actively participated in such plans; or
(B) be employed by a national or regional optical retailer with
operations in the Restricted Area, provided that Executive is not
directly supervising optometrists or other employees of such
retailers' operations within the Restricted Area; and.
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<PAGE> 77
(C) provide part-time optometric services, up to 3 days a week, for any
optometrist, optical retailers or professional corporation; provided
that his sole duties shall consist of providing optometric
examinations; and provided further that Executive has first offered
his services to the Company and Hour Eyes, Inc. at the market rate
and the Company and Hour Eyes, Inc. has declined to provide such
part-time employment.
The foregoing exceptions to the prohibitions against Competitive
Activities shall not release Executive, or waive any rights of the Company with
respect to, any of Executive's other covenants, obligations or duties hereunder
including without limitation, the provisions of Section 6(a), 6(c) and 6(d).
(c) ANTISOLICITATION. Executive agrees that during the Term of this
Agreement, and for a period of two (2) years thereafter, he will not influence
or attempt to influence customers (including customers with respect to managed
care plans), of the Company or any of its present or future direct or indirect
subsidiaries or affiliates, either directly or indirectly, to divert their
business to any individual, partnership, firm, corporation or other entity then
in competition with the business of the Company or any subsidiary or affiliate
of the Company; provided this prohibition shall not apply to general
advertisements in newspaper or other widely distributed publications, media, or
mail, whether electronic or otherwise.
(d) SOLICITING EMPLOYEES. Executive agrees that during the Term of this
Agreement, and for a period of two (2) years thereafter, without the written
consent of the Company such consent to be given only after Executive is no
longer a shareholder of the Company, he will not directly or indirectly contact
or solicit to employ, or employ, any of the then current or past employees of
the Company or any subsidiary or affiliate of the Company unless such person
shall have ceased to be employed by the Company (or its subsidiary or affiliate,
as the case may be) and such cessation of employment shall have occurred at
least twelve (12) months prior thereto; provided this prohibition shall not
apply to general advertisements in newspaper or other widely distributed
publications, media, or mail, whether electronic or otherwise.
7. REMEDIES FOR BREACH. In addition to the rights and remedies provided in
Section 16, and without waiving the same if Executive breaches, or threatens to
breach, any of the provisions of Section 6, the Company shall have the following
rights and remedies, in addition to any others, each of which shall be
independent of the other and severally enforceable:
(i) The right and remedy to have such provisions specifically
enforced by any court having equity jurisdiction together with an
accounting for any benefit or gain by Executive in connection with any
such breach. Executive specifically acknowledges and agrees that any
breach or threatened breach of the provisions of Section 6 will cause
irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. Such injunction shall be available
without the posting of any bond or other security.
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(ii) The right and remedy to require Executive to account for and
pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (hereinafter collectively the "Benefits")
derived or received, directly or indirectly, by Executive as a result of
any transactions constituting a breach of any of the provisions of Section
6, Executive hereby agreeing to account for and pay over the Benefits to
the Company.
(iii) The right to terminate Executive's employment pursuant to
Section 8(c).
(iv) Upon discovery by the Company of a breach or threatened breach
of Section 6, the right to immediately suspend payments to Executive under
Section 8, pending a resolution of the dispute.
If any covenant contained in Section 6 or any portion thereof is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants contained therein, which shall be given
full effect, without regard to the invalid portions, and any court having
jurisdiction shall reform the covenant to the extent necessary to cause the
limitations contained therein as to time, geographical area and scope of
activity to be restrained to be reasonable and to impose a restraint that is not
greater than necessary to protect the goodwill and other business interest of
the Company and to enforce the covenant as reformed. The parties hereto intend
to and hereby confer jurisdiction to enforce the covenants contained in Section
6 upon the courts of any state or other jurisdiction in which any alleged breach
of any such covenant occurs. If the courts of any of one or more of such states
or other jurisdictions shall hold such covenants not wholly enforceable by
reason of the scope thereof or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the Company's right
to the relief provided above in the courts of any other states or jurisdictions
as to breaches of such covenants in such other respective states or
jurisdictions, and the above covenants as they relate to each state or
jurisdiction being, for this purpose, severable into diverse and independent
covenants. If any court determines that such covenants are unenforceable, the
Company shall be relieved of all obligations under this Agreement and Executive
shall not be entitled to any payments which are suspended pursuant to Section
7(iv).
8. TERMINATION OF AGREEMENT.
(a) DEATH. This Agreement shall automatically terminate upon the death of
Executive. During the Term, if Executive's employment is terminated due to his
death, Executive's estate shall be entitled to receive the Base Salary set forth
in Section 4 accrued through the end of the month in which the death occurs;
provided, however, Executive's estate shall not be entitled to any bonus
payments (except as otherwise provided in the applicable bonus plan) or any
other benefits (except as provided by law).
(b) DISABILITY. If Executive is unable to perform his services by reason
of mental or physical Disability (as herein defined), the Company may terminate
this Agreement at any time.
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Upon termination of Executive's employment due to Disability, Executive shall be
entitled to receive the Base Salary set forth in Section 4 accrued through the
date on which Executive is first eligible to receive payment of disability
benefits under the employee benefit plans as then in effect, and if no such plan
is in effect, through the month ending one hundred eighty (180) days after onset
of Disability and Executive shall not be entitled to any bonus payments (except
as otherwise provided in the applicable bonus plan) or any other benefits
(except as provided by law). The term "Disability" shall mean an infirmity
preventing Executive from performing his duties for a period of more than three
(3) consecutive months where no reasonable accommodation is available or where a
reasonable accommodation would create an undue burden on the Company. Any
question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If the Executive and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in writing.
The determination of Disability made in writing to the Company and Executive
shall be final and conclusive for all purposes of the Agreement.
(c) TERMINATION FOR CAUSE. The Company may terminate this Agreement at any
time for "Cause" in accordance with the procedures provided below. Termination
of this Agreement for "Cause" shall mean termination upon (i) the breach of any
material provision of this Agreement by Executive, (ii) commission of an act
punishable by imprisonment, (iii) willful and continued failure to substantially
perform his duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness), (iv) the engaging by Executive in
conduct that is injurious to the Company, monetarily or otherwise, including,
without limitation, embezzlement, fraud, theft, dishonesty, misfeasance,
insubordination, malfeasance, and neglect of duties, (v) violation of the
Company's ethics policy or any material violation or repeated violations by
Executive of the other policies and procedures promulgated from time to time by
the Company, (vi) current alcohol or drug abuse by Executive, (vii) the
suspension, revocation or cancellation of Employee's right to practice optometry
in any state or the District of Columbia; or (viii) Executive ceases to be a
shareholder of the Company. In the event of termination of Executive's
employment for Cause, Executive shall be entitled to receive only the Base
Salary set forth in Section 4 accrued through the date of termination and he
shall not be entitled to any bonus payments or other benefits (except as
provided by law).
(d) OTHER TERMINATION BY THE COMPANY. The Company may terminate this
Agreement at any time without "Cause" by providing thirty (30) days prior
written notice to Executive. If the Company terminates this Agreement at any
time without Cause (i.e., other than pursuant to Section 8(b) or 8(c) above), or
the Company elects not to renew the Term as provided in Section 2 hereof, the
Company shall be obligated to pay Executive, and Executive shall be entitled to
receive only, the Base Salary set forth in Section 4 accrued through the date of
termination and he shall not be entitled to any bonus payments or other benefits
(except as provided by law).
(e) TERMINATION BY EXECUTIVE. Executive may terminate this Agreement upon
thirty (30) days prior written notice to the Company; provided, however,
Executive shall not be entitled to
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terminate this Agreement so long as he is a shareholder of the Company.
Termination shall be effective at the expiration of the notice period. All
obligations of the Company under this Agreement shall end on the effective date
of termination and the Company shall have no further obligations under this
Agreement, including, but not limited to payment of salary, bonuses or any
similar compensation or benefits. Notwithstanding the notice provided by
Executive, the Company, in its sole discretion, may choose to accept Executive's
resignation immediately. In that event, the Company's only obligation to
Executive will be to pay the Base Salary Executive would have received during
the notice period.
9. EFFECT OF TERMINATION. Upon the termination of this Agreement, whether
by the expiration of the Term specified in Section 2 or pursuant to Section 8,
the rights of Executive which shall have accrued prior to the date of such
termination shall not be affected in any way. Except as provided in Section
8(d), Executive shall not have any rights which have not previously accrued upon
termination of this Agreement.
10. FEES. The Company shall have the exclusive authority to determine the
amount and nature of all fees and the procedure for establishing the fees to be
charged patients of the Company, even though such patients might be treated
solely by the Company in the course of Executive's employment by the Company.
11. OWNERSHIP OF FEES AND INCOME. All income generated by Executive for
Executive's professional services and all activities related thereto shall
belong to the Company, whether paid directly to the Company or the Executive.
Executive may be required (and agrees upon request of the Company so to do) to
render a true accounting of all transactions relating to Executive's practice
during the course of his employment.
12. COMMUNICATIONS. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the respective addresses set forth below,
or to such other addresses as either party may have furnished to the other in
writing in accordance herewith, except that notice of a change of address shall
be effective only upon actual receipt; to the Company: the Company, at 5568
General Washington Dr., Suite A-215, Alexandria, Virginia 22312, for the
attention of the President; and to Executive: Daniel Poth, O.D., 5401 North 20th
Street, Arlington, Virginia 22205.
13. AMENDMENTS OR ADDITIONS. No amendments or additions to this Agreement
shall be binding or effective unless in writing and signed by all parties
hereto.
14. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon,
and shall inure to the benefit of, Executive; the obligations of Executive
hereunder are personal and this Agreement
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<PAGE> 81
may not be assigned by Executive. This Agreement is completely assignable by the
Company without notice to or consent of Executive. This Agreement shall be
binding upon, and shall inure to the benefit of, the Company and shall also bind
and inure to the benefit of any successor of the Company by merger or
consolidation or any assignee of all or substantially all of its properties.
15. HEADINGS, REFERENCES. The headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement. References to a "Section" when used without
further attribution shall refer to the particular sections of this Agreement.
16. BINDING ARBITRATION. Subject to the rights of any party to seek
injunctive relief pursuant to Section 7 above and without waiving the same, the
parties agree that all disputes, controversies or claims that may arise among
them (including their agents and employees), arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be submitted
to, and determined by, binding arbitration. Such arbitration shall be conducted
before a single arbitrator pursuant to the Commercial Arbitration Rules then in
effect of the American Arbitration Association, except to the extent such rules
are inconsistent with this Section 16. The arbitrator shall apply the laws of
the Commonwealth of Virginia (without regard to conflict of law rules) in
determining the substance of the dispute, controversy or claim and shall decide
the same in accordance with applicable usages and terms of trade. The fees of
the arbitration initially shall be paid one-half by the Company and one-half by
Executive; provided, however, that the prevailing party in any such arbitration
shall be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties, and judgment on the
award may be entered in any federal or state court sitting in any court having
jurisdiction. The obligations set forth in this Section 16 shall survive the
termination of this Agreement. THE COMPANY AND EMPLOYEE EACH KNOWINGLY AND
VOLUNTARILY GIVE UP ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE,
CLAIM OR CONTROVERSY WHICH MAY ARISE BETWEEN THEM.
17. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Virginia without regard to its conflicts of law
principles.
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18. SURVIVING PROVISIONS. The obligations of the Company under Section 8,
of Executive under Sections 3(b), 6 and 7, and of both the Company and Executive
under Section 16 shall survive the expiration of the Term of this Agreement.
19. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
between the parties superseding all prior agreements and all other negotiations,
letter of intent, memoranda of understandings, and representations (if any) made
by and among such parties, and may not be modified or amended, and no waiver
shall be effective, unless by written document signed by both parties hereto.
Notwithstanding its foregoing, the parties agree that the provisions of Section
6 shall be in addition to, and shall not supersede, similar provisions contained
in the Stock Purchase Agreement. The Company and Executive have each had an
opportunity to consult with counsel of their choice regarding the terms and
conditions of this Agreement, and each understands the consequences of entering
into and complying with the terms and conditions of the Agreement.
20. PRONOUNS. In this Agreement, the use of any gender shall be deemed to
include all genders, and the use of the singular shall include the plural,
wherever it appears appropriate from the context.
21. ENFORCEMENT COSTS. If any legal action or other proceeding, including
arbitration, is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, the prevailing party or parties shall be entitled
to recover reasonable attorneys' fees, court costs and all expenses even if not
taxable as court costs, incurred in that action or proceeding, in addition to
any other relief to which such party or parties may be entitled.
22. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
23. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
DR. SAMIT'S HOUR EYES OPTOMETRIST, P.C.
By: ______________________________
Title: ____________________________
EXECUTIVE:
_________________________________
Daniel Poth, O.D.
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<PAGE> 83
EXHIBIT 4.6A
COVENANT NOT TO COMPETE
<TABLE>
<CAPTION>
Radius From Miles
- ----------- -----
<S> <C>
Virginia Offices 3.0
Washington D.C. Offices 0.5
Maryland Offices 3.0
All Other Offices 3.0
</TABLE>
17
<PAGE> 84
EXHIBIT 4.6B
PROFESSIONALS EXECUTING EMPLOYMENT AGREEMENTS
18
<PAGE> 85
EXHIBIT 4.11
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
CORPORATE EXISTENCE AND ENFORCEMENT OF COVENANTS
NOT TO COMPETE
As an inducement to the Retail Business Manager to enter into this Retail
Business Management Agreement with the Practice or as required in the Retail
Business Management Agreement, each of the undersigned person(s), having an
ownership interest in the Practice, irrevocably and unconditionally covenants
and agrees to maintain in good standing the corporate existence of the Practice
under the laws of the Commonwealth and to cause the Practice to use its best
efforts to enforce employment agreements (including the Restrictive Covenant
described in Section 4.6) again any individuals violating such employment
agreements. The undersigned persons further unconditionally covenant and agree
to indemnify and hold harmless Retail Business Manager from and against any and
all claims requirements, demands, liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees, resulting in any manner from the
failure of the Practice to remain in good standing under the laws of the
Commonwealth or the failure of the Practice to use its best efforts to enforce
the aforesaid employment agreements and the Restrictive Covenants described in
Section 4.6 of such Retail Business Management Agreement, a copy of which has
been delivered to the undersigned for his review. This Undertaking may be
assumed by a successor Shareholder or Shareholders, whereupon the undersigned
shall be released to the extent of such assumption, provided that any such
successor Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: __________, 1997 ______________________________
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<PAGE> 86
EXHIBIT 6.4(f)
SHAREHOLDERS' UNDERTAKING TO CARRY OUT
PRACTICE'S PURCHASE OBLIGATION
As an inducement to the Retail Business Manager to enter into this Retail
Business Management Agreement with the Practice or as required in Retail
Business Management Agreement, each of the undersigned person(s), having an
ownership interest in the Practice, irrevocably and unconditionally covenants
and agrees subject to the limitations contained in the Retail Business
Management Agreement to (i) cause the Practice to carry out the purchase
obligation described in Section 6.4 of the Retail Business Management Agreement,
(ii) personally execute and deliver the security agreements referred to in
Section 6.4(d) of such Retail Business Management Agreement, a copy of which has
been delivered to the undersigned for his review, and (iii) execute the
documents described in Section 6.5. The undersigned acknowledges that he or she
has received adequate consideration for the execution hereof.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: __________, 1997 ______________________________
20
<PAGE> 1
EXHIBIT 10.10
PROFESSIONAL BUSINESS MANAGEMENT AGREEMENT
This Professional Business Management Agreement is made and entered into
effective as of September 30, 1997, by and between Visionary MSO, Inc., a
Delaware corporation ("Professional Business Manager"), and Dr. Samit's Hour
Eyes Optometrist, P.C., a Virginia professional corporation (the "Practice").
RECITALS
A. The Practice is a professional corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia (the "Commonwealth")
which is engaged in the provision of Professional Eye Care Services (as defined
below) and Optical Services (as defined below) to the general public in the
Commonwealth through individual Professionals (as defined below) who are
licensed to practice optometry and/or ophthalmology in the Commonwealth and who
are employed or otherwise retained by the Practice.
B. Professional Business Manager is a business corporation duly organized
and validly existing under the laws of the Commonwealth.
C. The Practice desires to devote substantially all of its energies,
expertise and time to the delivery of Professional Eye Care Services to
patients.
D. The Practice desires to engage Professional Business Manager to provide
facilities, equipment and such management, administrative and business services
as are necessary and appropriate for the day-to-day administration of the
non-optometric aspects of the Practice's professional eye care practice, and
Professional Business Manager desires to provide such, upon the terms and
conditions hereinafter set forth, for the purpose of enhancing the
cost-efficiency and quality of services rendered by the Practice to its
patients.
NOW, THEREFORE, for and in consideration of the mutual agreements, terms,
covenants and conditions contained herein and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Professional Business Management Agreement, the
following terms shall have the following meanings ascribed thereto, unless
otherwise clearly required by the context in which such term is used:
1.1 ACCOUNT. The term "Account" shall mean the bank account described in
Sections 3.9 and 3. 1 0 of the Retail Business Management Agreement (as defined
below).
<PAGE> 2
1.2 ADJUSTED GROSS REVENUE. The term "Adjusted Gross Revenue" shall mean
all revenues for Optical Services, Professional Eye Care Services, or otherwise,
generated by or on behalf of the Practice and/or its Professionals, or other
personnel during the term of this Professional Business Management Agreement,
calculated on an accrual basis under GAAP, including all technical fees from
ancillary services, all proceeds from key person life and disability insurance
policies purchased by Retail Business Manager, in agreement with the Practice,
in accordance with Section 3.15, all amounts paid by third parties for
contractual liabilities, including, but not limited to, payments under
non-shareholder Professionals' non-competition agreements and compensation
payments under any service agreement between the Practice and another entity,
and all consultant, teaching and expert witness fees minus any allowances for
bad debts, uncollectible accounts, Medicare, Medicaid and other payor
contractual adjustments, discounts, workers' compensation adjustments,
reasonable professional courtesies, and other reductions in collectible revenue
that result from activities that do not result in collectible charges.
1.3 BILL OF SALE. The term "Bill of Sale" shall mean the agreement by and
between Professional Business Manager and the Practice as of even date whereby
Professional Business Manager shall purchase from the Practice substantially all
of the furniture, fixtures, and equipment used in the operation of the Office
(as defined below) prior to execution of this Professional Business Management
Agreement.
1.4 BUDGET. The term "Budget" shall mean an operating budget and capital
expenditure budget for each fiscal year as prepared in accordance with Section
3.11(a).
1.5 CAPITATION REVENUES. The term "Capitation Revenues" shall mean all
collections from managed care organizations or third-party payors where such
payment is made periodically on a per member basis for the partial or total
needs of a subscribing patient, less amounts that are payable to other providers
of health care items and services to capitation patients. Capitation Revenues
shall include any co-payments and incentive bonuses received as a result of a
capitation plan.
1.6 CLINICAL DUTIES. The term "Clinical Duties " shall mean those duties
of NonProfessional Personnel (as defined below) which entail directly or
indirectly assisting a Professional (as defined below) in the scheduling,
examination or care of patients in the course of providing Professional Eye Care
Services, regardless of whether the performance of such duties requires
licensure under applicable state law.
1.7 COMMONWEALTH. The term "Commonwealth" shall have the meaning set forth
in the Recitals.
1.8 CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean any information of Professional Business Manager or the Practice, as
appropriate (whether written or oral), including all business management or
economic studies, patient fists, proprietary
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<PAGE> 3
forms, proprietary business or management methods, marketing data, fee
schedules, or trade secrets of the Professional Business Manager or of the
Practice, as applicable, whether or not such Confidential Information is
disclosed or otherwise made available to one Party by the other Party pursuant
to this Professional Business Management Agreement. Confidential Information
shall also include the terms and provisions of this Professional Business
Management Agreement and any transaction or document executed by the Parties
pursuant to this Professional Business Management Agreement. Confidential
Information does not include any information that the receiving party can
establish (a) is or becomes generally available to and known by the public or
optometric community (other than as a result of an unpermitted disclosure
directly or indirectly by the receiving party or its affiliates, advisors, or
Representatives); (b) is or becomes available to the receiving party on a
nonconfidential basis from a source other than the furnishing party or its
affiliates, advisors or Representatives, provided that such source is not and
was not bound by a confidentiality agreement with or other obligation of secrecy
to the furnishing party of which the receiving party has knowledge; or (c) has
already been or is hereafter independently acquired or developed by the
receiving party without violating any confidentiality agreement with or other
obligation of secrecy to the furnishing party.
1.9 DISPENSARY. The term "Dispensary" shall have the meaning set forth in
the Retail Business Management Agreement.
1.10 DISPENSARY EXPENSE. The term "Dispensary Expense" shall have the
meaning set forth in the Retail Business Management Agreement.
1.11 EXECUTIVE OFFICE ADMINISTRATOR. The term "Executive Office
Administrator" shall mean the employee of Professional Business Manager having
executive authority and responsibility for the general and active management of
the Professional Business Manager.
1.12 GAAP. The term "GAAP" shall mean generally accepted United States
accounting principles.
1.13 INFLATION ADJUSTMENT. The term "Inflation Adjustment" shall for any
year be equal to the fraction the numerator of which is the revised Bureau of
Labor Statistics Consumer Price Index for all Items and Major Group Figures for
All Urban Consumers, U. S. City Average (1982-84=100) (the "index") for December
of the preceding year and the denominator of which is the Index for September,
1997. Appropriate modification to the Inflation Adjustment shall be made if the
Index shall cease to be updated as of the end of each calendar year.
1.14 MANAGEMENT FEE. The term "Management Fee" shall mean the Professional
Business Manager's compensation established as described in Article V hereof.
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<PAGE> 4
1.15 MANAGEMENT SERVICES. The term "Management Services" shall mean the
business, administrative, and management services to be provided for the
Practice and the Office, including, without limitation, the provision of
equipment, inventory and supplies, support services, personnel (excluding
Professionals) management, administration, financial record keeping, and
reporting, and other business office services, all as reasonably contemplated by
this Professional Business Management Agreement and which are necessary for the
conduct of the Practice's business.
1.16 NET EARNINGS. The term "Net Earnings" shall mean Adjusted Gross
Revenue minus the sum of the following: (i) any refunds owed to patients by the
Practice, (ii) any unpaid or past due compensation owed to Professional Business
Manager pursuant to Section 5.1 hereof and to Retail Business Manager pursuant
to the Retail Business Management Agreement, (iii) all Office Expenses, (iv) all
Dispensary Expenses, (v) all Practice Expenses and (vi) all Shareholder Expenses
up to an amount equal to One Hundred Thirty Nine Thousand Dollars ($139,000.00)
on an annualized basis multiplied in the case of years ending after December 31,
1998 by the Inflation Adjustment. Net Earnings associated with an individual
Office, Dispensary, or Practice location shall be determined using the amount of
the foregoing items which is attributable to such Office, Dispensary, or
Practice location. To the extent such amount is not susceptible to precise
calculation, it shall be determined based on the proportion the Adjusted Gross
Revenue attributable to such Office, Dispensary, or Practice location bears to
the Adjusted Gross Revenue of the Practice.
1.17 NEW OFFICE. The term "New Office" shall mean any additional or other
Office, Dispensary or Practice location which commences operation at any time on
or after the date hereof.
1.18 NON-PROFESSIONAL PERSONNEL. The term "Non-Professional Personnel"
shall mean those individuals employed primarily at the Practice who are not
Optometrists or Ophthalmologists.
1.19 OFFICE. The term "Office" shall mean all facilities and locations
used by the Practice, all business operations related to the Practice's
optometric and/or therapeutic optometric practice, and all related business
operations of the Practice which are to be administered by Professional Business
Manager under the Professional Business Management Agreement, but excluding all
facilities and locations, or portions thereof, used by the Practice and all
business operations of the Practice related to the Dispensary.
1.20 OFFICE EXPENSE. The term "Office Expense" shall mean all operating
and non-operating expenses incurred by the Professional Business Manager in the
provision of Management Services to the Office and shall include all operating
and non-operating expenses incurred by the Practice relating to the items set
forth in this Section. The Professional Business Manager shall be reimbursed by
the Practice for any Office Expense incurred by the Professional Business
Manager in the provision of services to the Practice, upon request by the
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<PAGE> 5
Professional Business Manager. Office Expense shall not include any Professional
Business Manager Expense, Practice Expense or Shareholder Expense or any state,
local or federal income or franchise tax. Without limitation, Office Expense
shall include the following expenses:
(a) the salaries, benefits, payroll taxes, and other direct costs of
all employees of Professional Business Manager primarily working at the Office
and the salaries, benefits, payroll taxes, and other direct costs of the
Non-Professional Personnel of the Practice primarily working at the Office, but
not the salaries, benefits, payroll taxes or other direct costs of the
Professionals;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Office for improved Office performance,
such as management, billing and collections, business office consultation, and
accounting and legal services, but only when such services are coordinated by
Professional Business Manager and/or included in the Budget;
(c) reasonable recruitment costs and out-of-pocket expenses of
Professional Business Manager or the Practice associated with the recruitment of
additional Professionals, other employees of the Practice and Professional
Business Manager's employees primarily located at the Office,
(d) personal property and intangible property taxes assessed against
Professional Business Manager's assets used in connection with the operation of
the Office;
(e) comprehensive general and professional liability insurance
covering the Office, employees of the Practice in connection with the operation
of the Office and employees of Professional Business Manager in connection with
the operation of the Office;
(f) the expense of using, leasing, purchasing or otherwise procuring
and maintaining the Office and maintaining Office related equipment;
(g) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of the Practice or reasonable imputed interest on capital
advanced by Professional Business Manager which shall be equal to the average
cost of borrowing by Professional Business Manager as reflected on its most
recent published financial statements, or in the absence of either of the
foregoing, eight percent (8%)) to finance or refinance obligations of the
Practice incurred in connection with the Office, or to finance new ventures of
the Practice in connection with the Office; in any such case only as such cost
of capital is set forth in the Budget or otherwise approved in advance by the
Practice Advisory Council;
(h) the reasonable travel expenses associated with attending
meetings, conferences, or seminars to benefit the Practice so long as such
expenses are related to
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individuals located at the Office and the Practice's pro rata share for
individuals who are consultants of or employed by Professional Business Manager
who provide material services to the Office;
(i) 0he cost of Office supplies, inventory and utilities;
(j) billing and collection costs and expenses;
(k) the Practice's pro-rata share of reasonable corporate overhead
charges or other reasonable expenses (including computer and data processing
costs) which are incurred by Professional Business Manager in connection with
corporate headquarters expenses which relate to the provision of benefits or
services by Professional Business Manager to the Office and are reflected in the
Budget including without limitation direct or indirect costs of the Executive
Office Administrator and other Professional Business Manager personnel;
(l) all other expenses witch are set forth in the Budget and which
directly or indirectly benefit the Practice incurred by Professional Business
Manager in carrying out its obligations under this Professional Business
Management Agreement;
(m) reasonable costs and expenses (to the extent not covered by
insurance) of lawsuits or claims against the Professional Business Manager or
its personnel, or the Practice, its Professional(s), or other personnel related
to their performance of duties at the Office or their interest in assets used in
connection with the Office, provided that if any of the Professional Business
Manager or its personnel, or the Practice, its Professional(s), or other
personnel do not prevail in the lawsuit or claim or settle the matter with a
material payment by the party (the party at "fault"), such costs and expenses
shall be deemed a Professional Business Manager Expense in the event of
Professional Business Manager's fault or the fault of its personnel and a
Practice Expense in the event of fault by the Practice, its Professional(s), or
other personnel whereupon the Practice and such Professional(s) or other
personnel shall be jointly responsible for the immediate reimbursement of the
sums advanced by Professional Business Manager; provided further that
Professional Business Manager shall not advance such costs and expenses from the
Account if the Practice Advisory Council concludes that (i) it is unlikely that
the Account will be reimbursed if the party involved will not prevail in the
lawsuit or claim, or (ii) it is reasonable to believe that obtaining a
reimbursement of the advanced sums will be difficult to achieve; and the Parties
acknowledge that nothing in this Section shall create any liability on the part
of a Professional who would otherwise be shielded from personal liability by the
corporate or limited liability structure of the Practice;
(n) key person life and disability insurance premiums related to
policies which the Parties agree to acquire on the life of the Practice's
Shareholders or Professionals, whereupon any proceeds shall be paid to the
Account as Adjusted Gross Revenues, unless the Parties agree to a specific split
of the proceeds. Should only the Practice choose to obtain key person life
insurance, the Practice shall pay all premiums as a Practice Expense and shall
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receive all proceeds. Further, if only the Professional Business Manager chooses
to obtain such insurance, Professional Business Manager shall pay all premiums
as a Professional Business Manager Expense and shall receive all proceeds. The
Practice shall cause its Shareholders and Professionals to submit to a medical
examination necessary to obtain such insurance.
In the event that any of the individuals described in Section 1.20(b)
devote a substantial amount of time to serving one or more optometric practices
other than the Practice, which is not prohibited hereunder, or the above
described Office is utilized to a substantial degree by one or more optometric
practices other than the Practice, the Office Expenses shall be allocated
between the Practice and such other optometric practices to reflect each
practice's pro-rata share of any expenses or costs relating to such individuals
or Office (including the recruitment costs of such individuals and the
comprehensive and general liability insurance expenses with respect to such
individuals). Expenses contemplated in this paragraph which potentially and
primarily relate to Sections 1.20 (b), (c), (d), (e), (0, (g), (h), (k), and (1)
shall be in the Budget or approved by the Practice Advisory Council, and where
reasonably determinable, are intended to be reasonable and customary based upon
similar relationships generally existing between national practice management
companies and practices they manage. The Practice's pro-rata portion of expenses
related to individuals who are consultants of or employed by Professional
Business Manager and who provide services benefiting more than one practice
shall be based upon the actual time expended by the individuals in performing
such services as compared to the time spent by such individuals with other
practices managed by the Professional Business Manager, or, if not reasonably
calculable, as determined by Professional Business Manager, based upon the
estimated proportionate revenue size of the Practice as compared to the
aggregate revenue size as estimated in all of the Budgets of all other practices
managed by the Professional Business Manager which are benefiting from such
individual's services. Likewise, other benefits provided by the Professional
Business Manager to several Practices shall be split pro-rata based upon the use
or benefit derived by each Practice, but if not calculable, shall be based upon
the estimated proportionate revenue size as set forth in the preceding sentence.
Notwithstanding anything to the contrary herein, unless an expense is expressly
designated as a Professional Business Manager Expense, a Practice Expense or a
Shareholder Expense in this Professional Business Management Agreement or any
exhibit thereto, all expenses incurred by Professional Business Manager in
providing services pursuant to this Professional Business Management Agreement
shall be considered an Office Expense. Any and all expenses witch are incurred
by Retail Business Manager, Professional Business Manager, or the Practice shall
be allocated to the appropriate expense category or categories in accordance
with the terms and conditions of the Retail Business Management Agreement and
the Professional Business Management Agreement.
1.21 OPTICAL SERVICES. The term "Optical Services" shall mean the filling
of optical prescriptions, dispensing of optical goods, the fitting of eyewear,
all activities related to any of the foregoing, and the direction, supervision,
and control of those who perform these tasks.
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1.22. OPTOMETRIST. The term "Optometrist" shall mean each individually
licensed Optometrist, if any, who is employed or otherwise retained by or
associated with the Practice, each of whom shall meet at all times the
qualifications described in Section 4.3 and Section 4.4.
1.23 OPHTHALMOLOGIST. The term "Ophthalmologist" shall mean each
individually licensed Ophthalmologist, if any, who is employed or otherwise
retained by or associated with the Practice, each of whom shall meet at all
times the qualifications described in Section 43 and Section 4.4.
1.24 PARTIES. The term "Parties" shall mean the Practice and Professional
Business Manager.
1.25 PRACTICE. The term "Practice" shall have the meaning set forth in the
Recitals.
1.26 PRACTICE ADVISORY COUNCIL. The term "Practice Advisory Council" shall
have the meaning set forth in Section 2.6 of this Agreement.
1.27 PRACTICE EXPENSES. The term "Practice Expenses" shall mean (a) all
reasonable nonshareholder Professionals' salaries, benefits, payroll taxes and
other direct costs related to their services to the Practice (including
reasonable and customary professional dues, subscriptions, continuing education
and technical training expenses, and severance payments), (b) the cost of
optometric supplies (including, but not limited to, drugs, pharmaceuticals,
products, substances, items or optometric devices); (c) reasonable and customary
professional liability insurance expenses of Professionals; and (d) travel costs
for continuing education, technical training and necessary business travel for
nonshareholder Professionals; (e)to the extent not covered by insurance and
subject to the advance provisions contained herein, the defense costs and
expenses of any litigation or claims brought against the Practice or its
Professionals or other personnel by any third party in which the Practice or its
Professionals or other personnel do not prevail or the matter settles with a
material payment and the Practice or its Professionals or other personnel are at
fault, and any liability judgment or material settlement assessed against the
Practice or its Professionals or other personnel (certain equipment expenses
described in Sections 3.2(c) and 3.2(d) of this Professional Business Management
Agreement and 3.2(c) and 3.2(d) of the Retail Business Management Agreement; (g)
interest on any funds advanced to the Practice by Professional Business Manager
to the extent that Professional Business Manager is a net lender in accordance
with the terms of this Professional Business Management Agreement; (h) interest
on any funds advanced to the practice by Retail Business Manager to the extent
that Retail Business Manager is a net lender in accordance with the terms of the
Retail Management Agreement; (i) any income taxes or franchise taxes of the
Practice; and j) consulting, accounting, or legal fees which relate solely to
the Practice. Notwithstanding the foregoing, the term Practice Expenses shall
specifically exclude (i) business travel requested by Professional Business
Manager, which shall be an Office Expense, (ii) business travel requested by
Retail Business Manager, which shall be a
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Dispensary Expense, (iii) any and all compensation or expenses attributable to
Shareholders, which shall be Shareholder Expenses (except reasonable and
customary expenses for malpractice insurance which shall be a Practice Expense),
(iv) "tail" insurance coverage for Shareholders, which shall be a Shareholder
Expense, or (v) such other items agreed to in advance in writing by the Parties
hereto. During this Professional Business Management Agreement, for so long as a
current Shareholder of the Practice is an employee of, contractor to, or
Shareholder of the Practice, such Shareholder shall be deemed to be a
Shareholder for the purposes of this definition. Such expenses are to be
approved annually in the Budget.
1.28 PROFESSIONAL. The term "Professional" shall mean any Optometrist or
Ophthalmologist.
1.29 PROFESSIONAL BUSINESS MANAGEMENT AGREEMENT. The term "Professional
Business Management Agreement" shall mean this instrument as originally executed
and delivered, or, if amended or supplemented, as so amended or supplemented.
1.30 PROFESSIONAL BUSINESS MANAGER. The term "Professional Business
Manager" shall have the meaning set forth in the Recitals hereto.
1.31 PROFESSIONAL BUSINESS MANAGER EXPENSE. The term "Professional
Business Manager Expense" shall mean an expense or cost incurred by the
Professional Business Manager, for which the Professional Business Manager is
financially liable and is not entitled to reimbursement from the Practice.
Professional Business Manager Expense shall specifically include (a) any income
or franchise taxes of the Professional Business Manager; (b) the expense of
providing, leasing, purchasing or otherwise procuring and maintaining the Office
equipment, including depreciation in the case of furniture and equipment, and
(c) any other expenses or costs that are not reasonable and customary
reimbursements based upon a practice management company's usual arrangement with
a practice.
1.32 PROFESSIONAL EYE CARE SERVICES. The term "Professional Eye Care
Services" shall mean professional health care items and services, including, but
not limited to, the practice of optometry, and all related professional health
care services provided by the Practice through Optometrists, Ophthalmologists,
and other professional health care providers that are retained by or
professionally affiliated with the Practice. The term shall exclude any and all
business whatsoever in connection with any optical businesses owned or operated,
or to be owned or operated in the future, in whole or in part, by the Practice
or any of its Professionals during the terms of this Professional Business
Management Agreement.
1.33 PROFESSIONAL PRACTICE ACCOUNT. The term "Professional Practice
Account" shall mean the bank account described in Section 3.10.
1.34 REPRESENTATIVES. The term "Representatives" shall mean a Party's
officers, directors, managers, employees, or other agents.
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1.35 RETAIL BUSINESS MANAGEMENT AGREEMENT. The term "Retail Business
Management Agreement" shall mean the instrument made and entered into as of even
date by and between Visionary Retail Management, Inc. ("Retail Business
Manager") whereby Retail Business Manager shall provide certain facilities,
equipment, and management, administrative, and business services to the Practice
in connection with its provision of Optical Services.
1.36 RETAIL BUSINESS MANAGER. The term "Retail Business Manager" shall
have the meaning set forth in the Retail Business Management Agreement.
1.37 SHAREHOLDER. The term "Shareholder" shall mean any current or future
shareholder of the Practice.
1.38 SHAREHOLDER EXPENSE. The term "Shareholder Expense" shall be limited
to the following expenses: (a) Shareholders' salaries, benefits, payroll taxes,
and other direct costs (including professional dues, subscriptions, continuing
education expenses, severance payments, entertainment, and travel costs for
continuing education or other business travel but excluding business travel
requested by Professional Business Manager, which shall be an Office Expense,
and travel requested by Retail Business Manager which shall be a Dispensary
Expense and excluding any other expense of a Shareholder approved as an Office
Expense or Dispensary Expense in advance by the Parties; (b) "tail" coverage
malpractice insurance expenses for the Shareholders and any malpractice
insurance expenses of any Professional which are in excess of those which are
customary and reasonable; and (c) consulting, accounting, or legal fees which
relate solely to the Shareholders. The Practice shall reimburse the Professional
Business Manager for any Shareholder Expense incurred by the Professional
Business Manager. Unless expressly designated as a Management Fee, a
Professional Business Manager Expense, a Retail Business Manager Expense, an
Office Expense, a Dispensary Expense or a Practice Expense in this Professional
Business Management Agreement or in any exhibit hereto or in the Retail Business
Management Agreement or in any exhibit thereto or in any written agreement of
the Parties, any expense incurred by the Practice shall be considered a
Shareholder Expense. Notwithstanding the above, the Practice may require certain
Professionals to pay certain expenses incurred for them specifically. Nothing in
this Section shall create personal liability on the part of the Practice's
Shareholders.
1.39 TERM. The term "Term" shall mean the initial and any renewal periods
of duration of this Professional Business Management Agreement as described in
Section 6.1.
ARTICLE II
APPOINTMENT OF PROFESSIONAL BUSINESS MANAGER
2.1 APPOINTMENT. The Practice hereby appoints Professional Business
Manager as its sole and exclusive agent for the management and administration of
the business functions and business affairs of the Office, and Professional
Business Manager hereby accepts such
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appointment, subject at all times to the provisions of this Professional
Business Management Agreement.
2.2 AUTHORITY. Consistent with the provisions of this Professional
Business Management Agreement, Professional Business Manager shall have the
responsibility and commensurate authority to provide Management Services for the
Practice. The Practice shall give Professional Business Manager thirty (30)
days' prior notice of the Practice's intent to execute any agreement creating a
binding legal obligation on the Practice. The Parties acknowledge and agree that
the Practice, through its Professionals, shall be responsible for and shall have
complete authority, responsibility, supervision, and control over the provision
of all Professional Eye Care Services and other professional health care
services performed for patients, and that all diagnoses, treatments, procedures,
and other professional health care services shall be provided and performed
exclusively by or under the supervision of Professionals as such Professionals,
in their sole discretion, deem appropriate. Professional Business Manager shall
have and exercise absolutely no control, influence, authority or supervision
over the provision of Professional Eye Care Services.
2.3 PATIENT REFERRALS. Professional Business Manager and the Practice
agree that the benefits to the Practice hereunder do not require, are not
payment for, and are not in any way contingent upon the referral, admission, or
any other arrangement for the provision of any item or service offered by
Professional Business Manager to patients of the Practice in any facility,
laboratory, center, or health care operation controlled, managed, or operated by
Professional Business Manager.
2.4 INTERNAL DECISIONS OF THE PRACTICE. Matters involving the Practice's
allocation of professional income among its Shareholders and the Professional
employees of the Practice, tax planning, and pension and investment planning
shall remain the responsibility of the Practice and the Shareholders of the
Practice. The Professional Business Manager may not and shall not directly or
indirectly control or attempt to control, dictate or influence, directly or
indirectly, the professional judgment, including, but not limited to, the level
or type of care or services rendered, the manner of practice, or the practice of
the Practice or any Professional employed by the Practice.
2.5 PRACTICE OF OPTOMETRY. The Parties acknowledge that Professional
Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of optometry. To the
extent any act or service herein required to be performed by Professional
Business Manager should be construed by a court of competent jurisdiction or by
the Board of Optometry to constitute the practice of optometry, the requirement
to perform that act or service by Professional Business Manager shall be deemed
waived and unenforceable. Although Professional Retail Business Manager shall
provide Non-Professional Personnel to the Practice and Professional Retail
Business Manager and Retail Business Manager shall manage the administrative
aspects of their employment, all Non-Professional Personnel shall be subject to
the direction, supervision, and control of the
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Practice and its Professionals in the performance of any and all Clinical Duties
and in the performance of Clinical Duties shall not be subject to any direction
or control by, or liability to, Professional Business Manager and Retail
Business Manager in the performance of said duties. Professional Business
Manager may not and shall not control or attempt to control, directly or
indirectly, the professional judgment, the manner of practice, or the practice
of the Practice or any Professional employed by the Practice. In this regard,
Professional Business Manager shall not attempt to dictate, influence, or
control the scope, level, or type of Professional Eye Care Services provided to
patients of the Office, the frequency of patient contacts at the Office, the
discipline of any Professionals who are Practice Employees, the fees charged for
professional services provided to patients of the Office (except to the extent
necessary to establish the Budget or negotiate managed care contracts), or any
other matter that impinges on the professional judgment of the Practice or any
Professional employed by the Practice.
2.6 FORMATION AND OPERATION OF THE PRACTICE ADVISORY COUNCIL. The Parties
hereby establish a Practice Advisory Council which shall be responsible for
advising Professional Business Manager and the Practice with respect to
developing the Office and implementing management and administrative policies
for the overall operation of the Office and for providing dispute resolution on
certain matters. The Practice Advisory Counsel shall consist of six (6) members.
Professional Business Manager shall designate, in its sole discretion, two (2)
members of the Practice Advisory council or may have one (1) member with two (2)
votes. The Practice shall designate, in its sole discretion, two (2) members of
the Practice Advisory Council or may have one (1) member with two (2) votes.
Retail Business Manager shall designate, in its sole discretion, two (2) members
of the Practice Advisory Council or may have one member with two (2) votes. The
Practice Advisory Council members selected by the Practice shall be full-time
Professional employees of the Practice. Each Party's representatives to the
Practice Advisory Council shall have the authority to make decisions on behalf
of the respective Party. Except as may otherwise be provided, the act of a
majority of the members of the Practice Advisory Council shall be the act of the
Practice Advisory Council, provided that (i) the affirmative vote of the
Practice member(s) shall be required on all votes of the Practice Advisory
Council; (ii) the affirmative vote of the Professional Business Manager shall be
required on all matters relating to the Office; and (iii) the affirmative vote
of the Retail Business Manager shall be required on all matters relating to
Optical Services or the Dispensary. The decisions, resolutions, actions, or
recommendations of the Practice Advisory Council shall be implemented by
Professional Business Manager, Retail Business Manager or the Practice, as
appropriate.
2.7 DUTIES AND RESPONSIBILITIES OF THE PRACTICE ADVISORY COUNCIL. The
Practice Advisory Council shall review, evaluate, make recommendations, and
where specifically authorized herein and permitted by law, make decisions with
respect to the following matters:
(a) FACILITY IMPROVEMENTS AND EXPANSION. Any renovation and
expansion plans and capital equipment expenditures with respect to the
Practice's facilities shall be
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reviewed by the Practice Advisory Council which shall make recommendations to
the Practice with respect to proposed changes therein. Such renovation and
expansion plans and capital equipment expenditures shall be based upon economic
feasibility, optometry support, productivity and then current market conditions.
(b) MARKETING AND PUBLIC RELATIONS. The Practice Advisory Council
shall review and make recommendations to the Practice with respect to all
marketing and public relations services and programs promoting the Practice's
Professional Eye Care Services, Optical Services and ancillary services.
(c) PATIENT FEES, COLLECTION POLICIES. The Practice Advisory Council
shall review and make recommendations to the Practice concerning the fee
schedule and collection policies for all Professional Eye Care Services, Optical
Services and ancillary services rendered by the Practice.
(d) ANCILLARY SERVICES. The Practice Advisory Council must approve
any new non-professional ancillary services to be rendered by the Practice
including Optical Services, and the pricing, continuation of, access to, and
quality of such services.
(e) PROVIDER AND PAYOR RELATIONSHIPS. The Practice Advisory Council
shall review and make recommendations to the Practice regarding the
establishment or maintenance of relationships between the Practice and
institutional health care providers and third-party payors, and the Practice
shall review and approve all agreements, with institutional health care
providers and third party payors. The Practice Advisory Council shall also make
recommendations to the Practice concerning discounted fee schedules, including
capitated fee arrangements of which the Practice shall be a party, and the
Practice shall review and approve all such capitated fee arrangements.
(f) STRATEGIC PLANNING. The Practice Advisory Council may make
recommendations to the Practice concerning development of long-term strategic
planning objectives for the Practice.
(g) CAPITAL EXPENDITURES. The Practice Advisory Council shall make
recommendations to the Practice concerning the priority of major capital
expenditures and shall review and approve any commitment to make any capital
expenditures relating to the Office or the Dispensary, involving amounts in
excess of $15,000 individually, or $50,000 in the aggregate, in any one fiscal
year, which amounts may be increased from time-to-time by agreement of the
Parties.
(h) FEE DISPUTE RESOLUTION. At the request of Professional Business
Manager or the Practice, the Practice Advisory Council shall make
recommendations to Professional Business Manager with respect to any dispute
concerning a set off or reduction in Management Fees.
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(i) GRIEVANCES REFERRALS. The Practice Advisory Council shall
consider and make recommendations to Professional Business Manager and the
Practice regarding grievances pertaining to matters not specifically addressed
in this Professional Business Management Agreement as referred to it by
Professional Business Manager or the Practice's Board of Directors.
(j) TERMINATION OF PROFESSIONAL BUSINESS MANAGER'S PERSONNEL. The
Practice Advisory Council shall review and approve any decision by the
Professional Business Manager to terminate any of Professional Business
Manager's personnel primarily located at the Office who occupy office manager or
high level positions.
(k) APPROVAL OF NEW OFFICES OR DISPENSARY. The Practice Advisory
Council shall approve any move of any current Office or Dispensary location or
the expansion to an additional Practice location. Additionally, the Practice
Advisory Council shall approve the establishment of any optical business of the
Practice and the move or expansion of any such business.
Except in those specific instances set forth above in which the Practice
Advisory Council has been granted the authority to make decisions binding upon
the Professional Business Manager and the Practice, it is acknowledged and
agreed that recommendations of the Practice Advisory Council are intended for
the advice and guidance of Professional Business Manager and the Practice and
that the Practice Advisory Council does not have the power to bind Professional
Business Manager or the Practice. Where discretion with respect to any matter is
vested in Professional Business Manager or the Practice under the terms of this
Agreement, Professional Business Manager or the Practice, as the case may be,
shall have ultimate responsibility for the exercise of such discretion,
notwithstanding any recommendations of the Practice Advisory Council.
Professional Business Manager and the Practice shall, however, take such
recommendations of the Practice Advisory Council into account in good faith in
the exercise of such discretion.
2.8 PROFESSIONAL HEALTH CARE DECISIONS. Notwithstanding anything herein to
the contrary, all decisions required by applicable law to be made solely by
health care professionals will be made solely by the appropriate Professionals.
The Practice shall have ultimate and exclusive authority concerning issues
related to:
(a) Types, levels, and scope of Professional Eye Care Services to be
provided (provided, however, that the Practice Advisory Council shall have the
authority set forth in Section 2.7(d),with respect to non-professional ancillary
services);
(b) Recruitment of Professionals to the Practice, including the
specific qualifications and specialties of recruited Professionals;
(c) Any optometric related functions;
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(d) Fee schedules;
(e) Frequency and/or volume of patient encounters;
(f) The discipline of any Professionals or Non-Professional
Personnel who are employed by, retained by, or otherwise affiliated with the
Practice with respect to the performance of Professional Eye Care Services or
Clinical Duties, as applicable; and
(g) Any other decisions required by applicable law to be made solely
by Professionals and not by non-Professionals.
2.9 MEETINGS OF THE PRACTICE ADVISORY COUNCIL. The Practice Advisory
Council shall meet on a regular basis as mutually agreed by the Parties. A
special meeting of the Practice Advisory Council may be called by Professional
Business Manager, Retail Business Manager or the Practice upon two (2) weeks'
notice, except in the event of an emergency, in which case a special meeting may
be called by Professional Business Manager, Retail Business Manager or the
Practice upon three (3) business days' notice. Meetings may be held
telephonically or by any other means agreeable to the Parties.
ARTICLE III
OBLIGATIONS AND RESPONSIBILITIES OF BUSINESS MANAGER
3.1 MANAGEMENT SERVICES. Professional Business Manager shall provide all
Management Services as are necessary and appropriate for the day-to-day
administration of the business aspects of the Office's operations, pursuant to
the terms of this Professional Business Management Agreement. Professional
Business Manager shall operate in a reasonable and customary manner with due
consideration to the Practice's past business practices and shall operate in
accordance with all applicable laws, rules and regulations which are necessary
and material to the Professional Business Manager's performance of the
Management Services. Professional Business Manager will provide in good faith
and with due diligence its services consistent with management services
generally provided in operations of an optometric practice similar in size, type
and operations in the Commonwealth. All costs and expenses related to
Professional Business Manager's duties contained in this Article III shall be
Office Expenses unless limited or excluded as an Office Expense pursuant to the
terms of this Professional Business Management Agreement. Professional Business
Manager hereby consents and agrees to provide all Management Services to all
Office facilities and locations; provided, however, that during the Term of this
Professional Business Management Agreement and except for its obligations
pursuant to this Professional Business Management Agreement, the Practice shall
not establish operate, or provide Professional Eye Care Services at any new
Office facility or location without the consent and approval of the Practice
Advisory Council; and provided further that during the Term of this Agreement
the Practice shall not engage any individual or entity other than Professional
Business Manager to provide
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Management Services to the Practice without the consent and approval of the
Practice Advisory Council.
3.2 OFFICE, FACILITIES AND EQUIPMENT.
(a) Professional Business Manager shall procure for or on behalf of
the Practice one or more Offices that are deemed by the Parties to be
reasonable, necessary and appropriate, and the expense associated therewith
shall be an Office Expense. Professional Business Manager shall consult with the
Practice regarding the condition, use and needs of Office facilities, offices
and improvements. The Practice shall pay when due all rents and expenses of the
Office, including without limitation expenses for leasehold or facility
improvements. Such rents and expenses shall be Office Expenses.
(b) To the extent required to provide Office space to the Practice,
Professional Business Manager shall negotiate and administer all leases of and
agreements for Office facilities or locations on behalf of the Practice,
provided, however, that Professional Business Manager shall consult with the
Practice on all professional or clinical matters relating thereto and that the
Practice, in its sole discretion, may reject or otherwise refuse to enter into
any lease negotiated by Professional Business Manager.
(c) Professional Business Manager shall provide all non-health care
equipment, fixtures, office supplies, furniture and furnishings as are
reasonable and approved in the Budget for the operation of the Office and the
provision of Professional Eye Care Services. If the Practice wishes to choose
additional equipment, which the Professional Business Manager determines not to
acquire or lease, the Practice may acquire or lease such equipment, and the
expense related thereto shall be deemed a Practice Expense.
(d) Professional Business Manager shall provide, finance, or cause
to be provided or financed health care related equipment as reasonably required
by the Practice. The Practice shall have final authority in all health care
equipment selections; provided, however, that if the Practice chooses to acquire
health care equipment which is not in the Budget and which Professional Business
Manager reasonably chooses not to acquire, expenses related thereto shall be
treated as a Practice Expense and such equipment shall be owned by the Practice;
provided further that following such acquisition or lease by the Practice, if
the Practice Advisory Council determines after a period of six months of use
such equipment is reasonably certain to result in material profit to
Professional Business Manager (taking into account the cost or expense and
anticipated revenues associated with such equipment), then Professional Business
Manager shall acquire such equipment from the Practice by either (at
Professional Business Manager's option), paying cash or by assuming the
liability associated with such equipment, or if such equipment is then being
leased by the Practice, by assuming such lease. In the event of such an
acquisition by Professional Business Manager, it shall reimburse the Practice
for previous expenses applied thereto. Except for equipment which Professional
Business Manager elects not to acquire or lease which are acquired or leased by
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the Practice pursuant to Section 3.2(a), (b), (c)) or (d), all health care and
non-health care equipment, other than Professional-owned automobiles, acquired
for the use of the Practice shall be owned by Professional Business Manager and
the depreciation and related capital charge shall be Professional Business
Manager Expense. Professional Business Manager may make recommendations to the
Practice on the relationship between its health care equipment decisions and the
overall administrative and financial operations of the Practice.
(e) Professional Business Manager shall be responsible for the
repair and maintenance of the Office, consistent with the Practice's
responsibilities under the terms of any lease or other use arrangement, and for
the prompt repair, maintenance, and replacement of all equipment other than such
repairs, maintenance and replacement necessitated by the gross negligence or
willful misconduct of the Practice, its Professionals or other personnel
employed by the Practice, the repair or replacement of which shall be a Practice
Expense and not an Office Expense. Replacement equipment shall be acquired where
Professional Business Manager in good faith determines, in consultation with the
Practice, that such replacement is necessary or where the Budget has made
allowances for such replacement.
3.3 HEALTH CARE SUPPLIES. Professional Business Manager shall order,
procure, purchase and provide on behalf of and as agent for the Practice all
reasonable health care supplies unless otherwise prohibited by federal and/or
state law. Furthermore, Professional Business Manager shall ensure that the
Office is at all times adequately stocked with the health care supplies that are
necessary and appropriate for the operation of the Office and required for the
provision of Professional Eye Care Services. The ultimate oversight, supervision
and ownership for all health care supplies is and shall remain the sole
responsibility of the Practice and all costs and expenses relating to such
supplies shall be an Office Expense. As used in this provision, the term "health
care supplies" shall mean all drugs, pharmaceuticals, products, substances,
items or devices whose purchase, possession, maintenance, administration,
prescription or security requires the authorization or order of a license health
care provider or requires a permit, registration, certification or other
governmental authorization held by a licensed health care provider as specified
under any federal and/or state law.
3.4 SUPPORT SERVICES. Professional Business Manager shall provide or
arrange for all printing, stationery, forms, postage, duplication or
photocopying services, and other support services as are reasonably necessary
and appropriate for the operation of the Office and the provision of
Professional Eye Care Services therein.
3.5 QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW.
Professional Business Manager shall assist the Practice in the Practice's
establishment and implementation of procedures to ensure the consistency,
quality, appropriateness, and necessity of Professional Eye Care Services
provided by the Practice, and shall provide, administrative support for the
Practice's overall quality assurance, risk management, and utilization review
programs. Professional Business Manager shall perform these tasks in a manner to
ensure the
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confidentiality and non-discoverability of these program actions to the fullest
extent allowable under state and federal law.
3.6 LICENSES AND PERMITS. Professional Business Manager shall, on behalf
of and in the name of the Practice, coordinate all development and planning
processes, and apply for and use reasonable efforts to obtain and maintain all
federal, state and local licenses and regulatory permits required for or in
connection with the operation of the Office and the equipment (existing and
future) located at the Office, other than those relating to the practice of
optometry or the administration of drugs by Professionals retained by or
associated with the Practice. The expenses and costs associated with obtaining
and maintaining permits with respect to the Office shall be deemed Office
Expenses.
3.7 PERSONNEL.
(a) SELECTION AND RETENTION OF PROFESSIONAL BUSINESS MANAGER'S
PERSONNEL. Except as specifically provided in Section 4.3 of this Professional
Business Management Agreement, Professional Business Manager shall, in
consultation with the Practice, employ or otherwise retain and shall be
responsible for selecting, hiring, training, supervising, and terminating, all
management, administrative, technical, clerical, secretarial, bookkeeping,
accounting, payroll, billing and collection and other personnel (excluding
Professionals) as Professional Business Manager deems reasonably necessary and
appropriate for the operation of the Office and for Professional Business
Manager's performance of its duties and obligations under this Professional
Business Management Agreement. Consistent with reasonably prudent personnel
management policies, Professional Business Manager shall seek and consider the
advice, input, and requests of the Practice in regard to personnel matters.
Professional Business Manager shall have sole responsibility for determining the
salaries and providing fringe benefits, and for withholding, as required by law,
any sums for income tax, unemployment insurance, social security, or any other
withholding required by applicable law or governmental requirement. Professional
Business Manager reserves the right to change the number, composition or
employment terms of such personnel in the future at Professional Business
Manager's discretion, provided, however, that the termination of any of
Professional Business Manager's personnel who occupy office manager or high
level positions, and are primarily located at the Office must receive the
approval of the Practice Advisory Council. Professional Business Manager and the
Practice recognize and acknowledge that Professional Business Manager and
personnel retained by Professional Business Manager may from time-to-time
perform services for persons other than the Practice. This Professional Business
Management Agreement shall not be construed to prevent or prohibit Professional
Business Manager from performing such services for others or restrict
Professional Business Manager from using its personnel to provide services to
others. Professional Business Manager hereby disclaims any liability relating to
the effect of its employees on the qualification of the Practice's retirement
plans under the Internal Revenue Code, and all liabilities for such
classification shall be solely the responsibility of the Practice.
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(b) TERMINATION OF PROFESSIONAL BUSINESS MANAGER'S PERSONNEL. If the
Practice is dissatisfied with the services of any employee of Professional
Business Manager or any personnel under Professional Business Manager's
direction, supervision, and control, the Practice shall consult with
Professional Business Manager. Professional Business Manager shall in good faith
determine whether the performance of that employee could be brought to
acceptable levels through counsel and assistance, or whether such employee
should be relocated or terminated. All of Professional Business Manager's
determinations regarding Professional Business Manager's personnel shall be
governed by the overriding principle and goal of providing high quality
optometric and/or therapeutic optometric support services. Employee assignments
shall be made to assure consistent and continued rendering of high quality
optometric and/or therapeutic optometric support services. The Professional
Business Manager shall maintain established working relationships wherever
possible, and Professional Business Manager shall make every effort consistent
with sound business practices to honor the specific requests of the Practice
with regard to the assignment of employees. Notwithstanding that which is
contained in this Section 3.7(b), the Practice shall have the right and
obligation to determine the direction, supervision, and control of any personnel
while said personnel are involved in the performance of Clinical Duties,
including prohibiting said personnel from being involved in the performance of
Clinical Duties.
3.8 CONTRACT NEGOTIATIONS. Professional Business Manager shall evaluate,
assist in negotiations and administer on behalf of the Practice contracts that
do not relate to the provision of Professional Eye Care Services as set forth in
this Professional Business Management Agreement and/or as approved in the
Budget. To the extent permitted by law, Professional Business Manager shall
evaluate, assist in negotiations, administer and execute on the Practice's
behalf, all contractual arrangements with third parties as are reasonably
necessary and appropriate for the Practice's provision of Professional Eye Care
Services, including, without limitation, negotiated price agreements with
third-party payors, alternative delivery systems, or other purchasers of group
health care services. The Professional Business Manager shall review and make
recommendations to the Practice regarding the establishment or maintenance of
relationships between the Practice and institutional health care providers and
third-party payors, and the Practice shall review and approve all agreements
with institutional health care providers and third-party payors. The
Professional Business Manager shall also make recommendations to the Practice
concerning discounted fee schedules, including capitated fee arrangements of
which the Practice shall be a party, and the Practice shall review and approve
all such capitated fee arrangements. The Practice shall have the final authority
with regard to the entry into all such contractual arrangements relating to the
provision of Professional Eye Care Services.
3.9 BILLING AND COLLECTION. As an agent on behalf of and for the account
of the Practice, Professional Business Manager shall establish and maintain
credit and billing and collection services, policies and procedures, and shall
use reasonable efforts to timely bill and collect all fees for all billable
Professional Eye Care Services provided by the Practice, the Professionals or
other personnel employed or otherwise retained by the Practice, provided that
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Professional Business Manager shall perform these billing and collection
services only to the extent that said services are not provided to, or arranged
for, the Practice by Retail Business Manager. In connection with the billing and
collection services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 6.3), the Practice hereby grants to
Professional Business Manager an exclusive special power of attorney and
appoints Professional Business Manager as the Practice's exclusive true and
lawful agent and attorney-in-fact (which shall be deemed revoked in the event of
termination for cause by the Practice), and Professional Business Manager hereby
accepts such special power of attorney and appointment, for the following
purposes:
(a) To bill the Practice's patients, in the Practice's name using
the Practice's tax identification number and on the Practice's behalf, for all
billable Professional Eye Care Services provided by the Practice to patients.
(b) To bill, in the Practice's name using the Practice's tax
identification number and on the Practice's behalf, all claims for reimbursement
or indemnification from health maintenance organizations, self-insured
employers, insurance companies, Medicare, Medicaid, and all other third party
payors or fiscal intermediaries for all covered billable Professional Eye Care
Services provided by the Practice to patients.
(c) To collect and receive, in the Practice's name and on the
Practice's behalf, all accounts receivable generated by such billings and claims
for reimbursement, to administer such accounts including, but not limited to,
extending the time of payment of any such accounts; suing, assigning or selling
at a discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that the Practice
shall review and approve (which approval shall not be unreasonably withheld) any
decision by Professional Business Manager to undertake extraordinary collection
measures, such as filing lawsuits, discharging or releasing obligors, or
assigning or selling accounts at a discount to collection agencies. Professional
Business Manager shall act in a professional manner and in compliance with all
federal and state fair debt collection practices laws in rendering billing and
collection services.
(d) To deposit all amounts collected on behalf of the Practice into
the Professional Practice Account which shall be and at all times remain in the
Practice's name. The Practice covenants to transfer and deliver to the
Professional Practice Account all funds received by the Practice from patients
or third-party payors for billable Professional Eye Care Services and Optical
Services. Upon receipt by Professional Business Manager of any funds from
patients or third-party payors or from the Practice pursuant hereto for billable
Professional Eye Care Services and Optical Services, Professional Business
Manager shall immediately deposit the same into the Account. Professional
Business Manager shall administer, be responsible for, and be obligated to pay
for all Office Expenses; provided, however, that Professional Business Manager
shall only be liable for Office Expenses to the extent of funds in the
Professional Practice Account. Professional Business Manager shall
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disburse funds from the Professional Practice Account to creditors and other
persons on behalf of the Practice, maintaining records of such receipt and
disbursement of funds.
(e) To take possession of, endorse in the name of the Practice, and
deposit into the Professional Practice Account any notes, checks, money orders,
insurance payments, and any other instruments received in payment of accounts
receivable of the Practice.
(f) To sign checks on behalf of the Practice, and to make
withdrawals from the Professional Practice Account for payments specified in
this Professional Business Management Agreement. Upon request of Retail Business
Manager, the Practice shall execute and deliver to the financial institution
wherein the Professional Practice Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
power of attorney granted to Professional Business Manager by the Practice
pursuant to this Section 3.9. The special power of attorney granted herein shall
be coupled with an interest and shall be irrevocable except with Professional
Business Manager's written consent. The irrevocable power of attorney shall
expire when this Professional Business Management Agreement has been terminated,
all accounts receivable payable to Professional Business Manager pursuant to
this Professional Business Management Agreement have been collected, and all
Management Fees due to Professional Business Manager have been paid. If
Professional Business Manager assigns this Professional Business Management
Agreement in accordance with its terms, the Practice shall execute a power of
attorney in favor of the assignee in a form acceptable to Professional Business
Manager.
3.10 MAINTENANCE OF PROFESSIONAL PRACTICE ACCOUNT.
(a) POWER OF ATTORNEY. Professional Business Manager shall have
access to the Professional Practice Account solely for the purposes stated
herein. In connection herewith and throughout the term of this Professional
Business Management Agreement, the Practice hereby grants to Professional
Business Manager an exclusive special power of attorney for the purposes stated
herein and appoints Professional Business Manager as the Practice's exclusive,
true, and lawful agent and attorney-in-fact, and Professional Business Manager
hereby accepts such special power of attorney and appointment, to deposit into
the Professional Practice Account all funds, fees, and revenues received from
Retail Business Manager pursuant to its obligations under the Retail Business
Management Agreement and/or collection by Professional Business Manager for
Professional Eye Care Services rendered to patients of the Office, and for all
other professional and Office services and to make withdrawals from the
Professional Practice Account for payments specified in this Professional
Business Management Agreement and as requested from time-to-time by the
Practice. Notwithstanding the exclusive special power of attorney granted to
Professional Business Manager hereunder, the Practice may, upon reasonable
advance notice to Professional Business Manager, draw checks on the Account;
provided, however, that the Practice shall neither draw checks on the
Professional Practice Account nor request Professional Business Manager to do so
if the balance remaining in the Professional Practice Account after such
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withdrawal would be insufficient to enable Professional Business Manager to pay
on behalf of the Practice any Office Expense attributable to the operations of
the Office or to the provision of Professional Eye Care Services and/or any
other obligations of the Practice. Limits on authority to sign checks and
purchase orders shall be mutually agreed upon by Professional Business Manager
and the Practice.
(b) PAYMENTS FROM THE PROFESSIONAL PRACTICE ACCOUNT. From the funds
collected and deposited by the Professional Business Manager in the Professional
Practice Account, the Professional Business Manager shall pay in the following
order of priority and in accordance with applicable requirements under law or
contract:
(i) any refunds owed to patients by the Practice;
(ii) any unpaid or past due compensation owed to the
Professional Business Manager pursuant to Section 5.1 hereof,
(iii) all Office Expenses;
(iv) Practice Expenses;
(v) Shareholder Expenses up to an amount equal to One Hundred
Thirty Nine Thousand And No/100 Dollars ($139,000.00) on an annualized basis,
multiplied in the case of years ending after December 31, 1998 by the Inflation
Adjustment;
(vi) the current Base Management Fee compensation owed to the
Professional Business Manager pursuant to Section 5.1 hereof, and
(vii) all remaining Shareholder Expenses.
(c) ADDITIONAL DOCUMENTS. Upon request of Professional Business
Manager, the Practice shall execute and deliver to the financial institution
wherein the Professional Practice Account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
power of attorney granted to Professional Business Manager by the Practice
pursuant to this Section 3.9. The special power of attorney granted herein shall
be coupled with an interest and shall be irrevocable except with Professional
Business Manager's written consent. The irrevocable power of attorney shall
expire when this Professional Business Management Agreement has been terminated,
all accounts receivable payable to Retail Business Manager pursuant to this
Retail Business Management Agreement have been collected, and all Management
Fees due to Retail Business Manager have been paid. If Professional Business
Manager assigns this Professional Business Management Agreement in accordance
with its terms, the Practice shall execute a power of attorney in favor of the
assignee in a form acceptable to Professional Business Manager. Professional
Business Manager shall not make any withdrawal from the Professional Business
Manager.
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Professional Business Manager shall not make any withdrawal from the
Professional Practice's unless expressly authorized in this Professional
Business Management Agreement.
(d) PAYROLL ACCOUNT. A Practice payroll account in the name of the
Practice shall be established on behalf of the Practice for payroll to
non-shareholder Professionals of the Practice. Funds for this account shall be
received as Practice Expenses. The Practice, as employer of said non-shareholder
Professionals, and Professional Business Manager, as agent and attorney of the
Practice shall each have signing capacity to access the account for payroll.
3.11 FISCAL MATTERS.
(a) ANNUAL BUDGET. The initial Annual Budget shall be agreed upon by
the parties before the execution of this Professional Business Management
Agreement. Thereafter, annually and at least thirty (30) days prior to the
commencement of each fiscal year of the Practice, the Professional Business
Manager, in consultation with the Practice, shall prepare and deliver to the
Practice a proposed Budget, setting forth an estimate of the Practice's revenues
and expenses for the upcoming fiscal year. The Practice shall review the
proposed Budget and either approve the proposed Budget or request any changes
within twenty-one (21) days after receiving the proposed Budget. Disputes
concerning the Budget shall, at the request of either party hereto, be submitted
to the Practice Advisory Council. In the event the Parties are unable to agree
on a Budget by the beginning of the fiscal year, until an agreement is reached,
the Budget for the prior year shall be deemed to be adopted as the Budget for
the current year, with each line item in the Budget (with the exception of the
Management Fee which shall be established pursuant to the terms of this
Professional Business Management Agreement) increased or decreased by one of the
following, whichever is most appropriate relative to the particular item of
income or expense, (i)the percentage by which the Adjusted Gross Revenue in the
current year, excluding any damages paid by any Professional to the Practice
under any Restrictive covenant or otherwise, has increased or decreased compared
to the corresponding period of the prior year; (ii) the increase or decrease
from the prior year in the Consumer Price Index - Health/Medical Services for
the relevant region; and (iii) the proportionate increase or decrease in
mutually agreed upon personnel costs as measured by the increase or decrease in
full-time-equivalent personnel. The Practice Advisory Council may revise or
modify the Budget from time to time during the applicable fiscal year to reflect
changing circumstances affecting the Practice. Additionally, notwithstanding the
above, no change in an adopted Budget shall be contrary to the terms and spirit
of this Professional Business Management Agreement nor shall it have any effect
on the Management Fee expressly agreed to herein, unless approved in advance in
writing by the Parties hereto.
(b) OBLIGATIONS OF PROFESSIONAL BUSINESS MANAGER. Professional
Business Manager shall use commercially reasonable efforts to manage and
administer the operations of the Office as herein provided so that the actual
revenues, costs and expenses of the operation and maintenance of the Office
during any applicable period of the Practice's fiscal year shall be consistent
with the Budget.
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(c) ACCOUNTING AND FINANCIAL RECORDS. Professional Business Manager
shall establish and administer accounting procedures, controls, and systems for
the development, preparation, and safekeeping of administrative or financial
records and books of account relating to the business and financial affairs of
the Office and the provision of Professional Eye Care Services, all of which
shall be prepared and maintained in accordance with GAAP. Professional Business
Manager shall prepare and deliver to the Practice (i) within sixty (60) days of
the end of each of the first three (3) fiscal quarters in each fiscal year, and
(ii) within one hundred twenty (120) days of the end of each fiscal year, a
balance sheet and a profit and loss statement reflecting the financial status of
the Practice in regard to the provision of Professional Eye Care Services as of
the end of such period, all of which shall be prepared in accordance with GAAP
consistently applied. In addition, Professional Business Manager shall prepare
or assist in the preparation of any other financial statements or records as the
Practice may reasonably request.
(d) SALES AND USE TAXES. Professional Business Manager and the
Practice acknowledge and agree that to the extent that any of the services to be
provided by Professional Business Manager hereunder may be subject to any state
sales and use taxes, Professional Business Manager may have a legal obligation
to collect such taxes from the Practice and to remit the same to the appropriate
tax collection authorities. The Practice agrees to have applicable state sales
and use taxes attributable to the services to be provided by Professional
Business Manager hereunder treated as an Office Expense.
3.12 REPORTS AND RECORDS.
(a) HEALTH CARE RECORDS. All files and records relating to the
operation of the Office, including without limitation, accounting, billing and
collection, and patient records shall at all times be and remain the property of
the Practice and shall remain under its possession, custody, and control.
Subject to the foregoing and to the extent permitted by applicable law,
Professional Business Manager shall, in consultation with the Practice,
establish, monitor, and maintain procedures and policies for the timely,
appropriate, and efficient preparation, filing, retrieval, and secure storage of
such records. Patient records shall be located at Office facilities so that they
are readily accessible for patient care. Patient records shall not be removed
from Office premises without the express written consent of the Practice, except
as specified herein. Patient records for patients not seen within the last three
years may be stored in a commercial storage facility or other location
Professional Business Manager shall designate, provided that Professional
Business Manager shall notify the Practice of the location of said records. All
such health care records shall be retained and maintained by the Practice and
the Professional Business Manager as agent for the Practice in accordance with
all applicable state and federal laws relating to the confidentiality and
retention thereof. In this regard, Professional Business Manager shall use its
best efforts to preserve the confidentiality of patient records and shall use
information contained in such records only as the agent for the Practice and for
the limited purposes necessary to perform the services set forth herein.
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(b) OTHER REPORTS AND RECORDS. Professional Business Manager shall timely
create, prepare, and file such additional reports and records as are reasonably
necessary and appropriate for the Practice's provision of Professional Eye Care
Services, and shall be prepared to analyze and interpret such reports and
records upon the request of the Practice.
3.13 RECRUITMENT OF THE PRACTICE'S PROFESSIONALS. Upon the Practice's
request, Professional Business Manager shall coordinate, supervise or perform
all administrative services reasonably necessary and appropriate to recruit
potential Professionals to become employees of the Practice. It will be and
remain the sole and complete responsibility of the Practice to interview,
select, contract with, supervise, control and terminate all Professionals
performing Professional Eye Care Services or other professional services.
3.14 CONFIDENTIAL AND PROPRIETARY INFORMATION.
(a) Professional Business Manager agrees that it shall not disclose
any Confidential Information of the Practice to other persons without the
Practice's express written authorization, that such Confidential Information
shall not be used in any way detrimental to the Practice, and that Professional
Business Manager will keep such Confidential Information confidential and will
ensure that its affiliates and advisors who have access to such Confidential
Information comply with these nondisclosure obligations; provided, however, that
Professional Business Manager may disclose Confidential Information to those of
its Representatives who need to know Confidential Information for the purposes
of this Professional Business Management Agreement, it being understood and
agreed by Professional Business Manager that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section, and will be directed by Professional Business
Manager not to disclose to any other person any Confidential Information.
(b) Notwithstanding clause (a) above, Professional Business Manager
may share, subject to the restrictions of this Section, with other professional
corporations, associations, ophthalmology and optometry practices, or health
care delivery entities the practice statistics of the Practice, including
utilization review data, quality assurance data, cost data, outcomes data, or
other practice data. The Practice statistics and confidential information may be
disclosed within the Practice, to managed care providers or other third party
payors for the purpose of obtaining or maintaining third party payor contracts
or reimbursements, or to financial analysts and underwriters; provided that any
disclosure outside the Practice for any purpose not related to managed care
contracting shall not identify any Professional by name without the Practice's
consent and will not disclose or divulge patient identifying information.
3.15 PROFESSIONAL BUSINESS MANAGER'S INSURANCE. Throughout the Term,
Professional Business Manager shall, as an Office Expense, obtain and maintain
with commercial carriers, through self-insurance or some combination thereof,
appropriate workers' compensation
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coverage for Professional Business Manager's employed personnel provided
pursuant to this Professional Business Management Agreement, and professional,
casualty and comprehensive general liability insurance covering Professional
Business Manager, Professional Business Manager's personnel, and all of
Professional Business Manager's equipment in such amounts, on such basis and
upon such terms and conditions as Professional Business Manager deems
appropriate but which insurance is consistent with the insurance which is
maintained by the Practice pursuant to Section 4.5 of this Professional Business
Management Agreement. Professional Business Manager shall cause the Practice to
be named as an additional insured on Professional Business Manager's
professional, casualty and comprehensive general liability policy. Upon the
request of the Practice, Professional Business Manager shall provide the
Practice with a certificate evidencing such insurance coverage. Professional
Business Manager, in agreement with the Practice, may also carry, as an Office
expense, key person life and disability insurance on any Shareholder or
Professional employee of the Practice in amounts determined reasonable and
sufficient by the Professional Business Manager. Professional Business Manager
shall be the owner and beneficiary of any such insurance, although the Parties
hereby agree that the proceeds of any such insurance shall be paid to the
Account as Adjusted Gross Revenues unless the Parties agree to a specific split
of the proceeds. Should only the Practice choose to obtain key person fife and
disability insurance, the Practice shall pay all premiums as a Practice Expense
and shall receive all proceeds. Further, if only the Professional Business
Manager chooses to obtain such insurance, Professional Business Manager shall
pay all premiums as a Professional Business Manager Expense and shall receive
the proceeds. The Practice shall cause its Professionals to submit to a medical
examination necessary to obtain such insurance.
3.16 NO WARRANTY OR REPRESENTATIONS. The Practice acknowledges that
Professional Business Manager has not made and will not make any express or
implied warranties or representations that the Management Services provided by
Professional Business Manager will result in any particular amount or level of
income to the Practice. Specifically, Professional Business Manager has not
represented that its Management Services will result in higher revenues, lower
expenses, greater profits, or growth in the number of patients treated by the
Practice's Professionals.
3.17 MARKETING AND PUBLIC RELATIONS. Professional Business Manager
acknowledges that the Practice desires a public relations program to enhance its
optometric and/or therapeutic optometric practice and to extend the Office's
ability to provide Professional Eye Care Services to patients. Subject to the
Practice's approval, Professional Business Manager shall design and implement an
appropriate public relations program on behalf of the Practice, with appropriate
emphasis on public awareness of the availability of Professional Eye Care
Services at the Office. The public relations program shall be conducted in
compliance with applicable laws and regulations governing advertising by the
optometrical and optometric professions.
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3.18 PURCHASE OF THE OFFICE ASSETS. Contemporaneous with the execution of
this Professional Business Management Agreement, Professional Business Manager
shall enter into a Bill of Sale whereby Professional Business Manager shall
purchase from the Practice substantially all of the furniture, fixtures, and
equipment used in the operation of the Office prior to execution of this
Professional Business Management Agreement.
3.19 ACQUISITION OF SERVICES AND SUPPLIES. In obtaining services, supplies
and personnel for or on behalf of the Practice pursuant to this Professional
Business Management Agreement, Professional Business Manager shall be authorized
to obtain such services, supplies and personnel from an affiliate of
Professional Business Manager provided that the Office Expenses which are
incurred by or on behalf of the Professional Business Manager shall be
consistent with the expenses of optical dispensaries similar in size, type, and
operations in the Commonwealth.
3.20 COORDINATION OF OBLIGATIONS AND RESPONSIBILITIES. Professional
Business Manager shall, in good faith, coordinate all of its obligations and
responsibilities under this Professional Business Management Agreement with
Retail Business Manager's performance of its obligations and responsibilities
under the Retail Business Management Agreement. Any dispute, conflict or
disagreement between Professional Business Manager and Retail Business Manager
regarding their respective obligations and responsibilities shall be referred to
the Practice Advisory Council for resolution.
ARTICLE IV
OBLIGATIONS AND RESPONSIBILITIES OF THE PRACTICE
4.1 PROFESSIONAL SERVICES. The Practice shall diligently conduct the
business of an optometric and/or therapeutic optometric practice, including
utilizing its capacities to the greatest extent practicable to provide
Professional Eye Care Services to patients of the Office. The Practice shall
retain that number of Professional as are reasonably necessary and appropriate
in the sole discretion of the Practice for the provision of Professional Eye
Care Services and shall determine their assignment and scheduled hours of
practice at Office locations. The Practice shall provide Professional Eye Care
Services to the Office's patients in compliance at all times with ethical, laws
and regulations applying to the optometric and/or therapeutic optometric
professions. The Practice shall ensure that each Professional associated with or
employed by the Practice to provide optometric and/or therapeutic optometric
care to the Office's patients is licensed by the Commonwealth of Virginia. The
Practice shall establish and implement a program to monitor the quality of
Professional Eye Care Services provided at the Office (the "Continuous Quality
Improvement Program"). The Continuous Quality Improvement Program shall be
designed to promote and maintain quality care consistent with accepted practices
prevailing from time to time in the area where each Office facility is situated
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4.2 OPTOMETRIC AND THERAPEUTIC OPTOMETRIC PRACTICE. The Practice shall use
and occupy the Office for the provision of Professional Eye Care Services and
shall comply with all applicable local rules, ordinances and all standards of
optometric and/or therapeutic optometric care. It is expressly acknowledged by
the parties that the optometric and/or therapeutic optometric practice or
practices conducted at the Office shall be conducted solely by Professionals
employed by or under contract with the Practice, and no other Professional shall
be permitted to use or occupy the Office without the prior written consent of
Professional Business Manager.
4.3 EMPLOYMENT OF PROFESSIONALS. Subject to Section 3.13 hereof, the
Practice shall be responsible for the hiring, compensation, supervision,
evaluation, and termination of all Professionals. At the request of the
Practice, Professional Business Manager shall be available to consult with the
Practice respecting such matters. The Practice shall be responsible for the
payment of such Professionals' salaries and wages, payroll taxes, benefits, and
all other taxes and charges now or hereafter applicable to them. The Practice
shall employ and contract only with licensed Professionals who meet applicable
credentialing guidelines established by the Practice. The Practice shall not in
any fiscal year contract in the aggregate with Professionals for an amount
(including the cost of associated benefits, payroll expense, and professional
liability coverage) which is greater than the amount provided for such purpose
in the Budget for such fiscal year. The Practice represents, warrants and
covenants that on or before ninety (90) days from the effective date of this
Professional Business Management Agreement it will have obtained, shall in the
future obtain, and shall enforce formal written employment agreements from each
of its present full-time (an average of thirty (30) or more hours per week)
Professionals, except for the President of the Practice, and those employed in
the future in substantially the form attached hereto as Exhibit 4.3A
("Employment Agreement") containing a restrictive covenant (the "Restrictive
Covenant"). The Practice further represents, warrants and covenants that the
President of the Practice has entered into an employment agreement substantially
the form attached hereto as Exhibit 4.313, (the "Presidents Employment Agreement
Commission") which agreement is currently and shall remain in force and effect
during the term of this Agreement unless terminated in accordance therewith.
4.4 PROFESSIONAL STANDARDS. As a continuing condition of Professional
Business Manager's obligations hereunder each Professional and any other
Professional personnel retained by the Practice to provide Professional Eye Care
Services must (i) have and maintain a valid and unrestricted license to practice
optometry or ophthalmology in the Commonwealth, (ii) comply with be controlled
and governed by, and provide Professional Eye Care Services in accordance with
applicable federal, state and municipal laws, rules, regulations, ordinances and
orders, and the ethics and standard of care of the optometric community wherein
the principal Office of the Practice is located, and (iii) provide on a
continual basis, quality care to its patients.
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4.5 PRACTICE'S INSURANCE. The Practice shall, as a Practice Expense,
obtain and maintain with commercial carriers chosen by the Practice appropriate
workers' compensation coverage for the Practice's employed personnel, if any,
and professional and comprehensive general liability insurance covering the
Practice and each of the Professionals involved in the provision of Professional
Eye Care Services. The comprehensive general liability coverage with respect to
each of the Professionals shall be in the minimum amount of One Million Dollars
($1,000,000) and professional liability coverage shall be in the minimum amount
of One Million Dollars ($1,000,000) for each occurrence and One Million Dollars
($1,000,000) annual aggregate. The insurance policy or policies shall provide
for at least thirty (30) days' advance written notice to the Practice from the
insurer as to any alteration of coverage, cancellation, or proposed cancellation
for any cause. Upon the termination of this Professional Business Management
Agreement for any reason, the Practice shall continue to carry professional
liability insurance in the amounts specified herein for the shorter period of
(i) the period set forth in the Commonwealth's statute of repose (or if no
statute of repose exists, the Commonwealth's statute of limitations) for
bringing professional malpractice claims based upon injuries which are not
immediately discoverable plus any applicable tolling periods, or (ii) ten (10)
years after termination; or if the Practice dissolves or ceases to practice
optometry, the Practice shall obtain and maintain as a Practice Expense "tail"
professional liability coverage, in the amounts specified in this Section for
the shorter period of (i) the period set forth in the Commonwealth's statute of
repose (or if no statute of repose exists, the Commonwealth statute of
limitations) for bringing professional malpractice claims based upon injuries
which are not immediately discoverable plus any applicable tolling periods, or
(ii) ten (10) years. The Practice shall be responsible for paying all premiums
for Shareholder "tail" insurance coverage and such coverage shall be a Practice
Expense; provided, however, that the Practice may cause its Professionals to be
responsible for paying the premiums for such "tail" insurance coverage.
4.6 CONFIDENTIAL AND PROPRIETARY INFORMATION. The Practice agrees that it
shall not disclose any Confidential Information of the Professional Business
Manager to other persons without Professional Business Manager's express written
authorization, such Confidential Information shall not be used in any way
detrimental to Professional Business Manager, and the Practice will keep such
Confidential Information confidential and will ensure that its affiliates and
advisors who have access to such Confidential Information comply with these
nondisclosure obligations; provided, however, that the Practice may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Professional Business
Management Agreement, it being understood and agreed by the Practice that such
Representatives will be informed of the confidential nature of the Confidential
Information, will agree to be bound by this Section, and will be directed by the
Practice not to disclose to any other person any Confidential Information.
4.7 NON-COMPETITION. The Practice hereby recognizes, acknowledges, and
avers that Professional Business Manager will incur substantial costs in
providing the equipment, support services, personnel, management,
administration, and other items and services that are
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the subject matter of this Professional Business Management Agreement and that
in the process of providing services under this Professional Business Management
Agreement, the Practice will be privy to financial and Confidential Information,
to which the Practice would not otherwise be exposed. The Parties also recognize
that the services to be provided by Professional Business Manager will be
feasible only if the Practice operates an active practice to witch the
Professionals associated with the Practice devote their full time and attention.
The Practice agrees, acknowledges, and avers that the non-competition covenants
described hereunder are necessary for the protection of Professional Business
Manager, and that Professional Business Manager would not have entered into this
Professional Business Management Agreement without the following covenants.
(a) Except as specifically agreed to by Professional Business
Manager in writing, the Practice covenants and agrees that during the Term of
this Professional Business Management Agreement and for a period of one (1) year
from the date this Professional Business Management Agreement is terminated
other than if terminated by the Practice for cause, or expires, the Practice
shall not directly or indirectly own (excluding ownership of less than one
percent (1%) of the equity of any publicly traded entity and excluding ownership
of the common stock of Professional Business Manager), manage, operate, control,
contract with, lend funds to, lend its name to, maintain any interest whatsoever
in, or be employed by, any enterprise (i) having to do with the provision,
distribution, promotion, or advertising of any type of management or
administrative services or products to third parties in competition with
Professional Business Manager, within a 10 mile radius of any Office; and/or
(ii) offering any type of service(s) or product(s) to third parties
substantially similar to those offered by Professional Business Manager to the
Practice in Competition with Professional Business Manager within a 10 mile
radius of any Office. Notwithstanding the above restriction, nothing herein
shall prohibit (i) the Practice or any of its Shareholders from providing
management and administrative services to this or their own optometry practice
after the termination of this Professional Business Management Agreement; (ii)
the Practice or its Shareholders from contracting with a third party manager to
provide administrative or management services for its or their professional eye
care practices after termination of this Professional Business Management
Agreement; (iii) any of the Practice's Shareholders from providing management
and administrative services to their own optometry practices after the
termination of their employment relationship with the Practice, and (iv) such
Shareholders from contracting with a third-party manager to provide
administrative or management services for their professional eye care practices
after the termination of their employment relationship with the Practice.
(b) RESTRICTIVE COVENANTS BY OPTOMETRISTS. Under the Restrictive
Covenant, the non-Shareholder Professionals shall agree not to practice
optometry and/or therapeutic optometry or provide Optical Services within a
certain radius, as set forth in Exhibit 4.7A, of the Office location at which
such non-Shareholder Professionals performed services on a regular basis for
sixteen (16) or more hours per week or one thousand (1,000) hours during the
last twelve (12) months of such Professionals' employment with the Practice. The
Restrictive Covenant shall be effective for a period of one (1) year following
termination of
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employment with the Practice and may be subject to a liquidated damages
provision as authorized hereafter. A list of non-Shareholder Professionals the
Practice has required to execute Employment Agreements as of the effective date
of this Professional Business Management Agreement is attached hereto as Exhibit
4.7B.
(c) LIQUIDATED DAMAGES. The Practice represents, warrants, and
covenants that the Restrictive Covenant described above contains a liquidated
damages provision, consistent with the laws of the Commonwealth, mandating the
payment of $25,000.00 in liquidated damages. Any liquidated damage amount
collected by the Practice through enforcement of the Restrictive Covenant shall
be delivered immediately to Professional Business Manager for deposit in the
Account and included in the Adjusted Gross Revenue. The Practice hereby
stipulates and agrees that Professional Business Manager will suffer severe harm
if the Practice fails or refuses to obtain and enforce the Restrictive Covenant,
including the aforesaid liquidated damages provision. The Practice further
stipulate and agree that the parties may be unable to quantify such severe harm,
and, accordingly, the Practice shall pay to Professional Business Manager the
amount of $25,000.00, as agreed upon stipulated damages in the event of such
failure or refusal to obtain and enforce the Restrictive Covenant. Any
liquidated damage amount collected from the Practice as a result of its failure
or refusal to enforce the Restrictive Covenant, shall be immediately paid to
Professional Business Manager, and shall not be included in the Adjusted Gross
Revenue for the Practice.
(d) The Practice understands and acknowledges that Professional
Business Manager shall suffer severe harm in the event that the foregoing
non-competition covenants in Section 4.7 are violated, and accordingly, if the
Practice breaches any obligation of Section 4.7, in addition to any other
remedies available under this Professional Business Management Agreement, at law
or in equity, Professional Business Manager shall be entitled to enforce this
Professional Business Management Agreement by injunctive relief and by specific
performance of the Professional Business Management Agreement, such relief to be
without the necessity of posting a bond, cash or otherwise. Additionally,
nothing in this Section 4.7(d) shall limit Professional Business Manager's right
to recover any other damages to which it is entitled as a result of the
Practice's breach. The time period for which the non-competition covenant is
effective shall be extended day for day for the time period the Practice is in
violation of the non-competition covenant. If any provision of the covenants is
held by a court of competent jurisdiction to be unenforceable due to an
excessive time period, geographic area, or restricted activity, the covenant
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable. Following termination of
this Professional Business Management Agreement pursuant to Section 6.2(b)
hereof, the Practice shall not amend, alter or otherwise change any term or
provision of the Restrictive Covenants or liquidated damages provisions of the
Employment Agreements or the President's Employment Agreement with the
Professionals. Following termination of this Agreement pursuant to Section
6.2(a) hereof, the Practice and the Professionals shall be relieved of the
restrictions imposed by this Section 4.7.
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4.8 NAME, TRADEMARK. The Practice represents and warrants that on and
after sixty (60) days from the effective day of this Professional Business
Management Agreement, the Practice shall conduct its professional practice under
the name of, and only under the name of "Hour Eyes Optometrists, P. C." and that
such name is duly registered, qualified, or licensed under the laws of the
Commonwealth, and that, to the Practice's knowledge, the Practice is the sole
and absolute owner of the name in the Commonwealth. The Practice covenants and
promises that, without the prior written consent of the Professional Business
Manager, the Practice will not:
(a) take any action that is reasonably likely to result in the loss
of registration, qualification or licensure of the name;
(b) fail to take any reasonably necessary action that will maintain
the registration qualification, or licensure current;
(c) license, sell, give, or otherwise transfer the name or the right
to use the name to any optometry practice, Optometrist, professional
corporation, office or any other entity; or
(d) cease conducting the professional practice of the Practice under
the name.
4.9 BILLING INFORMATION AND ASSIGNMENTS, ESTABLISHMENT OF FEES. The
Practice shall promptly provide the Professional Business Manager with all
billing and other information reasonably requested by the Professional Business
Manager to enable it to bill and collect the Office's fees and other charges and
reimbursement claims pursuant to Section 3.9, and the Practice shall use its
best efforts to procure consents to assignments and other approvals and
documents necessary to enable the Professional Business Manager to obtain
payment or reimbursement from third parties for such fees, other charges and
claims.
4.10 PROVIDER AGREEMENTS. The Practice shall have ultimate authority with
regard to all contractual arrangements with third parties for the Practice's
provision of Professional Eye Care Services, and the Practice may at its sole
discretion reject or otherwise refuse to enter into any such contractual
arrangement.
4.11 TAX MATTERS. The Practice shall prepare or arrange for the
preparation by an accountant selected by the Practice of all appropriate
corporate tax returns and reports required of the Practice including such
returns and reports required with respect to the Professional Practice Account.
All costs and expenses relating to the preparation of such returns and reports
shall be deemed a Practice Expense.
4.12 SHAREHOLDERS' UNDERTAKING TO ENFORCE CERTAIN PROVISIONS OF AGREEMENT.
The Practice shall cause to be executed by all Shareholders of the Practice an
undertaking in the
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form of Exhibit 4.12 by such Shareholders to ensure that the covenants not to
compete described in Section 4.7 of this Professional Business Management
Agreement are enforced by the Practice against any individuals violating such
covenants.
4.13 LIMITATIONS ON ACTIONS OF THE PRACTICE. The Practice shall not take
any of the following actions without the express prior written consent of
Professional Business Manager:
(a) Any action leading to or intended to result in the merger,
combination or consolidation of the Practice or Office with, or acquisition of
the Practice, the Office, or their businesses by, any other entity;
(b) Mortgage or encumber any of the Practice's real, personal or
mixed property as security for any indebtedness which is not contemplated by the
Budget;
(c) Pay any dividend or make any other distribution, whether in cash
or in kind, to Shareholders of the Practice, if any compensation owed by the
Practice to Professional Business Manager hereunder has not been paid in full,
and if any and all monetary obligations of the Practice to Professional Business
Manager have not been fully paid in accordance with the terms of any and all
documents governing such obligations;
(d) Dissolve or liquidate the Practice, or take any action with a
view to or likely to have the result of the dissolution or liquidation of the
Practice; or
(e) Authorize the provision of professional services such that the
income derived therefrom is not owned by the Practice; provided that no such
consent is necessary for (i) professional services performed by Professionals
during said Professionals' vacation time, or (ii) professional services
performed in connection with duties and responsibilities as a member of the
Reserves or National Guard.
4.14 LEASES OF OFFICE. The Practice shall maintain and fulfill all of its
obligations under leases of Office facilities or locations.
ARTICLE V
BUSINESS MANAGER'S COMPENSATION
5.1 BASE MANAGEMENT FEE. The Practice and Professional Business Manager
agree to the compensation set forth herein as being paid to Professional
Business Manager in consideration of a substantial commitment made by
Professional Business Manager hereunder and that such fees are fair and
reasonable. Each month Professional Business Manager shall be paid that
percentage set forth in Exhibit 5.1 of Adjusted Gross Revenue.
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5.2 ADJUSTMENTS TO MANAGEMENT FEES FOR NEW OFFICES. Notwithstanding
anything in this Professional Business Management Agreement to the contrary, in
calculating the Base Management Fee pursuant to Section 5.1 hereof, the
following provisions shall govern:
(i) The calculation of the Base Management Fee shall not include the
revenues and expenses associated with any New Office during its first twelve
(12) months of operation (the "Initial Period") if the Net Earnings associated
with such New Office during such Initial Period is less than or equal to zero.
(ii) In the event that Net Earnings for such New Office exceeds
zero, the Base Management Fee to be paid to Professional Business Manager with
respect to such New Office shall be equal to such Net Earnings but shall not
exceed the Base Management Fee as applied to the New Office and as calculated
pursuant to Section 5.1 of the Agreement.
5.3 REASONABLE VALUE. Payment of the Management Fee is not intended to be
and shall not be interpreted or applied as permitting Professional Business
Manager to share in the Practice's fees for Professional Eye Care Services or
any other services, but is acknowledged as the Parties' negotiated agreement as
to the reasonable fair market value of Professional Business Manager's
commitment to pay all Office Expenses and the fair market value of the
equipment, contract analysis and support, other support services, purchasing,
personnel, management, administration, strategic management and other items and
services furnished by Professional Business Manager pursuant to the Professional
Business Management Agreement, considering the nature and volume of the services
required and the risks assumed by Professional Business Manager. The Practice
and Professional Business Manager recognize and acknowledge that Professional
Business Manager will incur substantial costs and business risks in undertaking
to pay all Office Expenses and in providing the support services, personnel,
marketing, management, administration, and other items and services that are the
subject matter of this Professional Business Management Agreement. It is the
intent of the Parties that the Management Fee reasonably compensate Professional
Business Manager for the value to the Practice of Professional Business
Manager's administrative expertise, given the considerable business risk to
Professional Business Manager in providing the Management Services that are the
subject of this Professional Business Management Agreement.
5.4 PAYMENT OF MANAGEMENT FEE. To facilitate the payment of the Management
Fee as provided in Section 5.1 hereof, the Practice hereby expressly authorizes
Professional Business Manager to make withdrawals of the Management Fee from the
Professional Practice Account as such fee becomes due and payable during the
Term in accordance with Section 3.10(a) and after termination as provided in
Section 6.3. Professional Business Manager shall deliver to the Practice an
invoice for the Management Fee accompanied by a reasonably detailed statement of
the information upon which the Management Fee calculation is based.
5.5 DISPUTES REGARDING FEES.
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(a) It is the Parties' intent that any disputes regarding
performance standards of the Professional Business Manager be resolved to the
extent possible by good faith negotiation. To that end, the Parties agree that
if the Practice in good faith believes that Professional Business Manager has
failed to perform its obligations, and that as a result of such failure, the
Practice is entitled to a se-off or reduction in its Management Fees, the
Practice shall give Professional Business Manager notice of the perceived
failure and request in the notice a set-off or reduction in Management Fees.
Professional Business Manager and the Practice shall then negotiate the dispute
in good faith, and if an agreement is reached, the Parties shall implement the
resolution without further action. At the request of Professional Business
Manager or the Practice, the Practice Advisory Council shall make
recommendations to Professional Business Manager with respect to any dispute
concerning a set off or reduction in Management Fees.
(b) If the Parties cannot reach a resolution within a reasonable
time, the Parties shall submit the dispute to mediation to be conducted in
accordance with the American Arbitration Association's Commercial Mediation
Rules.
(c) If the mediation process fails to resolve the dispute, the
dispute shall be submitted by either Party to binding arbitration under Section
8.7.
ARTICLE VI
TERM AND TERMINATION
6.1 INITIAL AND RENEWAL TERM. The Term of this Professional Business
Management Agreement will be for an initial period of forty (40) years after the
effective date, and shall be automatically renewed for successive five (5) year
periods thereafter, provided that neither Professional Business Manager nor the
Practice shall have given notice of termination of this Professional Business
Management Agreement at least one hundred twenty (120) days before the end of
the initial term or any renewal term, or unless otherwise terminated as provided
in Section 6.2 of this Professional Business Management Agreement.
6.2 TERMINATION.
(a) TERMINATION BY THE PRACTICE. The Practice may immediately
terminate this Professional Business Management Agreement at its discretion,
upon written notice pursuant to Section 8.3, as follows:
(i) If Professional Business Manager becomes insolvent by
reason of its inability to pay its debts as they mature; is adjudicated bankrupt
or insolvent; files a petition in bankruptcy, reorganization or similar
proceeding under the bankruptcy laws of the United States or shall have such a
petition filed against it w1iich is not discharged within thirty (30) days; has
a receiver or other custodian, permanent or temporary, appointed for its
business,
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assets or property; makes a general assignment for the benefit of creditors; has
its bank accounts, property or accounts attached; has execution levied against
its business or property; or voluntarily dissolves or liquidates or has a
petition filed for corporate dissolution and such petition is not dismissed with
thirty (30) days;
(ii) If the Professional Business Manager fails to comply with
any material provision of this Professional Business Management Agreement and
does not correct such failure within ninety (90) days after written notice of
such failure to comply is delivered by the Practice specifying the nature of the
breach in reasonable detail; or
(iii) Professional Business Manager commits any act of fraud
misappropriation or embezzlement, or any other felony and as a result the
Professional Business Manager is unable to substantially perform under the terms
of this Professional Business Management Agreement.
(b) TERMINATION BY PROFESSIONAL BUSINESS MANAGER Professional
Business Manager may immediately terminate this Professional Business Management
Agreement at its discretion, upon written notice pursuant to Section 8.3, as
follows:
(i) The revocation, suspension, cancellation or restriction of
any Shareholders' license to practice optometry in the Commonwealth if, in the
reasonable discretion of the Professional Business Manager, the Practice will
not be financially viable after such revocation, suspension, cancellation, or
restriction.
(ii) If the Practice becomes insolvent by reason of its
inability to pay its debts as they mature; is adjudicated bankrupt or insolvent;
files a petition in bankruptcy, reorganization or similar proceeding under the
bankruptcy laws of the United States or shall have such a petition filed against
it which is not discharged within thirty (30) days; has a receiver or other
custodian, permanent or temporary, appointed for its business, assets or
property; makes a general assignment for the benefit of creditors; has its bank
accounts, property or accounts attached; has execution levied against its
business or property; or voluntarily dissolves or liquidates or has a petition
filed for corporate dissolution and such petition is not dismissed with thirty
(30) days,
(iii) If the Practice fails to comply with any material
provision of this Professional Business Management Agreement, or any other
agreement with Professional Business Manager, and does not correct such failure
within ninety (90) days after written notice of such failure to comply is
delivered by Professional Business Manager specifying the nature of the breach
in reasonable detail;
(iv) If the Practice or any of the Practice Professionals
commit any act of fraud, misappropriation or embezzlement, or any other felony
and as a result the
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Practice is unable to substantially perform under the terms of this Professional
Business Management Agreement; or
(v) If any of the material representations of the Practice are
false or incorrect when made or hereafter become materially false or incorrect
or any warranty of the Practice is materially breached.
(c) TERMINATION BY AGREEMENT. In the event the Practice and
Professional Business Manager shall mutually agree in writing, this Professional
Business Management Agreement may be terminated on the date specified in such
written agreement.
(d) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the event
there shall be a change in the Medicare or Medicaid statutes, federal statutes,
state statutes, case law, administrative interpretations, regulations or general
instructions, the adoption of new federal or state legislation, a change in any
third-party reimbursement system, or any finding, ruling, or decree of any
regulatory body concerning this Professional Business Management Agreement, any
of which are reasonably likely to materially and adversely affect the manner in
which either Party may perform or be compensated for its services under this
Professional Business Management Agreement or which shall make this Professional
Business Management Agreement or any related agreements unlawful or
unenforceable, or which would be reasonably likely to subject either Party to
this Professional Business Management Agreement, or any member, shareholder,
officer, director, employee, agent or affiliated organization to any civil or
criminal penalties or administrative sanctions, the Parties shall immediately
use their best efforts to enter into a new service arrangement or basis for
compensation for the services furnished pursuant to this Professional Business
Management Agreement that complies with the law, regulation, policy, finding,
ruling, or decree, or which minimizes the possibility of such penalties,
sanctions or unenforceability, and that approximates as closely as possible the
economic position of the Parties prior to the change. If the Parties are unable
to reach a new agreement within sixty (60) days, this Professional Business
Management Agreement shall be terminated upon ninety (90) days written notice by
either party to the other.
6.3 EFFECTS OF TERMINATION.
(a) OBLIGATION AFTER TERMINATION. Upon termination of this
Professional Business Management Agreement, as hereinabove provided, neither
Party shall have any further obligations hereunder except for
(i) obligations accruing prior to the date of termination,
including, without limitation, payment of the Management Fee relating to
services provided prior to the termination of this Professional Business
Management Agreement;
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(ii) obligations, promises, or covenants set forth herein that
are expressly made to extend beyond the Term, including, without limitation,
insurance, indemnities and non-competition provisions, which provisions shall
survive the expiration or termination of this Professional Business Management
Agreement;
(iii) the obligation of the Practice described in Section 6.4;
and
(iv) the obligation of the Practice to repay amounts advanced
by Professional Business Manager to the Practice.
(b) RECEIPT OF COLLECTIONS AFTER TERMINATION. In effectuating the
provisions of this Section 6.3, the Practice specifically acknowledges and
agrees that if this Professional Business Management Agreement terminates
pursuant to Sections 6.1, 6.2(b) or 6.2 (d), Professional Business Manager shall
continue for a period not to exceed ninety (90) days to exclusively collect and
receive on behalf of the Practice all cash collections from accounts receivable
in existence at the time this Professional Business Management Agreement is
terminated, it being understood that
(i) such cash collections will represent compensation to
Professional Business Manager to the extent of all outstanding obligations to
Professional Business Manager by the Practice pursuant to this Agreement; for
Management Services already rendered;
(ii) Professional Business Manager shall not be entitled to
collect accounts receivable after the termination date if this Agreement is
terminated pursuant to Section 6.2(a);
(iii) the Professional Business Manager shall deduct from such
cash collections any other amounts owed to Professional Business Manager under
this Professional Business Management Agreement, including, without limitation,
ten percent (10%) of such cash collections as its Management Fee during any
period after the termination of this Professional Business Management Agreement
while such collections are taking place and any reasonable costs incurred by
Professional Business Manager in carrying out the post termination procedures
and transactions contemplated herein; and
(iv) Professional Business Manager shall remit remaining
amounts from such collection activities, if any, to the Practice.
(c) SURRENDER OF BOOKS AFTER TERMINATION. Upon the expiration or
termination of this Professional Business Management Agreement for any reason or
cause whatsoever, Professional Business Manager shall surrender to the Practice
all books and records pertaining to the Office.
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6.4 PURCHASE OBLIGATION. Upon expiration of this Professional Business
Management Agreement in accordance with Section 6.1 or termination of this
Professional Business Management Agreement by Professional Business Manager, as
set forth in Sections 6.2(b) or 6.2(d) above, the Practice shall upon
Professional Business Manager's demand:
(a) to the extent requested by Professional Business Manager,
purchase from Professional Business Manager at book value all of the assets,
including inventory and supplies, listed in the Bill of Sale whereby
Professional Business Manager acquired from the Practice substantially all of
the furniture, fixtures, and equipment used in the operation of the Office prior
to execution of this Professional Business Management Agreement, including all
replacements and additions thereto made by Professional Business Manager
pursuant to the performance of its obligations under this Professional Business
Management Agreement, as adjusted in accordance with GAAP to reflect operations
of the Office, depreciation, amortization, and other adjustments through the
last day of the month most recently ended prior to the date of such termination.
(b) Assume all contracts and leases and the Practice's pro rata
share of all debts and payables that are obligations of Professional Business
Manager and that relate principally to the performance of Professional Business
Manager's obligations under this Professional Business Management Agreement;
provided, however, that the Practice shall only be obligated to assume such
contacts and leases if the Practice will be able to enjoy the benefits of the
contracts and leases following such assumption;
(c) Purchase from Professional Business Manager at book value all of
the assets, tangible and intangible, including inventory and supplies NOT listed
in said Bill of Sale but used in the operations of the Office, including all
replacements and additions thereto made by Professional Business Manager
pursuant to the performance of its obligations under this Professional Business
Management Agreement, and all other assets, set forth on the books of
Professional Business Manager as adjusted through the last day of the month most
recently ended prior to the date of such termination in accordance with GAAP to
reflect operations of the Office, depreciation, amortization, and other
adjustments of assets shown on the books of Professional Business Manager; and
(d) Cause to be executed by Shareholders of the Practice such
security agreements reasonably required by Professional Business Manager in
connection with the purchase described in this Section 6.4. All current
Shareholders of the Practice shall on or before the effective date of this
Professional Business Management Agreement, and all individuals who become
Shareholders of the Practice after the effective date of commencement of this
Professional Business Management Agreement shall upon becoming a Shareholder of
the Practice, execute and deliver to Professional Business Manager an
undertaking to comply with this Section 6.4 which shall be in the form of
Exhibit 6.4.
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6.5 CLOSING OF PURCHASE. When the Practice purchases the assets
pursuant to Section 6.4, the Practice shall pay cash or deliver a note payable
in equal monthly installments over five (5) years at an interest rate not to
exceed "prime" plus one (1%) percent ("prime" being the commercial lending rate
of NationsBank, N.A. ), per annum, for the purchased assets. The amount of the
purchase price shall be reduced by the amount of debt and liabilities of
Professional Business Manager, if any, assumed by the Practice, by any payment
the Professional Business Manager has failed to make under this Professional
Business Management Agreement, and by any unpaid portion of any promissory notes
payable by Professional Business Manager to any Shareholder of the Practice. The
Practice and all Shareholders of the Practice shall execute such documents as
may be required to assume the liabilities set forth in Section 6.4(b) and to
remove Professional Business Manager from any liability with respect to such
purchased asset. The closing date for the purchase shall be determined by the
Parties, but shall in no event occur later than the expiration date of this
Professional Business Management Agreement if this Agreement expires in
accordance, with Section 6. 1, or sixty (60) days from the date of the notice of
termination for cause. The termination of this Professional Business Management
Agreement shall become effective upon the closing of the sale of the assets if
the assets are purchased, and all Parties shall be released from any restrictive
covenants provided for in Section 4.7 on the closing date. From and after any
termination, each Party shall provide the other Party with reasonable access to
the books and records then owned by it to permit such requesting Party to
satisfy reporting and contractual obligations that may be required of it.
6.6 LIMITATION OF LIABILITY. In no event shall Professional Business
Manager be liable to the Practice for any indirect, special or consequential
damages or lost profits, arising out of or related to this Professional Business
Management Agreement or the performance or breach thereof, even if Professional
Business Manager has been advised of the possibility thereof.
ARTICLE VII
INDEMNIFICATION THIRD PARTY CLAIMS
7.1 INDEMNIFICATION BY THE PRACTICE. The Practice shall indemnify and hold
harmless Professional Business Manager and Professional Business Manager's
shareholders, directors, officers, agents and employees, from and against all
claims, demands, liabilities, losses, damages, costs and expenses, including
reasonable attorneys' fees, resulting in any manner, directly or indirectly,
from the negligent or intentional acts or omissions of the Practice or its
members, Shareholders, directors, officers, employees, agents or independent
contractors, including but not limited to any such claims, demands, liabilities,
losses, damages, costs and expenses which accrued or arose prior to the date of
execution of this Professional Business Management Agreement.
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7.2 INDEMNIFICATION BY PROFESSIONAL BUSINESS MANAGER. Professional
Business Manager shall indemnify and hold harmless the Practice, and the
Practice's members, Shareholders, directors, officers, agents and employees,
from and against any and all claims, demands, liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees, resulting in any
manner, directly or indirectly, from the negligent or intentional acts or
omissions of Professional Business Manager or its shareholders, directors,
officers, employees, agents or independent contractors.
7.3 NOTICE OF CLAIM FOR INDEMNIFICATION. No claims for indemnification
under this Professional Business Management Agreement relating to claims solely
between the Parties shall be valid unless notice of such claim is delivered to
the Practice (in the case of a claim by Professional Business Manager) or
Professional Business Manager (in the case of a claim by the Practice) within
one (1) year after the Party making such claim first obtained knowledge of the
facts upon which such claim is based. Any such notice shall set forth in
reasonable detail, to the extent known by the Party giving such notice, the
facts on which such claim is based and the resulting estimated amount of
damages.
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If the Practice or Professional Business Manager receives notice
or acquires knowledge of any matter which may give rise to a claim by another
person and which may then result in a claim for indemnification under this
Professional Business Management Agreement, then: (i) if such notice or
knowledge is received or acquired by the Practice, the Practice shall promptly
notify Professional Business Manager; and (ii) if such notice or knowledge is
received or acquired by Professional Business Manager, the Professional Business
Manager shall promptly notify the Practice; except that no delay in giving such
notice shall diminish any obligation under this Professional Business Management
Agreement to provide indemnification unless (and then solely to the extent) the
Party from whom such indemnification is sought is prejudiced.
(b) Any Party from whom such indemnification (the "Indemnifying
Party") is sought shall have the right to defend the Party seeking such
indemnification (the "Indemnified Parry") against such claim by another person
(the "Third Party Claim") with counsel of the Indemnifying Party's choice
reasonably satisfactory to the Indemnified Party so long as: (i) within fifteen
(15) days after the Indemnified Party has given notice of the Third Party Claim
to the Indemnifying Party, the Indemnifying Party notifies the Indemnified Party
that the Indemnifying Party will indemnify the Indemnified Party from and
against all adverse consequences the Indemnified Party may suffer caused by,
resulting from or arising out of or relating to such Third Party Claim; (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
satisfactory to the Indemnified Party that the Indemnifying Party has the
financial resources necessary to defend against the Third Party Claim and
fulfill its indemnification obligations; (iii) the Third Party Claim seeks money
damages; (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim (other than an optometric
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<PAGE> 42
malpractice claim) is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party; and (v) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 7.4(b): (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (ii) the Indemnified Party
shall not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior consent of the Indemnifying
Party; and (iii) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior consent of the Indemnified Party.
(d) If any of the conditions specified in Section 7.4(b) is not
satisfied, however; (i)the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem advisable (and the Indemnified Parry
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith); (ii) the Indemnifying Party shall reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' and accountants' fees and
expenses); and (iii) the Indemnifying Party shall remain responsible for any
adverse consequences the Indemnified Party may suffer caused by, resulting from,
arising out of or relating to such Third Party Claim to the fullest extent
provided in this Professional Business Management Agreement.
7.5 SETTLEMENT. Except as permitted by Section 7.4, a Party shall not
compromise or settle any claim for which the other Party is obligated to
indemnify it without the written consent of such Party.
7.6 COOPERATION. The Indemnified Party shall make available all
information and assistance that the Indemnifying Party may reasonably request in
conjunction with assessing, defending and settling said claim.
ARTICLE VIII
MISCELLANEOUS
8.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Professional Business
Management Agreement is intended or shall be construed to allow Professional
Business Manager to exercise control, authority or direction over the manner or
method by which the Practice and its Professionals perform Professional Eye Care
Services or other professional health care services. The rendition of all
Professional Eye Care Services, including, but not
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<PAGE> 43
limited to, the prescription or administration of medicine and drugs, shall be
the sole responsibility of the Practice and its Professionals, and Professional
Business Manager shall not interfere in any manner or to any extent therewith.
Nothing contained in this Professional Business Management Agreement shall be
construed to permit Professional Business Manager to engage in the practice of
optometry, it being the sole intention of the Parties hereto that the services
to be rendered to the Practice by Professional Business Manager are solely for
the purpose of providing non-optometric management and administrative services
to the Practice so as to enable the Practice to devote its full time and
energies to the professional conduct of its professional eye care practice and
provision of Professional Eye Care Services to its patients.
8.2 STATUS OF INDEPENDENT CONTRACTOR. The Practice and Professional
Business Manager and their shareholders are not, and shall not be deemed to be
by virtue of this Professional Business Management Agreement, joint venturers,
partners, employees or agents of each other (except as expressly provided in
this Professional Business Management Agreement). Except as may be expressly
provided herein, neither Party shall have any authority to bind the other
without the other's express written consent; and then only to the extent of the
authority conferred by such express written consent. Each Party is an
independent contractor, and each Party shall remain professionally and
economically independent of the other. In the course of the business
relationship contemplated in this Professional Business Management Agreement
only the Practice and its Professionals shall practice optometry and/or
therapeutic optometry, and they shall do so as independent professionals with no
employment relationship to Professional Business Manager. Professional Business
Manager and the Practice agree that the Practice shall retain absolute authority
to direct the optometric, professional, and ethical aspects of its optometric
and/or therapeutic optometric practice, any authority granted herein to
Professional Business Manager concerning the business and administrative aspects
of such practice notwithstanding. Each party shall be solely responsible for and
shall comply with all state and federal laws applicable to that party pertaining
to employment taxes, income tax withholding, unemployment compensation
contributions, and other employment related matters.
8.3 NOTICES. Any notice, demand, or communication required, permitted, or
desired to be given hereunder shall be deemed effectively given when in writing
and personally delivered or mailed by prepaid certified or registered mail,
return receipt requested, addressed as follows:
The Practice: Dr. Samit's Hour Eyes Optometrists, P.C.
5568 General Washington Drive
Suite A-215
Alexandria, Virginia 22312
Attention: Daniel Poth, O.D.
Retail Business Manager: Visionary MSO, Inc.
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<PAGE> 44
5568 General Washington Drive
Suite A-215
Alexandria, Virginia 22312
Attention: Robert Brodney
with a copy to: Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Attention: James B. Smith, Jr.
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate.
8.4 GOVERNING LAW. This Professional Business Management Agreement shall
in a respects be governed, interpreted and construed in accordance with the laws
of the Commonwealth without giving effect to principles of comity or conflicts
of laws thereof.
8.5 JURISDICTION AND VENUE. Professional Business Manager and the Practice
hereby consent to the personal jurisdiction and venue of the state and federal
courts in the judicial circuit where the Practice has its principal corporate
office, and do hereby waive all questions of personal jurisdiction and venue,
including, without limitation, the claim or defense that such courts constitute
an inconvenient forum.
8.6 ASSIGNMENT. Except as may be herein specifically provided to the
contrary, this Professional Business Management Agreement shall inure to the
benefit of and be binding upon the Parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that the Practice
may not assign this Professional Business Management Agreement without the prior
written consent of Professional Business Manager, which consent may be withheld.
Professional Business Manager may assign or transfer its rights and obligations
under this Professional Business Management Agreement only in the following
situations: (a) pursuant to a merger of Professional Business Manager into
another entity or the sale of substantially all of the assets of Professional
Business Manager; (b) pursuant to the sale and/or assignment of all of this
Professional Business Management Agreement with the Practice's consent, which
shall not be unreasonably withheld; (c) pursuant to a transfer or assignment of
this Professional Business Management Agreement to one of Professional Business
Manager's subsidiaries; or (d) pursuant to any transfer or assignment to or by
any financial lender of the Professional Business Manager, and this Professional
Business Management Agreement is subordinate to the rights of such lender. After
such assignment and transfer, the Practice agrees to look solely to such
assignee or transferee for performance of this Professional Business Management
Agreement.
8.7 ARBITRATION. Any and every dispute of any nature whatsoever that may
arise between the Parties, whether sounding in contract, statute, tort, fraud,
misrepresentation,
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<PAGE> 45
discrimination or any other legal theory, including, but not limited to,
disputes relating to or involving the construction, performance or breach of
this Agreement or any other agreement between the Parties, whether entered into
prior to, on, or subsequent to the date of this Agreement, or those arising
under any federal, state or local law, regulation or ordinance, shall be
determined by binding arbitration in accordance with the then-current commercial
arbitration rules of the American Arbitration Association, to the extent such
rules do not conflict with the provisions of this paragraph. If the amount in
controversy in the arbitration exceeds Two Hundred Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. Otherwise, the
arbitration shall be conducted by a single neutral arbitrator. The Parties shall
endeavor to select neutral arbitrators by mutual agreement. If such agreement
cannot be reached within thirty (30) calendar days after a dispute has arisen
which is to be decided by arbitration, any Party or the Parties jointly shall
request the American Arbitration Association to submit to each Party an
identical panel of fifteen (15) persons. Alternate strikes shall be made to the
panel, commencing with the Party bringing the claim, until the names of three
(3) persons remain, or one (1) person if the case is to be heard by a single
arbitrator. The Parties may, however, by mutual agreement, request the American
Arbitration Association to submit additional panels of possible arbitrators. The
person(s) thus remaining shall be the arbitrator(s) for such arbitration. If
three (3) arbitrators are selected, the arbitrators shall elect a chairperson to
preside at all meetings and hearings. The arbitrator(s), or a majority of them,
shall have the power to determine all matters incident to the conduct of the
arbitration, including without limitation all procedural and evidentiary matters
and the scheduling of any hearing. The award made by a majority of the
arbitrators shall be final and binding upon the Parties thereto and the subject
matter. The arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss.ss. 1-16, and judgment upon the award rendered by the arbitrator(s)
may be entered by any court having jurisdiction thereof. The arbitrators shall
have no authority to award punitive or exemplary damages or any statutory
multiple damages, and shall only have the authority to award compensatory
damages, arbitration costs, attorney's fees declaratory relief, and permanent
injunctive relief, if applicable. Unless otherwise agreed by the parties, the
arbitration shall be held in Atlanta, Georgia. This Section 8.7 shall not
prevent either Party from seeking a temporary restraining order or temporary or
preliminary injunctive relief from a court of competent jurisdiction in order to
protect its rights under this Agreement. In the event a Party seeks such
injunctive relief pursuant to this Agreement, such action shall not constitute a
waiver of the provisions of this Section 8.7, which shall continue to govern any
and every dispute between the Parties, including without limitation the right to
damages, permanent injunctive relief and any other remedy, at law or in equity.
8.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE WHATSOEVER THAT MAY ARISE
BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO, THOSE DISPUTES RELATING TO, OR
INVOLVING IN ANY WAY, THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT
OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, THE PROVISIONS OF ANY
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<PAGE> 46
FEDERAL, STATE OR LOCAL LAW, REGULATION OR ORDINANCE NOTWITHSTANDING. By
execution of this Agreement, each of the parties hereto acknowledges and agrees
that it has had an opportunity to consult with legal counsel and that he/she it
knowingly and voluntarily waives any right to a trial by jury of any dispute
pertaining to or relating in any way to the transactions contemplated by this
Agreement, the provisions of any federal, state or local law, regulation or
ordinance notwithstanding.
8.9 WAIVER OF BREACH. The waiver by either Party of a breach or violation
of any provision of this Professional Business Management Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
8.10 ENFORCEMENT. In the event either Party resorts to legal action to
enforce or interpret any provision of this Professional Business Management
Agreement, the prevailing Party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
8.11 GENDER AND NUMBER. Whenever the context of this Professional Business
Management Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
8.12 ADDITIONAL ASSURANCES. Except as may be herein specifically provided
to the contrary, the provisions of this Professional Business Management
Agreement shall be self-operative and shall not require further agreement by the
Parties; provided, however, at the request of either Party, the other Party
shall execute such additional instruments and take such additional acts as are
reasonable and as the requesting Party may deem necessary to effectuate this
Professional Business Management Agreement.
8.13 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever this
Professional Business Management Agreement requires any consent or approval to
be given by either Party, or either Party must or may exercise discretion, and
except where specifically set forth to the contrary, the Parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
8.14 FORCE MAJEURE. Neither Party shall be liable or deemed to be in
default for any delay or failure in performance under this Professional Business
Management Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either Party's employees,
or any other similar cause beyond the reasonable control of either Party unless
such delay or failure in performance is expressly addressed elsewhere in this
Professional Business Management Agreement. Notwithstanding the same, the
Parties hereto agree to continue this Professional Business Management Agreement
to the best degree they can so long as
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<PAGE> 47
reasonably possible and the Practice shall not be excused from its obligations
under Sections 4.1, 6.4 and 6.5 pursuant to this Section 8.14.
8.15 SEVERABILITY. The Parties hereto have negotiated and prepared the
terms of this Professional Business Management Agreement in good faith the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective Parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Professional Business Management Agreement or the application thereof to
any person or circumstance shall be adjudged or rendered to any extent invalid,
unenforceable, void or voidable for any reason whatsoever by a court of
competent jurisdiction, an arbitration tribunal, a regulatory agency, or statute
such provision shall be reformed, construed and enforced as if such
unenforceable provision had not been contained herein, and each and all of the
remaining terms, provisions, promises, covenants and conditions of this
Professional Business Management Agreement or their application to other persons
or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Professional Business Management Agreement is in violation of applicable law,
then the Parties agree to negotiate in good faith to amend the Professional
Business Management Agreement, to the extent possible consistent with its
purposes, to conform to law.
8.16 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Except as otherwise required
by law or by applicable rules of any securities exchange or association of
securities dealers, neither the Practice nor the Professional Business Manager
shall issue any press release, make any public announcement or otherwise
disclose any information for the purpose of publication by any print, broadcast
or other public media, relating to the transactions contemplated by this
Agreement, without the prior approval of the other Party.
8.17 DIVISIONS AND HEADINGS. The division of this Professional Business
Management Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith are solely for convergence and
shall not affect in any way the meaning or interpretation of this Professional
Business Management Agreement.
8.18 AMENDMENTS AND EXECUTION. This Professional Business Management
Agreement and any amendments hereto shall be in writing and executed in multiple
copies on behalf of the Practice by its President, and on behalf of Professional
Business Manager by its President. Each multiple copy shall be deemed an
original, but all multiple copies together shall constitute one and the same
instrument.
8.19 LICENSES, PERMITS AND CERTIFICATES. Professional Business Manager and
the Practice shall each obtain and maintain in effect, at all times during the
term of this Professional Business Management Agreement, all licenses, permits
and certificates required by law which are applicable to the performance of
their respective obligations pursuant to this Professional Business Management
Agreement.
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<PAGE> 48
8.20 NO THIRD PARTY BENEFICIARIES. Except as otherwise provided herein,
this Professional Business Management Agreement shall not confer any rights or
remedies upon any person other than Professional Business Manager and the
Practice and their respective successors and permitted assigns.
8.21 COMPLIANCE WITH APPLICABLE LAWS. Professional Business Manager and
the Practice shall comply with all applicable federal, state and local laws,
regulations, rules and restrictions in the conduct of their obligations under
this Professional Business Management Agreement.
8.22 LANGUAGE CONSTRUCTION. The Practice and Professional Business Manager
acknowledge that each Party hereto and its counsel have reviewed and revised
this Professional Business Management Agreement and agree that the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting Party shall not be employed in the interpretation of this
Professional Business Management Agreement.
8.23 ENTIRE PROFESSIONAL BUSINESS MANAGEMENT AGREEMENT. With respect to
the subject matter of this Professional Business Management Agreement, this
Professional Business Management Agreement supersedes all previous contracts and
constitutes the entire agreement between the Parties. Neither Party shall be
entitled to benefits other than those specified herein. No prior oral statements
or contemporaneous negotiations or understandings or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Professional Business Management Agreement shall
be recognized unless incorporated herein by amendment as provided herein, such
amendment(s) to become effective on the date stipulated in such amendment(s).
The Parties specifically acknowledge that, in entering into and executing this
Professional Business Management Agreement, the Parties rely solely upon the
representations and agreements contained in this Professional Business
Management Agreement and no others.
8.24 AUTHORITY. Professional Business Manager and the Practice hereby
warrant and represent to each other that they have the requisite corporate
authority to execute and deliver this Professional Business Management Agreement
in their respective name.
(The remainder of this page is intentionally left blank.)
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<PAGE> 49
IN WITNESS WHEREOF, the Practice and Professional Business Manager have
caused this Professional Business Management Agreement to be executed by their
duly authorized representatives, all as of the day and year first above written.
Dr. SAMIT'S HOUR EYES OPTOMETRIST,
P.C. "The Practice"
By:/s/Daniel Poth
--------------------------
Daniel Poth, O.D., Vice President
VISIONARY MSO, INC.
"Professional Business Manager"
By:/s/Mark Pearson
--------------------------
Mark Pearson Vice President
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<PAGE> 50
EXHIBIT 4.3A
EMPLOYMENT AGREEMENT (PROFESSIONAL)
SEE ATTACHED
<PAGE> 51
EXHIBIT 4.3A
EMPLOYMENT AGREEMENT (PROFESSIONAL)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of
_________________, 199__, by and between ____________________, O.D.
("Employee"), and Dr. Samit's Hour Eyes Optometrist, P.C., a Virginia
professional corporation ("Employer").
W I T N E S S E T H:
WHEREAS, Employee is duly licensed to practice optometry in the
Commonwealth of Virginia and desires to accept employment to practice optometry
as an employee of Employer;
WHEREAS, Employer is engaged in the practice of optometry and desires to
employ Employee; and
WHEREAS, Employer has offered Employee employment in consideration for the
compensation and the other benefits herein provided, and Employee is willing to
accept employment on such terms;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, it is agreed as
follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment from Employer, upon the terms and conditions herein provided.
2. QUALIFICATIONS. Employee shall maintain a valid and unrestricted
license to practice optometry in each jurisdiction in which Employee provides
optometry services. In addition, Employee shall at all times during the term of
this Agreement maintain at least those qualifications and credentials set forth
in Exhibit "A" attached hereto.
3. TERM. The term of this Agreement shall begin on the date first above
written and shall continue for a period ending on _________________ (the
"Initial Term"), unless sooner terminated as herein provided. At the end of the
Initial Term or the Renewal Term (as herein defined), this Agreement, unless
otherwise terminated, shall automatically renew for a period of one (1) year
(the "Renewal Term") unless either party gives written notice of non-renewal of
this Agreement to the other party sixty (60) days prior to the end of the
current term.
4. COMPENSATION. For all services rendered by Employee under this
Agreement (and in addition to other monetary or other benefits specifically set
forth herein), compensation shall be paid to Employee as set forth in Exhibit
"B".
<PAGE> 52
5. DUTIES. Employee is employed to exclusively and actively practice
optometry on behalf of Employer, and shall have those duties, and
responsibilities set forth in Exhibit "N". Employee shall devote Employee's
entire time and attention to the duties of Employer, and shall not engage in the
practice of optometry except as an employee of Employer, unless otherwise
authorized in writing by the Board of Directors of Employer. Employer shall have
the authority to determine the assignment of patients to Employee and Employee
must perform services for patients assigned to Employee. Employer shall have the
authority to designate the days as well as the hours during the day Employee
shall perform Employee's duties, except as otherwise mutually agreed between
Employee and Employer. The authority to direct, control and supervise the
duties, the responsibilities and the means, manner and time of performing such
duties shall be exercised by Employer, provided, however, that Employer shall
not impose duties or constraints which would require Employee to infringe the
ethics of Employee's profession, or violate any federal, state or municipal
laws, regulations or ordinances. Employee agrees to follow and abide by the
ethics of Employee's profession, and all applicable federal, state and municipal
laws, regulations and ordinances.
6. OPTOMETRIC RECORDS. Employee shall, in accordance with Employer's
policies, cause to be properly prepared and filed reports of all examinations,
procedures and other professional services performed by Employee. It being
understood and agreed that all reports, records and supporting documents which
relate to the care and treatment of optometric patients by Employee are
maintained by Employer, and the ownership and right of control of all such
reports, records and supporting documents belong to Employer. Employee waives
any and all rights in and claims to said records and hereby conveys and
transfers to Employer all right, title and interest which Employee may have, if
any, in the reports, records and supporting documents which relate to the care
and treatment of optometric patients by Employee. In addition, Employee shall
promptly submit such additional records as Employer deems to be required by any
third party payors.
7. WORKING FACILITIES. Employer shall furnish Employee with administrative
support, supplies, equipment and such other facilities and services suitable to
Employee's position and adequate for the performance of Employee's duties and
responsibilities.
8. FEES. Employer shall have the exclusive authority to determine the
amount and nature of all fees and the procedure for establishing the fees to be
charged patients of Employer.
9. OWNERSHIP OF FEES AND INCOME. All income generated by Employee for
Employee's professional services and all activities related thereto shall belong
to Employer, whether paid directly to Employer or to Employee. Employee may be
required (and agrees upon request of Employer so to do) to render a true
accounting of all transactions relating to Employee's practice during the course
of Employee's employment.
10. PROFESSIONAL LIABILITY INSURANCE. Employer shall pay for and carry
professional liability insurance, insuring Employer and Employee for
professional errors, omissions,
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<PAGE> 53
negligence, incompetence, and malfeasance in such amounts and pursuant to such
terms as Employer, in its sole discretion, deems acceptable.
11. BENEFITS AND PERQUISITES. During the term of this Agreement, Employee
shall be entitled to participate in those health, accident and other benefit
plans or programs from time to time in effect for other similarly situated
employees or classes of employees, and shall be entitled to the specific
benefits and perquisites set forth in Exhibit "B".
12. TERMINATION. This Agreement shall terminate and the employment
relationship between Employee and Employer automatically and immediately shall
be severed upon the death of Employee, in which event Employer shall pay to the
estate of Employee the compensation which otherwise would be payable to Employee
up to the end of the month in which Employee's death occurs. Additionally, at
any time during the Initial Term or any Renewal Term of this Agreement, this
Agreement may be terminated and the employment relationship between Employee and
Employer automatically and immediately severed upon written notice by Employer
to Employee following the occurrence of any of the following:
(a) Upon the disability of Employee, such being Employee's inability to
perform one or more of the essential functions of Employee's position as
required by this Agreement, due to an illness, injury or incapacity exceeding a
period of ninety (90) days within a period of twelve consecutive months,
provided such termination shall be in accordance with federal, state and local
laws to the extent applicable to the employment of Employee;
(b) The suspension, revocation or cancellation of Employee's right to
practice optometry in any state, district or commonwealth;
(c) The imposition of any restrictions or limitations by any governmental
authority having jurisdiction over Employee or Employer to such an extent that
Employee cannot engage in the professional practice for which he or she was
employed;
(d) Upon a material breach by Employee of this Agreement, provided such
breach is not cured within thirty (30) days after the Employer provides written
notice of the breach to the Employee and within three (3) days after such notice
if such breach has been the subject of a written notice within two (2) years
prior to notice of breach hereunder. "Material breach" shall include, but be not
limited to, the following:
(i) Employee fails or refuses, in the determination of Employer, to
faithfully and diligently perform the usual customary duties of
Employee's employment or adhere to the provisions of this Agreement,
including those duties, responsibilities and conditions of
employment set forth in Exhibit "A"; or
(ii) Employee fails or refuses, in the determination of Employer, to
comply with such policies, standards and regulations of Employer
which from time to time may be reasonably established by Employer;
3
<PAGE> 54
(e) Employee breaches any fiduciary duty owed to Employer, or engages in
unprofessional, unethical, immoral, illegal or fraudulent conduct, or is found
guilty of unprofessional, illegal or unethical conduct by court, any board,
institution, organization or professional society having any privilege or right
to pass upon the conduct of Employee, or Employee's conduct discredits Employer
or is detrimental to the reputation, character and standing of Employer; or
(f) Such other event as is specifically set forth in Exhibit "B" hereto.
13. EARLY TERMINATION. Employee recognizes that failure to complete the
Initial Term or any Renewal Term and to provide appropriate notice to Employer
will cause substantial harm to Employer in terms of loss of business, damage to
business reputation, ability to obtain licensed optometrists to replace
Employee, inconvenience to other employees of Employer, and the costs associated
with finding a replacement. If Employee should terminate this Agreement and
cease to perform hereunder (i) without providing to Employer the required
non-renewal notice or (ii) prior to the end of the term of this Agreement,
Employee shall pay to Employer the sum of Three Thousand Dollars ($3,000), as
reimbursement to Employer of the costs to Employer associated with said early
termination. Employee and Employer agree that it is impossible to determine with
any reasonable accuracy the amount of prospective damages to Employer upon
breach by Employee of the provisions of this paragraph. Employee and Employer
agree that the payment set forth above is reasonable, and not a penalty, based
upon the facts and circumstances of the parties at the time of entering this
Agreement, and with due regard to future expectations.
14. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Employee specifically
agrees to the covenants and provisions governing Confidentiality and Competitive
Activities set forth in Exhibit "B".
15. PATIENT CARE UPON TERMINATION. Upon any termination of this employment
relationship, Employer shall provide duly licensed optometrists to assume the
care and treatment of all patients previously assigned to Employee.
16. RELATIONSHIP BETWEEN THE PARTIES. The parties recognize that the Board
of Directors shall manage the business affairs of Employer and that the
relationship between the parties hereto shall be that of an employer and an
employee. Employee shall be entitled to participate in any plans, arrangements
or distribution of and by Employer pertaining to or in connection with any
pension, profit-sharing, or similar benefits and group life, health, accident
and disability insurance or benefits, or similar fringe benefits for the
employees of Employer, to the extent of and in accordance with the terms and
provisions of any plan, arrangement or distribution, which may be in effect from
time to time during the term of this Agreement. Employee stipulates and agrees
that any and all such fringe benefits may be changed, altered, amended,
discontinued, decreased or increased in the sole discretion of the Board of
Directors of Employer.
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<PAGE> 55
17. REMEDIES AND WAIVER OF BREACH. The waiver by any party hereto of any
of the terms and conditions hereof or any breach of any provision of this
Agreement shall not operate or be construed as a general waiver of any such
terms and conditions or permit a subsequent breach by any party. Additionally,
in the event of any violation of paragraph 14 hereof by Employee, the parties
hereby recognize and acknowledge that a remedy at law will be inadequate and
Employer may suffer irreparable injury. Accordingly, Employee consents to
injunctive relief upon the institution of proceedings therefor by Employer in
order to protect Employer's rights under such paragraph 14. If any covenant
referred to in paragraph 14 or any portion thereof is hereafter construed to be
invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants contained therein, which shall be given full effect,
without regard to the invalid portions, and any court having jurisdiction shall
have the power to reduce the duration and/or area of such covenant and, in its
reduced form, such covenant shall then be enforceable. No delay or omission by
Employer in exercising any right or remedy hereunder, or at law or in equity,
and no payment to Employee of amounts owing him or her subsequent to the breach
of any provision hereof or after the termination hereof, shall operate as a
waiver of any rights or remedies which Employer may have hereunder and no single
or partial exercise thereof shall preclude any other or further exercise thereof
or of the exercise of any other right or remedy. Nothing in this paragraph 17
shall constitute a waiver of any of Employer's rights under paragraph 24 of this
Agreement.
18. ASSIGNMENT. Employee agrees that this Agreement and the rights,
interests and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by Employee. This Agreement shall not be assignable by
Employer except pursuant to a merger, to an affiliate of Employer or to a party
which succeeds to the ownership of all or substantially all of the business and
assets of Employer.
19. NOTICES. Any notice given under this Agreement shall be sufficient if
in writing and mailed by either registered or certified U.S. mail, return
receipt requested, postage prepaid, to Employer at its permanent address and to
Employee at Employee's residence address last known to Employer. Any such notice
shall be effective upon the earlier of actual receipt or five (5) days after
mailing in accordance with the preceding sentence.
20. INVALID PROVISION. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all aspects as if such unenforceable or
invalid provisions were omitted.
21. CONSTRUCTION, VENUE AND BINDING EFFECT. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED IN THE COMMONWEALTH OF VIRGINIA, AND SHALL IN
ALL RESPECTS BE INTERPRETED, CONSTRUED, AND GOVERNED BY AND IN ACCORDANCE WITH
THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF VIRGINIA. Subject to the
arbitration provisions of this Agreement, and without waiving the same, the
exclusive venue for any dispute between the parties hereto arising under this
Agreement shall be in the federal and state courts sitting in Commonwealth of
Virginia. The captions used herein as headings of the various paragraphs hereof
are for convenience only and
5
<PAGE> 56
are not to be used in determining or construing the intent or context of this
Agreement. This Agreement shall inure to the benefit of and be binding upon the
parties, their spouses, heirs, executors, personal representatives, and
permitted assigns.
22. BINDING ARBITRATION. Any and every dispute of any nature whatsoever
that may arise between the Parties, whether sounding in contract, statute, tort,
fraud, misrepresentation, discrimination or any other legal theory, including,
but not limited to, disputes relating to or involving the construction,
performance or breach of this Agreement or any other agreement between the
Parties, whether entered into prior to, on, or subsequent to the date of this
Agreement, or those arising under any federal, state or local law, regulation or
ordinance, shall be determined by binding arbitration in accordance with the
then-current commercial arbitration rules of the American Arbitration
Association, to the extent such rules do not conflict with the provisions of
this paragraph. If the amount in controversy in the arbitration exceeds Two
Hundred Fifty Thousand Dollars ($250,000), exclusive of interest, attorneys'
fees and costs, the arbitration shall be conducted by a panel of three (3)
neutral arbitrators. Otherwise, the arbitration shall be conducted by a single
neutral arbitrator. The Parties shall endeavor to select neutral arbitrators by
mutual agreement. If such agreement cannot be reached within thirty (30)
calendar days after a dispute has arisen which is to be decided by arbitration,
any Party or the Parties jointly shall request the American Arbitration
Association to submit to each Party an identical panel of fifteen (15) persons.
Alternate strikes shall be made to the panel, commencing with the Party bringing
the claim, until the names of three (3) persons remain, or one (1) person if the
case is to be heard by a single arbitrator. The Parties may, however, by mutual
agreement, request the American Arbitration Association to submit additional
panels of possible arbitrators. The person(s) thus remaining shall be the
arbitrators for such arbitration. If three (3) arbitrators are selected, the
arbitrators shall elect a chairperson to preside at all meetings and hearings.
The arbitrators, or a majority of them, shall have the power to determine all
matters incident to the conduct of the arbitration, including without limitation
all. procedural and evidentiary matters and the scheduling of any hearing. The
award made by a majority of the arbitrators shall be final and binding upon the
Parties thereto and the subject matter. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. ss.ss. 1-16, and judgment upon the award
rendered by the arbitrators may be entered by any court having jurisdiction
thereof. The arbitrators shall have no authority to award punitive or exemplary
damages or any statutory multiple damages, and shall only have the authority to
award compensatory damages, arbitration costs, attorney's fees declaratory
relief, and permanent injunctive relief, if applicable. Unless otherwise agreed
by the parties, the arbitration shall be held in Tyson's Corner, Fairfax County,
Virginia. This Paragraph 22 shall not prevent either Party from seeking a
temporary restraining order or temporary or preliminary injunctive relief from a
court of competent jurisdiction in order to protect its rights under this
Agreement. In the event a Party seeks such injunctive relief pursuant to this
Agreement, such action shall not constitute a waiver of the provisions of this
Paragraph 22, which shall continue to govern any and every dispute between the
Parties, including without limitation the right to damages, permanent injunctive
relief and any other remedy, at law or in equity.
23. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY DISPUTE OF ANY NATURE
6
<PAGE> 57
WHATSOEVER THAT MAY ARISE BETWEEN THEM, INCLUDING, BUT NOT LIMITED TO, THOSE
DISPUTES RELATING TO OR INVOLVING, IN ANY WAY THE CONSTRUCTION, PERFORMANCE OR
BREACH OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, THE
PROVISIONS OF ANY FEDERAL, STATE OR LOCAL LAW, REGULATION OR ORDINANCE
NOTWITHSTANDING. By execution of this Agreement, each of the parties hereto
acknowledges and agrees that it has had an opportunity to consult with legal
counsel and that he/she knowingly and voluntarily waives any right to a trial by
jury of any dispute pertaining to or relating in any way to the transactions
contemplated by this Agreement, the provisions of any federal, state or local
law, regulation or ordinance notwithstanding.
24. SURVIVING PROVISIONS. Notwithstanding the termination of this
Agreement, whether upon the expiration of the term hereof or by earlier
termination in accordance with the terms hereof or otherwise, the provisions of,
and the obligations, rights and remedies of the parties pursuant to, paragraphs
9, 14, 15, 17, 21, 22, 23 and 24 and those sections of Exhibit "B" which so
provide, shall survive the termination of this Agreement and remain in full
force and effect.
25. REPAYMENT. For any sums due to Employer from Employee pursuant to the
terms herein, this Agreement shall serve as a specific written authorization by
Employee to Employer for it to withhold from his or her compensation payments
owed to Employer including deducting all outstanding amounts upon termination or
non-renewal of this Agreement.
26. ENTIRE AGREEMENT.
(a) This Agreement (including all exhibits hereto) constitutes the
entire agreement between the parties and contains all of the agreements between
the parties with respect to the subject matter hereof and supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to all subject matters hereof and all such prior agreements are hereby
terminated. The exhibits referred to herein and attached hereto are incorporated
herein and made a part hereof with the same effect as if set forth at length
herein.
(b) This Agreement may be amended or revoked at any time prior to
the death, retirement or termination of Employee by a written agreement
(including amendment and replacement of any exhibit or addendum hereto) executed
by Employee and a designated officer of Employer. No change of or modification
to this Agreement shall be binding or valid unless the same be in writing and
signed by Employee and Employer.
(The remainder of this page is intentionally left blank.)
7
<PAGE> 58
IN WITNESS WHEREOF, the parties have executed this agreement the day and
year first above written.
Dr. Samit's Hour Eyes Optometrist, P.C.
("Employer")
By: __________________________________
Title: _______________________________
______________________________________
____________________, O.D.
("Employee")
8
<PAGE> 59
EXHIBIT "A"
(Attached to and incorporated into the foregoing Employment Agreement)
QUALIFICATIONS AND RESPONSIBILITIES
Employee is a optometrist who is qualified by training and experience to perform
the duties of an optometrist with the available facilities, equipment and
supporting technology provided by Employer. Employee is also expected to perform
a number of other administrative and business development duties which further
the goals of Employer. Many of these other items require additional time,
effort, and dedication to long-term goals and objectives of Employer.
At all times during the term of this Agreement, Employee shall, as directed by
Employer from time to time:
1. Work a minimum of __________ (___) hours each week.
2. When scheduled, be available by telephonic access for purposes of
optometric call coverage and consultation.
A-1
<PAGE> 60
EXHIBIT "B"
(Attached to and incorporated into the foregoing Employment Agreement)
COMPENSATION, BENEFITS, PERQUISITES
AND OTHER TERMS AND CONDITIONS OF EMPLOYMENT
A. COMPENSATION. For all services rendered by Employee under this Agreement
(and in addition to other monetary or other benefits referred to in this
Agreement), compensation shall be paid by Employer to Employee as follows:
(1) Employer shall Pay Employee, during the Initial Term of this
Agreement, a regular salary in the annualized amount of
____________________ Dollars ($__________.00), payable in equal
periodic installments in accordance with Employer's payroll
practices and policies in effect from time to time. The regular
salary of Employee shall be adjusted at the beginning of a renewal
term by an amount equal to the sum total obtained by multiplying the
then current regular annual salary by the CPI Adjustment Factor
(defined below). As used herein, the term `CPI Adjustment Factor"
shall mean the amount derived by dividing the CPI (as herein
defined) most recently published as of the first day of the calendar
year of the beginning of the subsequent term by the CPI most
recently published as of the first day of the calendar year of the
beginning of the current term. For purposes hereof "CPI" means the
Consumer Price Index of Urban Consumers - For All Urban Consumers
(all items 1982 - 1984 = 100), published by the United States
Department of Labor, Bureau of Labor Statistics (the "Bureau"). If
the CPI should ever cease to be published by the Bureau during the
term of this Agreement, the CPI Adjustment Factor shall be computed
by using an economic index selected by Employer, of generally
recognized standing, that reflects the increase or decrease of the
purchasing power of the dollar.
(2) In addition to the regular salary, Employee may receive a bonus
pursuant to a bonus program established by Employer. The amount and
time of payment of such bonus and requirements to obtain such bonus
shall be as set forth on Attachment B- 1.
B. PAID TIME OFF. Each calendar year (which shall be defined as January 1
through December 31), Employee shall be entitled paid time off, during
which time Employee's compensation shall continue to be paid in full, in
the following amounts:
B-1
<PAGE> 61
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS OF FULL-TIME PAID TIME-OFF
EMPLOYMENT PER CALENDAR YEAR
- -------------------------------------------------------------------------------
<S> <C>
During the 1st calendar year Equivalent of 1 day per full month worked
- -------------------------------------------------------------------------------
In the 2nd calendar year 12 days if employed less than 6 months in 1st
calendar year
14 days if employed 6 months or more in the
1st calendar year
- -------------------------------------------------------------------------------
In the 3rd calendar year and 17 days
thereafter
- -------------------------------------------------------------------------------
</TABLE>
The scheduling of time off shall be subject to the prior approval of
Employer. Paid time off is to include time absent from work (i) for
vacation, (ii)due to illness or injury or (iii) for the purpose of
attending continuing education conferences and meetings. Once Employee has
used all paid time off for a calendar year, any additional time taken off
by Employee during the same calendar year shall be without pay. Paid
time-off not used in one Calendar Year may not be accrued and used in the
subsequent Calendar Year. All unused paid time-off at the time of
termination of employment shall be forfeited. If Employee is currently
employed by Employer a parent, subsidiary or affiliate of Employer at the
time of the ;execution of this Agreement, when determining the number of
years of employment for purposes of this section, Employee shall be given
credit for all years of employment during Employee's current period of
employment by Employer.
In addition to the above referenced paid time off, Employee shall be
entitled to the following paid holidays: New Year's Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
C. DISABILITY. If Employee is unable to perform Employee's duties by reason
of illness, injury, or any other disability, Employee shall be entitled to
receive compensation during the period of such inability as follows:
(1) If Employee is unable to perform Employee's duties by reason of a
disability, including illness, injury, or other incapacity (including
pregnancy), then for the period of such disability up to a period of
forty-five thirty (45) days, including the use of any and all accrued and
unused paid time-off, Employee shall be entitled to receive Employee's
regular salary as specified in this Agreement but in no event shall
Employee be entitled to receive compensation under such circumstances for
more than forty-five (45) continuous days, or any forty-five (45) days
during a period of one (1) year, including the use of any and all accrued
and unused paid time off, provided that the compensation under this
section C shall cease the date Employee is first eligible to receive
payment of disability benefits under any disability insurance coverage
provided by Employer.
B-2
<PAGE> 62
(2) While Employee is receiving compensation pursuant to this section C,
Employee shall be eligible to participate in all employee benefits
provided by Employer to the extent allowed under each of the benefit
programs.
(3) All accrued and unused used paid time-off of Employee for the current
calendar year shall first be used in connection with time-off for a
disability and shall be deducted from Employee's forty-five (45) days of
paid disability pursuant to this section C.
(4) If a controversy shall arise concerning the existence, cause,
duration, or extent of disability claimed by Employee, the matter shall be
resolved by a qualified independent physician mutually acceptable to
Employee and Employer, who will make his determination in writing. If the
parties can not agree as to a qualified independent physician, Employer
shall appoint one physician and Employee shall appoint one physician, and
the two physicians shall appoint a qualified independent physician who
shall make a determination in writing. The determination of disability
pursuant to this section C shall be final and binding on the parties.
D. INDEMNIFICATION. Employer agrees to, and shall hereby, hold harmless
and fully indemnify Employee of and from any and all liability, damage,
cost or expense whatsoever incurred, relating to, or by reason of, acts
and/or omissions of Employee in the course of employment pursuant to this
Agreement, except to the extent that such liability, damage, cost, or
expense is the result of the gross negligence or willful misconduct of
Employee.
E. EDUCATION AND LICENSES. Following the completion of the first six (6)
months of the Initial Term of this Agreement, Employer shall pay for or
reimburse Employee for approved expenses related to Employee's continuing
education and licenses, up to a maximum of $500.00 per calendar year if
Employee is licensed to dispense or prescribe diagnostic pharmaceutical
agents or to a maximum of $750.00 per calendar year if Employee is
licensed to dispense or prescribe therapeutic pharmaceutical agents and
Employee uses said license in providing services pursuant to this
Agreement.
F. DISCLOSURE OF CONFIDENTIAL INFORMATION.
1. DEFINITION. "Confidential Information" shall mean all patient
lists, patient account information, patient examination
records, and any other records and books relating in any
manner to the patients and business records of Employer
(whether such records, books or lists are prepared by Employee
or otherwise come into the possession or use of Employee).
"Confidential Information" shall also mean any accounting,
sales, advertising, vision insurance plan information,
marketing or management information, methods or techniques,
any business plans such as refractive and photo-refractive
surgery plans and information, any computer programs and
routines of Employer and any other information of any kind
whatsoever, whether written
B-3
<PAGE> 63
or not, concerning, directly or indirectly, Employer, its
plans, programs or operations, which information is not
generally known in the industry or business in which Employer
is or may become engaged during Employee's employment with
Employer.
2. PROTECTION OF CONFIDENTIAL INFORMATION, ETC. Employee shall
not, at any time either during or after employment with
Employer, in any manner, directly or indirectly, divulge,
disclose, or communicate to any person, firm, corporation,
association, or any other business entity, or use for personal
benefit or for any other purpose than the exclusive benefit of
Employer, its subsidiaries, successors, or assigns,
Confidential Information or any information whatsoever
concerning matters affecting or relating to the business of
Employer which Employee knows or has reason to know would be
valuable to competitors or potential competitors of Employer.
Furthermore, but not by way of limitation to the foregoing,
Employee shall not (i) make known to any person or business
entity the names or addresses of any of the patients of
Employer or any other information pertaining to such patients
or (ii) call on, or solicit, or attempt to call on, or solicit
any of the patients of Employer with whom Employee became
acquainted or was assigned to examine during Employee's
employment with Employer; provided that this prohibition shall
not apply to advertisements in newspapers of general
circulation or telephone directories, including the Yellow
Pages.
3. BOOKS AND RECORDS. Employee shall not, other than as necessary
in the ordinary course of business, make copies of any books,
documents, records or other written or printed, photographic,
encoded, taped, electrostatically or electromagnetically
encoded date or information of whatever nature (hereinafter
the "documents") of Employer. Employee shall not, Without the
prior written approval of Employer, remove any of the
foregoing documents or copies thereof from the premises of the
Company, and shall not, without the prior written approval of
Employer, make available to third parties 'access to said
Employer documents. Employee agrees that all records and books
relating in any manner whatsoever to the patients, whether
prepared by Employee or otherwise in the possession of
Employee shall be exclusive property of Employer. All such
books and records shall be immediately returned to Employer by
Employee upon any termination of employment.
4. PRESCRIPTIONS. Except as otherwise may be provided by law,
lens prescriptions that may be written by Employee during the
term of this agreement shall be and remain the exclusive
property of Employer and Employee shall not use the same in
any manner for any purpose whatever upon termination of the
employment relationship without the prior written consent of
Employer.
B-4
<PAGE> 64
G. COMPETITIVE Activities. During the term of employment with Employer
and for a period of one (1) year thereafter, Employee shall not,
directly or indirectly (whether for compensation or otherwise),
alone or as officer, director, shareholder (excepting not more than
1% stockholdings for investment purposes in securities of publicly
held and traded companies), partner, associate, employee, agent,
principal, trustee, co-venturer, consultant or owner, own, manage,
operate, join, control, advise or otherwise participate with or
become interested in or associated with any person, firm,
partnership, corporation or other entity which intends to engage, or
is engaged, in the business of providing or rendering optometric
services at, or within the Radius (as herein after defined) of any
office or store of Employer in which Employee has provided services
on a regular basis for sixteen (16) or more hours per week or one
thousand (1,000) hours during the last twelve (12) months of this
Agreement. The provisions of this section G shall survive the
termination of this Agreement. For the purposes of this Agreement,
the "Radius" shall mean (i) three (3) miles of any office or store
of Employer which is not Within the District of Columbia or (ii)
one-half (1/2) mile of any office or store in Washington, D.C.
Employee hereby stipulates and agrees that Employer will suffer
severe harm if Employee violates the restrictive covenant set forth
in this Section G. Employee further stipulates and agrees that the
parties may be unable to quantify the severe harm to Employer and,
accordingly, Employee shall pay to Employer the amount of $25,000.00
in the event Employee violates this Section G.
H. SOLICITATION OF EMPLOYEES. Employee agrees that during the term of
this Agreement, and for a period of one (1) year thereafter, without
the written consent of Employer, Employee will not directly or
indirectly contact or solicit to employ, or employ, any of the then
current or past employees of Employer, any subsidiary or affiliate
of Employer or any employees of any company which is providing
management services to Employer or said company's subsidiaries or
affiliates, unless such person shall have ceased to be employed by
Employer (or its subsidiary or affiliate or the company managing
Employer or said company's subsidiary or affthate, as the case may
be) and such cessation of employment shall have occurred at least
twelve (12) months prior thereto; provided this prohibition shall
not apply to general advertisements in newspaper or other widely
distributed publications, media, or mail, whether electronic or
otherwise.
B-5
<PAGE> 65
ATTACHMENT "B-1"
(Attached to and incorporated into the foregoing Employment Agreement)
BONUS
Employee shall be entitled to participate in a performance based bonus
plan as established by Employer, which bonus plan may be amended, revised or
terminated, in the discretion of Employer.
Dated: ____________________, 199__.
Dr. Samit's Hour Eyes Optometrist, P.C.
("Employer")
By: _______________________________
Title: ____________________________
___________________________________
____________________, O.D.
("Employee")
<PAGE> 66
EXHIBIT 4.3B
EMPLOYMENT AGREEMENT
(PRESIDENT OF PRACTICE)
SEE ATTACHED
<PAGE> 67
EXHIBIT 4.3A
EMPLOYMENT AGREEMENT (PRESIDENT OF PRACTICE)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of
the day of September, 1997, by and between Dr. Samit's Hour Eyes Optometrist,
P.C., a Virginia professional corporation (the "Company"), or its assigns, and
Daniel Poth, O.D. ("Executive" or "Dr. Poth");
W I T N E S S E T H:
WHEREAS, pursuant to that certain Stock Purchase Agreement dated as of
September ___, 1997 (the "Stock Purchase Agreement"), by and among Dr. Poth, Dr.
Robert A. Samit and Dr. Michael Davidson, Dr. Poth purchased all of the capital
stock of the Company (the "Acquisition"); and
WHEREAS, Employee is duly licensed to practice optometry in the
Commonwealth of Virginia and desires to accept employment to practice optometry
as an employee of Employer;
WHEREAS, in connection with the Acquisition and the other transactions
related thereto, Executive is required to enter into this Agreement concurrent
with the consummation of the Acquisition; and
WHEREAS, Executive desires to serve in the employment of the Company on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve as President
of the Company, and Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
2. TERM. The term of this Agreement shall commence on the date hereof (the
"Effective Date") and shall terminate on December 31, 2002, subject to earlier
termination and extension as hereinafter provided (the "Term"). Thereafter, this
Agreement shall automatically renew for successive five-year terms unless either
party gives written notice of its election not to renew at least thirty (30)
days prior to the end of the then current period. In the event of such
extension, all of the terms and conditions of this Agreement shall remain in
full force and effect.
3. DUTIES, QUALIFICATIONS AND OPTOMETRIC RECORDS. (a) During the Term,
Executive shall serve as the President of the Company with such title, duties
and responsibilities as
<PAGE> 68
established from time to tune by the Board of Directors of the Company (the
"Board"), or such person who may be appointed by the Board to oversee the
operations of the Company. Such duties and responsibilities shall include, but
not be limited to, the management of the other optometrists employed by the
Company and the operations of the Company in Virginia and such other states as
the Company has operations. Executive agrees that he will devote substantially
all of his full business time, attention and energies to the business of the
Company, and to the performance of his duties hereunder. Executive shall devote
his time and attention to the duties of the Company, and shall not engage in the
practice of optometry except as an employee of the Company or with respect to
the stores of Hour Eyes, Inc. pursuant to that certain optometric director
agreement between Executive, an entity owned by Executive, and Hour Eyes, Inc.
Executive will at all times report to the board of directors of the Company or
such person who may be appointed by the Board to oversee the operations of the
Company and its direct and indirect subsidiaries and affiliates. Executive shall
abide by all of the Company's policies and procedures, as may be adopted from
time to time by the Company. Executive shall maintain a valid and unrestricted
license to practice optometry in each state or other jurisdiction 'in which the
Company provides optometry services.
(b) Executive shall, in accordance with the Company's policies, cause to
be properly prepared and filed reports of all examinations, procedures and other
professional services performed by himself and the other employees of the
Company. The ownership and right of control of all reports, records and
supporting documents prepared for and/or maintained by the Company belongs to
the Company. In addition, Executive shall promptly submit such additional
records as the Company deems to be required by any third party payors. In the
event that the Executive's employment with the Company is terminated, to the
extent that Executive has any rights in such patient records, Executive agrees
that such rights will be transferred to, and the records shall remain with, the
Company, and Executive shall have no ongoing rights with respect thereto.
4. COMPENSATION.
(a) BASE COMPENSATION. During the term of this Agreement, the Company
shall pay to Executive a salary at an annual rate of $125,000 MULTIPLIED, in the
case of years ending after December 31, 1998, by the Inflation Adjustment (the
"Base Salary"). The Base Salary shall be payable during the Term in
substantially equal installments not less frequently than monthly in accordance
with the Company's standard payroll policy or in such other 'installments as the
parties may mutually agree.
The "Inflation Adjustment" for any year shall be equal to the fraction the
numerator of which is the revised Bureau of Labor Statistics Consumer Price
Index for all Items and Major Group Figures for All Urban Consumers, U.S. City
Average (1982-84=100) (the "Index") for December of the preceding year and the
denominator of which is the Index for September, 1997. If the Inflation
Adjustment or another amount cannot be calculated when any of the Base Salary is
due, an estimated Base Salary amount shall be paid and an appropriate adjusting
payment shall
2
<PAGE> 69
be made as soon as such adjustment can be calculated. Appropriate modification
to the Inflation Adjustment shall be made if the Index shall cease to be updated
as of the end of each calendar year.
(b) REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive, in
accordance with the Company's policy in effect from time to time, for all
reasonable travel, entertainment and other business expenses incurred by
Executive in the performance of his duties and responsibilities hereunder.
(c) NET PAYMENTS. The amount of any gross payments provided for in this
Agreement shall be paid net of any applicable withholding required under
federal, state or local law.
5. BENEFITS. Executive shall be entitled to receive the benefits made
available or applicable from time to time to the employees of the Company;
provided, however, that the receipt of such benefits by Executive shall be
subject to the Company's eligibility and enrollment requirements pertaining to
such benefit programs. Executive shall be eligible for four weeks paid vacation
per year in accordance with the Company's vacation policy.
6. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES.
(a) CONFIDENTIALITY. Executive acknowledges that during his employment
with the Company, the Company has and will continue to disclose to him the
confidential affairs and proprietary information of the Company and its
subsidiaries and affiliates which is developed by and belongs to the Company and
its subsidiaries and affiliates, including matters of a business nature such as
information about costs, profits, markets, sales, trade secrets, potential
patents and other business ideas, customer lists, supplier and vendor lists,
plans for future developments and/or acquisitions, and information of any other
kind not known within the optical retail industry generally (collectively,
"Confidential Matters"). Executive further acknowledges that the Company would
not hire Executive or disclose these Confidential Matters to Executive without
the promises made by Executive in this Section 6. In light of the foregoing,
Executive agrees:
(i) To keep secret all Confidential Matters of the Company and of
any affiliates of the Company, and of any third party to whom the Company is
bound by a confidentiality agreement, and not to disclose them to anyone outside
of the Company or its affiliates, or otherwise use them or use his knowledge of
them for his own benefit or for the benefit of any third party, including,
without limitation, use of the trade secrets, trade names or trademarks of the
Company, either during or after the Tenn, except with the Company's prior
written consent; and
(ii) To deliver promptly to the Company at the termination of the
Term, or at any time the Company may request, all memoranda, notices, records,
reports and other documents (and all copies thereof) relating to the business of
the Company or any of its
3
<PAGE> 70
subsidiaries or affiliates, including, but not limited to, Confidential Matters,
which he may then possess or have under his control.
Notwithstanding any of the foregoing, the term "Confidential Matters" does
not include information which (1) is or becomes generally available to the
public other than as a result of any disclosure by Executive or (ii) Executive
is compelled to disclose by judicial or administrative process; provided, that
in the case of any such requirement or purported requirement Executive shall
provide written notice to the Company prior to producing such information, which
notice shall be given at least ten (10) days prior to the producing such
information, if practicable, so that the Company may seek a protective order or
other appropriate remedy.
(b) COMPETITIVE ACTIVITIES. Executive expressly recognizes and
acknowledges that the terms and condition of this Section 6(b) are reasonable as
to time, area and scope of restricted activity, necessary to protect the
legitimate interests of the Company, and are not unduly burdensome to Executive.
For a period commencing on the Effective Date and ending twenty-four (24) months
following the effective date of a termination of Executive's employment (for any
reason whatsoever), Executive shall not, directly or indirectly (whether for
compensation or otherwise), alone or as officer, director, stockholder
(excepting not more than 1% stockholdings for investment purposes in securities
of publicly held and traded companies), partner, associate, employee, agent,
principal, creditor, guarantor, trustee, salesman, consultant, or any other
capacity, take any action in or participate with or become interested in or
associated with any person, firm, partnership, corporation or other entity
whatsoever that is engaged in the business of the retail sale of optical goods
in any of the geographic areas consisting of each county or parish or district
(with respect to the District of Columbia) and each county, parish or district
contiguous thereto, in which (i) a store is located that is owned, operated or
managed by the Company as of the date of termination of employment or (11) the
Company has affirmative plans (evidenced by documentation) to commence
operations as of the date of termination of employment and Executive has
actively participated in such plans (such activities are hereinafter referred to
as the "Competitive Activities" and the restricted area is hereinafter referred
to as the "Restricted Area"). Notwithstanding the foregoing, Executive shall be
permitted to:
(A) own and operate a single store location for the purpose selling
optical goods and providing optometric services provided that such
store not affiliated with any national, regional or local optical
retailer and such store location is not within a one and one-half (1
1/2) three mile radius (one-half (1/2) mile with respect to stores
in Washington D.C. and three (3) miles with respect to the store
located in South Lakes, Virginia) of (i) a store location that is
owned, operated or managed by the Company as of the date of
termination of employment or (ii) a location in which the Company
has affirmative plans (evidenced by documentation) to commence
operations as of the date of termination of employment and Executive
has actively participated in such plans; or
4
<PAGE> 71
(B) be employed by a national or regional optical retailer with
operations in the Restricted Area, provided that Executive is not
directly supervising optometrists or other employees of such
retailers' operations within the Restricted Area; and.
(C) provide part-time optometric services, up to 3 days a week, for any
optometrist, optical retailers or professional corporation; provided
that his sole duties shall consist of providing optometric
examinations; and provided further that Executive has first offered
his services to the Company and Hour Eyes, Inc. at the market rate
and the Company and Hour Eyes, Inc. has declined to provide such
part-time employment.
The foregoing exceptions to the prohibitions against Competitive
Activities shall not release Executive, or waive any rights of the Company with
respect to, any of Executive's other covenants, obligations or duties hereunder
including without limitation, the provisions of Section 6(a), 6(c) and 6(d).
(c) ANTISOLICITATION. Executive agrees that during the Tenn of this
Agreement, and for a period of two (2) years thereafter, he will not influence
or attempt to influence customers (including customers with respect to managed
care plans), of the Company or any of its present or future direct or indirect
subsidiaries or affiliates, either directly or indirectly, to divert their
business to any individual, partnership, firm, corporation or other entity then
in competition with the business of the Company or any subsidiary or affiliate
of the Company; provided this prohibition shall not apply to general
advertisements in newspaper or other widely distributed publications, media, or
mail, whether electronic or otherwise.
(d) SOLICITING EMPLOYEES. Executive agrees that during the Term of this
Agreement, and for a period of two (2) years thereafter, "without the written
consent of the Company such consent to be given only after Executive is no
longer a shareholder of the Company, he will not directly or indirectly contact
or solicit to employ, or employ, any of the then current or past employees of
the Company or any subsidiary or affiliate of the Company unless such person
shall have ceased to be employed by the Company (or its subsidiary or affiliate,
as the case may be) and such cessation of employment shall have occurred at
least twelve (12) months prior thereto; provided this prohibition shall not
apply to general advertisements in newspaper or other widely distributed
publications, media, or mail, whether electronic or otherwise.
7. REMEDIES FOR BREACH. In addition to the rights and remedies provided in
Section 16, and without waiving the same if Executive breaches, or threatens to
breach, any of the provisions of Section 6, the Company shall have the following
rights and remedies, in addition to any others, each of which shall be
independent of the other and severally enforceable:
(i) The right and remedy to have such provisions specifically
enforced by any court having equity jurisdiction together with an
accounting for any benefit or gain by Executive in connection with any
such breach. Executive specifically acknowledges and
5
<PAGE> 72
agrees that any breach or threatened breach of the provisions of Section 6
will cause irreparable injury to the Company and that money damages will
not provide an adequate remedy to the Company. Such injunction shall be
available without the posting of any bond or other security.
(ii) The right and remedy to require Executive to account for and
pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (hereinafter collectively the "Benefits")
derived or received, directly or indirectly, by Executive as a result of
any transactions constituting a breach of any of the provisions of Section
6, Executive hereby agreeing to account for and pay over the Benefits to
the Company.
(iii) The right to terminate Executive's employment pursuant to
Section 8(c).
(iv) Upon discovery by the Company of a breach or threatened breach
of Section 6, the right to immediately suspend payments to Executive under
Section 8, pending a resolution of the dispute.
If any covenant contained in Section 6 or any portion thereof is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants contained therein, which shall be given
full effect, without regard to the invalid portions, and any court having
jurisdiction shall reform the covenant to the extent necessary to cause the
limitations contained therein as to time, geographical area and scope of
activity to be restrained to be reasonable and to impose a restraint that is not
greater than necessary to protect the goodwill and other business interest of
the Company and to enforce the covenant as reformed. The parties hereto intend
to and hereby confer jurisdiction to enforce the covenants contained in Section
6 upon the courts of any state or other jurisdiction in which any alleged breach
of any such covenant occurs. If the courts of any of one or more of such states
or other jurisdictions shall hold such covenants not wholly enforceable by
reason of the scope thereof or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the Company's right
to the relief provided above in the courts of any other states or jurisdictions
as to breaches of such covenants in such other respective states or
jurisdictions, and the above covenants as they relate to each state or
jurisdiction being, for this purpose, severable into diverse and independent
covenants. If any court determines that such covenants are unenforceable, the
Company shall be relieved of all obligations under this Agreement and Executive
shall not be entitled to any payments which are suspended pursuant to Section
7(iv).
8. TERMINATION OF AGREEMENT.
(a) DEATH. This Agreement shall automatically terminate upon the death of
Executive. During the Tenn, if Executive's employment is terminated due to his
death, Executive's estate shall be entitled to receive the Base Salary set forth
in Section 4 accrued through the end of the month in which the death occurs;
provided, however, Executive's estate
6
<PAGE> 73
shall not be entitled to any bonus payments (except as otherwise provided in the
applicable bonus plan) or any other benefits (except as provided by law).
(b) DISABILITY. If Executive is unable to perform his services by reason
of mental or physical Disability (as herein defined), the Company may terminate
this Agreement at any time. Upon termination of Executive's employment due to
Disability, Executive shall be entitled to receive the Base Salary set forth in
Section 4 accrued through the date on which Executive is first eligible to
receive payment of disability benefits under the employee benefit plans as then
in effect, and if no such plan Is in effect, through the month ending one
hundred eighty (180) days after onset of Disability and Executive shall not be
entitled to any bonus payments (except as otherwise provided in the applicable
bonus plan) or any other benefits (except as provided by law). The term
"Disability" shall mean an infirmity preventing Executive from performing his
duties for a period of more than three (3) consecutive months where no
reasonable accommodation is available or where a reasonable accommodation would
create an undue burden on the Company. Any question as to the existence of the
Disability of Executive as to which Executive and the Company cannot agree shall
be determined in writing by a qualified independent physician mutually
acceptable to Executive and the Company. If the Executive and the Company cannot
agree as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make such
determination in writing. The determination of Disability made in writing to the
Company and Executive shall be final and conclusive for all purposes of the
Agreement.
(c) TERMINATION FOR CAUSE. The Company may terminate this Agreement at any
time for "Cause" in accordance with the procedures provided below. Termination
of this Agreement for "Cause" shall mean termination upon (i) the breach of any
material provision of this Agreement by Executive, (ii) commission of an act
punishable by imprisonment, (iii) willful and continued failure to substantially
perform his duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness), (iv) the engaging by Executive in
conduct that is injurious to the Company, monetarily or otherwise, including,
without limitation, embezzlement, fraud, theft, dishonesty, misfeasance,
insubordination, malfeasance, and neglect of duties, (v) violation of the
Company's ethics policy or any material violation or repeated violations by
Executive of the other policies and procedures promulgated from time to time by
the Company, (vi) current alcohol or drug abuse by Executive, (vii) the
suspension, revocation or cancellation of Employee's right to practice optometry
in any state or the District of Columbia; or (viii) Executive ceases to be a
shareholder of the Company. In the event of termination of Executive's
employment for Cause, Executive shall be entitled to receive only the Base
Salary set forth in Section 4 accrued through the date of termination and he
shall not be entitled to any bonus payments or other benefits (except as
provided by law).
(d) OTHER TERMINATION BY THE COMPANY. The Company may terminate this
Agreement at any time without "Cause" by providing thirty (30) days prior
written notice to Executive. If the Company terminates this Agreement at any
time without Cause (i.e., other than pursuant to Section 8(b) or 8(c) above), or
the Company elects not to renew the Tenn as provided
7
<PAGE> 74
in Section 2 hereof, the Company shall be obligated to pay Executive, and
Executive shall be entitled to receive only, the Base Salary set forth in
Section 4 accrued through the date of termination and he shall not be entitled
to any bonus payments or other benefits (except as provided by law).
(e) TERMINATION BY EXECUTIVE. Executive may terminate this Agreement upon
thirty (30) days prior written notice to the Company; provided, however,
Executive shall not be entitled to terminate this Agreement so long as he is a
shareholder of the Company. Termination shall be effective at the expiration of
the notice period. All obligations of the Company under this Agreement shall end
on the effective date of termination and the Company shall have no further
obligations under this Agreement, including, but not limited to payment of
salary, bonuses or any similar compensation or benefits. Notwithstanding the
notice provided by Executive, the Company, in its sole discretion, may choose to
accept Executive's resignation immediately. In that event, the Company's only
obligation to Executive will be to pay the Base Salary Executive would have
received during the notice period.
9. EFFECT OF TERMINATION. Upon the termination of this Agreement, whether
by the expiration of the Term specified in Section 2 or pursuant to Section 8,
the rights of Executive which shall have accrued prior to the date of such
termination shall not be affected in any way. Except as provided in Section
8(d), Executive shall not have any rights which have not previously accrued upon
termination of this Agreement.
10. FEES. The Company shall have the exclusive authority to determine the
amount and nature of all fees and the procedure for establishing the fees to be
charged patients of the Company, even though such patients might be treated
solely by the Company in the course of Executive's employment by the Company.
11. OWNERSHIP OF FEES AND INCOME. All income generated by Executive for
Executive's professional services and all activities related thereto shall
belong to the Company, whether paid directly to the Company or the Executive.
Executive may be required (and agrees upon request of the Company so to do) to
render a true accounting of all transactions relating to Executive's practice
during the course of his employment.
12. COMMUNICATIONS. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the respective addresses set forth below,
or to such other addresses as either party may have furnished to the other in
writing in accordance herewith, except that notice of a change of address shall
be effective only upon actual receipt; to the Company: the Company, at 5568
General Washington Dr., Suite A-215, Alexandria, Virginia 22312, for the
attention of the
8
<PAGE> 75
President; and to Executive: Daniel Poth, O.D., 5401 North 20th Street,
Arlington, Virginia 22205.
13. AMENDMENTS OR ADDITIONS. No amendments or additions to this Agreement
shall be binding or effective unless in writing and signed by all parties
hereto.
14. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon,
and shall inure to the benefit of, Executive; the obligations of Executive
hereunder are personal and this Agreement may not be assigned by Executive. This
Agreement is completely assignable by the Company without notice to or consent
of Executive. This Agreement shall be binding upon, and shall inure to the
benefit of, the Company and shall also bind and inure to the benefit of any
successor of the Company by merger or consolidation or any assignee of all or
substantially all of its properties.
15. HEADINGS, REFERENCES. The headings used in this Agreement are included
solely for convenience and shall not affect, or be used 'in connection with, the
interpretation of this Agreement. References to a "Section" when used without
further attribution shall refer to the particular sections of this Agreement.
16. BINDING ARBITRATION. Subject to the rights of any party to seek
injunctive relief pursuant to Section 7 above and without waiving the same, the
parties agree that all disputes, controversies or claims that may arise among
them (including their agents and employees), arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be submitted
to, and determined by, binding arbitration. Such arbitration shall be conducted
before a single arbitrator pursuant to the Commercial Arbitration Rules then in
effect of the American Arbitration Association, except to the extent such rules
are inconsistent with this Section 16. The arbitrator shall apply the laws of
the Commonwealth of Virginia (without regard to conflict of law rules) in
determining the substance of the dispute, controversy or claim and shall decide
the same in accordance with applicable usages and terms of trade. The fees of
the arbitration initially shall be paid one-half by the Company and one-half by
Executive; provided, however, that the prevailing party in any such arbitration
shall be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties, and judgment on the
award may be entered in any federal or state court sitting in any court having
jurisdiction. The obligations set forth in this Section 16 shall survive the
termination of this Agreement. THE COMPANY AND EMPLOYEE EACH KNOWINGLY AND
VOLUNTARILY GIVE UP ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE,
CLAIM OR CONTROVERSY WHICH MAY ARISE BETWEEN THEM.
17. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
9
<PAGE> 76
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Virginia without regard
to its conflicts of law principles.
18. SURVIVING PROVISIONS. The obligations of the Company under Section 8,
of Executive under Sections 3(b), 6 and 7, and of both the Company and Executive
under Section 16 shall survive the expiration of the Term of this Agreement.
19. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
between the parties superseding all prior agreements and all other negotiations,
letter of intent, memoranda of understandings, and representations (if any) made
by and among such parties, and may not be modified or amended, and no waiver
shall be effective, unless by written document signed by both parties hereto.
Notwithstanding its foregoing, the parties agree that the provisions of Section
6 shall be in addition to, and shall not supersede, similar provisions contained
in the Stock Purchase Agreement. The Company and Executive have each had an
opportunity to consult with counsel of their choice regarding the terms and
conditions of this Agreement, and each understands the consequences of entering
into and complying with the terms and conditions of the Agreement.
20. PRONOUNS. In this Agreement, the use of any gender shall be deemed to
include all genders, and the use of the singular shall include the plural,
wherever it appears appropriate from the context.
21. ENFORCEMENT COSTS. If any legal action or other proceeding, including
arbitration, is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, the prevailing party or parties shall be entitled
to recover reasonable attorneys' fees, court costs and all expenses even if not
taxable as court costs, incurred in that action or proceeding, in addition to
any other relief to which such party or parties may be entitled.
22. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
23. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
10
<PAGE> 77
DR. SAMIT'S HOUR EYES OPTOMETRIST, P.C.
By: _________________________________
Title:______________________________
EXECUTIVE:
_____________________________________
Daniel Poth, O.D.
11
<PAGE> 78
EXHIBIT "4.7A"
COVENANT NOT TO COMPETE
<TABLE>
<CAPTION>
Radius From Miles
----------- -----
<S> <C>
Virginia Offices 3.0
Washington D.C. Offices 0.5
Maryland Offices 3.0
All Other Offices 3.0
</TABLE>
<PAGE> 79
EXHIBIT "4.7B"
PROFESSIONALS EXECUTING EMPLOYMENT AGREEMENTS
Janna Angeles, O. D.
Melissa Barbor, O.D.
Scott Baron, O.D.
William Bauscher, O.D.
Cathy Berwald, O.D.
Neil Bleakley, O.D.
Amy Chu, O. D.
John Cochran, O.D.
James Gomez, O.D.
Kathryn Parn, O.D.
Eric Ruta, O.D.
Heloi Stark, O.D.
<PAGE> 80
EXHIBIT 4.12
SHAREHOLDERS' UNDERTAKING TO MAINTAIN PRACTICE'S
CORPORATE EXISTENCE AND ENFORCEMENT OF COVENANTS
NOT TO COMPETE
As an inducement to the Professional Business Manager to enter into this
Professional Business Management Agreement with the Practice or as required in
the Professional Business Management Agreement, each of the undersigned
person(s), having an ownership interest in the Practice, irrevocably and
unconditionally covenants and agrees to maintain in good standing the corporate
existence of the Practice under the laws of the Commonwealth and to cause the
Practice to use its best efforts to enforce employment agreements (including the
Restrictive Covenant described in Section 4.7) against any individuals violating
such employment agreements (and covenants not to compete). The undersigned
persons further unconditionally covenant and agree to indemnify and hold
harmless Professional Business Manager from and against any and all claims
requirements, demands, liabilities, losses, damages, costs and expenses,
including reasonable attorneys' fees, resulting in any manner from the failure
of the Practice to remain in good standing under the laws of the Commonwealth or
the failure of the Practice to use its best efforts to enforce the aforesaid
employment agreements and the Restrictive Covenants described in Section 4.7 of
such Professional Business Management Agreement, a copy of which has been
delivered to the undersigned for his review. The undersigned acknowledges that
he or she has received adequate consideration for the execution hereof This
undertaking may be assumed by a successor Shareholder or Shareholders, whereupon
the undersigned shall be released to the extent of such assumption, provided
that any such successor Shareholder executes a form similar to this.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: __________, 1997 ______________________________
Shareholder
<PAGE> 81
EXHIBIT 5.1*
*Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
<PAGE> 82
EXHIBIT 6.4
SHAREHOLDERS' UNDERTAKING TO CARRY OUT
PRACTICE'S PURCHASE OBLIGATION
As an inducement to the Professional Business Manager to enter into this
Professional Business Management Agreement with the Practice or as required in
the Professional Business Management Agreement, each of the undersigned
person(s), having an ownership interest in the Practice, irrevocably and
unconditionally covenants and agrees subject to the limitations contained in the
Professional Business Management Agreement to (i) cause the Practice to carry
out the purchase obligation described in Section 6.4 of the Professional
Business Management Agreement, (ii) personally execute and deliver the security
agreements referred to in Section 6.4(d) of such Professional Business
Management Agreement, a copy of which has been delivered to the undersigned for
his review, and (iii) execute the documents described in Section 6.5. The
undersigned acknowledges that he or she has received adequate consideration for
the execution hereof.
IN WITNESS WHEREOF, the undersigned(s) have executed this Shareholders'
Undertaking as of the day and year written opposite such shareholder's name.
Date: _________________, 1997 ______________________________
Shareholder
<PAGE> 1
Exhibit 10.11
CONTRACT FOR PURCHASE AND SALE
THIS CONTRACT FOR PURCHASE AND SALE (the "Contract") is made and
entered into by and between EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Seller" and JDB REAL PROPERTIES, INC., a Texas corporation,
(the "Purchaser").
ARTICLE I
Sale and Purchase
Section 1.1 The Project. Subject to the terms and provisions hereof,
the Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from the Seller:
(a) All of the real property described on Exhibit "A" attached
hereto and made a part hereof (the "Land") together with all right,
title and interest of the Seller in and to (i) the rights, easements
and appurtenances pertaining thereto, and (ii) any and all roads,
easements, alleys, streets and rights-of way bounding the Land,
together with all rights of ingress and egress unto the Land;
(b) That certain office building located upon the Land and
known as the Eye Care Plaza together with all buildings, structures and
fixtures presently situated on the Land (the "Improvements");
(c) All of Seller's interest, if any, in the benefits of any
and all service contracts, maintenance arrangements, warranties,
guaranties, bonds or other agreements affecting the operation of the
Land and/or Improvements (the "Miscellaneous Contracts");
(d) Seller's interest in all of the fixtures, equipment,
machinery and other tangible personal property owned by Seller and
located on and used in connection and associated with the ownership,
maintenance, management and operation of the Land and Improvements as
described on Exhibit "B" attached hereto and made a part hereof for all
purposes, excluding, however, Seller's furniture, equipment, machinery,
inventory, trade fixtures and other tangible personal property used by
Seller in the operation of its business located in a portion of the
Improvements (the "Personal Property");
(e) Any and all (i) plans, drawings, specifications, surveys,
architectural, engineering, soils, seismic, environmental and
geological studies and certificates, and other technical descriptions
related to the Improvements (collectively the "Plans"), and (ii)
licenses, permits, governmental approvals, governmental waivers,
development rights or zoning rights or any other similar rights related
to the Land or the Improvements (collectively the "Governmental
Approvals"); and
<PAGE> 2
(f) All of the lessor's or landlord's interest in any oral or
written leases and any amendments and collateral documents with respect
thereto affecting or relating to the Land and Improvements ("Leases")
and to any security deposits described in the Leases.
The Land, Improvements, Miscellaneous Contracts, Personal Property, Plans,
Governmental Approvals and Leases are sometimes hereinafter referred to
collectively as the "Project").
ARTICLE 2
Purchase Price
Section 2.1 Amount. The Purchase Price (herein so called) for the
Project is and shall be the sum of FIVE MILLION ONE HUNDRED THOUSAND AND NO/100
DOLLARS (5,100,000.00), which shall be due and payable by Purchaser to Seller in
cash at the Closing (hereinafter defined). The payment of the Purchase Price to
Seller must be effectuated by wire transfer or other method sufficient to
provide Seller with "same day" funds on the Closing Date available for overnight
investment by Seller that same day.
ARTICLE 3
Earnest Money
Section 3.1 Deposit. Within two (2) business days after the effective
date hereof, the Purchaser shall deliver the cash amount of TWO HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($250,000.00) (the "Earnest Money") to Chicago Title
Insurance Company at 14607 San Pedro, San Antonio, Texas 78232, Attention: Carol
Reiss (the "Title Company"). In the event this Contract is closed, the Earnest
Money shall be applied to the Purchase Price at Closing. In the event this
Contract is not closed, then the Title Company shall disburse the Earnest Money
in the manner provided for elsewhere herein. The Title Company shall invest the
Earnest Money in federally insured money market accounts, certificates of
deposit or securities issued or guaranteed by the United States Government, or
in such manner as Purchaser may direct; provided, however, that the Title
Company shall invest the Earnest Money only in such manner as will allow the
Title Company to disburse the Earnest Money upon two (2) days notice. All
interest or other earnings on the Earnest Money shall become a part of the
Earnest Money and be disbursed to the party entitled to the Earnest Money.
Section 3.2 Title Company Bound. The Title Company must sign this
Contract as evidence that the Title Company agrees to be bound by the
obligations contained herein with respect to the Earnest Money. In the event the
Title Company cannot comply with the obligations imposed pursuant to this
Article, as indicated in a written notice to Purchaser and Seller executed by
the Title Company, the Purchaser and Seller shall mutually and reasonably select
another title company on or before the expiration of three (3) days following
written notice by either party to the other that said selection is required,
failing which the Earnest Money shall
- 2 -
<PAGE> 3
be returned to the Purchaser and the Contract shall terminate excepting only the
indemnity provisions in Section 7.2 and Section 13.2 hereof.
ARTICLE 4
"AS IS, WHERE IS"
Section 4.1 GENERAL. PURCHASER HEREBY EXPRESSLY ACKNOWLEDGES THAT IT
HAS OR WILL HAVE, PRIOR TO THE END OF THE INSPECTION PERIOD (HEREINAFTER
DEFINED), THOROUGHLY INSPECTED AND EXAMINED THE PROJECT TO THE EXTENT DEEMED
NECESSARY BY THE PURCHASER IN ORDER TO ENABLE THE PURCHASER TO EVALUATE THE
PURCHASE OF THE PROJECT. PURCHASER REPRESENTS THAT IT IS A KNOWLEDGEABLE
PURCHASER OF DEVELOPMENTS SUCH AS THE PROJECT AND THAT IT IS RELYING SOLELY ON
ITS OWN EXPERTISE AND THAT OF PURCHASER'S CONSULTANTS, AND THAT PURCHASER WILL
CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROJECT, INCLUDING, BUT NOT
LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AND SHALL RELY
UPON SAME, AND, UPON CLOSING, SHALL ASSUME THE RISK OF ANY ADVERSE MATTERS,
INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS,
THAT MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INSPECTIONS AND INVESTIGATIONS;
PROVIDED, HOWEVER, THAT, PURCHASER'S ASSUMPTION OF THE RISK AS TO THE
ENVIRONMENTAL CONDITION IS NOT INTENDED TO, NOR SHALL IT BE CONSTRUED TO,
CONSTITUTE AN ASSUMPTION BY PURCHASER OF LIABILITY ASSOCIATED WITH THE
ENVIRONMENTAL CONDITION OF THE PROJECT AS OF THE CLOSING DATE. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT PURCHASER IS ACQUIRING THE PROJECT ON AN AS IS,
WHERE IS AND WITH ALL FAULTS BASIS, WITHOUT REPRESENTATIONS (OTHER THAN THE
REPRESENTATIONS MADE HEREIN), WARRANTIES (OTHER THAN THE WARRANTY OF TITLE UNDER
THE DEED (HEREINAFTER DEFINED) TO BE DELIVERED AT CLOSING) OR COVENANTS, EXPRESS
OR IMPLIED, OF ANY KIND OR NATURE. PURCHASER HEREBY WAIVES AND RELINQUISHES ALL
RIGHTS AND PRIVILEGES ARISING OUT OF, OR WITH RESPECT OR IN RELATION TO, ANY
REPRESENTATIONS, WARRANTIES OR COVENANTS, WHETHER EXPRESS OR IMPLIED, WHICH MAY
HAVE BEEN MADE OR GIVEN, OR WHICH MAY HAVE BEEN DEEMED TO HAVE BEEN MADE OR
GIVEN, BY THE SELLER. EXCEPT AS OTHERWISE PROVIDED HEREIN WITH RESPECT TO THE
ENVIRONMENTAL CONDITION OF THE PROJECT, PURCHASER HEREBY ASSUMES ALL RISK AND
LIABILITY (AND AGREES THAT SELLER SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT,
INDIRECT, CONSEQUENTIAL OR OTHER DAMAGES) RESULTING OR ARISING FROM OR RELATING
TO THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR, OR OPERATION OF
THE PROJECT.
- 3 -
<PAGE> 4
Section 4.2 SPECIFIC. WITHOUT LIMITING THE GENERAL PROVISIONS OF
SECTION 4.1 HEREINABOVE, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING
AND SPECIFICALLY DISCLAIMS ANY WARRANTIES (OTHER THAN THE WARRANTY OF TITLE
UNDER THE DEED TO BE DELIVERED AT CLOSING) OR REPRESENTATIONS (OTHER THAN THE
REPRESENTATIONS MADE HEREIN) OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, AS TO
(a) MATTERS OF TITLE (OTHER THAN THE WARRANTY OF TITLE UNDER THE DEED TO BE
DELIVERED AT CLOSING), (b) ZONING, (c) TAX CONSEQUENCES, (d) PHYSICAL OR
ENVIRONMENTAL CONDITIONS, (e) AVAILABILITY OF ACCESS, INGRESS OR EGRESS, (f)
OPERATING HISTORY OR PROJECTIONS, (g) VALUATION, (h) GOVERNMENTAL APPROVALS, (i)
GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING
THE PROJECT, INCLUDING, WITHOUT LIMITATION: (i) THE VALUE, CONDITION,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE OF THE PROJECT, (ii) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR THE MATERIALS INCORPORATED INTO ANY OF THE PROJECT, AND (iii)
THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROJECT. PURCHASER
FURTHER ACKNOWLEDGES THAT SELLER HAS NOT WARRANTED, AND DOES NOT HEREBY WARRANT,
THAT THE PROJECT NOW OR IN THE FUTURE WILL MEET OR COMPLY WITH THE REQUIREMENTS
OF ANY SAFETY CODE, ENVIRONMENTAL LAW OR REGULATION OF THE STATE OF TEXAS, THE
CITY OF SAN ANTONIO, THE COUNTY OF BEXAR, OR ANY OTHER AUTHORITY OR
JURISDICTION.
Section 4.3 EXCLUDED ITEMS. NOTWITHSTANDING ANY SEEMING CONTRADICTION,
IT IS AGREED AND UNDERSTOOD THAT THE PROVISIONS OF THIS ARTICLE IV ARE LIMITED
SO AS TO NOT BE CONSTRUED AS DIMINISHING OR NEGATING (a) SELLER'S RESPONSIBILITY
FOR ANY REPRESENTATIONS PROVIDED IN ARTICLE VIII HEREOF (BUT ONLY TO THE EXTENT
EXPRESSLY PROVIDED AND FOR THE DURATION STATED), AND (b) ANY WARRANTY OF TITLE
SET FORTH IN THE DEED TO BE DELIVERED BY SELLER TO PURCHASER AT CLOSING.
Section 4.4 INCORPORATION INTO DEED. IT IS AGREED AND UNDERSTOOD THAT
THE TERMS AND PROVISIONS OF THIS ARTICLE IV SHALL EXPRESSLY SURVIVE THE CLOSING
AND NOT MERGE THEREIN AND SHALL BE INCORPORATED INTO THE DEED TO BE DELIVERED BY
SELLER TO PURCHASER AT CLOSING.
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ARTICLE 5
Survey and Title Matters
Section 5.1 Survey. Within five (5) days from the effective date of
this Contract, the Seller shall deliver or cause to be delivered to Purchaser an
as-built survey ("Survey") of the Project, bearing a current or updated
certificate, containing a metes and bounds description of the Land. The Survey
shall be sufficient to permit the Title Company, at Purchaser's sole option and
expense, to modify the standard printed exception in the Owner Policy of Title
Insurance pertaining to discrepancies in area or boundary lines, encroachments,
overlapping of improvements, or similar matters (herein called the "Survey
Exception"). The Survey shall indicate the location of all improvements on the
Land, if any. The Survey shall be staked on the ground, shall comply with the
standards of a Category 1-A, Condition II survey as specified by the latest
edition of the Manual of Practice for Land Surveying published by the Texas
Surveyors Association. In addition, the Survey shall (i) reflect the actual
dimensions of, and area within, the Land, the location of any easements, setback
lines, encroachments, or overlaps thereon or thereover, and the outside boundary
lines of all Improvements, (ii) identify by recording reference all easements,
setback lines, and other matters referred to on the Title Commitment, (iii)
include the surveyor's registered number and seal, and the date of the Survey,
(iv) reflect the roads and highways and accessability to and from the Land from
a publicly dedicated street or road, (v) reflect whether any area within the
Land has been designated by the Federal Insurance Administration, the Army Corps
of Engineers, or any other governmental agency or body as being subject to
special or increased flooding hazards, or that is otherwise a flood hazard area
by reference to the applicable Federal Emergency Management Agency Flood
Insurance Rate Map, and (vi) reflect all improvements and building lines. The
surveyor's certificate shall be in a form and content reasonably acceptable to
Purchaser. The cost of the Survey shall be borne solely by Seller.
Section 5.2 Title Commitment - Review. Within five (5) days from the
effective date of this Contract, the Seller shall furnish to the Purchaser a
current commitment ("Title Commitment") for the issuance of an Owner's Policy of
Title Insurance to the Purchaser from Chicago Title Insurance Company ("Title
Company"), together with true, correct and legible copies of all documents
constituting exceptions to Seller's title as reflected in the Title Commitment.
Purchaser shall have a period of ten (10) days from the last to be delivered of
each of the Survey and Title Commitment in which to review such items and to
deliver to Seller in writing such reasonable objections as Purchaser may have to
anything contained or set forth in the Title Commitment, title exception
documents or Survey. Any items to which Purchaser does not object within such
period shall be deemed to be permitted exceptions ("Permitted Exceptions"). In
the event Purchaser timely objects to any matter contained in the Title
Commitment, title exception documents and/or the Survey as hereinabove provided,
Seller shall have a reasonable period of time after receipt of Purchaser's
objections within which Seller may attempt to cure such objections specified as
aforesaid by Purchaser, provided, however, Seller shall be under no obligation
to incur any costs whatsoever in connection with such cure, except
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to pay off any hens voluntarily created by Seller or created in connection with
work performed on, or materials delivered to, the Project on Seller's behalf.
Section 5.3 Title Policy. At Closing, the Seller shall cause the Title
Company to modify (by interlineation or otherwise) the Title Commitment so as to
then reflect a current commitment by the Title Company to issue to Purchaser an
Owner's Policy of Title Insurance (the "Title Policy") on the standard form in
use in the State of Texas, insuring good and indefeasible title to the Land and
Improvements in the Purchaser, subject only to the Permitted Exceptions and the
standard printed, exceptions, except:
(a) The exception relating to restrictions against the Project
shall be deleted, except for such restrictions as may be included in
the Permitted Exceptions; and
(b) The exception relating to ad valorem taxes shall except
only to standby fees and taxes owing for the current and subsequent
years and subsequent assessments for prior years due to change in land
usage or ownership.
Without limiting the foregoing, Purchaser acknowledges and agrees that, to the
extent Purchaser desires the Survey Exception to be modified in the Title
Policy, such shall be undertaken at the sole expense of Purchaser. The standard
premium for the Title Policy shall be paid for by Seller, at Closing, as a
closing statement debit.
ARTICLE 6
Informational Items
Section 6.1 Submission Items. Within three (3) days from the effective
date of this Contract, Seller shall, at Seller's sole cost and expense, deliver
to Purchaser, to the extent available to Seller, copies of. (a) a current rent
roll ("Rent Roll") with respect to each of the Leases showing the (i) suite
number, (ii) name of tenant, (iii) approximate number of square feet contained
in such suite, (iv) the monthly rental, (v) the commencement and termination
dates of the lease, (vi) the amount of such tenant's security deposit, (vii) the
date through which the tenant's rental is paid, (viii) any prepaid or delinquent
rents, (ix) the amount and description of any cash rebate, free rent, or other
tenant concession (whether previously or promised for the future), (x) renewal
options, if any, and (xii) unpaid brokerage commissions, if any, attributable to
the lease; which rent roll shall be certified by an authorized officer of
Seller's management company, as being true, complete and correct in all material
respects as of the date shown on the rent roll; (b) the Miscellaneous Contracts;
(c) income and expense statements broken down on a monthly basis showing all
income and all expenses incurred and/or accrued, including, but not limited to,
utility, tax, insurance and maintenance costs, associated with the ownership and
operation of the Project for the period of ownership of the Project by Seller
(provided, however, Seller's submission of a copy of the general ledger is
sufficient to satisfy this requirement); (d)
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copies of all plans and specifications for Improvements in Seller's possession;
(e) true, correct, legible and complete copies of fully executed Leases,
including, without limitation, all amendments or addenda thereto; (f) to the
extent of Seller's possession, all licenses and permits with respect to the
ownership and operation of the Project, including, without limitation, building
permits, notices of completion, certificates of completion and certificates of
occupancy for the Improvements; (g) to the extent of Seller's possession, copies
of all reports or studies (including, without limitation, appraisals,
engineering reports, inspection reports, soil tests, soil reports, environmental
reports and evaluations, and all other reports, tests, and studies) pertaining
to the development, construction, maintenance, or operation of the Project in
Seller's, or Seller's management company's, possession or control; (h) to the
extent of Seller's possession, copies of all real estate and personal property
tax statements and valuation notices for the Project for 1995 and 1996; (i) all
other pertinent information in Seller's possession relating to the Project.
Seller warrants and represents that the information contained in items (a), (b),
(c), and (e) is true, correct and complete in all material respects. SELLER
EXPRESSLY MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION FURNISHED TO PURCHASER PURSUANT TO ITEMS (d),
(f), (g), (h), AND (i), AND, FURTHER, PURCHASER HEREBY AGREES THAT SUCH
INFORMATION SHALL BE PROVIDED ON AN "AS IS" BASIS AND SELLER SHALL HAVE NO
OBLIGATION TO COMPILE OR UPDATE SUCH DATA OR REPORTS.
In the event Seller delays in providing any of the material described
in the above paragraph, the Inspection Period (defined below) shall be extended
by tile number of days equal to the number of days Seller delays in providing
said material past said three day period.
ARTICLE 7
Inspection and Audit
Section 7.1 Scope of Inspection. The Seller agrees that Purchaser shall
be entitled to enter upon the Project and to conduct such inspections and audits
as Purchaser may desire, including, without limitation, engineering and economic
feasibility studies, provided, however, (a) Purchaser shall provide Seller at
least twenty-four (24) hours prior written notice of its election to conduct any
such on-site inspection; (b) Purchaser shall not enter any suite except under
the supervision of Seller or one of Seller's management representatives; and (c)
Purchaser shall not undertake any invasive testing procedures with respect to
the Improvements or any portion of the Project without Seller's prior written
permission which shall not be unreasonably withheld or delayed. In undertaking
any inspection hereunder, Purchaser will treat, and will cause any
representative of Purchaser to treat, all information obtained by Purchaser
pursuant to the terms of this Contract as strictly confidential. Further, in the
event Purchaser refuses or is unable to close under this Contract, Purchaser
shall keep confidential all information obtained pursuant to this Contract and
shall not disclose such information to anyone without the prior written consent
of Seller. Further, in the event Purchaser refuses or is unable to close under
this
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<PAGE> 8
Contract, for any reason whatsoever, any and all studies or tests, including,
but without limitation, soil tests, topographical information, structural tests,
engineering and economic feasibility studies or other similar preliminary work,
shall immediately be delivered to Seller and thereafter become the sole property
of Seller, upon payment to Purchaser by Seller of all amount equal to the
out-of-pocket expenses incurred by Purchaser for the same.
Section 7.2 Indemnity. Purchaser hereby indemnities and holds Seller
harmless from and against any loss, damage, injury, claim or cause of action
Seller may suffer or incur as a direct result of the presence on the Project of
Purchaser, Purchaser's agents or independent contractors, including, without
limitation, (i) any and all attorneys' fees incurred by Seller as a result of a
claim relating to such matters, or (ii) any mechanics' or materialmen's liens
imposed against all or any portion of the Project by a party claiming to be
performing an inspection or audit on Purchaser's behalf during the term of this
Contract.
Section 7.3 Inspection Period. The Purchaser shall have thirty (30)
days from the effective date hereof (the "Inspection Period") within which to
make any and all inspections of the Project and audits as Purchaser may desire.
In the event Purchaser shall notify Seller in writing on or before the
expiration of the Inspection Period that Purchaser, for any reason whatsoever,
does not desire to consummate this Contract, then, and in such event, this
Contract shall terminate, whereupon the Earnest Money shall be immediately
returned to the Purchaser by the Title Company (except to the extent of $100.00,
which shall be paid to Seller as independent contract consideration for Seller
entering into this Contract), and the parties hereto shall have no further
obligations to the other hereunder except pursuant to the indemnity provisions
of Section 7.2 and Section 13.2 hereof. Absent Purchaser's timely written notice
to Seller of Purchaser's election to so terminate this Contract as aforesaid,
then, and in such event, Purchaser shall have waived any and all claim
whatsoever to terminate this Contract pursuant to this Article 7, and shall
proceed to a Closing hereunder.
ARTICLE 8
Performance of Finish-Out
Section 8.1 Seller's Finish-Out Obligation. During the term of the
Lease, Seller must substantially complete the Seller's Improvements. As used
herein, the term "Seller's Improvements" shall mean the finish-out of the
portion of the Improvements (the "Warehouse Space") depicted on Exhibit "D",
attached hereto and made a part hereof for all purposes, so that the Warehouse
Space is "finished out" to a standard of quality that is consistent with either
the space in the Improvements occupied by Seller for office purposes, or the
space occupied by other presently existing tenants for retail purposes.
Section 8.2 Letter of Credit. At the Closing (as hereafter defined)
Seller shall deliver to Purchaser an irrevocable standby Letter of Credit (the
"Letter of Credit") in the form attached hereto as Exhibit "E" to secure
completion of Seller's Improvements. Upon completion of
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Seller's Improvements, Purchaser shall return the original Letter of Credit to
Seller. Purchaser's covenant to return the Letter of Credit upon completion of
Seller's Improvements shall survive the Closing.
ARTICLE 9
Environmental Provisions
Section 9.1 Environmental Definitions. As used herein, the term
"Applicable Environmental Laws" shall mean any local, state or federal law, rule
or regulation, pertaining to environmental regulation, contamination, cleanup or
disclosure, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.), the Resource, Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499 100
Stat. 1613), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.),
the Emergency Planning and Community Right to Know Act of 1986 (42 U.S.C.
Section 1101 et seq.) and all amendments of the foregoing, or any state super
lien or environmental clean-up or disclosure statutes. As used herein, the term
"Hazardous Substances" shall mean all substances and materials which are
included under or regulated by any Applicable Environmental Law together with
asbestos, polychlorinated biphenyls, petroleum products and raw materials which
include hazardous constituents.
Section 9.2 Inspection by Purchaser. Purchaser acknowledges that Seller
is providing Purchaser with an opportunity to thoroughly inspect the Project
during the Inspection Period for all purposes, including, any concerns with
respect to any past, current or future violation of Applicable Environmental
Laws or with respect to the presence, either now or in the past, of any
Hazardous Substances at the Project. As additional consideration for the
transaction contemplated by this Contract, Purchaser agrees that it will provide
to Seller immediately following the receipt of same by Purchaser copies of any
and all reports, tests or studies relative to the Project and involving,
directly or indirectly, Applicable Environmental Laws or the presence or absence
of Hazardous Substances at the Project.
ARTICLE 10
Casualty or Condemnation Prior to Closing
Section 10.1 Casualty. In the event the Improvements should be damaged
by any casualty prior to Closing, and the cost of repairing such damage, as
estimated by an independent third party insurance adjuster, is:
(a) less than or equal to FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00), then the Seller shall assign all of Seller's interest in
and to any insurance
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proceeds received or to be received by Seller by virtue of such
casualty, together with the amount of any applicable deductible under
such insurance policy; or
(b) more than FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00),
then either Seller or Purchaser may elect to terminate this Contract
within ten (10) days of such casualty whereupon Purchaser shall
immediately be provided a full refund of the Earnest Money and neither
party hereto shall owe any further obligations one to the other
hereunder, excepting only the indemnity provisions in Section 7.2 and
Section 13.2 hereof. If neither party elects to so terminate this
Contract, then the Closing shall occur as scheduled, whereupon Seller
shall assign all of Seller's interest in and to any insurance proceeds
received or to be received by Seller by virtue of such casualty,
together with the amount of any applicable deductible under such
insurance policy.
Section 10.2 Condemnation. In the event of a taking by condemnation or
similar proceedings or actions of all or any portion of the Project, Purchaser
shall have the option to terminate this Contract upon written notice to Seller
within ten (10) days of such condemnation, in which event the Earnest Money
shall be promptly refunded by the Title Company to Purchaser, and neither
Purchaser nor Seller shall have any further rights or obligations hereunder
except with respect to the indemnities provided in Section 7.2 and Section 13.2.
If Purchaser does not exercise its option to so terminate this Contract, then
the Contract shall remain in full force and effect and Seller shall assign or
pay to Purchaser at Closing Seller's interest in and to any and all condemnation
awards or proceeds from any such proceedings or actions in lieu thereof.
ARTICLE 11
Seller's Representations and Covenants
Section 11. Representations. Seller makes the following
representations, as of the date of this Contract:
(a) Title. Seller owns, or shall at Closing own, good and
indefeasible title to the Land and Improvements.
(b) Authority. Seller is duly organized and validly existing
under the laws of the state of its organization and has all requisite
power and authority to enter into and perform this Contract. Each
person executing this Contract on behalf of Seller warrants that he/she
has all requisite authority to do so.
(c) Foreign Investor Disclaimer. Seller is not a "foreign
person", as such term is defined in Section 1445 of the Internal
Revenue Code of 1954, as amended, and the regulations promulgated
thereunder ("Code"), and the sale of the Project is not subject to the
federal income tax withholding requirements of such section of the
Code.
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(d) No Litigation. No actions, suits, investigations,
litigation, bankruptcy, reorganization or other proceedings are pending
at law or in equity or before any federal, state, territorial,
municipal or other government department, commission, board, bureau,
agency, courts or instrumentality, or to the best of Seller's
knowledge, are threatened in writing against or affecting Seller which
would prohibit Seller from selling the Project.
(e) No Options. To the best of Seller's knowledge, the Project
is not subject to any outstanding agreement(s) of sale, option(s) or
other right(s) of third parties to acquire any interest therein.
(f) Seller has received no notice that the Project is in
violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any Authority or any remedial obligations
under any applicable laws, statutes, regulations, rules, ordinances,
codes, permits or orders of any governmental agencies, departments,
commissions, boards, bureaus, or instrumentalities of the United
States, the State of Texas and its political subdivisions and all
applicable judicial, administrative and regulatory decrees and
judgments pertaining to the protection of health or safety or the
environment ("Governmental Laws").
(g) To the best of Seller's knowledge, there are no leases
affecting the Project, oral or written, except the Leases delivered to
Purchaser pursuant to Section 6.1 hereof Copies of the Lease delivered
to Purchaser prior to the date hereof are true, correct and complete
copies thereof. All Leases are in full force and effect in all material
respects. Except for the Tenants under the Leases and Seller, there are
currently no other parties in possession of the Project.
(h) To the best of Seller's knowledge, there are no
Miscellaneous Contracts or other contracts or agreements affecting the
Project, oral or written, except those delivered to Purchaser pursuant
to Section 6.1 hereof. To the best of Seller's knowledge, all the
Miscellaneous Contracts are in full force and effect in all material
respects in accordance with their respective terms. To the best of
Seller's knowledge, the copies of the Miscellaneous Contracts delivered
to Purchaser are true, correct and complete copies thereof.
(i) There are no employees of Seller engaged in the operation
or maintenance of the Project for whom Purchaser will be responsible
after Closing.
(j) Seller's Knowledgeable Party (as defined herein) has
received no notice of taking, condemnation, betterment or assessment,
actual or proposed, with respect to the Project, and none has occurred.
(k) To the best of Seller's knowledge, the Project has not
been damaged by fire or other casualty except for such damage which has
been fully repaired and restored
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prior to the date of this Agreement and Seller's knowledge, Party has
received no notice from any insurance carrier of defects or
inadequacies in the Project which if not corrected would result in
termination of insurance coverage or increase its cost in any material
respect.
For purposes of this Contract, the phrase "to the best of Seller's knowledge"
shall mean the actual conscious knowledge of Mr. Mark Pearson ("Seller's
Knowledgeable Party"). The phrase does not obligate Seller's Knowledgeable Party
to make any investigation or inquiry, but does obligate Seller to make a
reasonable inquiry of Seller's Knowledgeable Party to determine if he has
knowledge relating to any of the representations or warranties made in this
Section 7.1.
Section 11.2 No Survival. It is expressly understood and agreed that
each and every representation or warranty included within this Contract shall
only remain viable during the term of this Contract and, upon the effectuation
of Closing, shall merge into the documents of Closing and thereafter have no
further force or effect.
Section 11.3 Covenants of Seller. Seller hereby covenants as follows:
(a) During the term of this Agreement, Seller shall not offer
the Project for sale, or in any way affect the condition of the title
of the Project without the prior written approval of the Purchaser.
(b) Between the date hereof and the Closing, Seller shall
fulfill all of its obligations under all Miscellaneous Contracts in all
material respects, and will not enter into any new contractual
obligations relating to the Project that may not be terminated on
thirty (30) days notice.
(c) Seller shall immediately notify Purchaser of any material
change, which Seller's Knowledgeable Party knows of, from the date
hereof to the Closing Date with respect to fire damage, casualty or
condemnation of the Project.
(d) Seller will cause fire and extended coverage insurance
relating to the Project to be maintained in full force and effect at an
amount not less than the full replacement cost of the Project.
(e) Seller will cause the Improvements and Personal Property
to be maintained in the condition in which they exist as of the date of
this Contract, except for normal wear and tear.
(f) Seller will continue to maintain, operate and manage the
Project in substantially the same manner that Seller has heretofore
maintained and operated the Project.
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(g) Seller agrees to cooperate with Purchaser's lender and to
provide such financial or other information to Purchaser's lender
regarding ownership and operation of the Project as Purchaser's lender
may reasonably request.
ARTICLE 12
Closing
Section 12.1 Time and Place. The exchange of documents and funds (the
"Closing") hereinafter described shall take place at 10:00 a.m. San Antonio,
Texas time at the offices of Chicago Title Insurance Company at 14607 San Pedro,
San Antonio, Texas 78232. The date of Closing ("Closing Date") shall be the
sixtieth (60th) day following the expiration of the Inspection Period, or on
such earlier date as may be mutually agreed to.
Section 12.2 Seller Delivery. At the Closing, Seller shall deliver or
cause to be delivered to Purchaser, at Seller's sole cost and expense, each of
the following items:
(a) A Special Warranty Deed (the "Deed") duly executed and
acknowledged by Seller, and in form for recording, conveying good and
indefeasible title in the Land and Improvements to Purchaser, subject
only to the Permitted Exceptions.
(b) A Blanket Conveyance, Bill of Sale and Assignment
("Blanket Conveyance"), duly executed by Seller, quitclaiming (without
any warranty whatsoever) and assigning to Purchaser all of Seller's
rights, title and interest, if any, in the Trade Name and in all
Miscellaneous Contracts.
(c) The final revised Title Commitment in the form specified
in Section 5.3 hereof, with the premium for the Title Policy having
been paid by Seller as a debit on Seller's Closing Statement.
(d) A Certification as to Non-Foreign Status of Seller.
(e) A lease agreement (the "Lease") in the form attached
hereto as Exhibit "C", duly executed by Seller.
(f) The Letter of Credit, duly executed by Seller.
(g) An Assignment of Tenant Leases and Assumption Agreement in
a form approved by Seller and Purchaser prior to the expiration of the
Inspection Period, fully executed by Seller, assigning, conveying and
transferring to Purchaser all of the Leases referred to therein.
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(h) An updated and certified Rent Roll dated not earlier than
five (5) days prior to Closing.
(i) Tenant estoppel certificates from all tenants under the
Leases.
(j) All additional documents and instruments as in the mutual
and reasonable opinion of Seller's and Purchaser's counsel are
reasonably necessary to the proper consummation of this transaction.
Section 12.3 Purchaser Delivery. At the Closing, Purchaser, at
Purchaser's sole cost and expense, shall deliver to Seller the following items:
(a) The Purchase Price in the amount and manner required by
Section 2.1 hereof;
(b) Purchaser's executed version of the Blanket Conveyance
assuming all obligations accruing under the Miscellaneous Contracts
from and after the Closing Date;
(c) The Lease executed by Purchaser;
(d) Assignment of Tenant Leases and Assumption Agreement in a
form approved by Seller and Purchaser prior to the expiration of the
Inspection Period, fully executed by Purchaser, assigning, conveying
and transferring back to Seller all of the Leases referred to therein;
(e) Such evidence or documents as may reasonably be required
by the Seller or the Title Company evidencing the status and capacity
of Purchaser and the authority of the person or persons who are
executing the various documents on behalf of the Purchaser in
connection with the sale of the Property.
Section 12.4 Possession. Possession of the Project shall be delivered
to Purchaser by Seller at the Closing, subject only to the Lease and Such rights
of others as have been expressly disclosed herein.
Section 12.5 Reporting Person. Each of Seller and Purchaser hereby
designate the Title Company as the "Reporting Person" as such term is utilized
in Section 6045 of the Code and regulations thereunder. Purchaser agrees to
provide the Title Company with such information as may be required for the Title
Company to file a Form 1099 or other required form relative to the Closing with
the Internal Revenue Service. A copy of the filed Form 1099 or other filed form
shall be provided to Seller and Purchaser simultaneously with its being provided
to the Internal Revenue Service.
Section 12.6 Costs and Expenses. All costs and expenses in connection
with the transaction contemplated by this Contract shall, except as otherwise
expressly provided herein,
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be borne by Seller and Purchaser in the manner in which such costs and expenses
are customarily allocated between the parties at closings of the purchase or
sale of real property similar to the Project in the San Antonio, Texas area.
ARTICLE 13
Real Estate Commission
Section 13.1 Commission. Seller and Purchaser covenant and agree one
with the other that no real estate commissions, finders' fees or brokers' fees
have been or will be incurred in connection with the Contract or the sale
contemplated hereby, except for a commission (the "Commission") to CB Commercial
Real Estate ("Broker") equal to four percent (4%) of the Purchase Price, which
Commission shall be payable in accordance with a separate commission agreement
executed by and between Seller and Broker.
Section 13.2 Indemnity. Each party hereto represents to the other that,
except as set forth above in the immediately preceding Section, such respective
party has not authorized any broker or finder to act on such party's behalf in
connection with the sale and purchase hereunder. Each party hereto agrees to
indemnify and hold harmless the other party from and against any and all claims,
losses, damages, costs or expenses of any kind or character arising out of or
resulting from any agreement, arrangement or understanding (except as set forth
in the immediately preceding Section) alleged to have been made by such party
with any broker or finder in connection with this Contract or the transaction
contemplated hereby. This obligation shall survive the Closing or any earlier
termination of this Contract.
Section 13.3 Title. Purchaser acknowledges that, at the time of
execution of this Contract, the Broker advised Purchaser that Purchaser should
have the abstract covering the Project examined by an attorney of Purchaser's
own selection or that Purchaser should be furnished with or obtain a policy of
title insurance.
ARTICLE 14
Remedies of Default
Section 14.1 Seller Default. In the event all conditions of this
Contract are satisfied by Purchaser in all material respects (if Purchaser's
obligation) or waived and in the event all covenants and agreements to be
performed by Purchaser prior to Closing are fully performed in all material
respects, and in the further event that performance of this Contract is tendered
by the Purchaser and the sale is not consummated through default on the part of
the Seller on the Closing Date, then Purchaser shall be entitled to either (i)
enforce specific performance hereunder, or (ii) the return of the Earnest Money
and to seek recovery of its actual and reasonable out-of-pocket expenses
incurred in this transaction, said expenses not to exceed
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<PAGE> 16
$50,000.00. The remedies set forth in this Section 14.1 shall be Purchaser's
sole and exclusive remedies.
Section 14.2 Purchaser Default. In the event of Purchaser's default
hereunder, Purchaser shall immediately deliver to Seller au information
delivered by Seller to Purchaser in accordance with Section 6.1. Further, the
Earnest Money shall in such event be paid to the Seller by the Title Company, as
liquidated damages for the Purchaser's default. Such amount is agreed upon by
and between the Seller and the Purchaser as liquidated damages, due to the
difficulty and inconvenience of ascertaining and measuring actual damages, and
the uncertainty thereof, and no other damages, rights or remedies shall in any
case be collectible, enforceable or available to the Seller other than in this
Article 14 defined, but the Seller shall accept said cash payment as the
Seller's total damages and relief by virtue of Purchaser's default hereunder.
THE REMEDIES SET FORTH IN THIS SECTION 14.2 SHALL BE SELLER'S SOLE REMEDIES;
PROVIDED, HOWEVER, THE INDEMNITIES PROVIDED IN SECTIONS 7.2 AND 13.2 HEREOF AND
ANY SUMS DUE PURSUANT TO SECTION 15.10 HEREOF SHALL CONSTITUTE SEPARATE
AGREEMENTS AND CAUSES OF ACTION IN ADDITION TO ANY LIQUIDATED DAMAGES DESCRIBED
HEREINABOVE.
ARTICLE 15
Miscellaneous
Section 15.1 Notices. All notices, demands, or other communications of
an type (herein collectively referred to as "Notices") given by the Seller to
the Purchaser or by the Purchaser to the Seller, whether required by this
Contract or in any way related to the transactions contracted for herein, shall
be void and of no effect unless given in accordance with the provisions of this
Section 15.1. All notices shall be in writing and delivered to the person to
whom the notice is directed, either in person (provided that such delivery is
confirmed by the courier delivery service), or by expedited delivery service
with proof of delivery, or by United States mail, postage prepaid, as a
Registered or Certified item, Return Receipt Requested. Notices delivered by
personal delivery shall be deemed to have been given at the time of such
delivery and notices delivered by mail shall be effective when deposited in a
Post office or other depository under the care or custody of the United States
Postal Service, enclosed in a wrapper with proper postage affixed and addressed,
as provided below. Notice may additionally be provided by facsimile transmission
so long as a copy of such notice is simultaneously forwarded by one of the other
means described above. Facsimile notice shall be effective upon receipt at the
facsimile station indicated below. The proper address and facsimile number for
Purchaser is as follows:
John D. Byram
JDB Real Properties, Inc.
510 South Congress, Suite 400
Austin, Texas 78704
Fax No. (512) 474-5213
Phone No. (512) 474-4242
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<PAGE> 17
with copy to: William D. Brown
Sneed, Vine & Perry
901 Congress Ave.
Austin, Texas 78701
Fax No. (512) 476-1825
Phone No. (512) 476-6955
The proper address and facsimile number for Seller is as follows:
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213-1392
Fax No. (210) 524-6996
Phone No. (210) 340-3531
with copy to: James M. McDonough
Cox & Smith Incorporated
112 E. Pecan Street, Suite 1800
Fax No. (210) 226-8395
Any party hereto may change the address for notice specified above by giving the
other party ten (10) days' advance written notice of such change of address.
Section 15.2 Confidentiality. Seller, Purchaser, Broker and Title
Company agree not to cause any public announcements to be made of the execution
of this Contract or the Closing of this transaction, and further agree not to
disclose to any party the Purchase Price payable hereunder. Seller and Purchaser
further agree not to disclose to any unrelated third party, any of the facts
concerning the execution and delivery of this Contract or the consummation of
the purchase and sale contemplated hereby. Notwithstanding the foregoing,
Seller, Purchaser or Title Company may disclose any aspect of this transaction
to any governmental agency, or any officer thereof , upon proper request or
requirement therefor, where required, in accordance with applicable law.
Section 15.3 Effective Date. For purposes of determining the time for
performance of various obligations under this Contract, the effective date of
this Contract shall be the later of the date this Contract is last executed by
Seller or Purchaser.
Section 15.4 Successors and Assignment. This Contract shall be binding
upon and inure to the benefit of the parties and their respective heirs, legal
representatives, and permitted successors and assigns. The rights of Purchaser
under this Contract are not assignable without the prior written consent of
Seller, which consent may be granted or withheld at Seller's sole discretion.
Notwithstanding the preceding sentence, Purchaser may assign its rights under
this Contract to any Affiliate. For the purposes of this Contract, the term
"Affiliate" shall mean, (a)
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<PAGE> 18
any Person who directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or under common control with, Purchaser; (b) any
Related Person of Purchaser. The term "Person" shall mean an individual,
partnership, corporation, unincorporated organization, limited liability
company, trust, estate or joint venture. The term "Related Person" shall mean
any Person directly or indirectly owning ten (10%) percent or more of the
outstanding voting Common Stock of Purchaser. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
Section 15.5 No Recordation. Seller and Purchaser hereby acknowledge
that neither this Contract nor any memorandum or affidavit thereof shall be
recorded of public record in Bexar County, Texas or any other County in Texas.
Should Purchaser ever record or attempt to record this Contract, or a memorandum
or affidavit thereof, or any other similar document, then, notwithstanding
anything herein to the contrary, said recordation or attempt at recordation
shall constitute a default by Purchaser hereunder, and, in addition to the other
remedies provided for herein, Seller shall have the express right to terminate
this Contract by filing a notice of said termination in the applicable real
property records for Bexar County, Texas.
Section 15.6 Governing Law. THIS CONTRACT SHALL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE
OBLIGATIONS OF THE PARTIES HERETO ARE AND SHALL BE PERFORMABLE IN THE COUNTY
WHEREIN THE PROJECT IS LOCATED. BY EXECUTING THIS CONTRACT, EACH PARTY HERETO
EXPRESSLY (a) CONSENTS AND SUBMITS TO PERSONAL JURISDICTION CONSISTENT WITH THE
PREVIOUS SENTENCE, (b) WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM
OR DEFENSE THAT SUCH VENUE IS NOT PROPER OR CONVENIENT, AND (c) CONSENTS TO THE
SERVICE OF PROCESS IN ANY MANNER AUTHORIZED BY TEXAS LAW. ANY FINAL JUDGMENT
ENTERED IN AN ACTION BROUGHT HEREUNDER SHALL BE CONCLUSIVE AND BINDING UPON THE
PARTIES HERETO.
Section 15.7 No Oral Modification. This Contract may not be modified or
amended, except by an agreement in writing signed by both the Seller and the
Purchaser.
Section 15.8 No Oral Waiver. The parties may waive any of the
conditions contained herein or any of the obligations of the other party
hereunder, but any such waiver shall be effective only if in writing and signed
by the party waiving such conditions or obligations.
Section 15.9 Time of Essence. Time is of the essence of this Contract.
Section 15.10 Attorneys' Fees. In the event it becomes necessary for
either party hereto to file a suit to enforce this Contract or any provisions
contained herein, the party prevailing in such action shall be entitled to
recover, in addition to all other remedies or damages, reasonable attorneys'
fees and court costs incurred by such prevailing party in such suit.
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<PAGE> 19
Section 15.11 Headings. The descriptive headings of the various
Articles and Sections contained in this Contract are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 15.12 Contract as Offer. Seller's execution of this Contract
and provision of same to Purchaser shall be deemed an offer to sell the Project
consistent with the terms and provisions of this Contract. To the extent
Purchaser should fail to execute this Contract and return an original signed
version of same back to Seller within three (3) days of Seller's execution of
this Contract, then such offer shall be deemed rescinded without further action
by Seller.
Section 15.13 Total Agreement. This Contract constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection therewith. No representation, warranty, covenant,
agreement or condition not expressed in this Contract shall be binding upon the
parties hereto or shall affect or be effective to interpret, change or restrict
the provisions of this Contract.
Section 15.14 Partial Invalidity. If any clause or provisions of this
Contract is or should ever be held to be illegal, invalid, or unenforceable
under any present or future law applicable to the terms hereof , then and in the
event, it is the intention of the parties hereto that the remainder of this
Contract shall not be affected thereby, and that in lieu of each such clause or
provision of this Contract that is illegal, invalid, or unenforceable, there be
added as a part of this Contract a clause or provision as similar in terms to
such illegal, invalid, or unenforceable clause or provision as may be possible
and be legal, valid, and enforceable.
Section 15.15 Counterpart Execution. To facilitate execution, this
Contract may be executed in as many counterparts as may be convenient or
required. It shall not be necessary that the signature of all persons required
to bind any party, appear on each counterpart. All counterparts shall
collectively constitute a single instrument. It shall not be necessary in making
proof of this Contract to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, each of the parties
hereto. Any signature page to any counterpart may be detached from such
counterpart without impairing the legal effect of the signatures thereon and
thereafter attached to another counterpart identical thereto except having
attached to it additional signature pages.
Section 15.16 Holidays. In the event that the date upon which any
duties or obligations hereunder to be performed shall occur upon a Saturday,
Sunday or legal holiday, then, in such event, the due date for performance of
any duty or obligation shall thereupon be automatically extended to the next
succeeding business day.
Section 15.17 1031 Exchange. Seller agrees to cooperate with Purchaser
in effecting for the benefit of Purchaser, or an entity affiliated with
Purchaser or Purchaser's assignee, a
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<PAGE> 20
simultaneous or delayed like-kind exchange of real property pursuant to Section
1031 of the Internal Revenue Code of 1986, as amended, and similar provisions of
applicable state law. Seller agrees to execute such further documents as are
reasonably necessary to effect a Section 1031 exchange for the benefit of
Purchaser (or Purchaser's affiliate or assignee) provided that Seller shall not
be obligated to delay the Closing, and all additional costs in connection with
exchange shall be borne by the Purchaser (or Purchaser's affiliate or assignee).
Seller will incur no personal or corporate liability with respect to any such
exchange documentation.
EXECUTED on this the 29th day of May, 1997 by Purchaser.
JDB REAL PROPERTIES, INC.,
a Texas corporation
By:/s/ Gary D. Stillwell
-----------------------------------
Gary D. Stillwell, President
EXECUTED on this the day of May, 1997 by Seller.
-----------
EYE CARE CENTERS OF AMERICA, INC.
a Texas corporation
By: /s/ Mark Pearson
----------------------------------------
Printed Name: Mark Pearson
---------------------------
Title: Chief Financial Officer
----------------------------------------
The Contract has been received by the Title Company this the 30th day of June,
1997. The undersigned Title Company agrees to be bound by the provisions of this
Contract, including those described in Article 3 hereof
CHICAGO TITLE INSURANCE COMPANY
By: /s/ Carol Reiss
----------------------------------------
Printed Name: Carol Reiss
----------------------------
Title:Escrow Officer
----------------------------------------
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<PAGE> 21
BROKER'S AGREEMENT RELATING TO
CONTRACT FOR PURCHASE AND SALE ("CONTRACT")
DATED MAY , 1997
--------
By and Between
Eye Care Center of America, as Seller,
and
Byram Properties, as Purchaser,
Pertaining to Project in San Antonio, Bexar County, Texas
Although not a party to the foregoing Contract, Broker hereby approves, and
agrees to be bound by, the terms and provisions of Section 14.2 pertaining to
nondisclosure and Section 12.1 pertaining to the amount and manner of payment of
the real estate sales commission, and Broker agrees to accept such commission in
full and complete satisfaction of all fees, commissions or other compensation
due Broker in connection with the purchase and sale of the Property.
Additionally, Broker hereby approves and agrees to be bound by the terms of
Section 12.3.
BROKER:
CB COMMERCIAL REAL ESTATE
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
License No.:
--------------------------
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<PAGE> 22
EXHIBIT "A"
Land Description
An approximately 68,434 net rentable square foot office building located at
11103 West Avenue, San Antonio, Texas, legally described as Lot 28, Block 38,
NCB 11754 San Antonio, Bexar County, Texas.
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<PAGE> 23
EXHIBIT B
All heating, ventilating and air conditioning equipment used in connection with
the Improvements
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<PAGE> 24
EXHIBIT "C"
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (this "lease" or "Lease"), made and entered into
by and between JDB REAL PROPERTIES, INC., a Texas corporation ("Landlord"), and
EYE CARE CENTERS OF AMERICA, INC., a Texas Corporation ("Tenant");
W I T N E S S E T H:
1. Premises and Term and Condition of Premises.
A. In consideration of the obligation of Tenant to pay rent as
herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord, for the term stated herein, certain
Premises situated within the County of Bexar, State of Texas, more particularly
described on Exhibit "A" attached hereto and incorporated herein by reference,
together with all rights, privileges, easements and appurtenances belonging to
or in any way pertaining to the Premises and together with the buildings and
other improvements situated upon said Premises (said real property, buildings
and improvements hereinafter referred to as the Premises), subject to all leases
pertaining to the Premises, recorded or unrecorded, existing as of the date
hereof (the Existing Leases").
B. TO HAVE AND TO HOLD, subject to the Existing Leases, the
same for a term commencing on __________, 1997 (the "Commencement Date"). The
term of this Lease (the "Term") shall begin on the Commencement Date and
continue until __________, 2012 (the "Termination Date").
2. Rent.
Tenant agrees to pay to Landlord rent (the "Rent") for the
Premises in advance, without demand, as follows (the rental payment for any
fractional calendar month during the lease period being prorated):
(1) From the Commencement Date, the Rent shall accrue at the
rate of, and be payable in regularly and monthly payments of, $46,750.00 per
month, said payments to be adjusted pursuant to subparagraph 2(A)(2) below. The
first payment of rent shall be due on the Commencement Date. Thereafter,
payments shall be due on the first day of each calendar month, commencing on the
first day of the month succeeding the month in which the Commencement Date
occurs, until the Termination Date.
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<PAGE> 25
(2) On each of __________, 2000; __________, 2003; __________,
2006; and __________, 2009 (each being individually referred to as an
"Adjustment Date"), the amount of monthly payment of Rent shall be adjusted by
multiplying the most recent amount of monthly payment of Rent by the CPI
Adjustment Factor; provided, however, in no event shall the Rent, as adjusted by
the CPI Adjustment Factor, be less than the Rent for the previous month. As used
herein, the term "CPI Adjustment Factor" shall mean, for any Adjustment Date,
the amount derived by dividing the CPI (as herein defined) most recently
published as of the first day of the year of the Adjustment Date in question by
the CPI most recently published as of the first day of the year of Commencement
Date. For purposes hereof "CPI" means the Consumer Price Index of Urban
Consumers, Dallas-Fort Worth Area (all items 1982 - 1984 = 100), published by
the United States Department of Labor, Bureau of Labor Statistics (the
"Bureau"). If the CPI should ever cease to be published by the Bureau during the
lease term, the CPI Adjustment Factor shall be computed by using an economic
index selected by Tenant, of generally recognized standing, that reflects the
increase or decrease of the purchasing power of the dollar.
3. Use. The Premises shall be used and occupied for general office
purposes, retail sales, and all lawful activities related thereto, so long as
such use is permitted by the existing zoning ordinances of the City of San
Antonio. Tenant shall (i) at its own cost and expense obtain any and all
licenses and permits necessary for any such permitted use, and (ii) comply, at
Tenant's sole cost and expense, with all governmental laws, ordinances,
regulations and restrictive covenants of record affecting the Premises
applicable to the use of the Premises, and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of nuisances in or upon, or connected with, the Premises. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance. Tenant will not permit the Premises to be used for any
purpose or in any manner (including without limitation any method of storage)
which would render the insurance thereon void or the insurance risk more
hazardous.
4. Taxes.
A. Tenant agrees to pay to Landlord, as additional rent, all
taxes, assessments and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the Premises during the term of this Lease. Taxes shall include all
taxes and assessments (special or otherwise) levied or assessed directly or
indirectly against the Premises (land, buildings and improvements), imposed by
federal, sate, or local governmental authority or any other taxing authority
having jurisdiction over, the Premises. Franchise, capital stock, income, estate
or inheritance taxes personal in nature to Landlord are not deemed to be taxes.
Landlord shall estimate the taxes referred to in this
Paragraph 4(A), and Tenant shall pay one-twelfth (1/12) thereof monthly in
advance, together with the payment of the
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<PAGE> 26
Rent. After the end of each calendar year, Landlord shall furnish Tenant a
statement in reasonable detail of the actual real estate taxes, prepared in
accordance with sound accounting practices by Landlord's accounting department,
and there shall be an adjustment between Landlord and Tenant, with payment to or
repayment by Landlord, as the case may require, to the end that Landlord shall
receive the entire amount of such taxes owing for such period.
B. Additionally, Tenant shall be liable for all taxes levied
against Tenant's leasehold improvements, merchandise, inventory, equipment,
furnishings, personal property, and trade fixtures. When possible, Tenant shall
cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of
Landlord. If any such taxes for which Tenant is liable are levied against
Landlord or Landlord's property, or if the assessed value of Landlord's property
is increased by inclusion of personal property and trade fixtures placed by
Tenant in the Premises, Tenant shall also pay the taxes so levied against
Landlord or associated with such increase in accordance with Paragraph 4A above.
Tenant shall pay prior to delinquency any and all taxes related to Tenant's use
and operation of its business on the Premises, including, but not limited to,
all franchise, capital stock, income, sales, use or any other taxes levied
against Tenant.
5. Tenant's Repairs.
A. Tenant shall at its own cost and expense keep and maintain
the entire Premises in good condition, promptly making all necessary repairs and
replacements, whether same are of a capital nature or otherwise. Tenant shall be
responsible for maintaining and making the necessary repairs and replacements to
all parts of the Premises, including, but not limited to, the roof, foundation,
exterior structural walls, windows, glass and plate glass, doors, interior walls
(structural, loadbearing or otherwise) and finish work, floor and floor
covering, downspouts, gutters, heating and air conditioning systems, paving,
plumbing work and fixtures. Tenant shall also be responsible for termite and
pest extermination, regular removal of trash and debris, regular mowing of any
grass, trimming, weed removal and general landscape maintenance, and keeping the
parking areas, driveways, alleys and the whole of the Premises in a clean and
sanitary condition (maintenance of the parking areas and driveways shall
include, but not be limited to, repairing any and all potholes located thereon
and repaving and restriping any such areas as necessary). Except as provided in
Paragraph 5 below, Tenant shall not be obligated to repair any damage caused by
fire or other casualty covered by the insurance to be maintained by Tenant
pursuant to subparagraph 11(A) below, except that Tenant shall be obligated to
repair all wind and/or other damage to glass.
B. Tenant shall not damage any load bearing walls of the
Premises or disturb the integrity and support provided by any such wall, and
shall, at Tenant's sole cost and expense, promptly repair any damage or injury
to any such wall caused by Tenant or its employees, contractors, agents or
invitees.
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<PAGE> 27
C. In connection with Tenant's obligations under subparagraph
5(A), Tenant shall establish, at its own cost and expense, a preventative
maintenance/service program with a maintenance contractor for servicing all hot
water, heating and air conditioning systems and equipment within the Premises.
(With respect to the heating and air conditioning systems and equipment, such
program shall provide for the regular replacement or cleaning of all filters
incorporated into such system and equipment or associated therewith.)
D. In the event Tenant fails to make (or have made) the
repairs and/or replacements described in this Paragraph 5 within thirty (30)
days of notice of the need for said repairs and/or replacements from Landlord,
or if such repairs and/or replacements are not reasonably capable of being made
within said thirty (30) day period, Tenant fails to commence the making of such
repairs and/or replacements within said thirty (30) days or thereafter fails to
diligently pursue to completion the making of such repairs and replacements,
then Landlord may enter the Premises and perform such repairs and/or
replacements. In the event Landlord performs the repairs and/or replacements
pursuant to this subparagraph 5(D), Tenant shall reimburse Landlord for the
out-of-pocket costs and expenses incurred in connection with such repairs and/or
replacements.
6. Alterations.
A. Except as provided in subparagraph 6(B), Tenant shall not
make any material alterations, additions or improvements to the Premises
(including but not limited to roof and wall penetrations), without the prior
written consent of Landlord which consent shall not be unreasonably withheld or
delayed by Landlord.
B. Tenant shall "finish-out" the portion of the Premises
depicted on Exhibit "B" attached hereto (the "Warehouse Space") so that the
Warehouse Space is finished-out to a standard of quality that is consistent with
either the space in the Premises that is then occupied by Tenant for office
purposes, or the space in the Premises occupied by tenants for retail purposes
under the Existing Leases.
7. Signs. Tenant and the tenants under the Existing Leases may
maintain and continue to use their respective signs installed upon the Premises
in the same places(s) that such signs are located upon the Premises on the date
this Lease is executed by Tenant subject, however, to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant shall,
at Tenant's sole cost and expense, remove all such signs by the termination of
this Lease. Such removals shall be made in such manner as to avoid injury or
defacement of the building and other improvements.
8. Inspection. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the Premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
Premises or in order to make such repairs as may be permitted to be made by
Landlord under the terms of this Lease, and for the purpose of showing
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<PAGE> 28
the Premises to any prospective or future tenant during the last six (6) months
of the term of this Lease, then-present mortgagee(s) and/or prospective
purchasers or mortgagee(s); provided, however, that Landlord shall have the
right, but not the obligation, to enter the Premises, without notice to Tenant,
at any time during the existence of an emergency and take whatever action
Landlord deems necessary, in its sole discretion, to cure and/or remedy such
emergency condition or the effects thereof.
9. Utilities. Tenant shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or from the Premises, together with any taxes, penalties, surcharges or the
like pertaining thereto and any maintenance charges for utilities. All accounts
relating to utilities used on or from the Premises shall be maintained in the
name of Tenant. Landlord shall in no event be liable for any interruption or
failure of utility services on the Premises.
10. Assignment and Subletting
A. Except as provided in subparagraph 10(B), Tenant may not
assign or sublet any or all of its rights under this Lease without Landlord's
prior written consent, such consent not to be unreasonably withheld or delayed.
B. Notwithstanding anything to the contrary in subparagraph
10(A), Tenant may, at any time, without Landlord's consent, assign or sublet any
or all of its fights under, or all or any portion of the Premises covered by,
this Lease so long as the express terms of the agreement pursuant to which
Tenant so assigns such rights or sublets such portion of the Premises provides
for monthly rental, on a per square foot basis,.of not less than ninety percent
(90%) of the Per Square Foot Rent (defined below) (such an assignment or
sublease being hereafter referred to as a Qualified Sublease). As used herein,
the term "Per Square Foot Rent" shall mean an amount equal to the amount of
monthly Rent due hereunder divided by the total number of square feet in the
improvements constituting a part of the Premises
In connection with any Qualified Sublease, notwithstanding
anything to the contrary in this Lease, Tenant may, pursuant to a separate
written agreement, subsidize the payment of rent due under any Qualified
Sublease, or provide to any subtenant/assignee under a Qualified Sublease such
other rental concessions as Tenant and such subtenant/assignee may agree
(provided, however, that no such rental concession shall be enforceable against
Landlord). Such separate written agreement shall not affect the Tenant's rights
under this Lease or the subtenant's/assignee's rights under such
sublease/assignment.
11. Insurance and Liability.
A. Fire and Casualty Insurance. Tenant agrees to maintain at
all times from and after the Commencement Date through the expiration of the
term hereof standard fire and extended coverage insurance covering the
improvements on the Premises in an amount not less
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<PAGE> 29
than the full "replacement cost" thereof as such term is defined in the
Replacement Cost Endorsement to be attached thereto, insuring against the perils
covered by fire and extended coverage insurance policies, and against vandalism,
malicious mischief, flood and special extended perils (i.e., "all risks" as such
term is used in the insurance industry), such coverages and endorsements to be
as defined, provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State of Texas for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of paragraph 12 below, such
insurance shall be for the sole benefit of Landlord and/or any Lien Holder (as
defined below) and under Landlord's sole control. Certified copies of such
policies, together with receipts evidencing payment of premiums therefor, shall
be delivered to Landlord prior to the Commencement Date. If Tenant fails to
deliver such policies or certificates on or before the Commencement Date,
Landlord shall have no duty to deliver possession of the Premises to Tenant
until such policies or certificates are provided, but such failure by Tenant
shall not delay the Commencement Date or have any effect on Tenant's other
obligations hereunder, including, without limitation, the obligation to pay
Rent. Not less than fifteen (15) days prior to the expiration date of any such
policies, certified copies of the renewals thereof (bearing notations evidencing
the payment of renewal premiums) shall be delivered to Landlord. Such policies
shall further provide that not less than thirty (30) days written notice shall
be given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby. If Tenant fails to obtain or maintain such policy of
insurance, then in addition to any other remedy Landlord may have for such
default, Landlord may obtain the required insurance and Tenant shall reimburse
Landlord, on demand, for the cost associated therewith, together with interest
on the amount paid by Landlord at the rate of ten percent (10%) per annum from
the date of such payment by Landlord until payment by Tenant. Any payment to be
made pursuant to this subparagraph A with respect to the calendar year in which
this Lease terminates shall be prorated. Such policy or policies shall be
procured by Tenant from reputable insurance companies satisfactory to Landlord.
B. Liability and Liability Insurance. Landlord shall not be
liable to Tenant or Tenant's employees, agents, patrons, invitees, business
invitees, guests or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the Premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants, invitees, business invitees, guests or employees, or of any other
person entering upon the Premises, or caused by the buildings and improvements
located on the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the Premises, or due to any
cause whatsoever (except where due to Landlord's negligent acts or omissions or
Landlord's willful misconduct), and TENANT HEREBY COVENANTS AND AGREES THAT IT
WILL AT ALL TIMES INDEMNIFY AND HOLD SAFE AND HARMLESS THE PROPERTY, LANDLORD
(INCLUDING ANY INDIVIDUALS OR ENTITIES WHICH CONSTITUTE LANDLORD), LANDLORD'S
AGENTS AND EMPLOYEES FROM ANY LOSS, LIABILITY, CLAIMS, SUITS, COSTS, EXPENSES,
INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES AND DAMAGES, BOTH REAL AND ALLEGED,
ARISING OUT OF ANY SUCH
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DAMAGE OR INJURY; EXCEPT INJURY TO PERSONS OR DAMAGE TO PROPERTY TO THE EXTENT
SAME IS CAUSED BY LANDLORD'S NEGLIGENT ACTIONS OR OMISSIONS OR BY LANDLORD'S
WILLFUL MISCONDUCT. Tenant shall procure and maintain from the Commencement Date
through the expiration of the term of this Lease a policy or policies of
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with; (i)
the Premises; (ii) the condition of the Premises; (iii) Tenant's operations in
and maintenance and use of the Premises; and (iv) Tenant's liability assumed
under this Lease, the combined single limits of such policy or policies to be in
the amount of not less than $1,000,000 per occurrence. Certified copies of all
policies, together with receipts evidencing payment of premiums therefor, shall
be delivered to Landlord prior to the Commencement Date. If Tenant fails to
deliver such policies or certificates on or before the Commencement Date,
Landlord shall have no duty to deliver possession of the Premises to Tenant
until such policies or certificates are provided, but such failure by Tenant
shall not delay the Commencement Date or have ally effect on Tenant's other
obligations hereunder, including, without limitation, the obligation to pay
Rent. Not less than fifteen (15) days prior to the expiration date of any
described policies, certified copies of the renewals thereof (bearing notations
evidencing the payment of renewal premiums) shall be delivered to Landlord. Such
policies shall further provide that not less than thirty (30) days written
notice shall be given to Landlord before such policy may be canceled or changed
to reduce insurance provided thereby.
C. Business Interruption Insurance. Tenant agrees to maintain
at all times from and after the Commencement Date through the expiration of the
term hereof, business interruption insurance in an amount sufficient to cover
the Rent and all additional rent payable under this Lease for a period of at
least one (1) year.
D. Waiver of Subrogation. In the event the Premises or its
contents are damaged or destroyed by fire or other casualty for which insurance
is maintained, or an employee sustains an injury covered by any Worker's
Compensation insurance maintained by Tenant (or such damage or injury is of a
type for which insurance was required to be maintained under the terms of this
Lease), the rights, if any of Tenant against Landlord with respect to such
damage, destruction or injury are waived with respect to both, and to the extent
of both, losses covered by insurance (or which should have been covered under
the terms of the insurance required to be maintained by Tenant under the terms
of this Lease) and losses not covered due to deductibles, coinsurance penalties,
insurance carrier insolvency, disputes with the insurance carrier regarding
coverage or under-insurance. All policies of fire and/or extended coverage,
other insurance covering the Premises or its contents required hereunder to be
maintained by Tenant shall contain a clause or endorsement providing in
substance that the insurance shall not be prejudiced if the insured has waived
right of recovery from any person or persons prior to the date and time of loss
or damage, if any. The failure of Tenant to obtain such endorsement, however,
shall not negate or otherwise adversely affect the waiver herein set forth,
which waiver in all instances shall be binding upon Tenant and Tenant's
respective insurers.
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<PAGE> 31
E. Rating of Insurers. Insurance required hereunder shall be in
companies holding "general policyholders rating" of at least "A Minus", or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the in the most current issue of "Best's Insurance Guide".
F. Insurance of Sublessee's. Any insurance required to be maintained by
Sublessees of the Premises shall list Landlord as an additional insured party on
the policy, and copies of all certificates of such policies must be delivered to
Landlord. Additionally. any insurance policies required to be maintained by
tenants under the Existing Leases must be reissued, naming Landlord as an
additional insured party, and a certificate of such policy (as reissued) must be
delivered to Landlord.
Not less than fifteen (15) days prior to the expiration of any of
the policies described in this subparagraph 11(f), certified copies of the
renewals thereof (bearing notations evidencing the 'payment of renewal premiums)
shall be delivered to Landlord. Such policies shall further provide that not
less than thirty (30) days written notice shall be given to Landlord before such
policy may be canceled or changed to reduce insurance provided thereby.
12. Fire and Casualty Damage.
A. Tenant shall give immediate written notice to Landlord of any
damage caused to the Premises by fire or other casualty.
B. In the event the Premises shall be damaged or destroyed by fire
or other casualty, Landlord at its option may either terminate this Lease or
elect to rebuild and repair the Premises. Landlord shall give written notice to
Tenant of its election within thirty (30) days after the date it receives notice
of such casualty and if Landlord elects to rebuild and repair shall proceed to
do so with reasonable diligence; provided, however, that if Landlord has not
completed the repair of the Premises on or before the date which is sixty (60)
days from and after the date Landlord learns of the casualty, Tenant shall be
entitled to terminate this Lease at any time thereafter but prior to the date
such repair and restoration is completed.
C. Landlord's obligation to rebuild and repair under this paragraph
12 shall in any event be limited to restoring the Premises to substantially the
condition in which the same existed prior to such casualty, exclusive of any
alterations, additions, improvements, fixtures and equipment installed by
Tenant. Tenant agrees that promptly after completion of Landlord's repairs,
Tenant will proceed with reasonable diligence and at Tenant's sole cost and
expense to restore, repair, and replace all alterations, additions,
improvements, fixtures, signs and equipment installed by Tenant.
D. Tenant agrees that during any period of reconstruction or repair
of the Premises, it will continue to operate its business within the Premises to
the extent that same is practical. During the period from the occurrence of any
casualty until Landlord's repairs are
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completed, the rent shall be reduced to such extent as may be fair and
reasonable under the circumstances.
E. Notwithstanding anything herein to the contrary, in the event a
holder of any indebtedness secured by a lien on the Premises (a "Lien Holder")
requires that the insurance proceeds (or any material portion thereof) arising
as the result of any fire or other casualty be applied to the indebtedness held
by the Lien Holder, then Landlord shall have the right to terminate this Lease
by delivering written notice of termination to Tenant within thirty (30) days
after such requirement is asserted by any such lien Holder.
F. Landlord and Tenant waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
13. Condemnation.
A. If the whole or any substantial part of the Premises should be
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by private purchase in lieu thereof and the taking would prevent
or materially interfere with the use of the Premises for the purpose for which
they are being used, this Lease shall, at the election of either Landlord or
Tenant, terminate and the rent shall be abated during the unexpired portion of
this Lease, effective as of the date the physical taking of said Premises.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this Lease
is not terminated as provided in the subparagraph above, this Lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking, or resulting from any
action or proceedings in lieu thereof, whether for the whole or a portion of the
Premises, shall be the sole properly of Landlord without any participation by
Tenant, and Tenant hereby expressly waives all claims for compensation and
hereby assigns to Landlord all rights with respect thereto; provided, however,
that Tenant may claim and recover directly from the condemning authority (if
permitted by law), such compensation as may be separately awarded or recovered
by Tenant in Tenant's own right for moving expenses, the expense of removing
Tenant's merchandise, furniture, fixtures and equipment or the loss of Tenant's
business goodwill.
14. Holding Over. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession of the Premises to
Landlord; provided, however, that upon such tender of possession of the Premises
to Landlord by Tenant, the Premises and the equipment and systems used therein,
including without limitation, the HVAC system, shall be in
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<PAGE> 33
at least the same condition in which the Premises and such equipment and systems
were in on the date hereof, normal wear and tear excepted. Notwithstanding
anything contained herein to the contrary, if Tenant holds over, any such
holding over shall be deemed to be a tenancy at sufferance and the rent during
any such period of time shall be one and one-quarter (1.25) times the rent in
effect on the termination date, computed on a daily basis for each day of the
hold over period. The preceding provisions of this paragraph 14 shall not be
construed as Landlord's consent for Tenant to hold over.
15. Quiet Enjoyment. Landlord agrees that upon Tenant's paying the rent
and performing and observing the agreements and conditions contained herein on
its part to be performed and observed, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises and all rights of Tenant hereunder
during the term of this Lease without any manner of hindrance or molestation,
subject, nevertheless, to the terms and conditions of this Lease, any mortgage
affecting the Premises, zoning ordinances and other building and fire ordinances
and governmental regulations relating to the use of the Premises, and easements,
restrictions and other conditions of record. Landlord represents and warrants
that it has full right and authority to enter into this Lease.
16. Events of Default. The following events shall be deemed to be
events of default by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes hereunder when due, or
any other payment or reimbursement to Landlord required herein when due, and
such failure shall continue for a period of five (5) days from the date of
notice of such non-payment is delivered by Landlord to Tenant.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make a general assignment for the benefit of
creditors, or shall permit the Premises or the leasehold estate created hereby
to be taken on execution or other process of law in any action against Tenant.
(c) Tenant shall file a petition, or a petition is filed against
Tenant, under any section or chapter of the United States Bankruptcy Code (Title
11 of the United States Code), as amended, or under any similar law or statute
of the United States or any State thereof; or Tenant shall be adjudged a
bankrupt or insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant and such receivership or trusteeship
is not terminated within ninety (90) days.
(e) Tenant shall fail to comply with any term, provision or
covenant of this Lease (other than the foregoing in this Paragraph 16), and
shall not cure such failure within thirty (30) days after written notice thereof
to Tenant; provided, however, that if such default is not reasonably susceptible
to being cured within thirty (30) days, then Tenant shall, provided it has
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<PAGE> 34
commenced to cure such default within said thirty (30) day period and is
diligently prosecuting the completion of such, have such additional period of
time as is reasonably necessary to effect such cure.
(f) Tenant, subject to any applicable cure or grace periods, shall
fail to comply with any covenants as to Tenant's financial condition made in
that certain Amended and Restated Credit Agreement, by and among Eye Care
Centers of America, Inc., Banque Indosuez, New York Branch, as Agent, and the
lending institutions named therein, amending that certain Revolving Credit
Agreement dated October 7, 1993, including, but not limited to the debt to
equity ratios and the net worth requirements set forth therein.
17. Landlord's Remedies. Upon the occurrence of any of such events of
default described in Paragraph 16 hereof, Landlord shall have the option to
pursue any one or more of the remedies available to Landlord at law or in equity
in connection with such event of default, without any notice or demand to Tenant
whatsoever, including, without limitation:
(i) The right to enter upon and take possession of the Premises,
without terminating this Lease, and expel or remove Tenant
and any other person who may be occupying the Premises, or
any part thereof, without being liable for prosecution or
any claim for damages therefor. Thereafter, Landlord shall
use good faith, reasonable efforts to relet the Premises, or
any part thereof, in the name of Landlord, or otherwise, in
a commercially reasonable manner and for such term or terms
(which may be greater or less than the period which would
otherwise have constituted the balance of the Term of this
Lease) and on such conditions as Landlord, in its reasonable
discretion, may determine and may collect and receive the
rent therefor. Upon such reletting, all rentals received by
Landlord shall be applied, first, to the payment of any
reasonable costs and expenses of such reletting, including
brokerage fees, attorneys' fees and costs of any
alterations, repairs or Tenant's improvements; second, to
the payment of rent due and unpaid hereunder; and the
residue, if any, shall be held by Landlord and applied in
payment of future rent as the same may become due and
payable. If such rentals received from such reletting during
any month shall be less than that to be paid during that
month by Tenant, Tenant shall pay any deficiency to
Landlord. No such re-entry taking possession of the Premises
by Landlord shall be construed as an election on its part to
terminate this Lease unless a written notice of such
election be given to Tenant or unless the termination is
decreed by a court of competent jurisdiction.
Notwithstanding any such reletting, Landlord may at any time
thereafter elect to terminate this Lease for such previous
breach, as described below; or
(ii) The right to terminate this Lease. Should Landlord at any
time terminate this Lease for any breach, Landlord may
recover from Tenant all damages Landlord may incur by reason
of such breach. In such event, Landlord's damages shall
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<PAGE> 35
consist of the sum of (i) all rent and other charges accrued
to the date of termination and previously unpaid; and (ii)
the present value (calculated using a ten percent (10%)
discount rate) of the balance of the Rent (at the then
current rate) which would have been due for the balance of
the Term, minus the present value (calculated using a ten
percent (10%) discount rate) of the fair market value of the
Premises for the balance of the Term. Such amount shall be
Landlord's final, liquidated damages, it being agreed that
actual damages would be difficult if not impossible to
ascertain and that such amount represents a reasonable
approximation of any actual damages which would be incurred.
All rights and remedies of Landlord herein existing at law or in equity
are cumulative and the exercise of one or more rights or remedies shall not be
taken to exclude or waive the right to the exercise of any other. No act or
thing done by the Landlord or its agents during the term hereby granted shall be
deemed a termination of this Lease or an acceptance of the surrender of the
Premises, and no agreement to terminate this Lease or accept a surrender of said
Premises shall be valid unless such agreement is in writing and signed by
Landlord. No waiver by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained.
18. Tenant's Remedies. In the event that Landlord shall default in the
performance of any covenant, condition or other provision of this Lease, and
such default remains uncured beyond any applicable cure period expressly
provided herein or, if no such cure period is provided, beyond thirty (30) days
from and after the date Landlord receives notice. Of Such default (or such
longer period as may be reasonably required to cure such default with the
exercise of due diligence and best efforts so long as Landlord promptly
commences and diligently pursues such cure without interruption) (except in the
case of emergency, in which case Tenant shall not be obligated to give Landlord
notice and opportunity to cure), Tenant may, at its option, without waiving any
claim for breach of Landlord's obligations, cure such default for Landlord at
Landlord's expense. Landlord shall reimburse Tenant upon Tenant's demand all
costs and expenses incurred by Tenant in curing Landlord's default. All such
sums not reimbursed to Tenant on demand shall accrue interest at the highest
rate permitted by law, and may be offset by Tenant against rental payments due
under this Lease.
In the event of any breach or threatened breach by Landlord of any of
the covenants, agreements, terms or conditions contained in this Lease, Tenant
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise.
19. Mortgages. Subject to the non-disturbance condition described
below, Tenant accepts this Lease subject and subordinate to any mortgage(s)
and/or deed(s) of trust now or at any time hereafter constituting a lien or
charge upon the Premises or the improvements situated thereon (except that at
the election of such mortgagee this Lease may be deemed superior to such
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<PAGE> 36
mortgagee's mortgage); provided, however, that so long as Tenant complies with
all of the terms of this Lease imposed upon Tenant, any foreclosure of such
mortgage shall not terminate or affect this Lease, and Landlord agrees that any
mortgagee shall enter into a Subordination, Attornment and Non-Disturbance
Agreement with Tenant. With respect to any specific mortgage, the foregoing
subordination is expressly conditioned upon Landlord delivering to Tenant a
Subordination, Attornment and Non-Disturbance Agreement in form acceptable to
Tenant, and its reasonable discretion.
20. Mechanic's Liens. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
Premises. Tenant covenants and agrees that it will save and hold Landlord
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease.
21. Notices.
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Notwithstanding anything
contained herein to the contrary, Tenant's obligation to pay rent and any other
amounts to Landlord under the terms of this Lease shall not be deemed satisfied
until such rent and other amounts have been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set forth, or at
such other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith. Amounts
owing to Tenant under the terms of this Lease shall not be deemed satisfied
until actually received by Tenant.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered (whether actually received or not) two
(2) days after the date the same is deposited in the United States Mail, postage
prepaid, Certified or Registered Mail, return receipt requested, addressed to
the parties hereto at the respective addresses set out below, or at such other
address as they have theretofore specified by written notice delivered in
accordance herewith:
LANDLORD: TENANT:
JDB Real Properties, Inc. Eye Care Centers of America, Inc.
510 South Congress 11103 West Avenue
Suite 400 San Antonio, Texas 78213-1392
Austin, Texas 78704
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All parties included within the terms "Landlord" and "Tenant", respectively,
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
22. Miscellaneous.
A. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this Lease in connection with a sale of the Premises to a third party, and, upon
execution of an assumption of Landlord's obligations hereunder by such
transferee, Landlord shall be relieved of any further obligations under this
Lease, and the term "Landlord" shall thenceforth mean such transferee.
C. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
D. The captions inserted in this Lease are for convenience
only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the interpretation of
this Lease.
E. Landlord shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Tenant, so long as the
performance or the nonperformance of the covenant or obligation is delayed,
caused or prevented by an "Act of God," "force majeure," or Tenant. An "Act of
God" or "force majeure" is defined for the purpose of this Lease as strikes,
lock-outs, sit-downs, material or labor restrictions by any governmental
authority, unusual shortages of material, unusual transportation delays, dots,
floods, wash-outs, explosions, earthquakes, fire storms, weather (including wet
grounds or inclement weather which prevents construction), acts of the public
enemy, wars, insurrections and any other cause not reasonably within the control
of Landlord and which by the exercise of due diligence Landlord is unable,
wholly or in part, to prevent or overcome.
F. This Lease may not be altered, changed or amended except by
an instrument in writing signed by both parties hereto.
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<PAGE> 38
G. All obligations of Tenant hereunder not fully perforated as
of the expiration or earlier termination of the term of this Lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including without limitation all
heating and air conditioning systems and equipment therein, in good condition
and repair, normal wear and tear excepted. Tenant shall also, prior to vacating
the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which this Lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied as the case may be.
H. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease shall not be affected thereby, and it is also
the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added as a part of this Lease contract a clause or provision as similar in terms
to such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
I. Until this Lease is duly executed by Landlord and Tenant,
this Lease shall be treated as an offer with the Premises being subject to prior
lease without notice and such offer being subject to withdrawal or
non-acceptance by Landlord without notice, and this Lease shall not be valid or
binding unless and until it is fully and duly executed by Landlord and Tenant.
J. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the date of execution set forth
below.
K. The time of the performance of all the covenants,
conditions and agreements of this Lease is of the essence.
L. It is expressly agreed by Tenant, as a material
consideration for the execution of this Lease, that this Lease, with its
specific references to written extrinsic documents, if any, is the entire
agreement of the parties; that there are, and were, no verbal representations,
warranties, understandings, stipulations, agreements or promises pertaining to
this Lease or to the expressly mentioned written extrinsic documents, if any,
not incorporated in writing in this Lease.
M. Neither Landlord nor Tenant has contacted any real estate
broker, finder or similar person in connection with this Lease. With respect to
this Lease and the payment of
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<PAGE> 39
brokers' commissions, Landlord agrees to indemnify and hold harmless Tenant from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker whose claim arises by, through, or on behalf of Landlord.
With respect to this Lease and the payment of brokers' commissions, Tenant
agrees to indemnify and hold harmless Landlord from and against any liability or
claim, whether meritorious or not, arising with respect to any broker (unless
Tenant has executed and independent commission agreement with any such broker,
in which event such broker shall not be excluded from this indemnity), whose
claim arises by, through or on behalf of Tenant.
23. Hazardous Substances.
A. As used herein, "Hazardous Substances" means any substance
that has toxic, corrosive, flammable or reactive properties and that is
regulated by the State of Texas or the United States Government. Hazardous
Substances include, but are not limited to, asbestos, polychlorobiphenyls
("PCBs"), flammable explosives, radioactive materials, chemical carcinogens,
pollutants, effluent, contaminants, emissions and petroleum.
B. Tenant hereby agrees, warrants and represents that Tenant,
its agents, employees or contractors have not prior to the date hereof, and will
not during the term hereof, knowingly store, place or discard Hazardous
Substances in the Premises, other than cleaning supplies or other materials
customarily used by Tenant in the course of its operations which may constitute
Hazardous Substances which will at all times be stored and discarded in
compliance with any applicable laws. Notwithstanding the immediately preceding
sentence, in the event Tenant, its agents, employees or contractors bring upon,
store on or in, use on or in, or install in, the Premises any materials that are
then known to be, or are later classified as, Hazardous Substances, then Tenant
shall, upon written demand from Landlord, promptly proceed to remove such
Hazardous Substances, at Tenant's sole cost and expense, in accordance with all
applicable governmental regulations. Tenant hereby agrees to indemnify and hold
Landlord harmless from and against and to reimburse Landlord with respect to any
and all claims, demands, causes of action, loss, damage, liabilities, cost and
expenses (including attorneys' fees and court costs) of any and every character,
known or unknown, fixed or contingent, asserted against or incurred by Landlord
at any time and from time to time by reason of, or arising out of, the presence
of any Hazardous Substances within the Premises or in, on or under the building,
or the Premises, the presence of which was caused by an act of Tenant.
24. Title: Condition Precedent.
The terms of this Lease are expressly conditioned upon the
Landlord obtaining title to the Premises by __________, 1997. In the event
Landlord fails to obtain title to the Premises by said date, Landlord may, at
any time thereafter prior to obtaining title to the Premises, deliver written
notice to Tenant that this Lease shall be null, void and of no legal effect and
upon the delivery of such notice to Tenant this Lease shall be deemed to be
null, void and of no legal effect.
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EXECUTED to be effective as of this _____ day of __________, 1997 (the
"effective date").
"LANDLORD" "TENANT"
JDB REAL PROPERTIES, INC., EYE CARE CENTERS OF AMERICA, INC.,
a Texas corporation a Texas corporation
By: By:
----------------------------------- ------------------------------
Gary D. Stillwell, President Printed Name:
--------------------
Title:
---------------------------
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<PAGE> 1
Exhibit 10.12
AMENDMENT TO CONTRACT FOR PURCHASE AND SALE
This Amendment to Contract For Purchase and Sale ("Amendment") is made and
entered into effective as of July 3, 1997, by and EYE CARE CENTERS OF AMERICA,
INC., a Texas corporation ("Seller") and JDB REAL PROPERTIES, INC., a Texas
corporation ("Purchaser").
WHEREAS, Seller and Purchaser previously entered into that certain
Contract for Purchase and Sale ("Contract"), with an effective date of June 3,
1997, with respect to certain property as more particularly described therein
and on Exhibit "A" attached hereto, and
WHEREAS, Seller and Purchaser have agreed to amend the Contract according
to the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the above recitals, and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby amend the Contract as follows:
1. The Purchaser's Inspection Period (defined in Section 7.3 - page 6
of the Contract) has been extended to expire on July 10, 1997.
2. The Closing Date (defined in Section 12.1 - page 10 of the Contract)
shall remain September 1, 1997.
Except as expressly amended by the terms of this Amendment, all of the
terms and conditions of the Contract shall be, remain and continue in full force
and effect as set forth in the Contract.
This Amendment may be executed in one or more counterparts, each of which
shall have the force and effect of an original, and all of which shall
constitute but one document.
EXECUTED to be effective as of the date first written above.
SELLER:
JDB REAL PROPERTIES, INC., a Texas corporation
By:
------------------------------
Gary D. Stillwell, President
<PAGE> 2
PURCHASER:
EYE CARE CENTERS OF AMERICA, INC.,
a Texas corporation
By: /s/ Mark Pearson
------------------------------
Name: Mark Pearson
----------------------------
Title: CFO
---------------------------
Receipt of this Amendment is hereby acknowledged this 3rd day of July, 1997.
CHICAGO TITLE INSURANCE COMPANY
By:
------------------------------
Title:
---------------------------
<PAGE> 3
EXHIBIT "A"
LAND DESCRIPTION
An approximately 68,434 net rentable square foot office building located at
111103 West Avenue, San Antonio, Texas legally described as Lot 28, Block 38,
NCB 11754 San Antonio, Bexar County, Texas
<PAGE> 1
Exhibit 10.13
SECOND AMENDMENT TO CONTRACT FOR PURCHASE AND SALE
This Second Amendment to Contract for Purchase and Sale ("Second
Amendment") is made and entered into effective as of July 10, 1997, by and
between EYE CARE CENTERS OF AMERICA, INC., a Texas corporation ("Seller") and
JDB REAL PROPERTIES, INC., a Texas corporation ("Purchaser").
WHEREAS, Seller and Purchaser entered into that certain Contract for
Purchase and Sale, with an effective date of June 3, 1997, with respect to
certain real property more particularly described on Exhibit "A" attached hereto
and made a part hereof, and
WHEREAS, Seller and Purchaser amended said Contract for Purchase and
Sale by executing that certain Amendment to Contract for Purchase and Sale dated
effective as of July 3, 1997 (said Contract for Purchase and Sale, as amended by
said Contract for Purchase and Sale, being hereafter referred to as the
"Contract"); and
WHEREAS, Seller and Purchaser have again agreed to amend the Contract
according to the terms and conditions set forth herein.
NOW, THEREFORE, for the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Purchaser hereby amend
the Contract as follows:
1. Section 2.1 of the Contract shall be modified to state as
follows:
Section 2.1 Amount. The purchase price (herein so called) for
the Project is and shall be the sum of FIVE MILLION ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($5,100,000.00). Except as
provided below, the Purchase Price shall be due and payable by
Purchaser to Seller in cash at the Closing (hereinafter
defined). The payment of the Purchase Price to Seller must be
effectuated by wire transfer or other method sufficient to
provide Seller with "same day" funds on the Closing Date
available for overnight investment by Seller that same day.
Notwithstanding anything to the contrary in this Section 2.1,
FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) of the proceeds
constituting the Purchase Price shall be withheld from Seller
at the Closing and deposited in escrow subject to the terms of
the Escrow Agreement (hereinafter defined).
2. Section 12.2 of the Contract shall be modified to include a
subsection (k), which shall state as follows:
(h) An executed counterpart of the Escrow Agreement (the
"Escrow Agreement") in the form attached hereto as Exhibit
"F".
<PAGE> 2
3. Section 12.3 of the Contract shall be modified to include a
subsection (f), which shall state as follows:
(f) An executed counterpart of the Escrow Agreement.
4. The Escrow Agreement attached hereto as Exhibit "F" shall be
incorporated into the Contract as Exhibit "F" to the Contract and shall be and
is hereby made a part thereof for all purposes.
5. Seller and purchaser hereby acknowledge and agree that (i) the
Inspection Period (as defined in the contract) has expired, (ii) Purchaser's
right to terminate the Contract pursuant to Section 7.3 of the Contract is
hereby waived, and (iii) effective as of the date hereof, Purchaser's right to a
return of the Earnest Money, pursuant to Section 7.3, is also waived.
6. Except as expressly amended by the terms of this Second Amendment,
all of the terms and conditions of the Contract shall be, remain and continue in
full force and effect as set forth in the Contract.
7. This Second Amendment may be executed in one or more counterparts,
each of which shall have the force and effect of an original, and all of which
shall constitute but one document. Copies of the executed originals transmitted
by telefax (i.e. facsimile copies) may be accepted as originals provided that
the originals are substantially contemporaneously mailed or delivered, by a
recognized overnight courier or by hand delivery, to the Title Company (as
defined in the Contract).
EXECUTED to be effective as of the date first written above.
SELLER:
JDB REAL PROPERTIES, INC., a Texas
corporation
By:
----------------------------
Gary D. Stillwell, President
PURCHASER:
EYE CARE CENTERS OF AMERICA, INC.,
a Texas corporation
By: /s/ Mark Pearson
----------------------------
Name: Mark Pearson
Title: CFO
<PAGE> 3
Receipt of a copy of this Amendment is hereby acknowledged this ___ day of July,
1997.
CHICAGO TITLE INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 10.14
THIRD AMENDMENT TO CONTRACT FOR PURCHASE AND SALE
This Third Amendment to Contract For Purchase and Sale ("Third Amendment")
is made and entered into effective as of July 10, 1997, by and between EYE CARE
CENTERS OF AMERICA, INC., a Texas corporation ("Seller") and JOHN D. BYRAM,
DALLAS MINI #262, LTD., a Texas limited partnership, and DALLAS MINI #343, LTD.,
a Texas limited partnership ("Purchaser").
WHEREAS, Seller and JDB Real Properties, Inc. entered into that certain
Contract for Purchase and Sale, with an effective date of June 3, 1997, with
respect to certain real property more particularly described on Exhibit "A"
attached hereto and made a part hereof; and
WHEREAS, Seller and JDB Real Properties, Inc. amended said Contract for
Purchase and Sale by executing that certain Amendment to Contract for Purchase
and Sale dated effective as of July 3,1997; and
WHEREAS, Seller and JDB Real Properties, Inc. amended said Contract for
Purchase and Sale by executing that certain Second Amendment to Contract for
Purchase and Sale, dated effective as of July 10, 1997 (said Contract for
Purchase and Sale, as amended being hereinafter referred to as the "Contract");
and
WHEREAS, JDB Real Properties, Inc. has assigned its rights under the
Contract to Purchaser; and
WHEREAS, Seller and Purchaser have again agreed to amend the Contract
according to the terms and conditions set forth herein.
NOW, THEREFORE, for the mutual covenants and agreements contained herein,
and for other good and valuable consideration, the receipt and Sufficiency of
which is hereby acknowledged, Seller and Purchaser hereby amend the Contract as
follows:
1. Section 8.1 of the Contract is hereby deleted in its entirety and the
following is substituted in lieu thereof:
Section 8.1 Seller's Finish-Out Obligation. Seller must
substantially complete the Seller's Improvements by August 18, 1999.
As used herein, the term "Seller's Improvements" shall mean the
finish-out of the portion of the Improvements (the "Warehouse
Space") depicted on Exhibit "D", attached hereto and made a part
hereof for all purposes, so that the Warehouse Space is
"finished-out" to a standard of quality that is consistent with
either the space in the Improvements occupied by Seller for office
purposes or the space occupied by other presently existing tenants
for retail purposes. Seller's obligations under this Section 8.1
shall survive the Closing, and shall inure to the benefit of
Purchaser, its successors and assigns, including 11103 West Avenue,
San
<PAGE> 2
Antonio, Ltd. Failure of Seller to comply with the terms of Section
8.2 below shall Constitute a default under this Section 8.1.
2. Section 8.2 of the Contract is hereby deleted in its entirety and the
following is substituted in lieu thereof:
Section 8.2 Letter of Credit. At the Closing (as hereafter defined)
Seller shall deliver to Purchaser an Irrevocable Standby Letter of
Credit (the "Letter of Credit") in tile form attached hereto as
Exhibit "E" to secure completion of Seller's Improvements. If Seller
has neither (i) completed Seller's Improvements within thirty (30)
days prior to the expiration of the Letter of Credit, nor (ii)
obtained a Renewal of the Letter of Credit (the "Renewal Letter of
"Credit") in the same form as the Letter of Credit, but with
expiration date no sooner than September 18, 1999, then Seller shall
be deemed to be in default under Section 8.1 above. Upon completion
of Seller's Improvements, Purchaser shall return the original Letter
of Credit, or the Renewal Letter of Credit, as the case may be, to
Seller. Purchaser's covenant to return the Letter of Credit, or the
Renewal Letter of Credit, upon completion of Seller's Improvements
shall survive the Closing.
3. Exhibit "E" to the Contract shall be deleted, and Exhibit "E" attached
hereto shall be substituted in lieu thereof.
3. Except as expressly amended by the terms of this Third Amendment, all
of the terms and conditions of the Contract shall be, remain and continue in
full force and effect as set forth in the Contract.
4. This Third Amendment may be executed in one or more counterparts, each
of which shall have the force and effect of an original, and all of which shall
constitute but one document. Copies of the executed other& transmitted by
telefax (i.e. facsimile copies) may be accepted as originals provided that the
originals are substantially contemporaneously mailed or delivered, by a
recognized overnight courier or by hand delivery, to the Title Company (as
defined in the Contract).
- 2 -
<PAGE> 3
EXECUTED to be effective as of the date first written above.
SELLER:
EYE CARE CENTERS OF AMERICA, INC.,
a Texas corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
PURCHASER:
____________________________________
John D. Byram
DALLAS MINI #262, LTD., a
Texas limited partnership
By: JDB Real Properties, Inc., a
Texas corporation, General Partner
By: ___________________________
Gary D. Stillwell, President
DALLAS MINI #343, LTD. a
Texas limited partnership
By: Diller Corporation, a
Texas corporation, General Partner
By: __________________________
Gary D. Stillwell, President
- 3 -
<PAGE> 4
Receipt of a copy of this Amendment is hereby acknowledged this ___ day of
August, 1997
CHICAGO TITLE INSURANCE COMPANY
By: ______________________________
Title: ______________________________
- 4 -
<PAGE> 1
Exhibit 10.15
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (this "lease" or "Lease"), made and entered into
by and between JOHN D. BYRAM, DALLAS MINI #262, LTD., a Texas limited
partnership, and DALLAS MINI #343, LTD., a Texas limited partnership, as Tenants
in Common (collectively as "Landlord"), and EYE CARE CENTERS OF AMERICA, INC., a
Texas Corporation ("Tenant");
W I T N E S S E T H:
1. Premises, and Term and Condition of Premises.
A. In consideration of the obligation of Tenant to pay rent as
herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord, for the term stated herein, certain
Premises situated within the County of Bexar, State of Texas, more particularly
described on Exhibit "A" attached hereto and incorporated herein by reference,
together with all rights, privileges, easements and appurtenances belonging to
or in any way pertaining to the Premises and together with the buildings and
other improvements situated upon said Premises (said real property, buildings
and improvements hereinafter referred to as the Premises), subject to all leases
pertaining to the Premises, recorded or unrecorded, existing as of the date
hereof (the "Existing Leases").
B. TO HAVE AND TO HOLD, subject to the Existing Leases, the
same for a term commencing on August 19, 1997 (the "Commencement Date"). The
term of this Lease (the "Term") shall begin on the Commencement Date and
continue until August 18, 2012 (the "Termination Date").
2. Rent.
Tenant agrees to pay to Landlord rent (the "Rent") for the
Premises in advance, without demand, as follows (the rental payment for any
fractional calendar month during the lease period being prorated):
(1) From the Commencement Date, the Rent shall accrue at
the rate of, and be payable in regularly and monthly payments of, $46,750.00 per
month, said payments to be adjusted pursuant to subparagraph 2(A)(2) below. The
first payment of rent shall be due on the Commencement Date. Thereafter,
payments shall be due on the first day of each calendar month, commencing on the
first day of the month succeeding the month in which the Commencement Date
occurs, until the Termination Date.
(2) On each of August 19, 2000; August 19, 2003; August
19, 2006; and August 19, 2009 (each being individually referred to as an
"Adjustment Date"), the amount of monthly payment of Rent shall be adjusted by
multiplying the most recent amount of monthly payment of Rent by the CPI
Adjustment Factor; provided, however, in no event
<PAGE> 2
shall the Rent, as adjusted by the CPI Adjustment Factor, be less than the Rent
for the previous month. As used herein, the term "CPI Adjustment Factor" shall
mean, for any Adjustment Date, the amount derived by dividing the CPI (as herein
defined) most recently published as of the first day of the year of the
Adjustment Date in question by the CPI most recently published as of the first
day of the year of Commencement Date. For purposes hereof "CPI" means the
Consumer Price Index of Urban Consumers, Dallas-Fort Worth Area (all items
1982 - 1984 = 100), published by the United States Department of Labor, Bureau
of Labor Statistics (the "Bureau"). If the CPI should ever cease to be published
by the Bureau during the lease term, the CPI Adjustment Factor shall be computed
by using an economic index selected by Tenant, of generally recognized standing,
that reflects the increase or decrease of the purchasing power of the dollar.
3. Use. The Premises shall be used and Occupied for general office
purposes, retail sales, and all lawful activities related thereto, so long as
such use is permitted by the existing zoning ordinances of the City of San
Antonio. Tenant shall (i) at its own cost and expense obtain any and all
licenses and permits necessary for any such permitted use, and (ii) comply, at
Tenant's sole cost and expense, with all governmental laws, ordinances,
regulations and restrictive covenants of record affecting the Premises
applicable to the use of the Premises, and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of nuisances in or upon, or connected with, the Premises. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance. Tenant will not permit the Premises to be used for any
Purpose or in any manner (including without limitation any method of storage)
which would render the insurance thereon void or the insurance risk more
hazardous.
4. Taxes.
A. Tenant agrees to pay to Landlord, as additional rent, all
taxes, assessments and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the Premises during the term of this Lease. Taxes shall include all
taxes and assessments (special or otherwise) levied or assessed directly or
indirectly against the Premises (land, buildings and improvements), imposed by
federal, state, or local governmental authority or any other taxing authority
having jurisdiction over the Premises. Franchise, capital stock. income. estate
or inheritance taxes personal in nature to Landlord are not deemed to be taxes.
Landlord shall estimate the taxes referred to in this
Paragraph 4(A), and Tenant shall pay one-twelfth (1/12) thereof monthly in
advance, together with the payment of the Rent. After the end of each calendar
year, Landlord shall furnish Tenant a statement in reasonable detail of the
actual real estate taxes, prepared in accordance with sound accounting practices
by Landlord's accounting department, and there shall be an adjustment between
- 2 -
<PAGE> 3
Landlord and Tenant, with payment to or repayment by Landlord, as the case may
require, to the end that Landlord shall receive the entire amount of such taxes
owing for such period.
B. Additionally, Tenant shall be liable for all taxes levied
against Tenant's leasehold improvements, merchandise, inventory, equipment,
furnishings, personal property, and trade fixtures. When possible, Tenant shall
cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of
Landlord. If any such taxes for which Tenant is liable are levied against
Landlord or Landlord's property, or if the assessed value of Landlord's property
is increased by inclusion of personal property and trade fixtures placed by
Tenant in the Premises, Tenant shall also pay the taxes so levied against
Landlord or associated with such increase in accordance with Paragraph 4A above.
Tenant shall pay prior to delinquency any and all taxes related to Tenant's use
and operation of its business on the Premises, including, but not limited to,
all franchise, capital stock, income, sales, use or any other taxes levied
against Tenant.
5. Tenant's Repairs.
A. Tenant shall at its own cost and expense keep and maintain
the entire Premises in good condition, promptly making all necessary repairs and
replacements, whether same are of a capital nature or otherwise. Tenant shall be
responsible for maintaining and making the necessary repairs and replacements to
all parts of the Premises, including, but not limited to, the roof, foundation,
exterior structural walls, windows, glass and plate glass, doors, interior walls
(structural, loadbearing or otherwise) and finish work, floor and floor
covering, downspouts, gutters, heating and air conditioning systems, paving,
plumbing work and fixtures. Tenant shall also be responsible for termite and
pest extermination, regular removal of trash and debris, regular mowing of any
grass, trimming, weed removal and general landscape maintenance, and keeping the
parking areas, driveways, alleys and the whole of the Premises in a clean and
sanitary condition (maintenance of the parking areas and driveways shall
include, but not be limited to, repairing any and all potholes located thereon
and repaving and restriping any such areas as necessary). Except as provided in
Paragraph 5 below, Tenant shall not be obligated to repair any damage caused by
fire or other casualty covered by the insurance to be maintained by Tenant
pursuant to subparagraph 11(A) below, except that Tenant shall be obligated to
repair all wind and/or other damage to glass.
B. Tenant shall not damage any load bearing walls of the
Premises or disturb the integrity and support provided by any such wall, and
shall, at Tenant's sole cost and expense, promptly repair any damage or injury
to any such wall caused by Tenant or its employees, contractors, agents or
invitees.
C. In connection with Tenant's obligations under subparagraph
5(A), Tenant shall establish, at its own cost and expense, a preventative
maintenance/service program with a maintenance contractor for servicing all hot
water, heating and air conditioning systems and equipment within the Premises.
(With respect to the heating and air
- 3 -
<PAGE> 4
conditioning systems and equipment, such program shall provide for the regular
replacement or cleaning of all filters incorporated into such system and
equipment or associated therewith.)
D. In the event Tenant fails to make (or have made) the
repairs and/or replacements described in this Paragraph 5 within thirty (30)
days of notice of the need for said repairs and/or replacements from Landlord,
or if such repairs and/or replacements are not reasonably capable of being made
within said thirty (30) day period, Tenant fails to commence the making of such
repairs and/or replacements within said thirty (30) days or thereafter fails to
diligently pursue to completion the making of such repairs and replacements,
then Landlord may enter the Premises and perform such repairs and/or
replacements. In the event Landlord performs the repairs and/or replacements
pursuant to this subparagraph 5(D), Tenant shall reimburse Landlord for the
out-of-pocket costs and expenses incurred in connection with such repairs and/or
replacements.
6. Alterations.
A. Except as provided in subparagraph 6(B), Tenant shall not
make any material alterations, additions or improvements to the Premises
(including but not limited to roof and wall penetrations), without the prior
written consent of Landlord which consent shall not be unreasonably withheld or
delayed by Landlord.
B. Tenant shall "finish-out" the portion of the Premises
depicted on Exhibit "B" attached hereto (the "Warehouse Space") so that the
Warehouse Space is finished-out to a standard of quality that is consistent with
either the space in the Premises that is then occupied by Tenant for office
purposes, or the space in the Premises Occupied by tenants for retail purposes
under the Existing Leases.
7. Signs. Tenant and the tenants under the Existing Leases may
maintain and continue to use their respective signs installed upon the Premises
in the same places(s) that such signs are located upon the Premises on the date
this Lease is executed by Tenant subject, however, to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant shall,
at Tenant's sole cost and expense, remove all such signs by the termination of
this Lease. Such removals shall be made in such manner as to avoid injury or
defacement of the building and other improvements.
8. Inspection. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the Premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
Premises or in order to make such repairs as may be permitted to be made by
Landlord under the terms of this Lease, and for the purpose of showing the
Premises to any prospective or future tenant during the last six (6) months of
the term of this Lease, then-present mortgagee(s) and/or prospective purchasers
or mortgagee(s); provided, however, that Landlord shall have the right, but not
the obligation, to enter the Premises, without notice to Tenant, at any time
during the existence of an emergency and take
- 4 -
<PAGE> 5
whatever action Landlord deems necessary, in its sole discretion, to cure and/or
remedy such emergency condition or the effects thereof.
9. Utilities. Tenant shall pay for all water, gas, heat, light,
power, telephone, slower, sprinkler charges and other utilities and services
used on or from the Premises, together with any taxes, penalties, surcharges or
the like pertaining thereto and any maintenance charges for utilities. All
accounts relating to utilities used on or from the Premises shall be maintained
in the name of Tenant. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises.
10. Assignment and Subletting.
A. Except as provided in Subparagraph 10(B), Tenant may not
assign or sublet any or all of its rights under this Lease without Landlord's
prior written consent, such consent not to be unreasonably withheld or delayed.
B. Notwithstanding anything to the contrary in subparagraph
10(A), Tenant may, at any time, without Landlord's consent, assign or sublet any
or all of its rights under, or all or any portion of the Premises covered by,
this Lease so long as the express terms of the agreement pursuant to which
Tenant so assigns such rights or sublets such portion of the Premises provides
for monthly rental, on a per square foot basis, of not less than ninety percent
(90%) of the Per Square Foot Rent (defined below) (Such an assignment or
sublease being hereafter referred to as a "Qualified Sublease"). As used herein,
the term "Per Square Foot Rent" shall mean an amount equal to the amount of
monthly Refit due hereunder divided by the total number of square feet in the
improvements constituting a part of the Premises.
In connection with any Qualified Sublease, notwithstanding
anything to the contrary in this Lease, Tenant may, pursuant to a separate
written agreement, subsidize the payment of rent due under any Qualified
Sublease, or provide to any subtenant/assignee under a Qualified Sublease such
other rental concessions as Tenant and such subtenant/assignee may agree
(provided, however, that no such rental concession shall be enforceable against
Landlord). Such separate written agreement shall not affect the Tenant's rights
under this Lease or the subtenant's assignee's rights under such
sublease/assignment.
11. Insurance and Liability.
A. Fire and Casualty Insurance. Tenant agrees to maintain at
all times from and after the Commencement Date through the expiration of the
term hereof standard fire and extended coverage insurance covering the
improvements on the Premises in an amount not less than the full "replacement
cost" thereof as such term is defined in the Replacement Cost Endorsement to be
attached thereto, insuring against the perils covered by fire and extended
coverage insurance policies, and against vandalism, malicious mischief, flood
and special extended perils (i.e., "all risks" as such term is used in the
insurance industry), such
- 5 -
<PAGE> 6
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
State of Texas for use by insurance companies admitted in such state for the
writing of such insurance on risks located within such state. Subject to the
provisions of paragraph 12 below, such insurance shall be for the sole benefit
of Landlord and/or any Lien Holder (as defined below) and under Landlord's sole
control. Certified copies of such policies, together with receipts evidencing
payment of premiums therefor, shall be delivered to Landlord prior to the
Commencement Date. If Tenant fails to deliver such policies or certificates on
or before the Commencement Date, Landlord shall have no duty to deliver
possession of the Premises to Tenant until such policies or certificates are
provided, but such failure by Tenant shall not delay the Commencement Date or
have any effect on Tenant's other obligations hereunder, including, without
limitation, the obligation to pay Rent. Not less than fifteen (15) days prior to
the expiration date of any such policies, certified copies of the renewals
thereof (bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby. If Tenant fails
to obtain or maintain such policy of insurance, then in addition to any other
remedy Landlord may have for such default, Landlord may obtain the required
insurance and Tenant shall reimburse Landlord, on demand, for the cost
associated therewith, together with interest on the amount paid by Landlord at
the rate of ten percent (10%) per annum from the date of such payment by
Landlord until payment by Tenant. Any payment to be made pursuant to this
subparagraph A with respect to the calendar year in which this Lease terminates
shall be prorated. Such policy or policies shall be procured by Tenant from
reputable insurance companies satisfactory to Landlord.
B. Liability and Liability Insurance. Landlord shall not be
liable to Tenant or Tenant's employees, agents, patrons, invitees, business
invitees, guests or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the Premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants, invitees, business invitees, guests or employees, or of any other
person entering upon the Premises, or Caused by the buildings and improvements
located on the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the Premises, or due to any
cause whatsoever (except where due to Landlord's negligent acts or omissions or
Landlord's willful misconduct), and TENANT HEREBY COVENANTS AND AGREES THAT IT
WILL AT ALL TIMES INDEMNIFY AND HOLD SAFE AND HARMLESS THE PROPERTY, LANDLORD
(INCLUDING ANY INDIVIDUALS OR ENTITIES WHICH CONSTITUTE LANDLORD), LANDLORD'S
AGENTS AND EMPLOYEES FROM ANY LOSS, LIABILITY, CLAIMS, SUITS, COSTS, EXPENSES,
INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES AND DAMAGES, BOTH REAL AND ALLEGED,
ARISING OUT OF ANY SUCH DAMAGE OR INJURY; EXCEPT INJURY TO PERSONS OR DAMAGE TO
PROPERTY TO THE EXTENT SAME IS CAUSED BY LANDLORD'S NEGLIGENT ACTIONS OR
OMISSIONS OR BY LANDLORD'S WILLFUL
- 6 -
<PAGE> 7
MISCONDUCT. Tenant shall procure and maintain from the Commencement Date through
the expiration of the term of this Lease a policy or policies of insurance, at
its sole cost and expense, insuring both Landlord and Tenant against all claims,
demands or actions arising out of or in connection with; (i) the Premises; (ii)
the condition of the Premises; (iii) Tenant's operations in and maintenance and
use of the Premises; and (iv) Tenant's liability assumed under this Lease, the
combined single limits of such policy or policies to be in the amount of not
less than $1,000,000 per occurrence. Certified copies of all policies, together
with receipts evidencing payment of premiums therefor, shall be delivered to
Landlord prior to the Commencement Date. If Tenant fails to deliver such
policies or certificates on or before the Commencement Date, Landlord shall have
no duty to deliver possession of the Premises to Tenant until such policies or
certificates are provided, but Such failure by Tenant shall not delay the
Commencement Date or have any effect on Tenant's other obligations hereunder,
including, without limitation, the obligation to pay Rent. Not less than fifteen
(15) days prior to the expiration date of any described policies, certified
copies of the renewals thereof (bearing notations evidencing the payment of
renewal premiums) shall be delivered to Landlord. Such policies shall further
provide that not less than thirty (30) days written notice shall be given to
Landlord before such policy may be canceled or changed to reduce insurance
provided thereby.
C. Business Interruption Insurance. Tenant agrees to maintain
at all times from and after the Commencement Date through the expiration of the
term hereof, business interruption insurance in an amount sufficient to cover
the Rent and all additional rent payable under this Lease for a period of at
least one (1) year.
D. Waiver of Subrogation. In the event the Premises or its
contents are damaged or destroyed by fire or other casualty for which insurance
is maintained, or an employee sustains an injury covered by any Workers
Compensation insurance maintained by Tenant (or such damage or injury is of a
type for which insurance was required to be maintained under the terms of this
Lease), the rights, if any of Tenant against Landlord with respect to such
damage, destruction or injury are waived with respect to both, and to the extent
of both, losses covered by insurance (or which should have been covered under
the terms of the insurance required to be maintained by Tenant under the terms
of this Lease) and losses not covered due to deductibles, coinsurance penalties,
insurance carrier insolvency, disputes with the insurance carrier regarding
coverage or under-insurance. All policies of fire and/or extended coverage,
other insurance covering the Premises or its contents required hereunder to be
maintained by Tenant shall contain a clause or endorsement providing in
substance that the insurance shall not be prejudiced if the insured has waived
right of recovery from any person or persons prior to the date and time of loss
or damage, if any. The failure of Tenant to obtain such endorsement, however,
shall not negate or otherwise adversely affect the waiver herein set forth,
which waiver in all instances shall be binding upon Tenant and Tenant's
respective insurers.
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<PAGE> 8
E. Rating of Insurers. Insurance required hereunder shall be
in companies holding "general policyholders rating" of at least "A Minus", or
such other rating as may be required by a lender having a lien on the Premises,
as set forth in the in the most current issue of "Best's Insurance Guide".
F. Insurance of Sublessee's. Any insurance required to be
maintained by Sublessees of the Premises shall list Landlord as an additional
insured party on the policy, and copies of all certificates of such policies
must be delivered to Landlord. Additionally, any insurance policies required to
be maintained by tenants under the Existing Leases must be reissued, naming
Landlord as an additional insured party, and a certificate of such policy (as
reissued) must be delivered to Landlord.
Not less than fifteen (15) days prior to the expiration of
any of the policies described in this subparagraph 11(F), certified copies of
the renewals thereof (bearing notations evidencing the payment of renewal
premiums) shall be delivered to Landlord. Such policies shall further provide
that not less than thirty (30) days written notice shall be given to Landlord
before such policy may he canceled or changed to reduce insurance provided
thereby.
12. Fire and Casualty Damage.
A. Tenant shall give immediate written notice to Landlord of
any damage caused to the Premises by fire or other casualty.
B. In the event the Premises shall be damaged or destroyed by
fire or other casualty, Landlord at its option may either terminate this Lease
or elect to rebuild and repair the Premises. Landlord shall give written notice
to Tenant of its election within thirty (30) days after the date it receives
notice of such casualty and if Landlord elects to rebuild and repair shall
proceed to do so with reasonable diligence; provided, however, that if Landlord
has not completed the repair of the Premises on or before the date which is
sixty (60) days from and after the date Landlord learns of the casualty, Tenant
shall be entitled to terminate this Lease at any time thereafter but prior to
the date such repair and restoration is completed.
C. Landlord's obligation to rebuild and repair under this
paragraph 12 shall in any event be limited to restoring the Premises to
substantially the condition in which the same existed prior to such casualty,
exclusive of any alterations, additions, improvements, fixtures and equipment
installed by Tenant. Tenant agrees that promptly after completion of Landlord's
repairs, Tenant will proceed with reasonable diligence and at Tenant's sole cost
and expense to restore, repair, and replace all alterations, additions,
improvements, fixtures, signs and equipment installed by Tenant.
D. Tenant agrees that during any period of reconstruction or
repair of the Premises, it will continue to operate its business within the
Premises to the extent that same is
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<PAGE> 9
practical. During the period from the occurrence of any casualty until
Landlord's repairs are completed, the rent shall be reduced to such extent as
may be fair and reasonable under the circumstances.
E. Notwithstanding anything herein to the contrary, in the
event a holder of any indebtedness secured by a lien on the Premises (a "Lien
Holder") requires that the insurance proceeds (or any material portion thereof)
arising as the result of any fire or other casualty be applied to the
indebtedness held by the Lien Holder, then Landlord shall have the right to
terminate this Lease by delivering written notice of termination to Tenant
within thirty (30) days after such requirement is asserted by any such Lien
Holder.
F. Landlord and Tenant waive the provisions of any statutes
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
13. Condemnation.
A. If the whole or any substantial pail of the Premises should
be taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by private purchase in lieu thereof and the taking would prevent
or materially interfere with the use of the Premises for the purpose for which
they are being used, this Lease shall, at the election of either Landlord or
Tenant, terminate and the rent shall be abated during the unexpired portion of
this Lease, effective as of the date the physical taking of said Premises.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this Lease
is not terminated as provided in the subparagraph above, this Lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances.
C. All compensation awarded for any taking, or resulting from
any action or proceedings in lieu thereof, whether for the whole or a portion of
the Premises, shall be the sole property of Landlord without any participation
by Tenant, and Tenant hereby expressly waives all claims for compensation and
hereby assigns to Landlord all rights with respect thereto; provided, however,
that Tenant may claim and recover directly from the condemning authority (if
permitted by law), such compensation as may be separately awarded or recovered
by Tenant in Tenant's own right for moving expenses, the expense of removing
Tenant's merchandise, furniture, fixtures and equipment or the loss of Tenant's
business goodwill.
14. Holding Over. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession of the Premises to
Landlord; provided, however, that upon such tender of possession of the Premises
to Landlord by Tenant, the Premises and
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<PAGE> 10
the equipment and systems used therein, including without limitation, the HVAC
system, shall be in at least the same condition in which the Premises and such
equipment and systems were in on the date hereof, normal wear and tear excepted.
Notwithstanding anything contained herein to the contrary, if Tenant holds over,
any such holding over shall be deemed to be a tenancy at sufferance and the rent
during any such period of time shall be one and one-quarter (1.25) times the
rent in effect on the termination date, computed on a daily basis for each day
of the hold over period. The preceding provisions of this paragraph 14 shall not
be construed as Landlord's consent for Tenant to hold over.
15. Quiet Enjoyment. Landlord agrees that upon Tenant's paying the
rent and performing and observing the agreements and conditions contained herein
on its part to be performed and observed, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises and all rights of Tenant hereunder
during the term of this Lease without any manner of hindrance or molestation,
subject, nevertheless, to the terms and conditions of this Lease, any mortgage
affecting the Premises, zoning ordinances and other building and fire ordinances
and governmental regulations relating to the use of the Premises, and easements,
restrictions and other conditions of record. Landlord represents and warrants
that it has full right and authority to enter into this Lease.
16. Events of Default. The following events shall be deemed to be
events of default by Tenant under this Lease:
(a) Tenant shall fail to pay any installment of the rent
herein reserved when due, of any payment with respect to taxes hereunder when
due, or any other payment or reimbursement to Landlord required herein when due,
and such failure shall continue for a period of five (5) days from the date of
notice of such non-payment is delivered by Landlord to Tenant.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make a general assignment for the benefit of
creditors, or shall permit the Premises or the leasehold estate created hereby
to be taken on execution or other process of law in any action against Tenant.
(c) Tenant shall file a petition, or a petition is filed
against Tenant, under any section or chapter of the United States Bankruptcy
Code (Title 11 of the United States Code), as amended, or under any similar law
or statute of the United States or any State thereof; or Tenant shall be
adjudged a bankrupt or insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or
Substantially all of the assets of Tenant and such receivership or trusteeship
is not terminated within ninety (90) days.
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<PAGE> 11
(e) Tenant shall fail to comply with any term, provision or
covenant of this Lease (other than the foregoing in this Paragraph 16), and
shall not cure such failure within thirty (30) days after written notice thereof
to Tenant; provided, however, that if such default is not reasonably susceptible
to being cured within thirty (30) days, then Tenant shall, provided it has
commenced to cure such default within said thirty (30) day period and is
diligently prosecuting the completion of such, have such additional period of
time as is reasonably necessary to effect such cure.
(f) Tenant, subject to any applicable cure or grace periods,
shall fail to comply with any covenants as to Tenant's financial condition made
in that certain Amended and Restated Credit Agreement, by and among Eye Care
Centers of America, Inc., Banque Indosuez, New York Branch, as Agent, and the
lending institutions named therein, amending that certain Revolving Credit
Agreement dated October 7, 1993, including, but not limited to the debt to
equity ratios and the net worth requirements set forth therein.
17. Landlord's Remedies. Upon the occurrence of any of such events of
default described in Paragraph 16 hereof, Landlord shall have the option to
pursue any one or more of the remedies available to Landlord at law or in equity
in connection with such event of default, without any notice or demand to Tenant
whatsoever, including, without limitation:
(i) The right to enter upon and take possession of the Premises,
without terminating this Lease, and expel or remove Tenant and
any other person who may be occupying the Premises, or any part
thereof, without being liable for prosecution or any claim for
damages therefor. Thereafter, Landlord shall use good faith,
reasonable efforts to relet the Premises, or any part thereof,
in the name of Landlord, or otherwise, in a commercially
reasonable manner and for such term or terms (which may be
greater or less than the period which would otherwise have
constituted the balance of the Term of this Lease) and on such
conditions as Landlord, in its reasonable discretion, may
determine and may collect and receive the rent therefor. Upon
such reletting, all rentals received by Landlord shall be
applied, first, to the payment of any reasonable costs and
expenses of such reletting, including brokerage fees, attorneys'
fees and costs of any alterations, repairs or Tenant's
improvements; second, to the payment of rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord
and applied in payment of future rent as the same may become due
and payable. If such rentals received from such reletting during
any month shall be less than that to be paid during that month
by Tenant, Tenant shall pay any deficiency to Landlord. No such
re-entry taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease
unless a written notice of such election be given to Tenant or
unless the termination is decreed by a court of competent
jurisdiction. Notwithstanding any such reletting, Landlord may
at any time thereafter elect to terminate this Lease for such
previous breach, as described below; or
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<PAGE> 12
(ii) The right to terminate this Lease. Should Landlord at any time
terminate this Lease for any breach, Landlord may recover from
Tenant all damages Landlord may incur by reason of such breach.
In such event, Landlord's damages shall consist of the sum of
(i) all rent and other charges accrued to the date of
termination and previously unpaid; and (ii) the present value
(calculated using a ten percent (10%) discount rate) of the
balance of the Rent (at the then current rate) which would have
been due for the balance of the Term, minus the present value
(calculated using a ten percent (10%) discount rate) of the fair
market value of the Premises for the balance of the Term. Such
amount shall be Landlord's final, liquidated damages, it being
agreed that actual damages would be difficult if not impossible
to ascertain and that such amount represents a reasonable
approximation of any actual damages which would be incurred.
All rights and remedies of Landlord herein existing at law or in equity
are cumulative and the exercise of one or more rights or remedies shall not be
taken to exclude or waive the right to the exercise of any other. No act or
thing done by the Landlord or its agents during the term hereby granted shall be
deemed a termination of this Lease or an acceptance of the Surrender of the
Premises, and no agreement to terminate this Lease or accept a surrender of said
Premises shall be valid unless such agreement is in writing and signed by
Landlord. No waiver by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained.
18. Tenant's Remedies. In the event that Landlord shall default in
the performance of any covenant, condition or other provision of this Lease, and
such default remains uncured beyond any applicable cure period expressly
provided herein or, if no such cure period is provided, beyond thirty (30) days
from and after the date Landlord receives notice of such default (or such longer
period as may be reasonably required to cure such default with the exercise of
due diligence and best efforts so long as Landlord promptly commences and
diligently pursues such cure without interruption) (except in the case of
emergency, in which case Tenant shall not be obligated to give Landlord notice
and opportunity to cure), Tenant may, at its option, without waiving any claim
for breach of Landlord's obligations, cure such default for Landlord at
Landlord's expense. Landlord shall reimburse Tenant upon Tenant's demand all
costs and expenses incurred by Tenant in curing Landlord's default. All such
sums not reimbursed to Tenant on demand shall accrue interest at the highest
rate permitted by law, and may be offset by Tenant against rental payments due
under this Lease.
In the event of any breach or threatened breach by Landlord of any of
the covenants, agreements, terms or conditions contained in this Lease, Tenant
shall be entitled to enjoin such breach or threatened breach and shall have the
right to invoke any right and remedy allowed at law or in equity or by statute
or otherwise.
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<PAGE> 13
19. Mortgages. Subject to the non-disturbance condition described
below, Tenant accepts this Lease subject and subordinate to any mortgages)
and/or deed(s) of trust now or at any time hereafter constituting a lien or
charge upon the Premises or the improvements situated thereon (except that at
the election of such mortgagee this Lease may be deemed superior to such
mortgagee's mortgage); provided, however, that so long as Tenant complies with
all of the terms of this Lease imposed upon Tenant, any foreclosure of such
mortgage shall not terminate or affect this Lease, and Landlord agrees that any
mortgagee shall enter into a Subordination, Attornment and Non-Disturbance
Agreement with Tenant. With respect to any specific mortgage, the foregoing
subordination is expressly conditioned. upon Landlord delivering to Tenant a
Subordination, Attornment and Non-Disturbance Agreement in form acceptable to
Tenant, and its reasonable discretion.
20. Mechanic's Liens. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
Premises. Tenant covenants and agrees that it will save and hold Landlord
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease.
21. Notices.
(a) All rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at the address hereinbelow
set forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Notwithstanding anything
contained herein to the contrary, Tenant's obligation to pay rent and any other
amounts to Landlord under the terms of this Lease shall not be deemed satisfied
until such rent and other amounts have been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set forth, or at
such other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith. Amounts
owing to Tenant under the terms of this Lease shall not be deemed satisfied
until actually received by Tenant.
(c) Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered (whether actually received
or not) two (2) days after the date the same is deposited in the United States
Mail, postage prepaid, Certified or Registered Mail, return receipt requested,
addressed to the parties hereto at the respective addresses set out below, or at
such other address as they have theretofore specified by written notice
delivered in accordance herewith:
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<PAGE> 14
LANDLORD: TENANT:
John D. Byram Eye Care Centers of America, Inc.
Dallas Mini #252, Ltd. 11103 West Avenue
Dallas Mini #343, Ltd. San Antonio, Texas 78213-1392
c/o JDB Real Properties, Inc.
510 South Congress, Suite 400
Austin, Texas 78704
All parties included within the terms "Landlord" and "Tenant", respectively,
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
22. Miscellaneous.
A. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Landlord shall have the right to assign any of its rights and obligations under
this Lease in connection with a sale of the Premises to a third party, and, upon
execution of an assumption of Landlord's obligations hereunder by such
transferee, Landlord shall be relieved of any further obligations under this
Lease, and the term "Landlord" shall thenceforth mean such transferee.
C. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this Lease.
D. The captions inserted in this Lease are for convenience
only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the interpretation of
this Lease.
E. Landlord shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Tenant, so long as the
performance or the nonperformance of the covenant or obligation is delayed,
caused or prevented by an "Act of God," "force majeure," or Tenant. An "Act of
God" or "force majeure" is defined for the purpose of this Lease as strikes,
lock-outs, sit-downs, material or labor restrictions by any governmental
authority, unusual shortages of material, unusual transportation delays, riots,
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<PAGE> 15
floods, wash-outs, explosions, earthquakes, fire storms, weather (including wet
grounds or inclement weather which prevents construction), acts of the public
enemy, wars, insurrections and any other cause not reasonably within the control
of Landlord and which by the exercise of due diligence Landlord is unable,
wholly or in part, to prevent or overcome.
F. This Lease may not be altered, changed or amended except by
an instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as
of the expiration of earlier termination of the term of this Lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including without limitation all
heating and air conditioning systems and equipment therein, in good condition
and repair, normal wear and tear excepted. Tenant shall also, prior to vacating
the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which this Lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied as the case may be.
H. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease shall not be affected thereby, and it is also
the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added as a part of this Lease contract a clause or provision as similar in terms
to such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
I. Until this Lease is duly executed by Landlord and Tenant,
this Lease shall be treated as an offer with the Premises being subject to prior
lease without notice and such offer being subject to withdrawal or
non-acceptance by Landlord without notice, and this Lease shall not be valid or
binding unless and until it is fully and duly executed by Landlord and Tenant.
J. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the date of execution set forth
below.
K. The time of the performance of all the covenants,
conditions and agreements of this Lease is of the essence.
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<PAGE> 16
L. It is expressly agreed by Tenant, as a material
consideration for the execution of this Lease, that this Lease, with its
specific references to written extrinsic documents, if any, is the entire
agreement of the parties; that there are, and were, no verbal representations,
warranties, understandings, stipulations, agreements or promises pertaining to
this Lease or to the expressly mentioned written extrinsic documents, if any,
not incorporated in writing in this Lease.
M. Neither Landlord nor Tenant has contacted any real estate
broker, finder or similar person in connection with this Lease. With respect to
this Lease and the payment of brokers' commissions, Landlord agrees to indemnify
and hold harmless Tenant from and against any liability or claim, whether
meritorious or not, arising with respect to any broker whose claim arises by,
through, or on behalf of Landlord. With respect to this Lease and the payment of
brokers' commissions, Tenant agrees to indemnify and hold harmless Landlord from
and against any liability or claim, whether meritorious or not, arising with
respect to any broker (unless Tenant has executed and independent commission
agreement with any such broker, in which event such broker shall not be excluded
from this indemnity), whose claim arises by, through or on behalf of Tenant.
23. Hazardous Substances.
A. As used herein, "Hazardous Substances" means any substance
that has toxic, corrosive, flammable or reactive properties and that is
regulated by the State of Texas or the United States Government. Hazardous
Substances include, but are not limited to, asbestos, polychlorobiphenyls
("PCBs"), flammable explosives, radioactive materials, chemical carcinogens,
pollutants, effluent, contaminants, emissions and petroleum.
B. Tenant hereby agrees, warrants and represents that Tenant,
its agents, employees or contractors have not prior to the date hereof, and will
not during the term hereof, knowingly store, place or discard Hazardous
Substances in the Premises, other than cleaning supplies or other materials
customarily used by Tenant in the course of its operations which may constitute
Hazardous Substances which will at all times be stored and discarded in
compliance with any applicable laws. Notwithstanding the immediately preceding
sentence, in the event Tenant, its agents, employees or contractors bring upon,
store on or in, use on or in, or install in, the Premises any materials that are
then known to be, or are later classified as, Hazardous Substances, then Tenant
shall, upon written demand from Landlord, promptly proceed to remove such
Hazardous Substances, at Tenant's sole cost and expense, in accordance with all
applicable governmental regulations. Tenant hereby agrees to indemnify and hold
Landlord harmless from and against and to reimburse Landlord with respect to any
and all claims, demands, causes of action, loss, damage, liabilities, cost and
expenses (including attorneys' fees and court costs) of any and every character,
known or unknown, fixed or contingent, asserted against or incurred by Landlord
at any time and from time to time by reason of, or arising out of, the presence
of any Hazardous Substances within the Premises
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<PAGE> 17
or in, on or under the building, or the Premises, the presence of which was
caused by an act of Tenant.
24. Title: Condition Precedent.
The terms of this Lease are expressly conditioned upon the Landlord
obtaining title to the Premises by August 19, 1997. In the event Landlord fails
to obtain title to the Premises by said date, Landlord may, at any time
thereafter prior to obtaining title to the Premises, deliver written notice to
Tenant that this Lease shall be null, void and of no legal effect and upon the
delivery of such notice to Tenant this Lease shall be deemed to be null, void
and of no legal effect. Multiple original copies of this Lease may be executed,
and the execution of this Lease may be through the execution by the parties of
separate counterparts. All of the original copies of this Lease together shall
constitute one agreement, binding on all of the parties hereto notwithstanding
that the parties hereto may or may not be signatories to the same counterpart.
For purposes of this Lease, each of the parties hereto agrees that a copy
(including a facsimile copy) of the signature of a person executing this Lease
shall be effective as an original signature and shall cause the copy of this
Lease upon which such copy of that signature appears to be legally binding and
effective as an execution counterpart hereof. Each of the undersigned parties
authorizes the assembly of one or more original copies of this Lease through the
combination of the several executed counterpart signature pages with one or more
bodies of this Lease, including the Exhibits, if any, to this Lease, such that
each such original copy of this Lease shall consist of (i) the body of this
Lease, (ii) counterpart signature pages which collectively include all of the
signatures of the parties hereto, and (iii) the Exhibits, if any, to this Lease.
Each such Lease shall constitute one original of this Lease.
EXECUTED to be effective as of this 19th day of August, 1997 (the
---------
"effective date").
"LANDLORD" "TENANT"
EYE CARE CENTERS OF AMERICA, INC.,
a Texas corporation
John D. Bryam,
by Gary D. Stillwell
/s/ Attorney in Fact By: /s/ Mark Pearson
- --------------------------------- ------------------------------
John D. Byram Printed Name: Mark Pearson
--------------------
Title: CFO
----------------------------
DALLAS MINI #262, LTD., a
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<PAGE> 18
Texas limited partnership
By: JDB Real Properties, Inc., a
Texas corporation, General Partner
By: /s/ Gary D. Stillwell
------------------------
Gary D. Stillwell, President
DALLAS MINI #343, LTD., a
Texas limited partnership
By: Diller Corporation, a
Texas corporation, General Partner
By: /s/ Gary D. Stillwell
------------------------
Gary D. Stillwell, President
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<PAGE> 19
EXHIBIT "A"
PROPERTY DESCRIPTION
Lot 28, Block 38, New City Block 11754, Lockhill Estates Commercial, Unit 1, an
addition to the City of San Antonio, Bexar County, Texas, according to the map
or plat thereof, recorded in, volume 9514, Page 146, Deed and Plat Records of
Bexar County, Texas.
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<PAGE> 1
EXHIBIT 10.16
1997 INCENTIVE PLAN
FOR
KEY MANAGEMENT
The Eye Care Centers of America, Inc. 1997 Incentive Plan hereafter referred to
as "the Company" and "the Plan") for Key Management is designed to attract,
retain, and reward key management people who contribute to the achievement of
Company objectives. The Plan includes those participants who are most able to
influence the Company's growth and profitability as determined by the
President/C.E.O.
The Plan is intended to support the Company's compensation philosophy, which is
to provide superior direct compensation opportunities for superior financial and
individual performance.
OBJECTIVES
The specific objectives of the Plan are to:
- motivate and reward key management for superior performance in
achieving the Company's financial goals.
- strengthen the commonality of shareholder and management interests.
- enhance the Company's ability to acquire and retain qualified
management.
FEATURES
The following is a summary of the major features of the Plan:
PLAN YEAR
The Plan year shall commence January 1st and end December 31st of each year.
ELIGIBILITY
Participation in the Plan is based on approval from the President/C.E.O.
The participant should be a regular full-time employee of the Company. A
Participant who subsequently is on a leave of absence away from work for a
period longer than 90 days during the Plan year shall not be eligible for an
incentive.
INCENTIVE OPPORTUNITY
The incentive award opportunity for 3 Participants in the Plan is as follows:
<PAGE> 2
Company Objective: EBITDA Weighted: 75%
Individual Objective: 3 - 4 Performance Weighted: 25%
Objectives
COMPANY OBJECTIVE
"EBITDA" shall mean earnings before interest expense, income tax, depreciation
and amortization as determined in accordance with generally accepted accounting
principles. Note: EBITDA thresholds referenced in this Plan are for the base
business. Acquisitions not comprehended in the Plan will be treated as a
discretionary issue by the Compensation Committee.
No Bonus shall be paid with respect to the fiscal year unless minimum EBITDA (as
defined below as set forth below (in thousands), is exceeded for the year. The
Bonus shall be 30% of Base Salary if target EBITDA, as set forth below (in
thousands), is achieved for the year, shall be 45% of Base Salary if superior
EBITDA, as set forth below (in thousands), is achieved or exceeded for the year
and shall be 60% of Base Salary if Super EBITDA, as set forth below (in
thousands) is achieved or exceeded for such year. If EBITDA achieved for the
fiscal year exceeds minimum EBITDA but does not exceed target EBITDA, the Bonus
shall be such percentage of Base Salary between 0% and 30% calculated on a
straight line basis, as corresponds to the relative achievement of EBITDA, with
0% corresponding to minimum EBITDA and 30% corresponding to target EBITDA. If
EBITDA achieved for the fiscal year exceeds target EBITDA but is equal to or
less than Superior EBITDA, the Bonus shall be such percentage of Base Salary
between 30% and 45%, calculated on a straight line basis, as corresponds to the
relative achievement of EBITDA, with 30% corresponding to target EBITDA and 45%
to Superior EBITDA but is equal to or less than Super EBITDA, the Bonus shall be
such percentage of Base Salary between 45% and 60%, calculated on a straight
line basis, as corresponds to the relative achievement of EBITDA, with 45%
corresponding to Superior EBITDA and 60% to Super EBITDA.
Schedule of payout as a % of
"EBITDA annual W-2 Base Salary
1997 Earnings
------- ----------------------------
Super $ 44,000 60%
Superior $ 41,000 45%
Target $ 38,000 30%
Minimum $ 36,000 >0%
*Expressed in thousands
-2-
<PAGE> 3
PERFORMANCE OBJECTIVES
Before the beginning of each Plan year, Company performance objectives will be
established by the President/C.E.O. Three to four individual objectives will be
set using the following criteria:
- Objectives must be quantitative and well defined.
- Objectives must be set and weighted by the Participant's supervisor and
discussed with the Participant on an ongoing basis.
- Objectives must be approved by the President/C.E.O.
- Objectives must be submitted to Human Resources.
Individual incentive awards may be paid when the Company's performance exceeds
the minimum EBITDA threshold and individual performance objectives are met. The
Board of Directors holds the right to amend this Plan and payout a discretionary
incentive award should the Board deem the payout appropriate.
PAYMENT
The incentive bonus will be determined following the completion of the audit of
the Company's financial statements. Payment will be in cash and made no later
than March 15 following the end of the Plan year.
WITHHOLDING
The Company shall have the right to deduct any sums as required to be withheld
by federal, state, or local tax laws with respect to the payment of any bonus
award. There is no obligation hereunder that any Plan Participant be advised of
the existence of the tax or the amount which the Company will be required to
withhold.
EMPLOYEE NEW HIRE/TRANSFER/PROMOTION DEMOTION
If an employee is hired, transferred, promoted or demoted into a position with
eligibility in the Plan, their incentive will be considered effective, for
purposes of the Plan, on the first day of the month following the hire,
transfer, promotion or demotion. Any incentive will be calculated on a pro-rata
basis.
EMPLOYMENT TERMINATION
If a Participant becomes permanently disabled or dies during or after the Plan
year, the Plan may award the Participant or his/her estate a bonus on a pro-rata
basis following the year-end closing.
-3-
<PAGE> 4
If the Participant leaves the Company for any reason other than disability of
death, the Participant will forfeit the right to a bonus payment. The
Participant must be on the payroll at the time the incentive payment is made to
receive payment.
PLAN ADMINISTRATION
The President/C.E.O. will have the sole discretionary authority to administer
the Plan in all of its details. All actions and determinations of the
President/C.E.O. will be final and binding upon all parties.
The company reserves the sole discretionary right to modify, amend or terminate
the Plan at any time, for any reason, with or without notice. If any questions
arise as to the administration of the Plan, the President/C.E.O. will serve as
the main contact person.
RIGHTS OF PLAN PARTICIPANTS
All payment made under this Plan will be made from the general assets of the
Company. No participant or other party will have any right to or interest in any
assets of the Company except as specifically provided in this Plan.
LIMITATION OF RIGHTS
The establishment, maintenance and provisions of the Plan will not be considered
or construed: (1) as giving to any employee any right to be continued in the
employment of the Company; (2) as limiting the right of the Company to
discipline to discharge any of its employees; (3) as creating any contract of
employment between the Company and any employee; or (4) as conferring any legal
or equitable right against the Company or any individual responsible for
administering the Plan.
NO ASSIGNMENTS
Amounts payable under the Plan will constitute general assets of the Company and
will not be subject to any claims by any creditor of or claimant against the
Participant; and any attempt to reach such amounts by any such creditor or
claimant, or attempt by the Participant to confer on any such creditor or
claimant any right or interest with respect to such amounts, will be null and
void. No amounts payable under the Plan will cause the Company to be liable for,
or subject to, any manner of debt or liability of any Participant.
GOVERNING LAW
This Plan shall be governed by, and construed in accordance with, the laws of
the State of Texas. Any claim or dispute arising under this Plan will be
adjudicated by a court of competent jurisdiction in the State of Texas.
-4-
<PAGE> 5
SEVERABILITY
If any of the provisions of the Plan are held to be invalid, such holdings will
not in any way affect the validity of the remainder of the Plan.
WRITTEN PLAN REQUIREMENT
No person has the authority to make any verbal statement of any kind which (1)
is legally binding upon the Company and/or (2) alters the Plan documents or
other documents maintained in conjunction with the Plan.
-5-
<PAGE> 6
KEY MANAGEMENT INCENTIVE
ACKNOWLEDGMENT
I, _______________________________________, acknowledge that I have received a
copy of the 1997 Key Management Incentive Plan for which I am eligible and I
agree to read and become familiar with its contents.
__________________________ ____________________________
Participant's Signature Date
-6-
<PAGE> 7
1997 KEY MANAGEMENT INCENTIVE AGREEMENT
___________________________ ___________________________
Participant's Name Participant's Title
Company Objectives: Weight
EBITDA Target: $38,000 75%
Discretionary: _______ 25%
---
100%
Target incentive:____________________ Maximum Incentive:______________
Individual Objectives:
Weighting
___________ 1. -------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
___________ 2. -------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
___________ 3. -------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
___________ 4. -------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
___________ 5. -------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-7-
<PAGE> 8
I agree that I fully understand all objectives as set forth above.
_________________________________ _________________________________
Participant's Signature/Date Supervisor's Signature/Date
_________________________________
President/C.E.O.'s Signature/Date
-8-
<PAGE> 1
EXHIBIT 10.17
1998 INCENTIVE PLAN
FOR
KEY MANAGEMENT
The Eye Care Centers of America, Inc. 1998 Incentive Plan (hereafter referred to
as "the Company" and "the Plan") for Key Management is designed to attract,
retain, and reward key management people who contribute to the achievement of
Company objectives. The Plan includes those participants who are most able to
influence the Company's growth and profitability as determined by the C.E.O.
The Plan is intended to support the Company's compensation philosophy, which is
to provide superior direct compensation opportunities for superior financial and
individual performance.
OBJECTIVES
The specific objectives of the Plan are to:
- - motivate and reward key management for superior performance in achieving
the Company's financial goals.
- - strengthen the commonality of shareholder and management interests.
- - enhance the Company's ability to acquire and retain qualified management.
FEATURES
The following is a summary of the major features of the Plan:
PLAN YEAR
The Plan year shall be the fiscal year from January 4, 1998 through January 2,
1999.
ELIGIBILITY
Participation in the Plan is based on approval from the C.F.O.
The participant should be a regular full-time employee of the Company. A
Participant who subsequently is on a leave of absence away from work for a
period longer than 90 days during the Plan year shall have his/her incentive
prorated based upon his/her active time in position.
INCENTIVE OPPORTUNITY
No performance bonus shall be paid with respect to the fiscal year unless
minimum EBITDA, as defined and set forth (in thousands) under Financial
Objectives, is exceeded for the year.
<PAGE> 2
Bonus maximums shall not exceed 60% of Base Salary.
Participant incentive awards will be based on weighted objectives of: (A) up to
75% on EBITDA as defined under Financial Objectives and/or Subsidiary/Region
Financial objectives and (B) a minimum of 25% on up to four individual
performance objectives consistent with the criteria outlined under Performance
Objectives.
FINANCIAL OBJECTIVES
"EBITDA" shall mean earnings for the Company before interest expense, income
tax, depreciation and amortization as determined in accordance with generally
accepted accounting principles. Note: EBITDA thresholds referenced in this Plan
are for the base business. Acquisitions not comprehended in the Plan will be
treated as a discretionary issue by the Compensation Committee.
No performance bonus shall be paid with respect to the fiscal year unless
minimum EBITDA, as set forth below (in thousands), is exceeded for the year. The
Bonus shall be 30% of Base Salary if target EBITDA, as set forth below (in
thousands), is achieved for the year, shall be 45% of Base Salary if superior
EBITDA, as set forth below (in thousands) is achieved for the year and shall be
60% of Base Salary if Super EBITDA, as set forth below (in thousands) is
achieved or exceeded for such year. If EBITDA achieved for the fiscal year
exceeds minimum EBITDA but does not exceed target EBITDA, the Bonus shall be
such percentage of Base Salary between 0% and 30% calculated on a straight line
basis, as corresponds to the relative achievement of EBITDA, with 0%
corresponding to minimum EBITDA and 30% corresponding to target EBITDA. If
EBITDA achieved for the fiscal year exceeds target EBITDA but is equal to or
less than Superior EBITDA, the Bonus shall be such percentage of Base Salary
between 30% and 45%, calculated on a straight line basis, as corresponds to the
relative achievement of EBITDA, with 30% corresponding to target EBITDA and 45%
to Superior EBITDA. If EBITDA achieved for the fiscal year exceeds superior
EBITDA but is equal to or less than Super EBITDA, the Bonus shall be such
percentage of Base Salary between 45% and 60%, calculated on a straight line
basis, as corresponds to the relative achievement of EBITDA, with 45%
corresponding to Superior EBITDA and 60% to Super EBITDA.
COMPANY BONUS AS A %
EBITDA* OF BASE SALARY
1998 EARNINGS
------- --------------
Super $52,200 60%
Superior $49,000 45%
2
<PAGE> 3
COMPANY BONUS AS A %
EBITDA* OF BASE SALARY
1998 EARNINGS
------- --------------
Target $45,500 30%
Minimum $41,000 >=0%
*Expressed in thousands
For executives who are paid on subsidiary or regional financial objectives in
lieu of, or in addition to Company EBITDA, minimum, target, superior, and super
objective levels will be set and payout as a percent of Base Salary will be
calculated in the same manner used for Company EBITDA as outlined in this
section.
PERFORMANCE OBJECTIVES
Each Plan year, Company performance objectives will be established by the C.E.O.
Three to four individual objectives may be set using the following criteria:
- - Objectives must be quantitative and/or well defined.
- - Objectives will be set and weighted by the Participant's supervisor.
- - Objectives must be approved by the C.E.O.
- - Objectives must be submitted to Human Resources.
- - Final results against objectives will be determined by the Participant's
supervisor and approved by the C.E.O.
No performance bonus shall be paid with respect to these individual objectives
unless minimum Company EBITDA, as defined and set forth (in thousands), under
Financial Objectives is exceeded for the year.
The portion of bonus earned as a result of performance against individual
objectives shall be calculated as the percent of base salary earned based on
Company EBITDA times the percentage of total bonus allocated to individual
objectives times the participant's base salary.
PAYMENT
Individual incentive awards may be paid when the Company's performance exceeds
the minimum Company EBITDA. The incentive bonus will be determined following the
completion
3
<PAGE> 4
of the audit of the Company's financial statements. Payment will be by check and
made no later than March 15th following the end of the Plan year.
The Board of Directors holds the right to payout a discretionary incentive award
should the Board deem the payout appropriate.
WITHHOLDING
The Company shall have the right to deduct any sums as required to be withheld
by federal, state, or local tax laws with respect to the payment of any bonus
award. There is no obligation hereunder that any Plan Participant be advised of
the existence of the tax or the amount which the Company will be required to
withhold.
EMPLOYEE NEW HIRE/TRANSFER/PROMOTION/DEMOTION
If an employee is hired, transferred, promoted or demoted into a position, with
eligibility in the Plan, their incentive will be considered effective, for
purposes of the Plan, on the first day of the month following the hire,
transfer, promotion or demotion. Any incentive will be calculated on a pro-rata
basis.
If an employee is demoted to a non-eligible position during the fiscal year,
he/she shall lose his/her bonus potential for the entire fiscal year.
EMPLOYMENT TERMINATION
If a Participant becomes permanently disabled or dies during or after the Plan
year, the Plan may award the Participant or his/her estate a bonus on a pro-rata
basis following the year-end closing. If the Participant leaves the Company for
any reason other than disability or death, the Participant will forfeit the
right to a bonus payment. The Participant must be on the payroll at the time the
incentive payment is made to receive payment.
PLAN ADMINISTRATION
The C.E.O. will have the sole discretionary authority to administer the Plan in
all of its details. All actions and determinations of the C.E.O. will be final
and binding upon all parties.
The company reserves the sole discretionary right to modify, amend or terminate
the Plan at any time, for any reason, with or without notice. If any questions
arise as to the administration of the Plan, the C.E.O. will serve as the main
contact person.
RIGHTS OF PLAN PARTICIPANTS
4
<PAGE> 5
All payments made under this Plan will be made from the general assets of the
Company. No participant or other party will have any right to or interest in any
assets of the Company except a specifically provide in this Plan.
LIMITATION OF RIGHTS
The establishment, maintenance and provisions of the Plan will not be considered
or construed: (1) as giving to any employee any right to be continued in the
employment of the Company; (2) as limiting the right of the Company to
discipline or discharge any of its employees; (3) as creating any contract of
employment between the Company and any employee; or (4) as conferring any legal
or equitable right against the Company or any individual responsible for
administering the Plan.
NO ASSIGNMENTS
Amounts payable under the Plan will constitute general assets of the Company and
will not be subject to any claims by any creditor of or claimant against the
Participant; and any attempt to reach such amounts by any such creditor or
claimant, or attempt by the Participant to confer on any such creditor or
claimant any right or interest with respect to such amounts, will be null and
void. No amounts payable under the Plan will cause the Company to be liable for,
or subject to, any manner of debt or liability of any Participant.
GOVERNING LAW
This Plan shall be governed by, and construed in accordance with, the laws of
the State of Texas. Any claim or dispute arising under this Plan will be
adjudicated by a court of competent jurisdiction in the State of Texas.
SEVERABILITY
If any of the provisions of the Plan are held to be invalid, such holdings will
not in any way affect the validity of the remainder of the Plan.
WRITTEN PLAN REQUIREMENT
No person has the authority to make any verbal statement of any kind which (1)
is legally binding upon the Company and/or (2) alters the Plan documents or
other documents maintained in conjunction with the Plan.
5
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT AND NON-COMPETITION AGREEMENT
EMPLOYMENT AGREEMENT AND NON-COMPETITION AGREEMENT dated December 31,
1996 by and between EYE CARE CENTERS OF AMERICA, INC., a Texas corporation (the
"Company") and Gary Hahs ("Executive").
WHEREAS, the Company desires to employ Executive and provide severance
pay in the event of termination without case as provided in this Agreement;
WHEREAS, the Company has adopted an enhanced Annual Incentive Plan for
Key Management in which Executive shall be permitted to participate upon
execution of this Agreement; and
WHEREAS, the Company intends to convey confidential information to
facilitate the employment of Executive; and WHEREAS, the Company seeks to
protect its legitimate business interests with regard to the conveyance of
confidential information to Executive in the event of the termination of
Executive's employment for any reason; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. This Agreement shall commence on December 31,
1996 and shall terminate on December 31, 1997 (the "Employment Term"), except as
otherwise provided in this Agreement. The Company, at its sole option and
discretion, may extend the term of this Agreement until December 31, 1998, upon
written notice to Executive on or before November 30, 1997.
2. Duties. During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance of
this duties hereunder and shall not engage in any other business, profession or
occupation for compensation or otherwise.
<PAGE> 2
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of not less than
$141,827, payable in arrears, in accordance with the usual payment practices of
the Company. Executive's Base Salary shall be subject to annual review for
possible increase, and the Company's sole discretion, at the end of February or
in March of each year during the Employment Term.
4. Incentive Compensation. The Executive shall be permitted to
participate in the Company's Annual Incentive Plan for Key Management and his
rights are governed solely by the terms of the Plan as it may be in effect from
time to time.
5. Stock Options. The Executive shall be permitted to participate in
the Company's Executive Stock Option Plan, and his rights are governed solely by
the terms of that Plan as it may be in effect from time to time, and his
Executive Stock Option Agreement(s) as in effect from time to time.
6. Employee Benefits. During the Employment Term, Executive shall be
provided employee benefits as shall be maintained by the Company from time to
time on the same basis as the other similarly situated executives of the
Company.
7. Business Expenses and Perquisites. The Company shall reimburse such
of Executive's travel, entertainment and other business expenses as are
reasonably and necessarily incurred by Executive during the Employment Term in
the performance of his duties hereunder, in accordance with the Company's
policies as in effect from time to time. During the Employment Term, Executive
shall be furnished with a car allowance in accordance with the Company's policy
as in effect from time to time.
- 2 -
<PAGE> 3
8. Termination. Notwithstanding Section 1, this Agreement shall
terminate automatically upon the death or disability of Executive.
9. Severance Payments on Termination.
(a) Without Cause by the Company. If Executive's employment is
terminated by the Company during the Employment Term without "cause,"
Executive shall receive in lieu of any other compensation, benefits or
payments, continued periodic payment of Base Salary for nine months
following date of termination. "Cause" shall be defined as set forth in
Section 4(f)(i)(A) through (E) of the Eye Care Centers of America
Executive Stock Option Plan effective in September, 1996. Severance pay
shall be forfeited and will cease immediately upon Executive entering
into competition as defined in Section (10)(a)(i) of this Agreement;
however, the Company's right to enforce the non-competition provisions
of this Agreement shall not end upon the Executive's forfeiture by
entering into competition.
(b) Disability. Upon termination of Executive's employment
hereunder for disability, Executive shall receive his Base Salary
through the date on which Executive is first eligible to receive
payment of disability benefits under the Company's employee benefit
plans as then in effect, and if no such plan is in effect, through the
month ending 180 days after onset of disability. "Disability" as used
herein shall mean the inability of Executive, notwithstanding any
reasonable accommodation the Company may make, to perform his customary
duties due to any condition of physical or mental illness, injury,
disease or other incapacity, which condition has existed or may
reasonably be expected to continue for six consecutive months or for an
aggregate of
- 3 -
<PAGE> 4
six months in any 24 consecutive months. Any question as to the
existence of the Disability of Executive as to which Executive and the
Company cannot agree shall be determined in writing by a qualified
independent physician mutually acceptable to Executive and the Company.
If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians
shall select a third who shall make such determination in writing. The
determination of disability made in writing to the Company and
Executive shall be final and conclusive for all purposes of the
Agreement.
(c) Death. Upon termination of Executive's employment
hereunder for death, Executive shall receive his Base Salary at the
rate in effect at the time of Executive's death through the end of the
month in which his death occurs.
(d) Executive shall not be entitled to any payment or benefit
upon termination of his employment, except for payments of Base Salary
expressly provided in this Section 9, any rights under the Company's
Executive Stock Option Plan and Agreement(s), and any statutory rights
such as COBRA.
10. Non-Competition. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company. Executive and the Company
agree that the Company will, in the course of Executive's employment, provide
Executive with highly confidential and sensitive information, which, if revealed
to the Company's competitors, would provide those competitors with an unfair
advantage over the Company. The Parties agree that the Company would not divulge
this information to Executive were it not for
- 4 -
<PAGE> 5
Executive's promise not to disclose this information as set forth in Section 9
of this Agreement. Accordingly, Executive agrees as follows:
(a)(i) During the Employment Term of this Agreement, including
any extension(s), and thereafter while receiving any severance pay
under Section 9(a) of this Agreement, Executive shall not enter into
any competitive endeavors with and shall not undertake any commercial
activity which is in direct competition with the Company, including
becoming an employee, owner, officer, agent or director of any firm or
person in any geographic areas in Texas, Ohio, or Arkansas, which
engages in optical retailing; and
(ii) Except in the event of a termination of employment by the
Company during the Employment Term with or without cause, Executive
shall not without the Company's written consent, for the longer of (a)
one year following termination of his employment or (b) until December
31, 1998, serve as an employee, owner, officer, agent or director of
any firm or person in any geographic areas in Texas, Ohio, or Arkansas
which engages in optical retaining. Nothing in this Section 10(a) shall
prohibit Executive from owning passive investments of not more than 1%
of the outstanding shares of any company or entity listed or traded on
a national securities exchange or in an over-the-counter securities
market.
(b) For the longer of (i) one year following termination of
his employment, with or without cause, including any termination upon
or after expiration of the Employment Term, and (ii) until December 31,
1998, Executive shall not directly or indirectly induce any employee of
the Company to engage in any activity in which
- 5 -
<PAGE> 6
Executive is prohibited from engaging by Section 10(a)(i) or (ii) above
or to terminate his employment with the Company, and shall not directly
or indirectly employ or offer employment to any such person unless such
person shall have ceased to be employed by the Company and such
cessation of employment shall have occurred at least 12 months prior
thereto.
11. Confidentiality. Executive shall not, during the Employment term
(including extensions) or thereafter, without the prior written consent of the
Company, use, divulge, disclose or make accessible to any other person, firm,
partnership or corporation any Confidential Information, as hereinafter defined,
except while employed by the Company in the business of and for the benefit of
the Company or when required to do so by a court of law, by any governmental
agency having supervisory authority over the business of the Company or by any
administrative body or legislative body, including a committee thereof, with
jurisdiction to order him to divulge, disclose or make accessible such
Information; provided, that in the case of any such requirement or purported
requirement Executive shall provide written notice to the Company prior to
producing such Information, which notice shall be given at least 10 days prior
to the producing of such Information, if practicable, so that the Company may
seek a protective order or other appropriate remedy. For purposes of this
Agreement, "Confidential Information" shall mean all non-public information
concerning the business of the Company, including, without limitation,
information relating to its product development, customer lists, relationships
with customer, financial information, business and marketing plans and
strategies, operating policies and manuals, and current or prospective
transactions, except for specific items which become publicly available
information other than
- 6 -
<PAGE> 7
through a breach by Executive of his fiduciary duty or any confidentiality
agreement, including without limitation this Section 11. Executive agrees that
upon termination of his employment hereunder for any reason, he shall return to
the Company immediately all memoranda, books, papers, plans, information,
letters and other data, and all copies thereof or therefrom, in any way relating
to the business of the Company, except that he may retain personal notes,
notebooks and diaries. Executive further agrees that he shall not retain or use
for his account at any time any trade name, trademark, service mark or other
proprietary business designation used or owned in connection with the business
of the Company.
12. Specific Performance and Other Remedies. Executive acknowledges and
agrees that the Company has no adequate remedy at law for a breach or threatened
breach of any of the provisions of Sections 10(a)(i), 10(a)(ii), 10(b) or 11
and, in recognition of this fact, Executive agrees that, in the event of such a
breach or threatened breach, in addition to any remedies at law, the Company,
without posting any bond, shall be entitled to obtain equitable relief in the
form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
Nothing in this Agreement shall be construed as prohibiting the Company from
pursuing any other remedies at law or in equity that it may have or any other
rights that it may have under any other agreement.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without
reference to principles of conflict of laws.
- 7 -
<PAGE> 8
(b) Entire Agreement/Amendments. This Agreement contains the
entire understanding of the parties with respect to the subject matter
hereof, and supersedes any prior employment agreements between the
Company and Executive. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to the term or any
other term of this Agreement. Any such waiver must be in writing and
signed by Executive or any authorized officer of this Company, as the
case may be.
(d) Severability. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained
in Sections 10 and 11 to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the
time or territory restrictions in Section 10 or any other restriction
contained in Section 10 or 11 is an unenforceable restriction against
Executive, such provisions shall not be rendered void but shall be
deemed amended to apply to such maximum time and territory, if
applicable, or otherwise to such maximum extent as such court may
judicially determine or indicate to be enforceable. In the event that
any provision of this Agreement shall nevertheless be or become
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions of this
Agreement shall not be affected thereby.
- 8 -
<PAGE> 9
(e) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall inure to the benefit of and be binding
upon the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees of the parties
hereto.
(f) Communications. For the purpose of this Agreement, notices
and all other communications provided for this Agreement shall be in
writing and shall be deemed to have been duly given when faxed or
delivered or two business days after being mailed by the United States
Registered or certified mail, return receipt requested, postage
prepaid, addressed to the Company at its principal place of business,
and to Executive at his last known place of business or his residence.
(g) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(h) Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of Executive's
employment to the extent necessary to the agreed preservation of such
rights and obligations.
(i) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
(j) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control
or affect the meaning or construction of any provision of this
Agreement.
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
By: /s/ Bernard W. Andrews
-------------------------------------------
Bernard W. Andrews
Title: President/Chief Executive Officer
/s/ Gary Hahs
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Gary Hahs
Title: Senior Vice President of
Marketing & Real Estate
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Exhibit 10.19
LEASE NO. ECC0897
MASTER LEASE AGREEMENT
This agreement (the "Agreement") is made this 12th day of August, 1997,
between Pacific Financial Company, with an office at 420 E. South Temple, Suite
240, Salt Lake City, UT 84111, (the"Lessor"), and Eye Care Centers of America,
Inc., with its principal office located at 11103 West Avenue, San Antonio, TX
78213 (the "Lessee").
1. LEASE:
Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment ("Equipment") described in any Equipment Schedule executed
and delivered by Lessor and Lessee in connection with the Agreement. The terms
and conditions contained herein and in each Equipment Schedule shall govern the
leasing and use of the Equipment. In the event of conflict between the
provisions of this Agreement and any Equipment Schedule, the provisions of the
Equipment Schedule shall govern. Each Equipment Schedule shall constitute a
separate lease.
2. ADDITIONAL DEFINITIONS:
a. "Acceptance Date" means, as to the Equipment designated on any
Equipment Schedule, the earliest to occur of: (a) the date specified as the
Acceptance Date in the applicable Equipment Schedule; (b) the date Lessee
accepts the Equipment as set forth in any certificate of acceptance or delivery
signed by the Lessee (the "Acceptance Certificate"); or, (c) the date which is
determined by the manufacturer or vendor of the Equipment to be the date of
installation of such Equipment.
b. "Commencement Date" means, as to the Equipment designated on any
Equipment Schedule, the first day of the month following the Acceptance Date.
3. TERMS OF LEASE:
The Initial Lease Term and the Rent payable with respect to each Leased
Item shall be as set forth in and as stated in the respective Equipment
Schedule(s). Lessee may a) exercise an Early Purchase Option, if applicable; or
b) terminate any Equipment Schedule effective at the expiration of the Initial
Lease Term or any renewal term thereof; by giving the Lessor at least sixty (60)
days prior written notice. If said written notice is not received by Lessor
within the specified period, then the Lease shall continue until the end of the
Initial Lease Term. No notice of intent to exercise an Early Purchase Option or
termination may be revoked without prior written consent of the Lessor.
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4. RENT AND PAYMENT:
As to any Equipment leased hereunder, the "Monthly Rental" payable by
Lessee to Lessor shall be as set forth in the applicable Equipment Schedule. The
Monthly Rental shall begin on the Acceptance Date and shall be due and payable
by Lessee in advance on the first day of each month throughout the Initial
Period and any Automatic Renewal Period. If the Acceptance Date does not fall on
the first day of the month, then the first rental payment shall be a pro rata
portion of the Monthly Rental, calculated on a 30-day basis for the period
between the Acceptance Date and the Commencement Date, and shall be due and
payable on the Acceptance Date. Lessee shall pay all Monthly Rental to Lessor,
its successors or assigns, at Lessor's address set forth above (or as otherwise
directed in writing by Lessor, its successors, or assigns), whether or not
Lessee has received any notice that such payment is due. LESSEE SHALL NOT ABATE,
SET OFF, OR DEDUCT ANY AMOUNT OR DAMAGES FROM OR REDUCE ANY MONTHLY RENTAL FOR
ANY REASON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, ITS SUCCESSORS, OR
ASSIGNS.
Late charges on any payments, taxes, or other charges due hereunder and
not received within ten (10) days of the due date shall accrue at the rate of
1.5% of the payment amount due per month (or if such rate shall exceed the
maximum rate allowed by law, then at the highest rate that is permitted to be
charged on liquidated amounts after judgment) beginning with the date that such
amount was due and continuing until the amount is paid. If late charges are
assessed by a lending institution due to any late payment, Lessee agrees to pay
such late charges or to reimburse Lessor for their payments. Lessee agrees to
make payment for any late charges promptly upon demand by Lessor.
5. TAXES
Lessee shall pay to Lessor an amount equal to all taxes paid, payable
or required to be collected by Lessor, however designated, which are levied or
based on the Monthly Rental or on the possession, use, operation, lease, rental,
sale, purchase, control or value of the Equipment, including without limitation,
registration and license fees and assessments, state and local privilege or
excise taxes, sales and use taxes, personal and other property taxes, and taxes
or charges based on gross revenue, but excluding taxes based on Lessor's net
income. Lessor shall furnish to Lessee, within thirty (30) days of receipt by
Lessor, copies of all tax assessments or valuation issues by the applicable
taxing authorities. Lessor shall invoice Lessee for all such taxes in advance of
their payment due date, and Lessee shall promptly remit to Lessor all such taxes
and charges upon receipt of such invoice from Lessor. Lessee shall pay all
penalties and interest resulting from its failure to remit such taxes to Lessor
within forty-five (45) days of being invoiced by Lessor, which invoice shall be
accompanied by a copy of the tax bill issued by the applicable taxing
authorities. Lessor shall file all required sales and use tax and personal
property tax returns and reports concerning the Equipment with all applicable
governmental agencies. Lessee shall have the right in Lessor's and/or Lessee's
name, to contest any such tax bill, assessment or valuation so long as no
foreclosure of a
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tax lien is imminent, or if foreclosure is imminent, Lessee has taken
reasonable steps to protect the Equipment against foreclosure (such as
providing an appropriate indemnity bond).
6. USE; ALTERATIONS AND ATTACHMENTS:
a. After Lessee receives and inspects any Equipment and is satisfied
that the Equipment is satisfactory, Lessee shall execute and deliver to Lessor
an Acceptance Certificate in a form provided by Lessor; provided, however, that
Lessee's failure to execute and deliver an Acceptance Certificate for any
Equipment shall not affect the validity of this Agreement with respect to the
Equipment.
b. Lessee shall be entitled to unlimited usage of the Equipment during
the Initial Period, the Automatic Renewal Periods and any extension or renewal
periods approved by Lessor in writing.
c. Lessee shall at all times keep the Equipment in its sole possession
and control. The Equipment shall not be moved from the location stated in the
Equipment Schedule without the prior written consent of the Lessor.
d. Lessee shall cause the Equipment to be installed, used, operated
and, at the termination of the Agreement as to each Equipment Schedule, removed
(i) in accordance with any applicable manufacturer's manuals or instructions;
(ii) by competent and duly qualified personnel only, and, (iii) in accordance
with applicable governmental regulations, if any.
e. Lessee may not make alterations in or add attachments to the
Equipment without first obtaining the written consent of the Lessor. Any such
alterations or attachments shall be made at Lessee's expense and shall not
interfere with the normal and satisfactory operation or maintenance of the
Equipment. The manufacturer may incorporate engineering changes or make
temporary alterations to the Equipment upon request of the Lessee. Unless Lessor
shall otherwise agree in writing, all such alterations and attachments, that can
not be removed without damaging the Equipment, shall be and become the property
of the Lessor or, at the option of the Lessor, shall be removed by the Lessee at
the termination of this Agreement as to such Equipment and the Equipment
restored at Lessee's expense to its original condition, reasonable wear and tear
only excepted.
f. Lessee acknowledges that the Equipment is and shall remain personal
property during the term of this Agreement. Lessee shall not permit the
Equipment to become an accession to other goods or a fixture to, or part of, any
real property.
g. Lessee shall comply with all applicable laws, regulations and orders
relating to the Equipment and this Agreement.
h. The Equipment is leased solely for commercial or business purposes.
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7. MAINTENANCE AND REPAIRS; RETURN OF EQUIPMENT:
a. During the continuance of this Agreement and at its expense, Lessee
(i) shall keep the Equipment in good repair, working order and condition; (ii)
shall make all necessary adjustments, repairs and replacements; (iii) shall
furnish all required parts, mechanisms, devices, and servicing, and, (iv) shall
not use or permit the Equipment to be used for any purpose for which, in the
opinion of the manufacturer, the Equipment is not designed or suitable. Such
parts, mechanisms, and devices shall immediately become part of the Equipment
for all purposes hereunder.
b. At the termination of the Agreement and at its expense, Lessee shall
return the Equipment to Lessor at the location within the Continental United
States designated by Lessor. Upon such return, the Equipment shall be in the
same operating order, repair, condition, and appearance as on the Acceptance
Date, excepting reasonable wear and tear from proper use thereof, including all
engineering changes theretofore prescribed by the manufacturer. If the Equipment
or its component parts were packed or crated for shipping when new, Lessee shall
pack or crate the same carefully and in accordance with any recommendations of
the Supplier or manufacturer before redelivering the item to Lessor. Lessee
shall also deliver to Lessor the plans, specifications, operating manuals,
software documentation, discs, warranties and other documents furnished by the
manufacturer or supplier of the Equipment and such other documents in Lessee's
possession relating to the maintenance and method of operation of such
Equipment. Lessee shall return and convey to Lessor at no cost to Lessor all
upgrades and/or enhancements made to the equipment provided, however, that the
same can be removed without physically damaging the Equipment, and provided
further, that Lessee restore the Equipment to its condition immediately prior to
installation of such upgrade or enhancement. Lessee shall provide maintenance
qualification letters and/or arrange for and pay the cost of repairs which are
necessary for the manufacturer or qualified maintenance organization to accept
the Equipment under contract maintenance at its then standard rates. At Lessor's
written request, Lessee shall provide free storage for any item of Equipment for
a period not to exceed sixty (60) days after the expiration of the Agreement
before returning such item to Lessor and permit Lessor access to the Equipment
for inspection and/or resale, upon reasonable prior notice to Lessee. If Lessee
shall fail to return any item of Equipment as provided herein, Lessee shall be
responsible for all cost and expense incurred Lessor in returning the Equipment
to such required condition or and reduction in value as a result thereof.
8. OWNERSHIP AND INSPECTION:
a. The Equipment shall at all times remain the property of Lessor or
its assigns. By this Agreement, Lessee acquires no ownership rights in the
Equipment. Lessor may affix (or require Lessee to affix) tags, decals, or plates
to the Equipment indicating Lessor's ownership, and Lessee shall not permit
their removal or concealment. At the termination of this Agreement, Lessee may
remove said tags, decals, or plates from the Equipment.
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b. LESSEE SHALL KEEP THE EQUIPMENT AND LESSEE'S INTEREST UNDER
THIS AGREEMENT FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES,
EXCEPT THOSE PERMITTED BY LESSOR OR ITS ASSIGNS.
c. Lessor, its assigns and their agents, upon reasonable prior notice
to Lessee, shall have free access to the Equipment at all reasonable times
during normal business hours for the purpose of inspecting the Equipment and for
any other purpose contemplated in this Agreement.
d. Lessee shall immediately notify Lessor in writing of all details
concerning any damage or loss to the Equipment arising from the alleged or
apparent improper manufacture, functioning, or operation of the Equipment.
9. WARRANTIES:
a. LESSEE ACKNOWLEDGES THAT LESSOR HAS NOT MADE ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT,
INCLUDING, WITHOUT LIMITATION, WARRANTIES RELATING TO ANY OF THE FOLLOWING: (i)
THE DESCRIPTION, CONDITION, DESIGN, QUALITY OR PERFORMANCE OF THE EQUIPMENT;
(ii) ITS MERCHANTABILITY OR FITNESS OR SUITABILITY FOR PARTICULAR PURPOSE
WHETHER OR NOT DISCLOSED TO LESSOR; AND, (iii) DELIVERY OF THE EQUIPMENT FREE OF
THE RIGHTFUL CLAIM OF ANY PERSON BY WAY OF INFRINGEMENT OR THE LIKE. LESSOR
EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES. LESSOR SHALL HAVE NO LIABILITY TO
LESSEE FOR ANY CLAIM, LOSS, OR DAMAGE OF ANY KIND OR NATURE WHATSOEVER,
INCLUDING SPECIAL OR CONSEQUENTIAL DAMAGES.
b. Lessor hereby assigns to Lessee all assignable warranties on the
Equipment, as described in Lessor's purchase contract which assignment shall be
effective so long as this Agreement remains in effect (and if a purchase option
is exercised, such assignment shall become absolute).
10. NET LEASE; LESSEE'S OBLIGATIONS ABSOLUTE AND UNCONDITIONAL:
This Agreement is a "net lease" and, as between Lessor and Lessee,
Lessee shall be responsible for all costs, expenses, and claims of every nature
whatsoever arising out of or in connection with or related to this Agreement or
the Equipment (such as, but not limited to, transportation in and out, packing,
installation, deinstallation, shipping, and other such charges).
Lessee agrees that its Monthly Rental and other obligations hereunder
shall be irrevocable, independent, absolute, and unconditional and shall not be
subject to any abatement, reduction, recoupment, defense, offset or counterclaim
otherwise available to Lessee against Lessor; nor, except as otherwise expressly
provided herein or as agreed to by Lessor in writing, shall this Agreement
terminate for any reason whatsoever prior to the end of the Initial Period.
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11. ASSIGNMENT:
a. LESSEE MAY NOT ASSIGN THIS AGREEMENT OR ANY OF ITS RIGHTS HEREUNDER
OR SUBLEASE THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, which
consent shall not be unreasonably withheld, except that Lessee may, without
obtaining such consent, assign the Agreement or sublease the Equipment to any
parent or subsidiary corporation, or to a corporation which shall have acquired
all or substantially all of the property of Lessee by merger, consolidation or
purchase. NO PERMITTED ASSIGNMENT OR SUBLEASE SHALL RELIEVE LESSEE OF ANY OF ITS
OBLIGATIONS HEREUNDER.
b. Lessor may sell and assign its rights and interests in any Equipment
and in any Equipment Schedule hereunder, to another party ("Lessor's Assignee")
either outright or as collateral security for loans. Upon notice of any such
assignment and instructions from Lessor, Lessee shall pay its Monthly Rental and
perform its other obligations hereunder to the Lessor's Assignee, (or to another
party designated by Lessor's Assignee). Upon any such sale or assignment
LESSEE'S OBLIGATIONS TO LESSOR'S ASSIGNEE UNDER THE ASSIGNED EQUIPMENT SCHEDULE
SHALL BE ABSOLUTE AND UNCONDITIONAL AND LESSEE WILL NOT ASSERT AGAINST LESSOR'S
ASSIGNEE ANY CLAIM, DEFENSE OR COUNTERCLAIMS WHICH LESSEE MIGHT HAVE AGAINST
LESSOR. Lessor's Assignee shall have all of the rights but none of the
obligations of Lessor under this Agreement Notwithstanding any assignment by
Lessor, Lessor's Assignee shall not be deemed to have assumed or to be obligated
to perform any of the obligations of Lessor, and Lessor shall remain liable for
the performance of Lessor's obligations under this Agreement
In connection with any assignment by Lessor of its interest in the
Equipment of this Agreement, Lessee acknowledges that the assignment will not
materially change the duty of or materially increase the burden or risk imposed
on Lessee; and Lessee waives its right, if any, to demand Lessor's Assignee to
comply with the provisions of Utah Uniform Commercial Code Leases, Section
7OA-2a-303(2) (as it now exists or hereafter modified) dealing with adequate
assurance and assumption requirements, among other things.
Upon any such assignment, Lessee agrees to execute (i) any document
reasonably requested by Lessor acknowledging such assignment and affirming to
Lessor's Assignee basic provisions of this Agreement and the Equipment Schedule,
and (ii) UCC-1 precautionary filings reasonably requested.
Only one executed counterpart of any Equipment Schedule shall be marked
"Original"; any other executed counterparts shall be marked "Duplicate Original"
or "Counterpart". No security interest in any Equipment Schedule may be created
through the transfer and possession of any counterpart other than the
"Original".
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12. RISK OF LOSS ON LESSEE:
From and after the date the Equipment is delivered to Lessee and until
the Equipment is returned to Lessor as provided in the Agreement, Lessee shall
bear all risk of loss, damage, theft, or destruction to the Equipment howsoever
caused. If any item of Equipment is rendered unusable as a result of any
physical damage to or destruction of the Equipment or if any item of Equipment
is lost or stolen, then:
a. Lessee shall give Lessor immediate notice thereof, and this
Agreement as to such item shall continue in full force and effect without any
abatement of any Monthly Rental. Lessee shall determine and notify Lessor,
within fifteen (15) days after the date of occurrence of such damage or
destruction, whether such item of Equipment can be repaired.
b. If Lessee determines that such item of Equipment can be repaired,
Lessee shall cause such item of Equipment to be promptly repaired.
c If Lessee determines that the item of Equipment cannot be repaired or
if the item of Equipment is lost or stolen, then at Lessor's option, Lessee
shall either (i) at its expense promptly replace such item of Equipment with
like equipment having a comparable or greater value and convey title to such
replacement to Lessor free and clear of all liens and encumbrances, whereupon
this Lease shall continue in full force and effect as though such loss, damage,
theft, or destruction had not occurred,; or (ii) pay Lessor an amount equal to
the Casualty Loss Value of the item of Equipment determined under any Casualty
Loss Schedule attached to the Equipment Schedule, or if none is attached, then
an amount equal to the replacement cost of such item of Equipment.
All proceeds of insurance received by Lessor or Lessee under any
insurance policy shall be applied toward the cost of any such repair of
replacement
13. INSURANCE:
During the continuance of this Agreement as to each Equipment Schedule,
Lessee, at its expense, shall keep in effect (i) an all risk casualty insurance
policy covering the Equipment designated in such Equipment Schedule that
includes, without limitation, coverage against extended coverage risks,
vandalism, theft, and malicious mischief, for amounts not less than the Casualty
Loss Value of the item of Equipment determined under any Casualty Loss Schedule
attached to the Equipment Schedule, or if none is attached, then for amounts not
less than the replacement cost of each item of Equipment with Lessor and its
assigns designated as additional insured and loss payees under such policy; and
(ii) a comprehensive general liability policy in amounts acceptable to Lessor
and that designates Lessor and its assigns as co-insured. All such insurance
policies shall be with licensed insurance companies acceptable to Lessor; shall
prohibit cancellation or modification thereof without at least thirty (30) days
prior written notice to Lessor; shall be evidenced whether by certificates of
insurance or other written evidence acceptable by Lessor; and shall provide that
as to Lessor, its successors, and assigns, the
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insurance shall not be invalidated by any act, omission, or neglect of Lessee.
Lessee shall be responsible for paying any deductibles on such policies.
14. INDEMNIFICATION:
Except for the gross negligence or willful misconduct of Lessor or as
otherwise provided herein, Lessee shall indemnify Lessor against and hold Lessor
harmless of and from any and all claims (including without limitation, claims
involving strict or absolute liability), actions, suits, proceedings, costs,
expenses (including a reasonable attorneys fee incurred by Lessor either in
enforcing this indemnity or in defending against such claims), damages and
liabilities at law or in equity, arising out of, connected with or resulting
from this Agreement or the Equipment (including without limitation the delivery,
possession, use, operation, condition, lease, return, storage, or disposition
thereof). For purposes of this paragraph, the term "Lessor" shall include
Lessor, its successors and assigns, shareholder, directors, officers,
representatives and agents, and the provisions of this paragraph shall survive
expiration of the Agreement with respect to events occurring prior thereto.
15. EVENTS OF DEFAULT:
The occurrence of any one or more of the following events (each an
"Event of Default") shall constitute a default under this Agreement:
a. Lessee fails to pay any Monthly Rental when the same becomes due and
such failure shall continue uncured for ten (10) days after written notice
thereof is given to Lessee;
b. Except as expressly provided herein, Lessee attempts to, or does,
remove, sell, assign, transfer, encumber, sublet, or part with possession of any
one or more items of the Equipment, or any interest under this Agreement, except
as expressly permitted herein.
c. Through the act or omission of Lessee, any item of Equipment is
subject to any levy, seizure, attachment, assignment, or execution; or Lessee
abandons any item of Equipment.
d. Lessee fails to observe or perform any of the other obligations
required to be observed or performed by Lessee thereunder and such failure shall
continue uncured for thirty (30) days after written notice thereof is given to
Lessee; and Lessor has failed to grant Lessee a subsequent thirty (30) day
extension when requested by Lessee to do so in writing.
e. Lessee's representations and warranties made in this Agreement or in
connection herewith shall be false or misleading in any material respect.
f. Lessee ceases doing business as a going concern, makes an assignment
for the benefit of creditors, is insolvent, admits in writing its inability to
pay its financial obligations as they become due, files a voluntary petition in
bankruptcy, is adjudicated a bankrupt or an insolvent, files
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a petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any present
or future statute, law or regulation or files an answer admitting the material
allegation of a petition filed against it in any such proceeding, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of it or of
all or any substantial part of its assets or properties, or if it or its
shareholders shall take any action looking to its dissolution or liquidation.
g. Within sixty (60) days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed, or if within sixty
(60) days after the appointment without Lessee's consent or acquiescence of any
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated.
16. REMEDIES:
Upon the occurrence of any Event of Default, Lessor shall have the
option, with or without giving notice to Lessee, to do any one or more of the
following, provided, however, that in no event shall Lessor be entitled to
exercise one of the following remedies in conjunction within its exercise of any
other remedy if the affect thereof would be to provide a duplicative recovery to
Lessor;
a. Lessor may enforce this Agreement according to its terms;
b. Lessor may advance funds on Lessee's behalf to cure the Event of
Default, whereupon Lessee shall immediately reimburse Lessor therefor, together
with late charges accrued thereon.
c. Lessor may refuse to deliver the Equipment to Lessee;
d. By notice to Lessee, Lessor may terminate this Agreement as to any
or all Equipment Schedules;
e. Lessee shall remain fully liable for and shall pay Lessor for (i)
all sums due and payable under the Equipment Schedule for all periods up to and
including the date on which Lessor has declared this Agreement to be in default;
(ii) all costs and expenses incurred by Lessor on account of such default,
including, but no limited to, all court costs and reasonable attorney's fees;
and, (iii) all reasonable damages as provided by law (collectively "Lessor's
Damages').
f. Whether or not this Lease is terminated as to any or all Equipment
Schedules, Lessor may (i) take possession of any or all of the Equipment listed
on any or all Equipment Schedules, wherever situated and for such purpose,
Lessor may enter upon any Lessee's premises without any
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court order and without liability for so doing (Lessee hereby waives any action
for trespass or damages by reason of such entry or taking possession); (ii)
cause Lessee (and Lessee hereby agrees) to assemble the Equipment and either
make it available to Lessor at a place designated by Lessor or return it to
Lessor as provided in this Agreement.
g. Lessor may sue for and recover all rents and other payments that
accrue after the occurrence of the Event of Default, as the same become due.
h. Lessor may recover from Lessee, as liquidated damages ("Liquidated
Damages") for loss of a bargain and not as a penalty, an amount equal to the
present value of all future Monthly Rentals to be paid by Lessee during the
remainder of the Initial Period or any Automatic Renewal Period then in effect
discounted at the rate of seven percent (7%) per annum, which payment shall
become immediately due and payable.
i. Lessor may sell, dispose of, hold, use, or lease any Equipment as
Lessor in its sole discretion may determine without any duty, except as provided
below, to account to Lessee. Lessor may purchase at any such sale, and Lessor
shall not be obligated to give preference to the sale, lease, or other
disposition of the Equipment over the sale, lease, or other disposition of
similar equipment owned or leased by or through Lessor.
If Lessee shall have paid to Lessor all of the Liquidated Damages, then
Lessor shall pay to Lessee, promptly after receipt thereof, all rentals or
proceeds received from (a) the reletting of the Equipment during the remainder
of the Initial Period or the Automatic Renewal Period then in effect (after
deduction of an amount equal to all Lessor's Damages); or (b) any sale of the
Equipment occurring during the remainder of the Initial Period or Automatic
Renewal Period then in effect less an amount equal to the estimated fair market
value of the Equipment at the end of the Initial Period or Automatic Renewal
Period then in effect (after deduction of an amount equal to all Lessor's
Damages), said amount never to exceed the amount of the Liquidated Damages paid
by Lessee. Any remaining amounts from reletting or sale shall be retained by
Lessor.
Lessor may exercise any and all rights and remedies available at law or
in equity, including those available under the Uniform Commercial Code
(including the section thereof dealing with Leases) as enacted in Utah or in any
state in which the Equipment is located; or other applicable law.
The right and remedies afforded the Lessor hereunder shall not be
deemed to be exclusive, but shall be in addition to any rights or remedies
provided by law. Lessor's failure to promptly enforce any right hereunder shall
not operate as waiver of such right, and Lessor's waiver of any default shall
not constitute a waiver of any subsequent or other default. Lessor may accept
late payments or partial payments of amount due under this Agreement and may
delay enforcing any of Lessor's rights hereunder without losing or waiving any
of Lessor's rights under this Agreement
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17. TAX OWNERSHIP:
This Agreement is entered into on the basis that: Lessor shall be the
owner of the Equipment for federal and state income tax purposes and entitled to
such deductions, credits, and other benefits as are provided an owner of
personal property, including but not limited to the maximum Modified Accelerated
Cost Recovery System deductions ("depreciation") for the MACRS Property Class
life under the Internal Revenue Code of 1986 ("Code"); and interest paid or
accrued with respect to any loan made to or assumed by Lessor or its assigns to
finance the purchase of the Equipment (collectively referred to herein as the
"Tax Benefits").
If, with respect to any item of Equipment, Lessor or its assigns shall
not have or shall lose the right to claim all or any portion of the Tax Benefits
or if all or any portion of the Tax Benefits shall be disallowed or recaptured
(hereinafter referred to as "Tax Benefit Loss") due to the acts or omission of
Lessee, then the following provisions shall be applicable:
18. COVENANT OF QUIET POSSESSION:
Lessor agrees that so long as no Event of Default has occurred and is
continuing, Lessee shall be entitled to quietly possess the equipment subject to
and in accordance with the terms and conditions of this Agreement.
19. GENERAL:
a. Integration: All schedules or riders to this Agreement, Equipment
Schedules executed hereunder, schedules or riders attached to Equipment
Schedules, other documents referred to in Equipment Schedules, and Acceptance
Certificates,whether they are signed before, on, or after the date of this
Agreement, are incorporated into this Agreement by this reference. Such
documents appertaining to any Equipment Schedule and this Agreement constitute
the entire agreement between the parties with respect to the items of Equipment
listed on such Equipment Schedule.
b. Modification: This Agreement may not be amended or modified except
by writing, signed by a duly authorized representative of each party, but no
such amendment or modification needs further consideration to be binding.
Notwithstanding the foregoing, Lessee authorizes Lessor to amend any Equipment
Schedule to identify more accurately the Equipment (including without
limitation, supplying serial numbers or other identifying data), and such
amendment shall be binding on Lessor and Lessee unless Lessee objects thereto
within fifteen (15) days after receiving notice of the amendment from Lessor.
c. Interpretation: The provisions of this Agreement shall be deemed to
be independent and severable. The invalidity or partial invalidity of any one
provision or portion of this Agreement under the laws of any jurisdiction shall
not affect the validity or enforceability of
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any other provision of this Agreement. The captions and headings set forth
herein are for convenience of reference only and shall not define or limit any
of the terms hereof.
d. Notices: Notices hereunder shall be in writing and addressed to the
other party at the address herein or such other address provided by notice
hereunder and shall be effective: (i) upon the next business day, if sent by
guaranteed overnight express service (such as Federal Express); (ii) on the same
day, if personally delivered; or (iii) three (3) days after mailing if sent by
certified or registered U.S. Mail, postage prepaid and addressed to the other
party.
e. Governing Law: This Lease shall be governed by and shall be
interpreted pursuant to the laws of the State of Utah.
LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY.
THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
(OR ANY ASSIGNEE OF LESSOR) RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION
OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN LESSEE AND LESSOR (OR ITS ASSIGNEE). THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT
OF LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
f. Binding Effect: The provision of this Agreement shall inure to the
benefit of and shall bind Lessor and Lessee and their respective permitted
successors and assigns.
g. Financing Statements: Lessee shall sign and deliver to Lessor one or
more financing statements, supplements thereto, and other instruments in order
to establish, perfect, extend, and/or enforce the parties' interest in the
Equipment and under this Agreement. Lessee shall pay all costs of filing such
statements. A photocopy of this Agreement shall be sufficient as, and may be
filed as, an original financing statement. If Lessee defaults hereunder, then
Lessor shall automatically be constituted as Lessee's attorney-in-fact for the
purpose of carrying out the provision of this paragraph.
Initial: /s/ MP
- 12 -
<PAGE> 13
h. Opinion of Counsel: Upon request, Lessee shall provide to Lessor an
opinion of its counsel as to Lessee's legal standing, the authorization and
execution of this Agreement and other documents the enforceability of its
Agreement against Lessee, and other matters reasonably requested.
i. Audited Financial Statements: Upon request, Lessee shall provide to
Lessor a copy of its annual audited financial statements and any quarterly
financial statements whether audited or unaudited.
j. Provisional Security Interest: In the event a court of competent
jurisdiction or their governing authority shall determine that this Agreement is
not a "true lease" or that Lessor (or its assigns) does not hold legal title to
or is not the Owner of the Equipment, then this , Agreement shall be deemed to
be a security agreement with Lessee, as debtor, having granted to Lessor, as
secured party, a security interest in the Equipment effective the date of this
Agreement; and Lessor shall have all of the rights, privileges, and remedies of
a secured party under the Utah Uniform Commercial Code.
k. As to new Equipment, Lessee acknowledges that Lessee ordered the
Equipment from the supplier thereof, and either (a) Lessee received a copy of
the contract by which Lessor acquired the Equipment, or (b) Lessor has informed
Lessee in writing of (i) the identity of the supplier, (ii) that Lessee may have
rights under said contract and may be entitled, under the version of Uniform
Commercial Code Article A ("UCC2A") as in effect in the state specified in
Section 11, to the benefit of warranties provided to Lessor by said supplier,
and (iii) that Lessee may and should contact the supplier to receive an accurate
and complete description of such rights including any disclaimers or limitations
on them or of the remedies thereunder. Lessee makes this acknowledgment so that
each such Schedule shall qualify as and be a "finance lease" under UCC2A.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement on
the day and year first above written.
LESSOR: Pacific Financial Company
by Amembal Capital Corporation, General Partner
By: ______________________________
Title: ______________________________
LESSEE: Eye Care Centers of America, Inc.
By: /s/ Mark Pearson
______________________________
Title: CFO
______________________________
Initial: /s/ MP
______
- 13 -
<PAGE> 14
-14-
Initial: /s/ MP
<PAGE> 15
EQUIPMENT SCHEDULE
LEASE NO. ECC0897
EQUIPMENT SCHEDULE NO. 3
SCHEDULE DATE: August 12,1997
To Master Lease Agreement dated August 12, 1997 between Pacific Financial
Company as Lessor, and Eye Care Centers of America, Inc. as Lessee.
1. Equipment:
An Equipment described on Exhibit A attached hereto together
with all parts, accessories, attachments, substitutions,
repairs, improvements and replacements and any and all
proceeds thereof, including without limitation, insurance
proceeds.
2. Equipment Location: See Exhibit A attached hereto and made a part
hereof for the location(s) of the Equipment
3. Equipment Cost: $508,294.50
4. Acceptance Date: August 12, 1997
5. Commencement Date: September 1, 1997
6. Initial Period: forty-eight (48) months from Commencement Date.
7. Monthly Rental: Lessee shall make monthly rental payments of
$12,309.16, (plus applicable sales/use tax, if any) payable first in
advance, to the Lessor. Lessee shall pay interim rent based on a
pro-rata portion of the Monthly Rental, calculated a 30-day basis for
the period between the Acceptance Date and the Commencement Date.
Lessor reserves the right to increase the Daily Interim Rent Amounts
and the monthly rent Payments as of each Purchase Price Payment,
proportionately to any increase weekly average of the interest rates of
the four (4) year U.S. Treasury Constant Maturities as published in the
August 11, 1997 Wall Street Journal at a rate of 6.21. As of the
Commencement Date, the monthly rent Payments would be fixed for the
entire term. As soon as practicable thereafter, Lessor shall provide
Lessee with written notice of any increase in the Monthly Rental and
the Daily Interim Rent Amounts. Lessor's calculations shall be
conclusive absent manifest error.
Initial: /s/ MP
- 15 -
<PAGE> 16
8. End of Term Options: At the end of the Initial Period, the Lessee shall
have the following options:
a) Purchase all, but not less than all of the Equipment for ten
percent (10%) of original Equipment Cost, or its then Fair
Market Value, whichever is greater, or
b) Renew the Lease for an additional twelve (12) month period
("Renewal Period"). The Monthly Rental amount during the
Renewal Period shall be one half (1/2) of the Monthly Rental
payments during the Initial Period as outlined above. At the
end of the Renewal Period the Lessee shall have the following
options: (i) purchase all, but not less than all, of the
Equipment for its then Fair Market Value; (ii) renew the Lease
for another twelve (12) month period at the same Monthly
Rental as the previous Renewal Period; or (iii) return the
Equipment to Lessor.
9. Representation of Lessee: Lessor and Lessee agree that this Equipment
Schedule constitutes a "true lease" under the Utah Uniform Commercial
Code - Leases, in that (a) Lessee has selected the Equipment in its
sole discretion, (b) Lessor has acquired the Equipment solely for
purposes of leasing such Equipment under this Equipment Schedule,
and/or (c) Lessee has received a copy of the contract evidencing
Lessor's purchase of the Equipment.
10. Master Lease: This Equipment Schedule No. 3 is issued pursuant to the
Master Lease Agreement identified herein. All of the terms and
conditions of the Master Lease Agreement are hereby incorporated herein
and made a part hereof as if such terms and conditions were set forth
herein. By their execution and delivery of this Equipment Schedule, the
parties hereby reaffirm all of the terms and conditions of the Master
Lease Agreement, except to the extent, if any, modified hereby.
This is Counterpart No. 1 of 1 serially numbered, manually executed
counterparts. To the extent that this document constitutes chattel paper under
the Uniform Commercial Code, no security interest is this document may be
created through the transfer and possession of any counterpart other than
Counterpart No. 1.
LESSOR: Pacific Financial Company LESSEE: Eye Care Centers of America, Inc.
by Amembal Capital Corporation,
General Partner
BY:______________________________ BY: /s/ Mark Pearson
______________________
TITLE:___________________________ TITLE: CFO
______________________
Initial: /s/ MP
- 16 -
<PAGE> 17
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein, together
with all parts, accessories, attachments,
substitutions, repairs, improvements, and
replacements and any all proceeds thereof,
including, without limitation, insurance
proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166; EAST HILLS SHOPPING
CENTER
3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
- 17 -
<PAGE> 18
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
- 18 -
<PAGE> 19
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230; PARMATOWN MALL &
PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
- 19 -
<PAGE> 20
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
- 20 -
<PAGE> 21
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL,
ST. 1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
- 21 -
<PAGE> 22
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153; METCALF SOUTH S.C.
MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
Initial: /s/ MP
- 22 -
<PAGE> 23
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59; ROGUE VALLEY
MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTR
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140; VALLEY RIVER
CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
- 23 -
<PAGE> 24
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176; CLACKAMAN
TOWN CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181; JANTZEN BEACH
CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182; BINYONS
EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
Initial: /s/ MP
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<PAGE> 25
EQUIPMENT LOCATION: EYEMASTERS, STORE #251; TANASBOURNE TOWN
CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
Initial: /s/ MP
- 25 -
<PAGE> 26
RIDER NO. 1
TO EQUIPMENT SCHEDULE NO. 3
TO MASTER LEASE AGREEMENT NO. ECC0897
<TABLE>
<S> <C>
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
11103 West Avenue 420 E. South Temple,
San Antonio, TX 78213 Suite 240
Salt Lake City, UT 84111
</TABLE>
EARLY TERMINATION AGREEMENT
Provided that no Event of Default shall have occurred and be continuing, Lessee
shall have the option, which shall not be assignable, to cancel the Lease
("Early Termination Option") and return the Equipment to the Lessor in
accordance with the General Return Provisions outlined in Rider No. 1 attached
hereto and incorporated herein by reference, effective as of the calendar day
which falls exactly twenty-four (24) months after the Commencement Date ("Option
Date") of the Lease, so long as the following conditions are satisfied as of the
Option Date:
1. Lessee shall have paid to Lessor on or prior to the Option Date (i)
all rental payments due under the Lease as of the Option Date, (ii) all
property taxes on the Equipment attributable to lien dates occurring on
or prior to the Option Date, and (iii) all other amounts duo Lessor as
of the Option Date.
2. Lessee shall have notified Lessor, via certified mail, of its
election to exercise the Early Termination Option, addressing such
notice to the attention of LONI LOWDER AT PACIFIC FINANCIAL COMPANY not
less than three hundred sixty-five (365) days prior to the Option Date.
(Lessor shall have no obligation to notify Lessee further of the
opportunity to exercise this Early Termination Option.)
3. Lessee shall have paid, in addition to the monthly rentals in (1)
above, a cancellation fee equal to forty-two and seven tenths percent
(42.7%) of the original cost of the Equipment to Lessor, and at
Lessee's risk and expense shall have loaded the Equipment, property
packed for shipment, on board the carrier and delivered to the location
as Lessor shall specify, all to be completed on or before the Option
Date. As of the Option Date, the Lessee shall also provide Lessor with
a Letter of Maintainability from the manufacturer of the Equipment,
which letter shall state that the Equipment will be eligible for the
manufacturer's standard maintenance contract when sold or leased to a
third party.
In the event that Lessee elects to exercise the Early Termination
Option as set forth herein (and provided that all of the conditions set
forth have been met), the Lease shall
Initial: /s/ MP
- 26 -
<PAGE> 27
be terminated and Lessee shall have no further obligations to pay rent
to Lessor under the Lease. In the event that Lessee does not exercise
the Early Termination Option as of the Option Date (or in the event
that the conditions as set forth herein have not been met) the Lease
shall continue in full force and effect.
DATE: August 12, 1997 DATE:
-------------------------------- -----------------------------
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
by Amembal Capital Corporation,
General Partner
By: /s/ Mark Pearson By:
----------------------------------- ------------------------------
Its: CFO Its:
----------------------------------- -----------------------------
Initial: /s/ MP
- 27 -
<PAGE> 28
RIDER NO.2
TO EQUIPMENT SCHEDULE NO. 3
TO MASTER LEASE AGREEMENT NO. ECC0897
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
11103 West Avenue 420 E. South Temple,
San Antonio, TX 78213 Suite 240
Salt Lake City, UT 84111
GENERAL RETURN PROVISIONS
In addition to the provisions of Section 7 of the Master Lease Agreement
("Lease"), and provided that the Lessee has elected to exercise its Early
Termination Option contained in Rider No. I to Equipment Schedule No. 3 to
Master Lease Agreement No. ECC0897 the Lessee shall, at Lessee's expense:
1. At least sixty (60) days and not more than ninety (90) days prior to
expiration or earlier termination of the Lease, provide to Lessor a
detailed inventory of all pieces and components of the Equipment. The
inventory should include, but not be limited to, a listing of model and
serial numbers for all pieces and components of the Equipment having
serial or model numbers. For Equipment that cannot be identified by
model and/or serial numbers, the Lessee, shall provide plans, drawings,
detailed descriptions or other information adequately describing the
Equipment;
2. at least ninety (90) days prior to the early termination of the Lease,
upon receiving reasonable notice from Lessor, provide or cause the
vendor(s) or manufacturer(s) of equipment, to provide to Lessor the
following documents: (1) one set of service and operating manuals
including replacements and/or additional thereto, such that all
documentation is completely up-to-date; and (2) one set of documents,
detailing equipment configuration, operating requirements, maintenance
records, and other technical data concerning the set up and operation
of the Equipment, including replacements and/or additions thereto, such
that all documentation is completely up-to-date;
3. at least ninety (90) days prior to the early termination of the Lease,
upon receiving reasonable notice from Lessor, make the Equipment
available for on-site operational inspections by potential purchasers,
and provide personnel, power and other operations requirements
necessary to demonstrate electrical and mechanical systems for each
applicable item of the Equipment and all fixtures and related equipment
must be easily accessible;
Initial: /s/ MP
<PAGE> 29
4. at least ninety (90) days prior to the early termination of the Lease,
cause the manufacturer's representative or a qualified equipment
maintenance provider, acceptable to Lessor, to perform a comprehensive
physical inspection, including viewing, examining and testing all
material and workmanship of the Equipment; and if during such
inspection, examination and testing, the authorized inspector finds any
of the Equipment to be defective, or the Equipment not operating within
the manufacturer's specifications, then the Lessee, shall repair or
replace all such defective material and, after corrective measures are
completed, the Lessee, will provide for a follow-up inspection of the
Equipment by the authorized inspector as outlined in the preceding
clause;
5. have each item of Equipment pertaining to all electronic/computer and
mechanical related equipment, returned with an in-depth field service
report detailing said inspection as in Section E of this Rider. The
report shall certify that the Equipment has been properly inspected,
examined and tested and is operating within the manufacturer's or other
qualified service provider's (acceptable to Lessor) specifications;
6. have all Equipment reconditioned, refurbished or refinished so as to be
in "as new condition" (subject to ordinary wear and tear). All
Equipment will be cleaned and cosmetically acceptable, with no
noticeable cracks, scratches or other visual or mechanical damage and
in such condition so that it may be immediately installed and placed
into use;
7. properly remove or treat all rust or corrosion, repair any water or
other damage to wood components and repair any damage to stained or
painted pieces (subject to ordinary wear and tear);
8. ensure all applicable food processing and preparation items of
Equipment will be completely steam-cleaned and de-greased and all other
Equipment will be completely cleaned and packaged according to
manufacturer or qualified service provider recommendations upon
redelivery;
9. properly remove all markings installed by Lessee;
10. ensure all Equipment and equipment operations conform to all applicable
local, state, and federal laws, health and safety guidelines;
11. the Equipment shall be de-installed and delivered to Lessor with all
component parts in good operating condition (subject to ordinary wear
and tear). All components must meet or exceed the manufacturer's
minimum recommended specifications unless otherwise specified;
Initial: /s/ MP
- 2 -
<PAGE> 30
12. ensure the Equipment shall be mechanically structurally sound, capable
of performing the functions for which the Equipment was originally
designed, in accordance with the manufacturer's published and
recommended specifications (subject to ordinary wear and tear);
13. provide for the de-installation, packaging, transporting, and
certifying of the Equipment to include, but not be limited to, the
following: (1) the manufacturer's representative or other qualified
service provider acceptable to Lessor shall de-install all computer and
POS related Equipment (including all wire, cable and mounting hardware)
in accordance with the specifications of the manufacturer or qualified
service provider; (2) each item of Equipment will be returned with a
certificate of eligibility for such maintenance plan shall be
transferable to another operator of the Equipment; (3) the Equipment
shall be packed properly and in accordance with the manufacturer's or
other qualified service provider's (acceptable to Lessor)
recommendations; and (4) Lessee shall transport the Equipment in a
manner consistent with the manufacturer's recommendations and
practices;
14. upon sale of the Equipment to a third party, provide transportation to
the location anywhere in the continental United States selected by
Lessor;
15. obtain and pay for a policy of transit insurance for the redelivery
period in an amount equal to the replacement value of the Equipment and
Lessor shall be named as additional insured and the loss payee on all
such policies of insurance;
16. have the Equipment reassembled and installed at the location to which
it is redelivered in good operating condition and able to perform all
functions for which the Equipment is redesigned, and
17. provide insurance and safe, secure storage for the Equipment for one
hundred eighty (180) days after expiration or earlier termination of
the lease at ten (10) accessible locations satisfactory to Lessor,
subject to all terms and conditions of the Lease and the applicable
Equipment Schedule other than the obligation to make rental payments in
respect thereof.
DATE: August 12, 1997 DATE:
-------------------------------- -----------------------------
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
by Amembal Capital Corporation,
General Partner
By: /s/ Mark Pearson By:
----------------------------------- ------------------------------
Its: CFO Its:
----------------------------------- -----------------------------
Initial: /s/ MP
- 3 -
<PAGE> 31
LESSOR: PACIFIC FINANCIAL COMPANY
EQUIPMENT: See Exhibit A attached hereto
LEASE NUMBER: ECC0897
SCHEDULE NO: 3
DATE OF LEASE: August 12, 1997
LESSEE: EYE CARE CENTERS OF AMERICA, INC.
ACKNOWLEDGMENT AND ACCEPTANCE
OF EQUIPMENT BY LESSEE
Lessee hereby acknowledges that the Equipment described above has been received
in good condition and repair, has been properly installed, tested, and
inspected, and is operating satisfactorily in all respects for all of Lessee's
intended uses and purposes. Lessee hereby accepts unconditionally and
irrevocably the Equipment.
By signature below, Lessee specifically authorizes and requests Lessor to make
payment to the supplier of the Equipment. Lessee agrees that said Equipment has
not been delivered, installed, or accepted on a trial basis.
WITH THE DELIVERY OF THIS DOCUMENT TO LESSOR, LESSEE ACKNOWLEDGES AND AGREES
THAT LESSEE'S OBLIGATIONS TO LESSOR BECOME ABSOLUTE AND IRREVOCABLE AND LESSEE
SHALL BE FOREVER ESTOPPED FROM DENYING THE TRUTHFULNESS OF THE REPRESENTATIONS
MADE IN THIS DOCUMENT.
DATE OF ACCEPTANCE: LESSEE: Eye Care Centers of America,
Inc.
August 12, 1997 /s/ Mark Pearson, CFO
IMPORTANT: THIS DOCUMENT HAS I HEREBY AUTHORIZE N/A TO ORALLY
LEGAL AND FINANCIAL VERIFY MY/OUR ACCEPTANCE OF THE ABOVE
CONSEQUENCES TO YOU. DO NOT REFERENCED EQUIPMENT IN MY ABSENCE.
SIGN THIS DOCUMENT UNTIL YOU
HAVE ACTUALLY RECEIVED ALL OF
THE EQUIPMENT AND ARE
COMPLETELY SATISFIED WITH IT.
Initial: /s/ MP
<PAGE> 32
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein,
together with all parts, accessories,
attachments, substitutions, repairs,
improvements, and replacements and any all
proceeds thereof, including, without
limitation, insurance proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166; EAST HILLS SHOPPING
CENTER
3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
- 2 -
<PAGE> 33
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
- 3 -
<PAGE> 34
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230; PARMATOWN MALL
& PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
- 4 -
<PAGE> 35
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
- 5 -
<PAGE> 36
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL, ST.
1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
- 6 -
<PAGE> 37
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153; METCALF SOUTH S.C.
MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
Initial: /s/ MP
- 7 -
<PAGE> 38
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59; ROGUE VALLEY
MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTR
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140; VALLEY RIVER
CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
- 8 -
<PAGE> 39
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176; CLACKAMAN TOWN
CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181; JANTZEN BEACH
CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182; BINYONS
EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
Initial: /s/ MP
- 9 -
<PAGE> 40
EQUIPMENT LOCATION: EYEMASTERS, STORE #251; TANASBOURNE TOWN
CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
Initial: /s/ MP
- 10 -
<PAGE> 41
INSURANCE CERTIFICATION
TO: Agent's Name:______________________________ Date: _______
Address:___________________________________ Lease No: ECC0897
Schedule No.: 3
City:______________________ State: __ Zip: _____
Area Code/Phone No:____________________
FROM: Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
Gentlemen:
We have entered into a lease agreement with Pacific Financial Company for the
following equipment with a value of $508,294.50.
Equipment: See Exhibit A attached hereto and made a part hereof.
This equipment is located at: See Exhibit A attached hereto for location(s) of
Equipment
This is a net lease and we are responsible for the insurance cost. Please see
that we have immediate coverage and notify Pacific Financial Company at once in
the form of a copy of the insurance policy or a Certificate of Insurance. If the
latter is sent, please include therein the standard 10 day notice of
cancellation clause.
XX PHYSICAL DAMAGE: Insurance is to be provided for fire, theft, extended
coverage, vandalism and malicious mischief for the full
value of the equipment. Pacific Financial Company is
to be named as BOTH Loss Payee AND Additional Insured as
may appear.
XX LIABILITY: Coverage should be written with minimum limits of
$100,000/$300,000 for BODILY INJURY and $50,000 property
damage. Pacific Financial Company is to be named as
BOTH Loss Payee AND Additional Insured.
__ TITLED VEHICLE LIMITS: The minimum limits for each vehicle lease shall be:
Bodily injury liability per individual $500,000.00
Bodily injury liability per accident $500,000.00
Initial: /s/ MP
- 11 -
<PAGE> 42
Property damage liability $250,000.00
Property injury liability per accident $250,000.00
Fire, Theft, and Comprehensive Full
If you have any questions, please do not hesitate to call Pacific Financial
Company at (801)595-0009.
Thank you,
By: /s/ Mark Pearson Title: CFO
------------------------------------------ -----------------------
Initial: /s/ MP
- 12 -
<PAGE> 43
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein,
together with all parts, accessories,
attachments, substitutions, repairs,
improvements, and replacements and any all
proceeds thereof, including, without
limitation, insurance proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166; EAST HILLS SHOPPING
CENTER
3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
- 13 -
<PAGE> 44
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
- 14 -
<PAGE> 45
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230; PARMATOWN MALL &
PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
- 15 -
<PAGE> 46
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
- 16 -
<PAGE> 47
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL,
ST. 1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
- 17 -
<PAGE> 48
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153; METCALF SOUTH S.C.
MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
Initial: /s/ MP
- 18 -
<PAGE> 49
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59; ROGUE VALLEY
MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTR
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140; VALLEY RIVER
CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
- 19 -
<PAGE> 50
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176; CLACKAMAN TOWN
CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181; JANTZEN BEACH
CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182; BINYONS
EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
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<PAGE> 51
EQUIPMENT LOCATION: EYEMASTERS, STORE #251; TANASBOURNE TOWN
CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
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LEASE NO. ECC0897
MASTER LEASE AGREEMENT
This agreement (the "Agreement") is made this 12th day of August, 1997,
between Pacific Financial Company, with an office at 420 E. South Temple, Suite
240, Salt Lake City, UT 84111, (the"Lessor"), and Eye Care Centers of America,
Inc., with its principal office located at 11103 West Avenue, San Antonio, TX
78213 (the "Lessee").
1. LEASE:
Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment ("Equipment") described in any Equipment Schedule executed
and delivered by Lessor and Lessee in connection with the Agreement. The terms
and conditions contained herein and in each Equipment Schedule shall govern the
leasing and use of the Equipment. In the event of conflict between the
provisions of this Agreement and any Equipment Schedule, the provisions of the
Equipment Schedule shall govern. Each Equipment Schedule shall constitute a
separate lease.
2. ADDITIONAL DEFINITIONS:
a. "Acceptance Date" means, as to the Equipment designated on any
Equipment Schedule, the earliest to occur of: (a) the date specified as the
Acceptance Date in the applicable Equipment Schedule; (b) the date Lessee
accepts the Equipment as set forth in any certificate of acceptance or delivery
signed by the Lessee (the "Acceptance Certificate"); or, (c) the date which is
determined by the manufacturer or vendor of the Equipment to be the date of
installation of such Equipment.
b. "Commencement Date" means, as to the Equipment designated on any
Equipment Schedule, the first day of the month following the Acceptance Date.
3. TERMS OF LEASE:
The Initial Lease Term and the Rent payable with respect to each Leased
Item shall be as set forth in and as stated in the respective Equipment
Schedule(s). Lessee may a) exercise an Early Purchase Option, if applicable; or
b) terminate any Equipment Schedule effective at the expiration of the Initial
Lease Term or any renewal term thereof; by giving the Lessor at least sixty (60)
days prior written notice. If said written notice is not received by Lessor
within the specified period, then the Lease shall continue until the end of the
Initial Lease Term. No notice of intent to exercise an Early Purchase Option or
termination may be revoked without prior written consent of the Lessor.
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4. RENT AND PAYMENT:
As to any Equipment leased hereunder, the "Monthly Rental" payable by
Lessee to Lessor shall be as set forth in the applicable Equipment Schedule. The
Monthly Rental shall begin on the Acceptance Date and shall be due and payable
by Lessee in advance on the first day of each month throughout the Initial
Period and any Automatic Renewal Period. If the Acceptance Date does not fall on
the first day of the month, then the first rental payment shall be a pro rata
portion of the Monthly Rental, calculated on a 30-day basis for the period
between the Acceptance Date and the Commencement Date, and shall be due and
payable on the Acceptance Date. Lessee shall pay all Monthly Rental to Lessor,
its successors or assigns, at Lessor's address set forth above (or as otherwise
directed in writing by Lessor, its successors, or assigns), whether or not
Lessee has received any notice that such payment is due. LESSEE SHALL NOT ABATE,
SET OFF, OR DEDUCT ANY AMOUNT OR DAMAGES FROM OR REDUCE ANY MONTHLY RENTAL FOR
ANY REASON WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, ITS SUCCESSORS, OR
ASSIGNS.
Late charges on any payments, taxes, or other charges due hereunder and
not received within ten (10) days of the due date shall accrue at the rate of
1.5% of the payment amount due per month (or if such rate shall exceed the
maximum rate allowed by law, then at the highest rate that is permitted to be
charged on liquidated amounts after judgment) beginning with the date that such
amount was due and continuing until the amount is paid. If late charges are
assessed by a lending institution due to any late payment, Lessee agrees to pay
such late charges or to reimburse Lessor for their payments. Lessee agrees to
make payment for any late charges promptly upon demand by Lessor.
5. TAXES
Lessee shall pay to Lessor an amount equal to all taxes paid, payable
or required to be collected by Lessor, however designated, which are levied or
based on the Monthly Rental or on the possession, use, operation, lease, rental,
sale, purchase, control or value of the Equipment, including without limitation,
registration and license fees and assessments, state and local privilege or
excise taxes, sales and use taxes, personal and other property taxes, and taxes
or charges based on gross revenue, but excluding taxes based on Lessor's net
income. Lessor shall furnish to Lessee, within thirty (30) days of receipt by
Lessor, copies of all tax assessments or valuation issues by the applicable
taxing authorities. Lessor shall invoice Lessee for all such taxes in advance of
their payment due date, and Lessee shall promptly remit to Lessor all such taxes
and charges upon receipt of such invoice from Lessor. Lessee shall pay all
penalties and interest resulting from its failure to remit such taxes to Lessor
within forty-five (45) days of being invoiced by Lessor, which invoice shall be
accompanied by a copy of the tax bill issued by the applicable taxing
authorities. Lessor shall file all required sales and use tax and personal
property tax returns and reports concerning the Equipment with all applicable
governmental agencies. Lessee shall have the right in Lessor's and/or Lessee's
name, to contest any such tax bill, assessment or valuation so long as no
foreclosure of a
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<PAGE> 54
tax lien is imminent, or if foreclosure is imminent, Lessee has taken reasonable
steps to protect the Equipment against foreclosure (such as providing an
appropriate indemnity bond).
6. USE; ALTERATIONS AND ATTACHMENTS:
a. After Lessee receives and inspects any Equipment and is satisfied
that the Equipment is satisfactory, Lessee shall execute and deliver to Lessor
an Acceptance Certificate in a form provided by Lessor; provided, however, that
Lessee's failure to execute and deliver an Acceptance Certificate for any
Equipment shall not affect the validity of this Agreement with respect to the
Equipment.
b. Lessee shall be entitled to unlimited usage of the Equipment during
the Initial Period, the Automatic Renewal Periods and any extension or renewal
periods approved by Lessor in writing.
c. Lessee shall at all times keep the Equipment in its sole possession
and control. The Equipment shall not be moved from the location stated in the
Equipment Schedule without the prior written consent of the Lessor.
d. Lessee shall cause the Equipment to be installed, used, operated
and, at the termination of the Agreement as to each Equipment Schedule, removed
(i) in accordance with any applicable manufacturer's manuals or instructions;
(ii) by competent and duly qualified personnel only, and, (iii) in accordance
with applicable governmental regulations, if any.
e. Lessee may not make alterations in or add attachments to the
Equipment without first obtaining the written consent of the Lessor. Any such
alterations or attachments shall be made at Lessee's expense and shall not
interfere with the normal and satisfactory operation or maintenance of the
Equipment. The manufacturer may incorporate engineering changes or make
temporary alterations to the Equipment upon request of the Lessee. Unless Lessor
shall otherwise agree in writing, all such alterations and attachments, that can
not be removed without damaging the Equipment, shall be and become the property
of the Lessor or, at the option of the Lessor, shall be removed by the Lessee at
the termination of this Agreement as to such Equipment and the Equipment
restored at Lessee's expense to its original condition, reasonable wear and tear
only excepted.
f. Lessee acknowledges that the Equipment is and shall remain personal
property during the term of this Agreement. Lessee shall not permit the
Equipment to become an accession to other goods or a fixture to, or part of, any
real property.
g. Lessee shall comply with all applicable laws, regulations and orders
relating to the Equipment and this Agreement.
h. The Equipment is leased solely for commercial or business purposes.
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<PAGE> 55
7. MAINTENANCE AND REPAIRS; RETURN OF EQUIMENT:
a. During the continuance of this Agreement and at its expense, Lessee
(i) shall keep the Equipment in good repair, working order and condition; (ii)
shall make all necessary adjustments, repairs and replacements; (iii) shall
furnish all required parts, mechanisms, devices, and servicing, and, (iv) shall
not use or permit the Equipment to be used for any purpose for which, in the
opinion of the manufacturer, the Equipment is not designed or suitable. Such
parts, mechanisms, and devices shall immediately become part of the Equipment
for all purposes hereunder.
b. At the termination of the Agreement and at its expense, Lessee shall
return the Equipment to Lessor at the location within the Continental United
States designated by Lessor. Upon such return, the Equipment shall be in the
same operating order, repair, condition, and appearance as on the Acceptance
Date, excepting reasonable wear and tear from proper use thereof, including all
engineering changes theretofore prescribed by the manufacturer. If the Equipment
or its component parts were packed or crated for shipping when new, Lessee shall
pack or crate the same carefully and in accordance with any recommendations of
the Supplier or manufacturer before redelivering the item to Lessor. Lessee
shall also deliver to Lessor the plans, specifications, operating manuals,
software documentation, discs, warranties and other documents furnished by the
manufacturer or supplier of the Equipment and such other documents in Lessee's
possession relating to the maintenance and method of operation of such
Equipment. Lessee shall return and convey to Lessor at no cost to Lessor all
upgrades and/or enhancements made to the equipment provided, however, that the
same can be removed without physically damaging the Equipment, and provided
further, that Lessee restore the Equipment to its condition immediately prior to
installation of such upgrade or enhancement. Lessee shall provide maintenance
qualification letters and/or arrange for and pay the cost of repairs which are
necessary for the manufacturer or qualified maintenance organization to accept
the Equipment under contract maintenance at its then standard rates. At Lessor's
written request, Lessee shall provide free storage for any item of Equipment for
a period not to exceed sixty (60) days after the expiration of the Agreement
before returning such item to Lessor and permit Lessor access to the Equipment
for inspection and/or resale, upon reasonable prior notice to Lessee. If Lessee
shall fail to return any item of Equipment as provided herein, Lessee shall be
responsible for all cost and expense incurred Lessor in returning the Equipment
to such required condition or and reduction in value as a result thereof.
8. OWNERSHIP AND INSPECTION:
a. The Equipment shall at all times remain the property of Lessor or
its assigns. By this Agreement, Lessee acquires no ownership rights in the
Equipment. Lessor may affix (or require Lessee to affix) tags, decals, or plates
to the Equipment indicating Lessor's ownership, and Lessee shall not permit
their removal or concealment. At the termination of this Agreement, Lessee may
remove said tags, decals, or plates from the Equipment.
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b. LESSEE SHALL KEEP THE EQUIPMENT AND LESSEE'S INTEREST UNDER
THIS AGREEMENT FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES,
EXCEPT THOSE PERMITTED BY LESSOR OR ITS ASSIGNS.
c. Lessor, its assigns and their agents, upon reasonable prior notice
to Lessee, shall have free access to the Equipment at all reasonable times
during normal business hours for the purpose of inspecting the Equipment and for
any other purpose contemplated in this Agreement.
d. Lessee shall immediately notify Lessor in writing of all details
concerning any damage or loss to the Equipment arising from the alleged or
apparent improper manufacture, functioning, or operation of the Equipment.
9. WARRANTIES:
a. LESSEE ACKNOWLEDGES THAT LESSOR HAS NOT MADE ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT,
INCLUDING, WITHOUT LIMITATION, WARRANTIES RELATING TO ANY OF THE FOLLOWING: (i)
THE DESCRIPTION, CONDITION, DESIGN, QUALITY OR PERFORMANCE OF THE EQUIPMENT;
(ii) ITS MERCHANTABILITY OR FITNESS OR SUITABILITY FOR PARTICULAR PURPOSE
WHETHER OR NOT DISCLOSED TO LESSOR; AND, (iii) DELIVERY OF THE EQUIPMENT FREE OF
THE RIGHTFUL CLAIM OF ANY PERSON BY WAY OF INFRINGEMENT OR THE LIKE. LESSOR
EXPRESSLY DISCLAIMS ALL SUCH WARRANTIES. LESSOR SHALL HAVE NO LIABILITY TO
LESSEE FOR ANY CLAIM, LOSS, OR DAMAGE OF ANY KIND OR NATURE WHATSOEVER,
INCLUDING SPECIAL OR CONSEQUENTIAL DAMAGES.
b. Lessor hereby assigns to Lessee all assignable warranties on the
Equipment, as described in Lessor's purchase contract which assignment shall be
effective so long as this Agreement remains in effect (and if a purchase option
is exercised, such assignment shall become absolute).
10. NET LEASE; LESSEE'S OBLIGATIONS ABSOLUTE AND UNCONDITIONAL:
This Agreement is a "net lease" and, as between Lessor and Lessee,
Lessee shall be responsible for all costs, expenses, and claims of every nature
whatsoever arising out of or in connection with or related to this Agreement or
the Equipment (such as, but not limited to, transportation in and out, packing,
installation, deinstallation, shipping, and other such charges).
Lessee agrees that its Monthly Rental and other obligations hereunder
shall be irrevocable, independent, absolute, and unconditional and shall not be
subject to any abatement, reduction, recoupment, defense, offset or counterclaim
otherwise available to Lessee against Lessor; nor, except as otherwise expressly
provided herein or as agreed to by Lessor in writing, shall this Agreement
terminate for any reason whatsoever prior to the end of the Initial Period.
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<PAGE> 57
11. ASSIGNMENT:
a. LESSEE MAY NOT ASSIGN THIS AGREEMENT OR ANY OF ITS RIGHTS HEREUNDER
OR SUBLEASE THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, which
consent shall not be unreasonably withheld, except that Lessee may, without
obtaining such consent, assign the Agreement or sublease the Equipment to any
parent or subsidiary corporation, or to a corporation which shall have acquired
all or substantially all of the property of Lessee by merger, consolidation or
purchase. NO PERMITTED ASSIGNMENT OR SUBLEASE SHALL RELIEVE LESSEE OF ANY OF ITS
OBLIGATIONS HEREUNDER.
b. Lessor may sell and assign its rights and interests in any Equipment
and in any Equipment Schedule hereunder, to another party ("Lessor's Assignee")
either outright or as collateral security for loans. Upon notice of any such
assignment and instructions from Lessor, Lessee shall pay its Monthly Rental and
perform its other obligations hereunder to the Lessor's Assignee, (or to another
party designated by Lessor's Assignee). Upon any such sale or assignment
LESSEE'S OBLIGATIONS TO LESSOR'S ASSIGNEE UNDER THE ASSIGNED EQUIPMENT SCHEDULE
SHALL BE ABSOLUTE AND UNCONDITIONAL AND LESSEE WILL NOT ASSERT AGAINST LESSOR'S
ASSIGNEE ANY CLAIM, DEFENSE OR COUNTERCLAIMS WHICH LESSEE MIGHT HAVE AGAINST
LESSOR. Lessor's Assignee shall have all of the rights but none of the
obligations of Lessor under this Agreement Notwithstanding any assignment by
Lessor, Lessor's Assignee shall not be deemed to have assumed or to be obligated
to perform any of the obligations of Lessor, and Lessor shall remain liable for
the performance of Lessor's obligations under this Agreement
In connection with any assignment by Lessor of its interest in the
Equipment of this Agreement, Lessee acknowledges that the assignment will not
materially change the duty of or materially increase the burden or risk imposed
on Lessee; and Lessee waives its right, if any, to demand Lessor's Assignee to
comply with the provisions of Utah Uniform Commercial Code Leases, Section
7OA-2a-303(2) (as it now exists or hereafter modified) dealing with adequate
assurance and assumption requirements, among other things.
Upon any such assignment, Lessee agrees to execute (i) any document
reasonably requested by Lessor acknowledging such assignment and affirming to
Lessor's Assignee basic provisions of this Agreement and the Equipment Schedule,
and (ii) UCC-1 precautionary filings reasonably requested.
Only one executed counterpart of any Equipment Schedule shall be marked
"Original"; any other executed counterparts shall be marked "Duplicate Original"
or "Counterpart". No security interest in any Equipment Schedule may be created
through the transfer and possession of any counterpart other than the
"Original".
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12. RISK OF LOSS ON LESSEE:
From and after the date the Equipment is delivered to Lessee and until
the Equipment is returned to Lessor as provided in the Agreement, Lessee shall
bear all risk of loss, damage, theft, or destruction to the Equipment howsoever
caused. If any item of Equipment is rendered unusable as a result of any
physical damage to or destruction of the Equipment or if any item of Equipment
is lost or stolen, then:
a. Lessee shall give Lessor immediate notice thereof, and this
Agreement as to such item shall continue in full force and effect without any
abatement of any Monthly Rental. Lessee shall determine and notify Lessor,
within fifteen (15) days after the date of occurrence of such damage or
destruction, whether such item of Equipment can be repaired.
b. If Lessee determines that such item of Equipment can be repaired,
Lessee shall cause such item of Equipment to be promptly repaired.
c If Lessee determines that the item of Equipment cannot be repaired or
if the item of Equipment is lost or stolen, then at Lessor's option, Lessee
shall either (i) at its expense promptly replace such item of Equipment with
like equipment having a comparable or greater value and convey title to such
replacement to Lessor free and clear of all liens and encumbrances, whereupon
this Lease shall continue in full force and effect as though such loss, damage,
theft, or destruction had not occurred,; or (ii) pay Lessor an amount equal to
the Casualty Loss Value of the item of Equipment determined under any Casualty
Loss Schedule attached to the Equipment Schedule, or if none is attached, then
an amount equal to the replacement cost of such item of Equipment.
All proceeds of insurance received by Lessor or Lessee under any
insurance policy shall be applied toward the cost of any such repair of
replacement
13. INSURANCE:
During the continuance of this Agreement as to each Equipment Schedule,
Lessee, at its expense, shall keep in effect (i) an all risk casualty insurance
policy covering the Equipment designated in such Equipment Schedule that
includes, without limitation, coverage against extended coverage risks,
vandalism, theft, and malicious mischief, for amounts not less than the Casualty
Loss Value of the item of Equipment determined under any Casualty Loss Schedule
attached to the Equipment Schedule, or if none is attached, then for amounts not
less than the replacement cost of each item of Equipment with Lessor and its
assigns designated as additional insured and loss payees under such policy; and
(ii) a comprehensive general liability policy in amounts acceptable to Lessor
and that designates Lessor and its assigns as co-insured. All such insurance
policies shall be with licensed insurance companies acceptable to Lessor; shall
prohibit cancellation or modification thereof without at least thirty (30) days
prior written notice to Lessor; shall be evidenced whether by certificates of
insurance or other written evidence acceptable by Lessor; and shall provide that
as to Lessor, its successors, and assigns, the
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<PAGE> 59
insurance shall not be invalidated by any act, omission, or neglect of Lessee.
Lessee shall be responsible for paying any deductibles on such policies.
14. INDEMNIFICATION:
Except for the gross negligence or willful misconduct of Lessor or as
otherwise provided herein, Lessee shall indemnify Lessor against and hold Lessor
harmless of and from any and all claims (including without limitation, claims
involving strict or absolute liability), actions, suits, proceedings, costs,
expenses (including a reasonable attorneys fee incurred by Lessor either in
enforcing this indemnity or in defending against such claims), damages and
liabilities at law or in equity, arising out of, connected with or resulting
from this Agreement or the Equipment (including without limitation the delivery,
possession, use, operation, condition, lease, return, storage, or disposition
thereof). For purposes of this paragraph, the term "Lessor" shall include
Lessor, its successors and assigns, shareholder, directors, officers,
representatives and agents, and the provisions of this paragraph shall survive
expiration of the Agreement with respect to events occurring prior thereto.
15. EVENTS OF DEFAULT:
The occurrence of any one or more of the following events (each an
"Event of Default") shall constitute a default under this Agreement:
a. Lessee fails to pay any Monthly Rental when the same becomes due and
such failure shall continue uncured for ten (10) days after written notice
thereof is given to Lessee;
b. Except as expressly provided herein, Lessee attempts to, or does,
remove, sell, assign, transfer, encumber, sublet, or part with possession of any
one or more items of the Equipment, or any interest under this Agreement, except
as expressly permitted herein.
c. Through the act or omission of Lessee, any item of Equipment is
subject to any levy, seizure, attachment, assignment, or execution; or Lessee
abandons any item of Equipment.
d. Lessee fails to observe or perform any of the other obligations
required to be observed or performed by Lessee thereunder and such failure shall
continue uncured for thirty (30) days after written notice thereof is given to
Lessee; and Lessor has failed to grant Lessee a subsequent thirty (30) day
extension when requested by Lessee to do so in writing.
e. Lessee's representations and warranties made in this Agreement or in
connection herewith shall be false or misleading in any material respect.
f. Lessee ceases doing business as a going concern, makes an assignment
for the benefit of creditors, is insolvent, admits in writing its inability to
pay its financial obligations as they become due, files a voluntary petition in
bankruptcy, is adjudicated a bankrupt or an insolvent, files
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a petition seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any present
or future statute, law or regulation or files an answer admitting the material
allegation of a petition filed against it in any such proceeding, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of it or of
all or any substantial part of its assets or properties, or if it or its
shareholders shall take any action looking to its dissolution or liquidation.
g. Within sixty (60) days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed, or if within sixty
(60) days after the appointment without Lessee's consent or acquiescence of any
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated.
16. REMEDIES:
Upon the occurrence of any Event of Default, Lessor shall have the
option, with or without giving notice to Lessee, to do any one or more of the
following, provided, however, that in no event shall Lessor be entitled to
exercise one of the following remedies in conjunction within its exercise of any
other remedy if the affect thereof would be to provide a duplicative recovery to
Lessor;
a. Lessor may enforce this Agreement according to its terms;
b. Lessor may advance funds on Lessee's behalf to cure the Event of
Default, whereupon Lessee shall immediately reimburse Lessor therefor, together
with late charges accrued thereon.
c Lessor may refuse to deliver the Equipment to Lessee;
d. By notice to Lessee, Lessor may terminate this Agreement as to any
or all Equipment Schedules;
e. Lessee shall remain fully liable for and shall pay Lessor for (i)
all sums due and payable under the Equipment Schedule for all periods up to and
including the date on which Lessor has declared this Agreement to be in default;
(ii) all costs and expenses incurred by Lessor on account of such default,
including, but no limited to, all court costs and reasonable attorney's fees;
and, (iii) all reasonable damages as provided by law (collectively "Lessor's
Damages").
f. Whether or not this Lease is terminated as to any or all Equipment
Schedules, Lessor may (i) take possession of any or all of the Equipment listed
on any or all Equipment Schedules, wherever situated and for such purpose,
Lessor may enter upon any Lessee's premises without any
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<PAGE> 61
court order and without liability for so doing (Lessee hereby waives any action
for trespass or damages by reason of such entry or taking possession); (ii)
cause Lessee (and Lessee hereby agrees) to assemble the Equipment and either
make it available to Lessor at a place designated by Lessor or return it to
Lessor as provided in this Agreement.
g. Lessor may sue for and recover all rents and other payments that
accrue after the occurrence of the Event of Default, as the same become due.
h. Lessor may recover from Lessee, as liquidated damages ("Liquidated
Damages") for loss of a bargain and not as a penalty, an amount equal to the
present value of all future Monthly Rentals to be paid by Lessee during the
remainder of the Initial Period or any Automatic Renewal Period then in effect
discounted at the rate of seven percent (7%) per annum, which payment shall
become immediately due and payable.
i. Lessor may sell, dispose of, hold, use, or lease any Equipment as
Lessor in its sole discretion may determine without any duty, except as provided
below, to account to Lessee. Lessor may purchase at any such sale, and Lessor
shall not be obligated to give preference to the sale, lease, or other
disposition of the Equipment over the sale, lease, or other disposition of
similar equipment owned or leased by or through Lessor.
If Lessee shall have paid to Lessor all of the Liquidated Damages, then
Lessor shall pay to Lessee, promptly after receipt thereof, all rentals or
proceeds received from (a) the reletting of the Equipment during the remainder
of the Initial Period or the Automatic Renewal Period then in effect (after
deduction of an amount equal to all Lessor's Damages); or (b) any sale of the
Equipment occurring during the remainder of the Initial Period or Automatic
Renewal Period then in effect less an amount equal to the estimated fair market
value of the Equipment at the end of the Initial Period or Automatic Renewal
Period then in effect (after deduction of an amount equal to all Lessor's
Damages), said amount never to exceed the amount of the Liquidated Damages paid
by Lessee. Any remaining amounts from reletting or sale shall be retained by
Lessor.
Lessor may exercise any and all rights and remedies available at law or
in equity, including those available under the Uniform Commercial Code
(including the section thereof dealing with Leases) as enacted in Utah or in any
state in which the Equipment is located; or other applicable law.
The right and remedies afforded the Lessor hereunder shall not be
deemed to be exclusive, but shall be in addition to any rights or remedies
provided by law. Lessor's failure to promptly enforce any right hereunder shall
not operate as waiver of such right, and Lessor's waiver of any default shall
not constitute a waiver of any subsequent or other default. Lessor may accept
late payments or partial payments of amount due under this Agreement and may
delay enforcing any of Lessor's rights hereunder without losing or waiving any
of Lessor's rights under this Agreement
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17. TAX OWNERSHIP:
This Agreement is entered into on the basis that: Lessor shall be the
owner of the Equipment for federal and state income tax purposes and entitled to
such deductions, credits, and other benefits as are provided an owner of
personal property, including but not limited to the maximum Modified Accelerated
Cost Recovery System deductions ("depreciation") for the MACRS Property Class
life under the Internal Revenue Code of 1986 ("Code"); and interest paid or
accrued with respect to any loan made to or assumed by Lessor or its assigns to
finance the purchase of the Equipment (collectively referred to herein as the
"Tax Benefits").
If, with respect to any item of Equipment, Lessor or its assigns shall
not have or shall lose the right to claim all or any portion of the Tax Benefits
or if all or any portion of the Tax Benefits shall be disallowed or recaptured
(hereinafter referred to as "Tax Benefit Loss") due to the acts or omission of
Lessee, then the following provisions shall be applicable:
18. COVENANT OF QUIET POSSESSION:
Lessor agrees that so long as no Event of Default has occurred and is
continuing, Lessee shall be entitled to quietly possess the equipment subject to
and in accordance with the terms and conditions of this Agreement.
19. GENERAL:
a. Integration: All schedules or riders to this Agreement, Equipment
Schedules executed hereunder, schedules or riders attached to Equipment
Schedules, other documents referred to in Equipment Schedules, and Acceptance
Certificates,whether they are signed before, on, or after the date of this
Agreement, are incorporated into this Agreement by this reference. Such
documents appertaining to any Equipment Schedule and this Agreement constitute
the entire agreement between the parties with respect to the items of Equipment
listed on such Equipment Schedule.
b. Modification: This Agreement may not be amended or modified except
by writing, signed by a duly authorized representative of each party, but no
such amendment or modification needs further consideration to be binding.
Notwithstanding the foregoing, Lessee authorizes Lessor to amend any Equipment
Schedule to identify more accurately the Equipment (including without
limitation, supplying serial numbers or other identifying data), and such
amendment shall be binding on Lessor and Lessee unless Lessee objects thereto
within fifteen (15) days after receiving notice of the amendment from Lessor.
c. Interpretation: The provisions of this Agreement shall be deemed to
be independent and severable. The invalidity or partial invalidity of any one
provision or portion of this Agreement under the laws of any jurisdiction shall
not affect the validity or enforceability of
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any other provision of this Agreement. The captions and headings set forth
herein are for convenience of reference only and shall not define or limit any
of the terms hereof.
d. Notices: Notices hereunder shall be in writing and addressed to the
other party at the address herein or such other address provided by notice
hereunder and shall be effective: (i) upon the next business day, if sent by
guaranteed overnight express service (such as Federal Express); (ii) on the same
day, if personally delivered; or (iii) three (3) days after mailing if sent by
certified or registered U.S. Mail, postage prepaid and addressed to the other
party.
e. Governing Law: This Lease shall be governed by and shall be
interpreted pursuant to the laws of the State of Utah.
LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY.
THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
(OR ANY ASSIGNEE OF LESSOR) RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION
OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN LESSEE AND LESSOR (OR ITS ASSIGNEE). THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT
OF LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
f. Binding Effect: The provision of this Agreement shall inure to the
benefit of and shall bind Lessor and Lessee and their respective permitted
successors and assigns.
g. Financing Statements: Lessee shall sign and deliver to Lessor one or
more financing statements, supplements thereto, and other instruments in order
to establish, perfect, extend, and/or enforce the parties' interest in the
Equipment and under this Agreement. Lessee shall pay all costs of filing such
statements. A photocopy of this Agreement shall be sufficient as, and may be
filed as, an original financing statement. If Lessee defaults hereunder, then
Lessor shall automatically be constituted as Lessee's attorney-in-fact for the
purpose of carrying out the provision of this paragraph.
Initial: /s/ MP
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<PAGE> 64
h. Opinion of Counsel: Upon request, Lessee shall provide to Lessor an
opinion of its counsel as to Lessee's legal standing, the authorization and
execution of this Agreement and other documents the enforceability of its
Agreement against Lessee, and other matters reasonably requested.
i. Audited Financial Statements: Upon request, Lessee shall provide to
Lessor a copy of its annual audited financial statements and any quarterly
financial statements whether audited or unaudited.
j. Provisional Security Interest: In the event a court of competent
jurisdiction or their governing authority shall determine that this Agreement is
not a "true lease" or that Lessor (or its assigns) does not hold legal title to
or is not the Owner of the Equipment, then this , Agreement shall be deemed to
be a security agreement with Lessee, as debtor, having granted to Lessor, as
secured party, a security interest in the Equipment effective the date of this
Agreement; and Lessor shall have all of the rights, privileges, and remedies of
a secured party under the Utah Uniform Commercial Code.
k. As to new Equipment, Lessee acknowledges that Lessee ordered the
Equipment from the supplier thereof, and either (a) Lessee received a copy of
the contract by which Lessor acquired the Equipment, or (b) Lessor has informed
Lessee in writing of (i) the identity of the supplier, (ii) that Lessee may have
rights under said contract and may be entitled, under the version of Uniform
Commercial Code Article A ("UCC2A") as in effect in the state specified in
Section 11, to the benefit of warranties provided to Lessor by said supplier,
and (iii) that Lessee may and should contact the supplier to receive an accurate
and complete description of such rights including any disclaimers or limitations
on them or of the remedies thereunder. Lessee makes this acknowledgment so that
each such Schedule shall qualify as and be a "finance lease" under UCC2A.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement on
the day and year first above written.
LESSOR: Pacific Financial Company
by Amembal Capital Corporation, General Partner
By:
----------------------------------
Title:
----------------------------------
LESSEE: Eye Care Centers of America, Inc.
By: /s/ Mark Pearson
----------------------------------
Title: CFO
----------------------------------
Initial: /s/ MP
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<PAGE> 65
Initial: /s/ MP
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<PAGE> 66
EQUIPMENT SCHEDULE
LEASE NO. ECC0897
EQUIPMENT SCHEDULE NO. 3
SCHEDULE DATE: August 12,1997
To Master Lease Agreement dated August 12, 1997 between Pacific Financial
Company as Lessor, and Eye Care Centers of America, Inc. as Lessee.
1. Equipment:
An Equipment described on Exhibit A attached hereto together
with all parts, accessories, attachments, substitutions,
repairs, improvements and replacements and any and all
proceeds thereof, including without limitation, insurance
proceeds.
2. Equipment Location: See Exhibit A attached hereto and made a part
hereof for the location(s) of the Equipment
3. Equipment Cost: $508,294.50
4. Acceptance Date: August 12, 1997
5. Commencement Date: September 1, 1997
6. Initial Period: forty-eight (48) months from Commencement Date.
7. Monthly Rental: Lessee shall make monthly rental payments of
$12,309.16, (plus applicable sales/use tax, if any) payable first in
advance, to the Lessor. Lessee shall pay interim rent based on a
pro-rata portion of the Monthly Rental, calculated a 30-day basis for
the period between the Acceptance Date and the Commencement Date.
Lessor reserves the right to increase the Daily Interim Rent Amounts
and the monthly rent Payments as of each Purchase Price Payment,
proportionately to any increase weekly average of the interest rates of
the four (4) year U.S. Treasury Constant Maturities as published in the
August 11, 1997 Wall Street Journal at a rate of 6.21. As of the
Commencement Date, the monthly rent Payments would be fixed for the
entire term. As soon as practicable thereafter, Lessor shall provide
Lessee with written notice of any increase in the Monthly Rental and
the Daily Interim Rent Amounts. Lessor's calculations shall be
conclusive absent manifest error.
Initial: /s/ MP
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<PAGE> 67
8. End of Term Options: At the end of the Initial Period, the Lessee shall
have the following options:
a) Purchase all, but not less than all of the Equipment for ten
percent (10%) of original Equipment Cost, or its then Fair
Market Value, whichever is greater, or
b) Renew the Lease for an additional twelve (12) month period
("Renewal Period"). The Monthly Rental amount during the
Renewal Period shall be one half (1/2) of the Monthly Rental
payments during the Initial Period as outlined above. At the
end of the Renewal Period the Lessee shall have the following
options: (i) purchase all, but not less than all, of the
Equipment for its then Fair Market Value; (ii) renew the Lease
for another twelve (12) month period at the same Monthly
Rental as the previous Renewal Period; or (iii) return the
Equipment to Lessor.
9. Representation of Lessee: Lessor and Lessee agree that this Equipment
Schedule constitutes a "true lease" under the Utah Uniform Commercial
Code - Leases, in that (a) Lessee has selected the Equipment in its
sole discretion, (b) Lessor has acquired the Equipment solely for
purposes of leasing such Equipment under this Equipment Schedule,
and/or (c) Lessee has received a copy of the contract evidencing
Lessor's purchase of the Equipment.
10. Master Lease: This Equipment Schedule No. 3 is issued pursuant to the
Master Lease Agreement identified herein. All of the terms and
conditions of the Master Lease Agreement are hereby incorporated herein
and made a part hereof as if such terms and conditions were set forth
herein. By their execution and delivery of this Equipment Schedule, the
parties hereby reaffirm all of the terms and conditions of the Master
Lease Agreement, except to the extent, if any, modified hereby.
This is Counterpart No. 1 of 1 serially numbered, manually executed
counterparts. To the extent that this document constitutes chattel paper under
the Uniform Commercial Code, no security interest is this document may be
created through the transfer and possession of any counterpart other than
Counterpart No. 1.
LESSOR: Pacific Financial Company LESSEE: Eye Care Centers of America, Inc.
by Amembal Capital Corporation,
General Partner
BY: BY: /s/ Mark Pearson
------------------ ----------------------
TITLE: TITLE: CFO
------------------ ----------------------
Initial: /s/ MP
- 16 -
<PAGE> 68
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein,
together with all parts, accessories,
attachments, substitutions, repairs,
improvements, and replacements and any all
proceeds thereof, including, without
limitation, insurance proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166; EAST HILLS SHOPPING
CENTER 3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
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<PAGE> 69
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
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<PAGE> 70
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230; PARMATOWN MALL &
PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
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<PAGE> 71
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
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<PAGE> 72
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL,
ST. 1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
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<PAGE> 73
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153; METCALF SOUTH S.C.
MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
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<PAGE> 74
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59; ROGUE VALLEY
MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTER
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140; VALLEY RIVER
CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
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<PAGE> 75
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176; CLACKAMAN TOWN
CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181; JANTZEN BEACH
CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182; BINYONS
EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
Initial: /s/ MP
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<PAGE> 76
EQUIPMENT LOCATION: EYEMASTERS, STORE #251;
TANASBOURNE TOWN CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
Initial: /s/ MP
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<PAGE> 77
RIDER NO. 1
TO EQUIPMENT SCHEDULE NO. 3
TO MASTER LEASE AGREEMENT NO. ECC0897
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
11103 West Avenue 420 E. South Temple, Suite 240
San Antonio, TX 78213 Salt Lake City, UT 84111
EARLY TERMINATION AGREEMENT
Provided that no Event of Default shall have occurred and be continuing, Lessee
shall have the option, which shall not be assignable, to cancel the Lease
("Early Termination Option") and return the Equipment to the Lessor in
accordance with the General Return Provisions outlined in Rider No. 1 attached
hereto and incorporated herein by reference, effective as of the calendar day
which falls exactly twenty-four (24) months after the Commencement Date ("Option
Date") of the Lease, so long as the following conditions are satisfied as of the
Option Date:
1. Lessee shall have paid to Lessor on or prior to the Option Date (i)
all rental payments due under the Lease as of the Option Date, (ii) all
property taxes on the Equipment attributable to lien dates occurring on
or prior to the Option Date, and (iii) all other amounts duo Lessor as
of the Option Date.
2. Lessee shall have notified Lessor, via certified mail, of its
election to exercise the Early Termination Option, addressing such
notice to the attention of LONI LOWDER AT PACIFIC FINANCIAL COMPANY not
less than three hundred sixty-five (365) days prior to the Option Date.
(Lessor shall have no obligation to notify Lessee further of the
opportunity to exercise this Early Termination Option.)
3. Lessee shall have paid, in addition to the monthly rentals in (1)
above, a cancellation fee equal to forty-two and seven tenths percent
(42.7%) of the original cost of the Equipment to Lessor, and at
Lessee's risk and expense shall have loaded the Equipment, property
packed for shipment, on board the carrier and delivered to the location
as Lessor shall specify, all to be completed on or before the Option
Date. As of the Option Date, the Lessee shall also provide Lessor with
a Letter of Maintainability from the manufacturer of the Equipment,
which letter shall state that the Equipment will be eligible for the
manufacturer's standard maintenance contract when sold or leased to a
third party.
In the event that Lessee elects to exercise the Early Termination
Option as set forth herein (and provided that all of the conditions set
forth have been met), the Lease shall
Initial: /s/ MP
- 26 -
<PAGE> 78
be terminated and Lessee shall have no further obligations to pay rent
to Lessor under the Lease. In the event that Lessee does not exercise
the Early Termination Option as of the Option Date (or in the event
that the conditions as set forth herein have not been met) the Lease
shall continue in full force and effect
DATE: August 12, 1997 DATE:
-------------------------------- ------------------------------
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
by Amembal Capital Corporation,
General Partner
By: /s/ Mark Pearson By:
----------------------------------- --------------------------------
Its: CFO Its:
----------------------------------- --------------------------------
Initial: /s/ MP
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<PAGE> 79
RIDER NO.2
TO EQUIPMENT SCHEDULE NO. 3
TO MASTER LEASE AGREEMENT NO. ECC0897
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
11103 West Avenue 420 E. South Temple, Suite 240
San Antonio, TX 78213 Salt Lake City, UT 84111
GENERAL RETURN PROVISIONS
In addition to the provisions of Section 7 of the Master Lease Agreement
("Lease"), and provided that the Lessee has elected to exercise its Early
Termination Option contained in Rider No. I to Equipment Schedule No. 3 to
Master Lease Agreement No. ECC0897 the Lessee shall, at Lessee's expense:
1. At least sixty (60) days and not more than ninety (90) days prior to
expiration or earlier termination of the Lease, provide to Lessor a
detailed inventory of all pieces and components of the Equipment. The
inventory should include, but not be limited to, a listing of model and
serial numbers for all pieces and components of the Equipment having
serial or model numbers. For Equipment that cannot be identified by
model and/or serial numbers, the Lessee, shall provide plans, drawings,
detailed descriptions or other information adequately describing the
Equipment;
2. at least ninety (90) days prior to the early termination of the Lease,
upon receiving reasonable notice from Lessor, provide or cause the
vendor(s) or manufacturer(s) of equipment, to provide to Lessor the
following documents: (1) one set of service and operating manuals
including replacements and/or additional thereto, such that all
documentation is completely up-to-date; and (2) one set of documents,
detailing equipment configuration, operating requirements, maintenance
records, and other technical data concerning the set up and operation
of the Equipment, including replacements and/or additions thereto, such
that all documentation is completely up-to-date;
3. at least ninety (90) days prior to the early termination of the Lease,
upon receiving reasonable notice from Lessor, make the Equipment
available for on-site operational inspections by potential purchasers,
and provide personnel, power and other operations requirements
necessary to demonstrate electrical and mechanical systems for each
applicable item of the Equipment and all fixtures and related equipment
must be easily accessible;
Initial: /s/ MP
<PAGE> 80
4. at least ninety (90) days prior to the early termination of the Lease,
cause the manufacturer's representative or a qualified equipment
maintenance provider, acceptable to Lessor, to perform a comprehensive
physical inspection, including viewing, examining and testing all
material and workmanship of the Equipment; and if during such
inspection, examination and testing, the authorized inspector finds any
of the Equipment to be defective, or the Equipment not operating within
the manufacturer's specifications, then the Lessee, shall repair or
replace all such defective material and, after corrective measures are
completed, the Lessee, will provide for a follow-up inspection of the
Equipment by the authorized inspector as outlined in the preceding
clause;
5. have each item of Equipment pertaining to all electronic/computer and
mechanical related equipment, returned with an in-depth field service
report detailing said inspection as in Section E of this Rider. The
report shall certify that the Equipment has been properly inspected,
examined and tested and is operating within the manufacturer's or other
qualified service provider's (acceptable to Lessor) specifications;
6. have all Equipment reconditioned, refurbished or refinished so as to be
in "as new condition" (subject to ordinary wear and tear). All
Equipment will be cleaned and cosmetically acceptable, with no
noticeable cracks, scratches or other visual or mechanical damage and
in such condition so that it may be immediately installed and placed
into use;
7. properly remove or treat all rust or corrosion, repair any water or
other damage to wood components and repair any damage to stained or
painted pieces (subject to ordinary wear and tear);
8. ensure all applicable food processing and preparation items of
Equipment will be completely steam-cleaned and de-greased and all other
Equipment will be completely cleaned and packaged according to
manufacturer or qualified service provider recommendations upon
redelivery;
9. properly remove all markings installed by Lessee;
10. ensure all Equipment and equipment operations conform to all applicable
local, state, and federal laws, health and safety guidelines;
11. the Equipment shall be de-installed and delivered to Lessor with all
component parts in good operating condition (subject to ordinary wear
and tear). All components must meet or exceed the manufacturer's
minimum recommended specifications unless otherwise specified;
Initial: /s/ MP
- 2 -
<PAGE> 81
12. ensure the Equipment shall be mechanically structurally sound, capable
of performing the functions for which the Equipment was originally
designed, in accordance with the manufacturer's published and
recommended specifications (subject to ordinary wear and tear);
13. provide for the de-installation, packaging, transporting, and
certifying of the Equipment to include, but not be limited to, the
following: (1) the manufacturer's representative or other qualified
service provider acceptable to Lessor shall de-install all computer and
POS related Equipment (including all wire, cable and mounting hardware)
in accordance with the specifications of the manufacturer or qualified
service provider; (2) each item of Equipment will be returned with a
certificate of eligibility for such maintenance plan shall be
transferable to another operator of the Equipment; (3) the Equipment
shall be packed properly and in accordance with the manufacturer's or
other qualified service provider's (acceptable to Lessor)
recommendations; and (4) Lessee shall transport the Equipment in a
manner consistent with the manufacturer's recommendations and
practices;
14. upon sale of the Equipment to a third party, provide transportation to
the location anywhere in the continental United States selected by
Lessor;
15. obtain and pay for a policy of transit insurance for the redelivery
period in an amount equal to the replacement value of the Equipment and
Lessor shall be named as additional insured and the loss payee on all
such policies of insurance;
16. have the Equipment reassembled and installed at the location to which
it is redelivered in good operating condition and able to perform all
functions for which the Equipment is redesigned, and
17. provide insurance and safe, secure storage for the Equipment for one
hundred eighty (180) days after expiration or earlier termination of
the lease at ten (10) accessible locations satisfactory to Lessor,
subject to all terms and conditions of the Lease and the applicable
Equipment Schedule other than the obligation to make rental payments in
respect thereof.
DATE: August 12, 1997 DATE:
--------------------- -----------------------------
LESSEE: Eye Care Centers of America, Inc. LESSOR: Pacific Financial Company
by Amembal Capital Corporation,
General Partner
By: /s/ Mark Pearson By:
---------------------- ------------------------------
Its: CFO Its:
---------------------- ------------------------------
Initial: /s/ MP
- 3 -
<PAGE> 82
LESSOR: PACIFIC FINANCIAL COMPANY
EQUIPMENT: See Exhibit A attached hereto
LEASE NUMBER: ECC0897
SCHEDULE NO: 3
DATE OF LEASE: August 12, 1997
LESSEE: EYE CARE CENTERS OF AMERICA, INC.
ACKNOWLEDGMENT AND ACCEPTANCE
OF EQUIPMENT BY LESSEE
Lessee hereby acknowledges that the Equipment described above has been received
in good condition and repair, has been properly installed, tested, and
inspected, and is operating satisfactorily in all respects for all of Lessee's
intended uses and purposes. Lessee hereby accepts unconditionally and
irrevocably the Equipment.
By signature below, Lessee specifically authorizes and requests Lessor to make
payment to the supplier of the Equipment. Lessee agrees that said Equipment has
not been delivered, installed, or accepted on a trial basis.
WITH THE DELIVERY OF THIS DOCUMENT TO LESSOR, LESSEE ACKNOWLEDGES AND AGREES
THAT LESSEE'S OBLIGATIONS TO LESSOR BECOME ABSOLUTE AND IRREVOCABLE AND LESSEE
SHALL BE FOREVER ESTOPPED FROM DENYING THE TRUTHFULNESS OF THE REPRESENTATIONS
MADE IN THIS DOCUMENT.
DATE OF ACCEPTANCE: LESSEE: Eye Care Centers of America, Inc.
August 12, 1997 /s/ Mark Pearson, CFO
- ------------------- ----------------------
IMPORTANT: THIS DOCUMENT HAS I HEREBY AUTHORIZE N/A TO ORALLY
LEGAL AND FINANCIAL VERIFY MY/OUR ACCEPTANCE OF THE ABOVE
CONSEQUENCES TO YOU. DO NOT REFERENCED EQUIPMENT IN MY ABSENCE.
SIGN THIS DOCUMENT UNTIL YOU HAVE
ACTUALLY RECEIVED ALL OF
THE EQUIPMENT AND ARE
COMPLETELY SATISFIED WITH IT.
Initial: /s/ MP
<PAGE> 83
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein,
together with all parts, accessories,
attachments, substitutions, repairs,
improvements, and replacements and any all
proceeds thereof, including, without
limitation, insurance proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166; EAST HILLS SHOPPING
CENTER
3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
- 2 -
<PAGE> 84
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
- 3 -
<PAGE> 85
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230; PARMATOWN MALL
& PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
- 4 -
<PAGE> 86
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
- 5 -
<PAGE> 87
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL,
ST. 1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
- 6 -
<PAGE> 88
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153; METCALF SOUTH
S.C. MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
Initial: /s/ MP
- 7 -
<PAGE> 89
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59;
ROGUE VALLEY MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTR
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140;
VALLEY RIVER CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
- 8 -
<PAGE> 90
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176;
CLACKAMAN TOWN CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181;
JANTZEN BEACH CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182;
BINYONS EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
Initial: /s/ MP
- 9 -
<PAGE> 91
EQUIPMENT LOCATION: EYEMASTERS, STORE #251;
TANASBOURNE TOWN CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
Initial: /s/ MP
- 10 -
<PAGE> 92
INSURANCE CERTIFICATION
TO: Agent's Name:______________________________ Date: _______
Address:____________________________________ Lease No: ECC0897
Schedule No.: 3
City:______________________ State: __ Zip: _____
Area Code/Phone No:____________________
FROM: Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, TX 78213
Gentlemen:
We have entered into a lease agreement with Pacific Financial Company for the
following equipment with a value of $508,294.50.
Equipment: See Exhibit A attached hereto and made a part hereof.
This equipment is located at: See Exhibit A attached hereto for location(s) of
Equipment
This is a net lease and we are responsible for the insurance cost. Please see
that we have immediate coverage and notify Pacific Financial Company at once in
the form of a copy of the insurance policy or a Certificate of Insurance. If the
latter is sent, please include therein the standard 10 day notice of
cancellation clause.
XX PHYSICAL DAMAGE: Insurance is to be provided for fire, theft, extended
coverage, vandalism and malicious mischief for the full value of the
equipment. Pacific Financial Company is to be named as BOTH Loss Payee
AND Additional Insured as interests may appear.
XX LIABILITY: Coverage should be written with minimum limits of
$100,000/$300,000 for BODILY INJURY and $50,000 property damage. Pacific
Financial Company is to be named as BOTH Loss Payee AND Additional Insured.
____ TITLED VEHICLE LIMITS: The minimum limits for each vehicle lease shall be:
Bodily injury liability per individual $500,000.00
Bodily injury liability per accident $500,000.00
Initial: /s/ MP
- 11 -
<PAGE> 93
Property damage liability $250,000.00
Property injury liability per accident $250,000.00
Fire, Theft, and Comprehensive Full
If you have any questions, please do not hesitate to call Pacific Financial
Company at (801)595-0009.
Thank you,
By: /s/ Mark Pearson Title: CFO
----------------- --------
Initial: /s/ MP
- 12 -
<PAGE> 94
EXHIBIT A
LEASE NO. ECC0897 SCHEDULE NO. 3
Equipment Description: All Equipment described herein,
together with all parts, accessories,
attachments, substitutions, repairs,
improvements, and replacements and any all
proceeds thereof, including, without
limitation, insurance proceeds.
EQUIPMENT LOCATION: EYEMASTERS, STORE #145; WESTROADS MALL
10,000 CALIFORNIA ST. #315
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N:
1 UV Cure Unit: S/N: 718
EQUIPMENT LOCATION: EYEMASTERS, STORE #146; OAKVIEW MALL
3001 S.144TH ST. #1022
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1502
1 UV Cure Unit: S/N: 719
EQUIPMENT LOCATION: EYEMASTERS, STORE #144; CROSSROADS MALL
7300 DODGE ST. #139
OMAHA, NE 68114
Quantity Description
1 UOC Mini II: S/N: 1505
1 UV Cure Unit: S/N: 717
EQUIPMENT LOCATION: EYEMASTERS, STORE #166;
EAST HILLS SHOPPING CENTER
3702 FREDRICK BLVD., SP. 12
ST. JOSEPH, MO 64506
Quantity Description
1 UOC Mini II: S/N: 1497
1 UV Cure Unit: S/N: 724
Initial: /s/ MP
- 13 -
<PAGE> 95
EQUIPMENT LOCATION: EYEMASTERS, STORE #154; WARD PARKWAY CENTER
8600 WARD PARKWAY, SP.2350
KANSAS CITY, MO 64114
Quantity Description
1 UOC Mini II: S/N: 1498
1 UV Cure Unit: S/N: 723
EQUIPMENT LOCATION: EYEMASTERS, STORE #151; 267 METRO N. MALL
SP. 117
KANSAS CITY, MO 64155
Quantity Description
1 UOC Mini II: S/N: 1499
1 UV Cure Unit: S/N: 721
EQUIPMENT LOCATION: EYEMASTERS, STORE #169; BANNISTER MALL
5600 E. BANNISTER, STE. 286
KANSAS CITY, MO 64137
Quantity Description
1 UOC Mini II: S/N: 1489
1 UV Cure Unit: S/N: 716
EQUIPMENT LOCATION: EYEMASTERS, STORE #58; BOISE TOWN SQUARE
350 N. MILWAUKEE STE. 1005
BOISE, ID 83788
Quantity Description
1 UOC Mini II: S/N: 1396
1 UV Cure Unit: S/N: 621
EQUIPMENT LOCATION: EYEMASTERS, STORE #162; MAGIC VALLEY MALL
1485 POLE LINE RD. STE. 229
TWIN FALLS, ID 83301
Quantity Description
1 UOC Mini II: S/N: 1400
1 UV Cure Unit: S/N: 622
Initial: /s/ MP
- 14 -
<PAGE> 96
EQUIPMENT LOCATION: EYEMASTERS, STORE #167; SILVER LAKE PLAZA
255 W. CANFIELD AVE.
COEUR D'ALENE, ID 83814
Quantity Description
1 UOC Mini II: S/N: 1382
1 UV Cure Unit: S/N: 625
EQUIPMENT LOCATION: EYEMASTERS, STORE #227; GREAT NORTHERN MALL
600 GREAT NORTHERN MALL
NORTH OLMSTED, OH 44070
Quantity Description
1 UOC Mini II: S/N: 1428
1 UV Cure Unit: S/N: 632
EQUIPMENT LOCATION: EYEMASTERS, STORE #229; GREAT LAKES MALL
7850 MENTOR AVE. #368
MENTOR, OH 44060
Quantity Description
1 UOC Mini II: S/N: 1430
1 UV Cure Unit: S/N: 626
EQUIPMENT LOCATION: EYEMASTERS, STORE #230;
PARMATOWN MALL & PLAZA
7972 DAY DR.
PARMA, OH 44129
Quantity Description
1 UOC Mini II: S/N: 1405
1 UV Cure Unit: S/N: 619
EQUIPMENT LOCATION: EYEMASTERS, STORE #231; RANDALL PARK MALL
1161 RANDALL PARK MALL
NORTH RANDALL, OH 44125
Quantity Description
1 UOC Mini II: S/N: 1407
1 UV Cure Unit: S/N: 634
EQUIPMENT LOCATION: EYEMASTERS, STORE #232; RICHMOND MALL
691 RICHMOND RD.
RICHMOND HEIGHTS, OH 44143
Initial: /s/ MP
- 15 -
<PAGE> 97
Quantity Description
1 UOC Mini II: S/N: 1388
1 UV Cure Unit: S/N: 623
EQUIPMENT LOCATION: EYEMASTERS, STORE #235; EUCID SQUARE MALL
256 EUCID SQUARE MALL
EUCID, OH 44113
Quantity Description
1 UOC Mini II: S/N: 1406
1 UV Cure Unit: S/N: 590
EQUIPMENT LOCATION: EYEMASTERS, STORE #236; MIDWAY MALL
3547 MIDWAY MALL
ELYRIA, OH 44035
Quantity Description
1 UOC Mini II: S/N: 1432
1 UV Cure Unit: S/N: 635
EQUIPMENT LOCATION: EYEMASTERS, STORE #237; CHAPEL HILL
2000 BRITTAIN RD. STE. 601
AKRON, OH 44310
Quantity Description
1 UOC Mini II: S/N: 1404
1 UV Cure Unit: S/N: 627
EQUIPMENT LOCATION: EYEMASTERS, STORE #238; ROLLING ACRES MALL
2400 ROMIG RD.
AKRON, OH 44322
Quantity Description
1 UOC Mini II: S/N:1409
1 UV Cure Unit: S/N: 639
EQUIPMENT LOCATION: EYEMASTERS, STORE #37; HERITAGE PARK MALL
6755 RENO ST.
MIDWEST CITY, OK 73110
Quantity Description
1 UOC Mini II: S/N: 1477
1 UV Cure Unit: S/N: 695
Initial: /s/ MP
- 16 -
<PAGE> 98
EQUIPMENT LOCATION: EYEMASTERS, STORE #39; SOONER FASHION MALL
3459 W. MAIN ST.
NORMAN, OK 73072
Quantity Description
1 UOC Mini II: S/N: 1495
1 UV Cure Unit: S/N: 712
EQUIPMENT LOCATION: EYEMASTERS, STORE #131; QUAIL SPRINGS MALL
2501 W. MEMORIAL RD., ST. 211
OKLAHOMA CITY, OK 73134
Quantity Description
1 UOC Mini II: S/N: 1493
1 UV Cure Unit: S/N: 714
EQUIPMENT LOCATION: EYEMASTERS, STORE #141; CROSSROADS MALL,
ST. 1150
7000 CROSSROADS MALL
OKLAHOMA CITY, OK 73149
Quantity Description
1 UOC Mini II: S/N: 1494
1 UV Cure Unit: S/N: 715
EQUIPMENT LOCATION: EYEMASTERS, STORE #198; NORTHPARK MALL
1200 E. CTY LINE RD. ST. 259
RIDGELAND, MS 39157
Quantity Description
1 UOC Mini II: S/N: 1470
1 UV Cure Unit: S/N: 689
EQUIPMENT LOCATION: EYEMASTERS, STORE #199; METROCENTER MALL
1210 METROCENTER, #113
JACKSON, MS 39209
Quantity Description
1 UOC Mini II: S/N: 1467
1 UV Cure Unit: S/N: 690
Initial: /s/ MP
- 17 -
<PAGE> 99
EQUIPMENT LOCATION: EYEMASTERS, STORE #225; TURTLE CREEK MALL
1000 TURTLE CREEK DR. #450
HATTIESBERG, MS 39402
Quantity Description
1 UOC Mini II: S/N: 1474
1 UV Cure Unit: S/N: 693
EQUIPMENT LOCATION: EYEMASTERS, STORE #153;
METCALF SOUTH S.C. MALL
9587 METCALF
OVERLAND PARK, KS 66212
Quantity Description
1 UOC Mini II: S/N: 1500
1 UV Cure Unit: S/N: 722
EQUIPMENT LOCATION: EYEMASTERS, STORE #117; TOWNE EAST SQUARE
7700 E. KELLOGG
WICHITA, KS 67207
Quantity Description
1 UOC Mini II: S/N: 1491
1 UV Cure Unit: S/N: 710
EQUIPMENT LOCATION: EYEMASTERS, STORE #118; TOWNE WEST SQUARE
4600 W. KELLOGG
WICHITA, KS 67209
Quantity Description
1 UOC Mini II: S/N: 1492
1 UV Cure Unit: S/N: 711
EQUIPMENT LOCATION: EYEMASTERS, STORE #226; MISSION CENTER
4801 JOHNSON DR. #120
MISSION CENTER, KS 66205
Quantity Description
1 UOC Mini II: S/N: 1529
1 UV Cure Unit: S/N: 749
EQUIPMENT LOCATION: EYEMASTERS, STORE #152; OAK PARK MALL
11383 WEST 95TH ST.
OVERLAND PARK, KS 66214
Initial: /s/ MP
- 18 -
<PAGE> 100
Quantity Description
1 UOC Mini II: S/N: 1496
1 UV Cure Unit: S/N: 713
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #57; HERITAGE MALL
2169 14TH AVE. SE
ALBANY, OR 97321
Quantity Description
1 UOC Mini II: S/N: 1395
1 UV Cure Unit: S/N: 612
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #59;
ROGUE VALLEY MALL
1600 N. RIVERSIDE
MEDFORD, OR 97501
Quantity Description
1 UOC Mini II: S/N: 1394
1 UV Cure Unit: S/N: 616
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #81; LLOYD CENTR
1006 LLOYD CTR.
PORTLAND, OR 97232
Quantity Description
1 UOC Mini II: S/N: 1398
1 UV Cure Unit: S/N: 606
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #140;
VALLEY RIVER CTR.
249 VALLEY RIVER CTR.
EUGENE, OR 97401
Quantity Description
1 UOC Mini II: S/N: 1397
1 UV Cure Unit: S/N: 614
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #175; LANCASTER MALL
831 LANCASTER DR. NE
SALEM, OR 97301
Quantity Description
1 UOC Mini II: S/N: 1399
1 UV Cure Unit: S/N: 618
Initial: /s/ MP
- 19 -
<PAGE> 101
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #176;
CLACKAMAN TOWN CTR.
10000 SE 82ND AVE.
PORTLAND, OR 97266
Quantity Description
1 UOC Mini II: S/N: 1431
1 UV Cure Unit: S/N: 629
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #178; BEAVERTON MALL
3275 SW CEDAR HILLS BLVD.
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1390
1 UV Cure Unit: S/N: 611
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #179; CASCADE PLAZA
SUITE A-6
BEAVERTON, OR 97005
Quantity Description
1 UOC Mini II: S/N: 1393
1 UV Cure Unit: S/N: 613
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #181;
JANTZEN BEACH CTR.
1255 JANTZEN BEACH CTR.
PORTLAND, OR 97217
Quantity Description
1 UOC Mini II: S/N: 1385
1 UV Cure Unit: S/N: 620
EQUIPMENT LOCATION: BINYONS EYEWORLD, STORE #182;
BINYONS EYEWORLD DOWNTOWN
803 SW MORRISON ST.
PORTLAND, OR 97205
Quantity Description
1 UOC Mini II: S/N: 1401
1 UV Cure Unit: S/N: 624
Initial: /s/ MP
- 20 -
<PAGE> 102
EQUIPMENT LOCATION: EYEMASTERS, STORE #251;
TANASBOURNE TOWN CTR.
18070 EVERGREEN PKWY.
BEAVERTON, OR 97006
Quantity Description
1 UOC Mini II: S/N: 1429
1 UV Cure Unit: S/N: 637
Initial: /s/ MP
- 21 -
<PAGE> 1
EXHIBIT 10.20
CREDIT AGREEMENT
among
EYE CARE CENTERS OF AMERICA, INC.,
VARIOUS LENDERS,
BANKERS TRUST COMPANY,
as ADMINISTRATIVE AGENT
and
MERRILL LYNCH CAPITAL CORPORATION,
as SYNDICATION AGENT
----------------------------------
Dated as of April 23, 1998
----------------------------------
<PAGE> 2
CREDIT AGREEMENT, dated as of April 23, 1998, among EYE CARE CENTERS
<PAGE> 3
OF AMERICA, INC., a Texas corporation (the "Borrower"), the Lenders party hereto
from time to
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<PAGE> 4
time, BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the
-3-
<PAGE> 5
"Administrative Agent") and MERRILL LYNCH CAPITAL CORPORATION, as Syndication
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<PAGE> 6
Agent (in such capacity, the "Syndication Agent" and, together with the
Administrative Agent, each
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<PAGE> 7
an "Agent" and collectively the "Agents") (all capitalized terms used herein and
defined in Section
-6-
<PAGE> 8
11 are used herein as therein defined).
-7-
<PAGE> 9
W I T N E S S E T H :
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<PAGE> 10
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lenders are willing to make available to the Borrower the respective
credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 THE COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, each Lender with a Term Loan Commitment severally
agrees to make, on the Initial Borrowing Date, a term loan (each, a "Term Loan"
and, collectively, the "Term Loans") to the Borrower, which Term Loans (i) shall
be made and initially maintained as a single Borrowing of Base Rate Loans
(subject to the option to convert such Term Loans pursuant to Section 1.06) and
(ii) shall be made by each Lender in that initial aggregate principal amount as
is equal to the Term Loan Commitment of such Lender on such date (before giving
effect to any reductions thereto on such date pursuant to Section 3.03(b)(i) but
after giving effect to any reductions thereto on or prior to such date pursuant
to Section 3.03(b)(ii)). Once repaid, Term Loans incurred hereunder may not be
reborrowed.
(b) Subject to and upon the terms and conditions set forth herein,
each Lender with an Acquisition Loan Commitment severally agrees to make, from
time to time, on and after the Initial Borrowing Date, and prior to the
Acquisition Facility Expiry Date, a term loan or term loans (each such loan
incurred prior to the Acquisition Facility Reduction Date, an "A Acquisition
Loan" and any such loan incurred on or after the Acquisition Facility Reduction
Date a "B Acquisition Loan" and each such A Acquisition Loan and B Acquisition
Loan, an "Acquisition Loan" and, collectively, the "Acquisition Loans") to the
Borrower, which Acquisition Loans (i) shall, at the option of the Borrower, be
Base Rate Loans or Eurodollar Loans, PROVIDED that (A) except as otherwise
specifically provided in Section 1.10(b), all Acquisition Loans comprising the
same Borrowing shall at all times be of the same Type and (B) prior to the
earlier of (1) the 65th day after the Initial Borrowing Date and (2) the
Syndication Date, Acquisition Loans may only be incurred as Eurodollar Loans to
the extent comprising all or part of a single Borrowing of Eurodollar Loans
incurred on the first day of a PSD Interest Period, and (ii) shall not exceed
for any Lender at the time of incurrence thereof that aggregate principal amount
which equals the Acquisition Loan Commitment of such Lender (after giving effect
to the assumption of any Acquisition Loan Commitments on such date pursuant to
Section 1.14 but before giving effect to any reductions on such date pursuant to
Section 3.03(c)(i) and after giving effect to any reductions thereto prior to
such date under 3.03(c)(i) and on or prior to such date pursuant to Section
3.03(c)(ii)). Once repaid, Acquisition Loans incurred hereunder may not be
reborrowed.
(c) Subject to and upon the terms and conditions set forth herein,
each Lender with a Revolving Loan Commitment severally agrees, at any time and
from time to time on and after the Initial Borrowing Date and prior to the RL/AL
Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving
Loan" and, collectively, the "Revolving Loans") to the Borrower, which
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<PAGE> 11
Revolving Loans (i) shall, at the option of the Borrower, be Base Rate Loans or
Eurodollar Loans, PROVIDED that (A) except as otherwise specifically provided in
Section 1.10(b), all Revolving Loans comprising the same Borrowing shall at all
times be of the same Type and (B) prior to the earlier of (1) the 65th day after
the Initial Borrowing Date and (2) the Syndication Date, Revolving Loans may
only be incurred as Eurodollar Loans to the extent comprising all or part of a
single Borrowing of Eurodollar Loans incurred on the first day of a PSD Interest
Period, (ii) may be repaid and reborrowed in accordance with the provisions
hereof, (iii) shall not exceed for any Lender at any time outstanding that
aggregate principal amount which, when added to the product of (x) such Lender's
Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time and (II) the aggregate principal amount of all
Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds
of, and simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) then outstanding, equals the Revolving Loan Commitment of such
Lender at such time and (iv) shall not exceed for all Lenders at any time
outstanding that aggregate principal amount which, when added to (x) the amount
of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) at such time and (y) the aggregate
principal amount of all Swingline Loans (exclusive of Swingline Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of, the
respective incurrence of Revolving Loans) then outstanding, equals the Total
Available Revolving Loan Commitment at such time.
(d) Subject to and upon the terms and conditions herein set forth,
the Swingline Lender in its individual capacity agrees to make at any time and
from time to time on and after the Initial Borrowing Date and prior to the
Swingline Expiry Date, a revolving loan or revolving loans (each, a "Swingline
Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline
Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid
and reborrowed in accordance with the provisions hereof, (iii) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings at such time, an amount equal to the Total
Available Revolving Loan Commitment at such time (after giving effect to any
reductions to the Total Available Revolving Loan Commitment on such date), (iv)
shall not exceed at any time outstanding the Maximum Swingline Amount and (v)
shall not be extended if the Swingline Lender receives a written notice from any
Agent or the Required Lenders that has not been rescinded that there is a
Default or an Event of Default in existence hereunder. The Swingline Lender
shall not be obligated to make any Swingline Loans at a time when a Lender
Default exists unless the Swingline Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate the Swingline Lender's risk
with respect to the Defaulting Lender's or Lenders' participation in such
Swingline Loans, including by cash collateralizing such Defaulting Lender's or
Lenders' Percentage of the outstanding Swingline Loans.
(e) On any Business Day, the Swingline Lender may, in its sole
discretion, give notice to the other Lenders that its outstanding Swingline
Loans shall be funded with a Borrowing
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<PAGE> 12
of Revolving Loans (PROVIDED that such notice shall be deemed to have been
automatically given upon the occurrence of a Default or an Event of Default
under Section 10.05 or upon the exercise of any of the remedies provided in the
last paragraph of Section 10), in which case a Borrowing of Revolving Loans
constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing")
shall be made on the immediately succeeding Business Day by all Lenders with a
Revolving Loan Commitment (without giving effect to any reductions thereto
pursuant to the last paragraph of Section 10) PRO RATA based on each Lender's
Percentage (determined before giving effect to any termination of the Revolving
Loan Commitments pursuant to the last paragraph of Section 10) and the proceeds
thereof shall be applied directly to the Swingline Lender to repay the Swingline
Lender for such outstanding Swingline Loans. Each such Lender hereby irrevocably
agrees to make Revolving Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by the Swingline Lender
notwithstanding (i) the amount of the Mandatory Borrowing may not comply with
the minimum amount for Borrowings otherwise required hereunder, (ii) whether any
conditions specified in Section 6 are then satisfied, (iii) whether a Default or
an Event of Default then exists, (iv) the date of such Mandatory Borrowing and
(v) the amount of the Total Revolving Loan Commitment or the Total Available
Revolving Loan Commitment at such time. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the Borrower), then each such Lender
hereby agrees that it shall forthwith purchase (as of the date the Mandatory
Borrowing would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase) from the
Swingline Lender such participations in the outstanding Swingline Loans as shall
be necessary to cause such Lenders to share in such Swingline Loans ratably
based upon their respective Percentages (determined before giving effect to any
termination of the Revolving Loan Commitments pursuant to the last paragraph of
Section 10), PROVIDED that (x) all interest payable on the Swingline Loans shall
be for the account of the Swingline Lender until the date as of which the
respective participation is required to be purchased and, to the extent
attributable to the purchased participation, shall be payable to the participant
from and after such date and (y) at the time any purchase of participations
pursuant to this sentence is actually made, the purchasing Lender shall be
required to pay the Swingline Lender interest on the principal amount of
participation purchased for each day from and including the day upon which the
Mandatory Borrowing would otherwise have occurred to but excluding the date of
payment for such participation, at the overnight Federal Funds Rate for the
first three days and at the rate otherwise applicable to Revolving Loans
maintained as Base Rate Loans hereunder for each day thereafter. The Swingline
Lender shall not be obligated to make any Swingline Loans at a time when a
Lender Default exists unless the Swingline Lender has entered into arrangements
satisfactory to it and the Borrower to eliminate the Swingline Lender's risk
with respect to the Defaulting Lender's or Lenders' participation in such
Swingline Loans, including by cash collateralizing such Defaulting Lender's or
Lenders' Percentage of the outstanding Swingline Loans.
1.02 MINIMUM AMOUNT OF EACH BORROWING. (a) The aggregate principal
amount of each Borrowing of any Tranche of Loans shall not be less than the
Minimum Borrowing Amount
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<PAGE> 13
for such Tranche. More than one Borrowing may occur on the same date, but at no
time prior to the earlier to occur of (i) the Syndication Date and (ii) the 65th
day after the Closing Date, shall there be outstanding more than one Borrowing
of Eurodollar Loans, and at no time thereafter shall there be outstanding more
than fifteen Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to make
a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory
Borrowings), it shall give the Administrative Agent at its Notice Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Base Rate Loan and at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of
each Eurodollar Loan to be made hereunder, PROVIDED that any such notice shall
be deemed to have been given on a certain day only if given before 3:00 P.M.
(New York time) in the case of a Borrowing of Eurodollar Loans and 3:00 P.M.
(New York time) in the case of a Borrowing of Base Rate Loans on such day. Each
such written notice or written confirmation of telephonic notice (each, a
"Notice of Borrowing"), except as otherwise expressly provided in Section 1.10,
shall be irrevocable and shall be given by the Borrower in the form of Exhibit
A, appropriately completed to specify the aggregate principal amount of the
Loans to be made pursuant to such Borrowing, the date of such Borrowing (which
shall be a Business Day), whether the Loans being made pursuant to such
Borrowing shall constitute Term Loans, Acquisition Loans or Revolving Loans and
whether the Loans being made pursuant to such Borrowing are to be initially
maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
initial Interest Period to be applicable thereto. The Administrative Agent shall
promptly give each Lender which is required to make Loans of the Tranche
specified in the respective Notice of Borrowing, notice of such proposed
Borrowing, of such Lender's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give the Swingline Lender not later than
12:00 Noon (New York time) on the date that a Swingline Loan is to be made,
written notice or telephonic notice promptly confirmed in writing of each
Swingline Loan to be made hereunder. Each such notice shall be irrevocable and
specify in each case (A) the date of Borrowing (which shall be a Business Day)
and (B) the aggregate principal amount of the Swingline Loans to be made
pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of the Mandatory Borrowings as set forth in
Section 1.01(e).
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Lender, as the case may be, may act
without liability upon the basis of telephonic notice of such Borrowing,
believed by the Administrative Agent or the Swingline Lender, as the case may
be, in good faith to be from the Authorized Officer of the Borrower prior to
receipt of written confirmation. In each such case, the Borrower hereby waives
the right to dispute the Administrative Agent's and the
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<PAGE> 14
Swingline Lender's record of the terms of such telephonic notice of such
Borrowing of Loans (except in the case of gross negligence or willful
misconduct).
1.04 DISBURSEMENT OF FUNDS. Except as otherwise specifically
provided in the immediately succeeding sentence, no later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing (or (x) in the case
of Swingline Loans, not later than 2:00 P.M. (New York time) on the date
specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory
Borrowings, not later than 12:00 Noon (New York time) on the date specified in
Section 1.01(e)), each Lender with a Commitment of the respective Tranche will
make available its PRO RATA portion of each such Borrowing requested to be made
on such date (or in the case of Swingline Loans, the Swingline Lender shall make
available the full amount thereof). All such amounts shall be made available in
Dollars and in immediately available funds at the Payment Office of the
Administrative Agent, and the Administrative Agent will make available to the
Borrower at the Payment Office the aggregate of the amounts so made available by
the Lenders (for Loans other than Swingline Loans, prior to 1:00 P.M. (New York
time) on such day, to the extent of funds actually received by the
Administrative Agent prior to 12:00 Noon (New York time) on such day). Unless
the Administrative Agent shall have been notified by any Lender prior to the
date of Borrowing that such Lender does not intend to make available to the
Administrative Agent such Lender's portion of any Borrowing to be made on such
date, the Administrative Agent may assume that such Lender has made such amount
available to the Administrative Agent on such date of Borrowing and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender, the Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Lender or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to the
Borrower until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Lender, at the overnight Federal Funds Rate and (ii) if recovered from the
Borrower, the rate of interest applicable to the respective Borrowing, as
determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be
deemed to relieve any Lender from its obligation to make Loans hereunder or to
prejudice any rights which the Borrower may have against any Lender as a result
of any failure by such Lender to make Loans hereunder.
1.05 EVIDENCE OF DEBT; NOTES. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Lender resulting from each Loan of such
Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.
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<PAGE> 15
(b) The Administrative Agent shall maintain the Register pursuant to
Section 13.17, and a subaccount therein for each Lender in which shall be
recorded (i) the amount of each Loan made by such Lender hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof (if any).
(c) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 1.05(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made by
such Lender in accordance with the terms of this Agreement.
(d) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Loans made by such Lender shall be evidenced (i) if
Term Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B-1 with blanks appropriately completed in
conformity herewith (each, a "Term Note" and, collectively, the "Term Notes"),
(ii) if Acquisition Loans, by a promissory note duly executed and delivered by
the Borrower substantially in the form of Exhibit B-2 with blanks appropriately
completed in conformity herewith (each, an "Acquisition Note" and, collectively,
the "Acquisition Notes"), (iii) if Revolving Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit B-3,
with blanks appropriately completed in conformity herewith (each, a "Revolving
Note" and, collectively, the "Revolving Notes") and (iv) if Swingline Loans, by
a promissory note duly executed and delivered by the Borrower substantially in
the form of Exhibit B-4, with blanks appropriately completed in conformity
herewith (the "Swingline Note").
(e) The Term Note issued to each Lender requesting same shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender and be
dated the Initial Borrowing Date (or, in the case of Term Notes issued after the
Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in
a stated principal amount equal to the Term Loan made by such Lender on the
Initial Borrowing Date (or, in the case of Term Notes issued after the Initial
Borrowing Date, be in a stated principal amount equal to the outstanding
principal amount of the Term Loan of such Lender on the date of the issuance
thereof) and be payable in the principal amount of Term Loans evidenced thereby,
(iv) mature on the Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement
and the other Credit Documents.
(f) The Acquisition Note issued to each Lender requesting same shall
(i) be executed by the Borrower, (ii) be payable to the order of such Lender or
its registered assigns and be dated
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<PAGE> 16
the Initial Borrowing Date (or, in the case of Acquisition Notes issued after
the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be
in a stated principal amount equal to the Acquisition Loan Commitment of such
Lender on the Initial Borrowing Date (or, in the case of Acquisition Notes
issued after the Initial Borrowing Date, be in a stated principal amount equal
to the sum of the Acquisition Loan Commitment plus the outstanding Acquisition
Loans of such Lender on such date of the issuance) and be payable in the
principal amount of Acquisition Loans evidenced thereby, (iv) mature on the
RL/AL Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(g) The Revolving Note issued to each Lender requesting same shall
(i) be executed by the Borrower, (ii) be payable to the order of such Lender and
be dated the Initial Borrowing Date (or, in the case of Revolving Notes issued
after the Initial Borrowing Date, be dated the date of the issuance thereof),
(iii) be in a stated principal amount equal to the Revolving Loan Commitment of
such Lender and be payable in the principal amount of the Revolving Loans
evidenced thereby, (iv) mature on the RL/AL Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01 and mandatory
repayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(h) The Swingline Note (if any) issued to the Swingline Lender shall
(i) be executed by the Borrower, (ii) be payable to the order of the Swingline
Lender and be dated the Initial Borrowing Date (or, in the case of any Swingline
Note issued after the Initial Borrowing Date, be dated the date of the issuance
thereof), (iii) be in a stated principal amount equal to the Maximum Swingline
Amount and be payable in the principal amount of the outstanding Swingline Loans
evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date,
(v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans evidenced thereby and (vi) be entitled to the
benefits of this Agreement and the other Credit Documents.
(i) Each Lender holding a Note will, prior to any transfer of such
Note, endorse on the reverse side thereof the outstanding principal amount of
Loans evidenced thereby. Failure to make any such notation or any error in any
such notation or endorsement shall not affect the Borrower's obligations in
respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert,
subject to the conditions set forth below, on any Business Day all or a portion
equal to at least the applicable Minimum Borrowing Amount of the outstanding
principal amount of Loans pursuant to a single Tranche into a Borrowing or
Borrowings (of the same Tranche) of another Type of Loan, PROVIDED that (i) no
conversion of Base Rate Loans into Eurodollar Loans may be made prior to the
earlier of (A) the 65th day after the Initial Borrowing Date and (B) the
Syndication Date, except to the extent
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<PAGE> 17
comprising all or part of a single Borrowing of Eurodollar Loans occurring on
the first day of a PSD Interest Period, (ii) if for any reason whatsoever any
Eurodollar Loans are converted into Base Rate Loans on a day which is not the
last day of an Interest Period applicable to the Loans being converted, the
Borrower shall pay all amounts owing in connection therewith as required by
Section 1.11, (iii) no partial conversion of a Borrowing shall reduce the
outstanding principal amount of such Loans made pursuant to such Borrowing to
less than the Minimum Borrowing Amount applicable thereto, (iv) unless the
Required Lenders otherwise specifically agree in writing, Base Rate Loans may
only be converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion, (v) no conversion pursuant to this
Section 1.06 shall result in a greater number of Eurodollar Borrowings than is
permitted under Section 1.02 and (vi) Swingline Loans may not be converted
pursuant to this Section 1.06. Each such conversion shall be effected by the
Borrower by giving the Administrative Agent at its Notice Office prior to 3:00
P.M. (New York time) at least (x) in the case of a conversion to Eurodollar
Loans, three Business Days' prior notice and (y) in the case of a conversion to
Base Rate Loans, one Business Day's prior notice (each, a "Notice of
Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant
to which such Loans were made and, if to be converted into Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall give each Lender prompt notice of any such proposed conversion affecting
any of its Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Term Loans, Acquisition
Loans and Revolving Loans under this Agreement shall be incurred from the
Lenders PRO RATA on the basis of their Term Loan Commitments, Acquisition Loan
Commitments or Revolving Loan Commitments, as the case may be. It is understood
that no Lender shall be responsible for any default by any other Lender of its
obligation to make Loans hereunder and that each Lender shall be obligated to
make the Loans provided to be made by it hereunder, regardless of the failure of
any other Lender to make its Loans hereunder.
1.08 INTEREST. (a) The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Base Rate Loan from the date the proceeds
thereof are made available to the Borrower until the earlier of (i) the maturity
(whether by acceleration or otherwise) of such Base Rate Loan and (ii) the
conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06,
at a rate per annum which shall be equal to the sum of the Applicable Margin
plus the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof are
made available to the Borrower until the earlier of (i) the maturity (whether by
acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of
such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or
1.10(b), as applicable, at a rate per annum which shall, during each Interest
Period applicable thereto, be equal to the sum of the Applicable Margin plus the
Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at
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a rate per annum equal to 2% per annum in excess of the rate otherwise
applicable to Base Rate Loans of the respective Tranche of Loans from time to
time; PROVIDED that principal in respect of Eurodollar Loans shall bear interest
after the same becomes due (whether by acceleration or otherwise) until the end
of the applicable Interest Period for such Eurodollar Loan at a per annum rate
equal to 2% in excess of the rate of interest applicable on the due date
therefor.
(d) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Lenders thereof.
Each such determination shall, absent manifest error, be final and conclusive
and binding on all parties hereto.
1.09 INTEREST PERIODS. At the time it gives any Notice of Borrowing
or Notice of Conversion in respect of the making of, or conversion into, any
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or on the third Business Day prior to the expiration of an Interest Period
applicable to such Eurodollar Loan (in the case of any subsequent Interest
Period), the Borrower shall have the right to elect, by giving the
Administrative Agent notice thereof, the interest period (each, an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be a one, two, three or six month period, PROVIDED that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the
date of any conversion thereto from a Loan of a different Type) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the day on which the next preceding Interest Period
applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on
a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period
for a Eurodollar Loan would otherwise expire on a day
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which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(v) subject to the foregoing clauses (i) through (iv), only two
sequential one month interest periods shall be available to be selected
prior to the earlier of (A) the 65th day following the Initial Borrowing
Date and (B) the Syndication Date, with all Loans constituting Eurodollar
Loans during such period to be outstanding pursuant to a single Borrowing,
and the second such Interest Period to commence on the date the first such
Interest Period expires;
(vi) unless the Required Lenders otherwise specifically agree in
writing, no Interest Period may be selected at any time when a Default or
Event of Default is then in existence;
(vii) no Interest Period in respect of any Borrowing of any Tranche
of Loans shall be selected which extends beyond the respective Maturity
Date for such Tranche of Loans; and
(viii) no Interest Period of any Borrowing of Term Loans or
Acquisition Loans, as the case may be, shall be selected which extends
beyond any date upon which a mandatory repayment of such Tranche of Loans
will be required to be made under Section 4.02(b) or (c), as the case may
be, if the aggregate principal amount of Term Loans or Acquisition Loans,
as the case may be, which have Interest Periods which will expire after
such date will be in excess of the aggregate principal amount of Term
Loans or Acquisition Loans, as the case may be, then outstanding less the
aggregate amount of such required prepayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Eurodollar Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Lender, shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto but, with respect to clause (i) below, may be made only
by the Administrative Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition
of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule,
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regulation, order, guideline or request (whether or not having the force
of law) or in the interpretation or administration thereof and including
the introduction of any new law or governmental rule, regulation, order,
guideline or request, such as, for example, but not limited to: (A) a
change in the basis of taxation of payments to any Lender of the principal
of or interest such Eurodollar Loan or any other amounts payable hereunder
(except for changes in the rate of tax on, or determined by reference to,
the net income or profits of such Lender, or any franchise tax based on
the net income or profits of such Lender, in either case pursuant to the
laws of the United States of America, the jurisdiction in which it is
organized or in which its principal office or applicable lending office is
located or any subdivision thereof or therein), but without duplication of
any amounts payable in respect of Taxes pursuant to Section 4.04(a), or
(B) a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included in
the computation of the Eurodollar Rate and/or (y) other circumstances
since the date of this Agreement affecting such Lender or the interbank
Eurodollar market or the position of such Lender in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Lender in good
faith with any governmental request (whether or not having force of law)
or (z) impracticable as a result of a contingency occurring after the date
of this Agreement which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the Borrower and, except in the case of clause (i) above, to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Borrower and the
Lenders that the circumstances giving rise to such notice by the Administrative
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Loans which have not yet been
incurred (including by way of conversion) shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall, subject to
the provisions of Section 13.15 (to the extent applicable) pay to such Lender,
upon written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Lender in its sole discretion shall determine) as shall be required to
compensate such Lender for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to such Lender, showing the basis for and the calculation thereof,
submitted to the Borrower by such Lender in good faith shall, constitute PRIMA
FACIE evidence of such amounts due and (z) in the case of clause (iii) above,
the Borrower shall take one of the actions specified in Section 1.10(b) as
promptly as possible and, in any event, within the time period required by law.
Each of the Administrative Agent and each Lender agrees that if it gives notice
to the Borrower of any of the events described in clause (i) or (iii) above, it
shall promptly notify the Borrower and, in the case of any such Lender, the
Administrative Agent, if such event ceases to exist. If any such event described
in clause (iii) above ceases to exist as to a Lender, the
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<PAGE> 21
obligations of such Lender to make Eurodollar Loans and to convert Base Rate
Loans into Eurodollar Loans on the terms and conditions contained herein shall
be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Administrative Agent telephonic notice (confirmed in
writing) on the same date that the Borrower was notified by the affected Lender
or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if
the affected Eurodollar Loan is then outstanding, upon at least one Business
Day's written notice to the Administrative Agent, require the affected Lender to
convert such Eurodollar Loan into a Base Rate Loan, PROVIDED that, if more than
one Lender is affected at any time, then all affected Lenders must be treated
the same pursuant to this Section 1.10(b).
(c) If at any time after the date of this Agreement any Lender
determines that the introduction of or any change in any applicable law or
governmental rule, regulation, order, guideline, directive or request (whether
or not having the force of law) concerning capital adequacy, or any change in
interpretation or administration thereof by any governmental authority, central
bank or comparable agency, in each case introduced or changed after the date
hereof, will have the effect of increasing the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender based on the existence of such Lender's Commitments hereunder or its
obligations hereunder, then the Borrower shall, subject to the provisions of
Section 13.15 (to the extent applicable), pay to such Lender, upon its written
demand therefor, such additional amounts as shall be required to compensate such
Lender or such other corporation for the increased cost to such Lender or such
other corporation or the reduction in the rate of return to such Lender or such
other corporation as a result of such increase of capital. In determining such
additional amounts, each Lender will act reasonably and in good faith and will
use averaging and attribution methods which are reasonable, PROVIDED that such
Lender's determination of compensation owing under this Section 1.10(c) shall,
absent manifest error, be final and conclusive and binding on all the parties
hereto. Each Lender, upon determining that any additional amounts will be
payable pursuant to this Section 1.10(c), will give prompt written notice
thereof to the Borrower, which notice shall show in reasonable detail the basis
for and calculation of such additional amounts.
1.11 COMPENSATION. The Borrower shall, subject to the provisions of
Section 13.15 (to the extent applicable), compensate each Lender, upon its
written request (which request shall set forth in reasonable detail the basis
for requesting and the calculation of such compensation), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss,
expense or liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Lender to fund its Eurodollar Loans but
excluding any loss of anticipated profit) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender or the Administrative Agent)
a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by
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the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any
repayment (including any repayment made pursuant to Section 4.02, as a result of
an acceleration of the Loans pursuant to Section 10 or in connection with the
replacement of a Lender pursuant to Section 1.13 or Section 13.12(b)) or
conversion of any of its Eurodollar Loans occurs on a date which is not the last
day of an Interest Period with respect thereto; (iii) if any prepayment of any
of its Eurodollar Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Loans when required by the terms of this
Agreement or any Note held by such Lender or (y) any election made pursuant to
Section 1.10(b). Calculation of all amounts payable to a Lender under this
Section 1.11 shall be made as though that Lender had actually funded its
relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing
interest at the Eurodollar Rate in an amount equal to the amount of that Loan,
having a maturity comparable to the relevant Interest Period and through the
transfer of such Eurodollar deposit from an offshore office of that Lender to a
domestic office of that Lender in the United States of America; PROVIDED,
HOWEVER, that each Lender may fund each of its Eurodollar Loans in any manner it
sees fit and the foregoing assumption shall be utilized only for the calculation
of amounts payable under this Section 1.11.
1.12 CHANGE OF LENDING OFFICE. Each Lender agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such
Lender, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another lending
office for any Loans or Letters of Credit affected by such event, or, upon the
occurrence of any event giving rise to the operation of Section 4.04(a), use
such other reasonable efforts to eliminate or reduce such increased Taxes,
PROVIDED that such designation or other action is made on such terms that, in
the sole judgment of such Lender, such Lender and its lending office suffer no
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
in this Section 1.12 shall affect or postpone any of the obligations of the
Borrower or the right of any Lender provided in Sections 1.10, 2.05 and 4.04.
1.13 REPLACEMENT OF LENDERS. (x) If any Lender becomes a Defaulting
Lender or otherwise defaults in its obligations to make Loans or fund Unpaid
Drawings, (y) upon the occur rence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Lender which results in such Lender charging to the Borrower
increased costs in excess of those being generally charged by the other Lenders,
or (z) as provided in Section 13.12(b) in the case of certain refusals by a
Lender to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Lenders, the Borrower shall have the right, if no Default or Event of
Default will exist immediately after giving effect to the respective
replacement, to either replace such Lender (the "Replaced Lender") with one or
more other Eligible Transferee or Transferees, none of whom shall constitute a
Defaulting Lender at the time of such replacement (collectively, the
"Replacement Lender") and each of whom shall be reasonably acceptable to the
Administrative Agent or, at the option of the Borrower, to replace only (a) the
Revolving Loan Commitment (and outstandings pursuant thereto) of the Replaced
Lender with an identical Revolving Loan
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Commitment provided by the Replacement Lender, (b) the Acquisition Loan
Commitment of the Replaced Lender with an identical Acquisition Loan Commitment
provided by the Replacement Lender or (c) in the case of a replacement as
provided in Section 13.12(b) where the consent of the respective Lender is
required with respect to less than all Tranches of its Loans or Commitments, the
Commitments and/or outstanding Loans of such Lender in respect of each Tranche
where the consent of such Lender would otherwise be individually required, with
identical Commitments and/or Loans of the respective Tranche provided by the
Replacement Lender, PROVIDED that (i) at the time of any replacement pursuant to
this Section 1.13, the Replacement Lender shall enter into one or more
Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all
fees payable pursuant to said Section 13.04(b) to be paid by the Replacement
Lender) pursuant to which the Replacement Lender shall acquire all of the
Commitments and outstanding Loans (or, in the case of the replacement of only
(a) the Revolving Loan Commitment, the Revolving Loan Commitment and outstanding
Revolving Loans, (b) the Acquisition Loan Commitment and/or outstanding
Acquisition Loans, the Acquisition Loan Commitment and/or outstanding
Acquisition Loans or (c) the outstanding Term Loans, such outstanding Term
Loans) and in each case (except for the replacement of only the outstanding
Acquisition Loan Commitments, Acquisition Loans and/or Term Loans of the
respective Lender) participations in Letters of Credit by, the Replaced Lender
and, in connection therewith, shall pay to (x) the Replaced Lender in respect
thereof an amount equal to the sum (without duplication) of (A) an amount equal
to the principal of, and all accrued interest on, all applicable outstanding
Loans of the Replaced Lender, (B) except in the case of the replacement of only
the outstanding Acquisition Loan Commitments, Acquisition Loans and/or Term
Loans of a Replaced Lender, an amount equal to all Unpaid Drawings that have
been funded by (and not reimbursed to) such Replaced Lender, together with all
then unpaid interest with respect thereto at such time and (C) an amount equal
to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender (but
only with respect to the relevant Tranche, in the case of the replacement of
less than all Tranches of Loans then held by the respective Replaced Lender)
pursuant to Section 3.01 and (y) except in the case of the replacement of only
the outstanding Acquisition Loan Commitments, Acquisition Loans and/or Term
Loans of a Replaced Lender, the respective Issuing Lender an amount equal to
such Replaced Lender's Percentage of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore funded
by such Replaced Lender and to the Swingline Lender an amount equal to such
Replaced Lender's Percentage of any Mandatory Borrowing to the extent such
amount was not theretofore funded by such Replaced Lender, and (ii) all
obligations of the Borrower owing to the Replaced Lender (other than those (a)
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid or (b) relating to any
Tranche of Loans and/or Commitments of the respective Replaced Lender which will
remain outstanding after giving effect to the respective replacement) shall be
paid in full to such Replaced Lender concurrently with such replacement. Upon
the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Lender, delivery to the Replacement Lender of the
appropriate Note or Notes executed by the Borrower, the Replacement Lender shall
become a Lender hereunder and, unless the respective Replaced Lender continues
to have outstanding Loans or a Commitment hereunder, the Replaced Lender shall
cease to constitute a Lender hereunder, except with respect to indemnification
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provisions under this Agreement (including, without limitation, Sections 1.10,
1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such Replaced
Lender.
1.14 ADDITIONAL ACQUISITION LOAN COMMITMENTS. At any time and from
time to time on and after the Effective Date and prior to the Business Day
immediately preceding the Acquisition Facility Expiry Date, the Borrower may
request one or more Lenders or other lending institutions to assume an
additional Acquisition Loan Commitment and to make Acquisition Loans to the
Borrower as provided in Section 1.01(b) and, in the sole discretion of each such
Lender or other institution, any such Lender or other institution may agree to
so commit; PROVIDED that (i) no Default or Event of Default then exists, (ii)
the increase in the Total Acquisition Loan Commitment pursuant to any such
request shall be in an aggregate amount of at least $10,000,000 or, if less, the
maximum increase permitted pursuant hereto, (iii) after the Effective Date, the
Total Acquisition Loan Commitment shall not increase pursuant to this Section
1.14 by an aggregate amount of more than $50,000,000, (iv) on and after the
Acquisition Facility Reduction Date, the Total Acquisition Loan Commitment shall
not increase pursuant to this Section 1.14 by an aggregate amount of more than
the Fourth Year AL Facility Amount, and (v) after giving effect to any such
increase, the Total Acquisition Loan Commitment shall not exceed $100,000,000.
The Borrower and each such Lender or other lending institution (each, an
"Assuming Lender") which agrees to commit to assume such an Acquisition Loan
Commitment and to make such Acquisition Loans shall execute and deliver to the
Administrative Agent an Acquisition Commitment Assumption Agreement
substantially in the form of Exhibit C (with the increase in, or in the case of
a new Assuming Lender, assumption of, such Lender's Acquisition Loan Commitment
to be effective upon delivery of such Acquisition Commitment Assumption
Agreement to the Administrative Agent). The Administrative Agent shall promptly
notify each Lender as the occurrence of each Acquisition Commitment Assumption
Date. On each Acquisition Commitment Assumption Date, (x) Schedule I shall be
deemed modified to reflect the revised Acquisition Loan Commitments of such
Lenders, and (y) the Borrower shall pay to each such Assuming Lender and each
Agent such up front fees (if any) as may have been agreed between the Borrower
and such Assuming Lender and/or such Agent. Notwithstanding anything to the
contrary contained in this Agreement, on and after each Acquisition Commitment
Assumption Date, the Borrower shall cooperate with the Administrative Agent in
arranging its Borrowings of Acquisition Loans such that, to the maximum extent
reasonably practicable, Borrowings are combined and/or converted at times and in
amounts so that the various Lenders with Acquisition Loans will ultimately
participate in each such Borrowing on a PRO RATA basis based upon their
respective AL Percentages.
SECTION 2. Letters of Credit.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request that any Issuing Lender
issue, at any time and from time to time on and after the Initial Borrowing Date
and prior to the RL/AL Maturity Date, (x) for the account of the Borrower and
for the benefit of any holder (or any trustee, agent or other similar
representative for any such holders) of L/C Supportable Indebtedness of the
Borrower or any of its Subsidiaries, an irrevocable sight standby letter of
credit, in a form customarily used by such Issuing Lender or in
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such other form as has been approved by such Issuing Lender (each such standby
letter of credit, a "Standby Letter of Credit") in support of such L/C
Supportable Indebtedness and (y) for the account of the Borrower and for the
benefit of sellers of goods or materials to the Borrower or any of its
Subsidiaries, an irrevocable sight commercial letter of credit in a form
customarily used by such Issuing Lender or in such other form as has been
approved by such Issuing Lender (each such commercial letter of credit, a "Trade
Letter of Credit," and each such Trade Letter of Credit and each Standby Letter
of Credit, a "Letter of Credit") in support of commercial transactions of the
Borrower and its Subsidiaries.
(b) Subject to the terms and conditions contained herein, the
Administrative Agent hereby agrees that it will (and at the Borrower's request
each other Issuing Lender may, at its option, agree that it will), at any time
and from time to time on or after the Initial Borrowing Date and prior to the
RL/AL Maturity Date, following its receipt of the respective Letter of Credit
Request, issue for the account of the Borrower one or more Letters of Credit (x)
in the case of Standby Letters of Credit, in support of such L/C Supportable
Indebtedness of the Borrower or any of its Subsidiaries as is permitted to
remain outstanding without giving rise to a Default or Event of Default
hereunder and (y) in the case of Trade Letters of Credit, in support of sellers
of goods or materials as referenced in Section 2.01(a), PROVIDED that the
respective Issuing Lender shall be under no obligation to issue any Letter of
Credit of the types described above if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Lender from issuing such Letter of Credit or any requirement of law
applicable to such Issuing Lender or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over such Issuing Lender shall prohibit, or request that such
Issuing Lender refrain from, the issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon such Issuing
Lender with respect to such Letter of Credit any restriction or reserve or
capital requirement (for which such Issuing Lender is not otherwise
compensated) not in effect on the date hereof, or any unreimbursed loss,
cost or expense which was not applicable, in effect or known to such
Issuing Lender as of the date hereof and which such Issuing Lender in good
faith deems material to it; or
(ii) such Issuing Lender shall have received notice from any Lender
prior to the issuance of such Letter of Credit of the type described in
the second sentence of Section 2.02(b).
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time would
exceed either (x) $10,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans then outstanding and Swingline Loans then
outstanding, an amount equal to the Total Available Revolving Loan Commitment at
such time, (ii) each Letter of Credit shall be denominated in Dollars, (iii)
each Letter of Credit shall by its terms terminate (x) in the case of
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Standby Letters of Credit, on or before the earlier of (A) the date which occurs
12 months after the date of the issuance thereof (although any such Standby
Letter of Credit may be extendible for successive periods of up to 12 months, on
terms acceptable to the Issuing Lender thereof) and (B) the date which is five
Business Days prior to the RL/AL Maturity Date, and (y) in the case of Trade
Letters of Credit, on or before the earlier of (A) the date which occurs 360
days after the date of issuance thereof and (B) the date which is 30 days prior
to the RL/AL Maturity Date and (iv) the Stated Amount of each Letter of Credit
upon issuance shall be not less than $10,000 or such lesser amount as is
acceptable to the respective Issuing Lender.
(d) Notwithstanding the foregoing, in the event a Lender Default
exists, no Issuing Lender shall be required to issue any Letter of Credit unless
such Issuing Lender has entered into arrangements satisfactory to it and the
Borrower to eliminate such Issuing Lender's risk with respect to the Defaulting
Lender's or Lenders' participation in all Letters of Credit, including by cash
collateralizing such Defaulting Lender's or Lenders' Percentage of all Letter of
Credit Outstandings.
2.02 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower desires
that a Letter of Credit be issued for its account, the Borrower shall give the
Administrative Agent and the respective Issuing Lender at least five Business
Days' (or such shorter period as is acceptable to the respective Issuing Lender)
written notice thereof. Each notice shall be in the form of Exhibit D (each, a
"Letter of Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to
be a representation and warranty by the Borrower that such Letter of Credit may
be issued in accordance with, and will not violate the requirements of, Section
2.01(c). Unless the respective Issuing Lender has received notice from any
Lender before it issues a Letter of Credit that one or more of the conditions
specified in Section 5 or Section 6, as applicable, are not then satisfied, or
that the issuance of such Letter of Credit would violate Section 2.01(c), then
such Issuing Lender shall issue the requested Letter of Credit for the account
of the Borrower in accordance with such Issuing Lender's usual and customary
practices. Upon the issuance of or amendment to any Standby Letter of Credit,
such Issuing Lender shall promptly notify each Lender of such issuance or
amendment and such notice shall be accompanied by a copy of the issued Standby
Letter of Credit or amendment, as the case may be. For Trade Letters of Credit
on which the Issuing Lender is other than the Administrative Agent, the Issuing
Lender will send to the Administrative Agent by facsimile transmission, promptly
on the first Business Day of each week, the daily aggregate Stated Amount of
Trade Letters of Credit issued by such Issuing Lender and outstanding during the
preceding week. The Administrative Agent shall deliver to each Lender, after
each calendar month end and upon each payment of the Letter of Credit Fee, a
report setting forth for the relevant period the daily aggregate Stated Amount
of all outstanding Trade Letters of Credit during such period.
2.03 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by any Issuing Lender of any Letter of Credit, such Issuing Lender
shall be deemed to have sold and transferred to each Lender with a Revolving
Loan Commitment, other than such Issuing Lender (each such Lender, in its
capacity under this Section 2.03, a "Participant"), and each such Participant
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<PAGE> 27
shall be deemed irrevocably and unconditionally to have purchased and received
from such Issuing Lender, without recourse or warranty, an undivided interest
and participation, to the extent of such Participant's Percentage, in such
Letter of Credit, each drawing made thereunder and the obligations of the
Borrower under this Agreement with respect thereto, and any security therefor or
guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments
or Percentages of the Lenders pursuant to Section 1.13 or 13.04, it is hereby
agreed that, with respect to all outstanding Letters of Credit and Unpaid
Drawings, there shall be an automatic adjustment to the participations pursuant
to this Section 2.03 to reflect the new Percentages of the assignor and assignee
Lender or of all Lenders with Revolving Loan Commitments, as the case may be.
(b) In determining whether to pay under any Letter of Credit, such
Issuing Lender shall have no obligation relative to the other Lenders other than
to confirm that any documents required to be delivered under such Letter of
Credit appear to have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by any Issuing Lender under or in connection with
any Letter of Credit if taken or omitted in the absence of gross negligence or
willful misconduct as determined by a court of competent jurisdiction, shall not
create for such Issuing Lender any resulting liability to the Borrower or any
Lender.
(c) In the event that any Issuing Lender makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such amount in full
to such Issuing Lender pursuant to Section 2.04(a), such Issuing Lender shall
promptly notify the Administrative Agent, which shall promptly notify each
Participant, of such failure, and each Participant shall promptly and
unconditionally pay to such Issuing Lender the amount of such Participant's
Percentage of such unreimbursed payment in Dollars and in same day funds. If the
Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any
Business Day, any Participant required to fund a payment under a Letter of
Credit, such Participant shall make available to such Issuing Lender in Dollars
such Participant's Percentage of the amount of such payment on such Business Day
in same day funds. If and to the extent such Participant shall not have so made
its Percentage of the amount of such payment available to such Issuing Lender,
such Participant agrees to pay to such Issuing Lender, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to such Issuing Lender at the overnight Federal Funds
Rate. The failure of any Participant to make available to such Issuing Lender
its Percentage of any payment under any Letter of Credit shall not relieve any
other Participant of its obligation hereunder to make available to such Issuing
Lender its Percentage of any Letter of Credit on the date required, as specified
above, but no Participant shall be responsible for the failure of any other
Participant to make available to such Issuing Lender such other Participant's
Percentage of any such payment.
(d) Whenever any Issuing Lender receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, such Issuing Lender shall forward
such payment to the Administrative Agent, which in turn shall distribute to each
Participant which has paid its Percentage thereof, in Dollars and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount
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<PAGE> 28
originally funded by such Participant to the aggregate amount funded by all
Participants) of the principal amount of such reimbursement obligation and
interest thereon accruing after the purchase of the respective participations.
(e) Upon the request of any Participant, each Issuing Lender shall
furnish to such Participant copies of any Letter of Credit issued by it and such
other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to each
Issuing Lender with respect to Letters of Credit issued by it shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Issuing Lender, any Participant, or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The Borrower
hereby agrees to reimburse the respective Issuing Lender, by making payment to
the Administrative Agent in immediately available funds at the Payment Office,
for any payment or disbursement made by it under any Letter of Credit (each such
amount, so paid until reimbursed, an "Unpaid Drawing"), no later than three
Business Days after the date of such payment or disbursement, with interest on
the amount so paid or disbursed by such Issuing Lender, to the extent not
reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but excluding the
date such Issuing Lender was reimbursed by the Borrower therefor at a rate per
annum which shall be the Base Rate in effect from time to time plus the
Applicable Margin for Revolving Loans maintained as Base Rate Loans; PROVIDED,
HOWEVER, to the extent such
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<PAGE> 29
amounts are not reimbursed prior to 1:00 P.M. (New York time) on the third
Business Day following such payment or disbursement, interest shall thereafter
accrue on the amounts so paid or disbursed by such Issuing Lender (and until
reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in
effect from time to time plus the Applicable Margin for Revolving Loans
maintained as Base Rate Loans plus 2%, in each such case, with interest to be
payable on demand. The respective Issuing Lender shall give the Borrower prompt
notice of each Drawing under any Letter of Credit, PROVIDED that the failure to
give any such notice shall in no way affect, impair or diminish the Borrower's
obligations hereunder.
(b) The obligations of the Borrower under this Section 2.04 to
reimburse the respective Issuing Lender with respect to payments on Letters of
Credit (each, a "Drawing") (including, in each case, interest thereon) shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower may have or
have had against any Lender (including in its capacity as issuer of the Letter
of Credit or as Participant), or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing, the respective Issuing Lender's
only obligation to the Borrower being to confirm that any documents required to
be delivered under such Letter of Credit appear to have been delivered and that
they appear to substantially comply on their face with the requirements of such
Letter of Credit; PROVIDED that the Borrowers shall not be obligated to
reimburse such Issuing Lender for any wrongful payment made by such Issuing
Lender under a Letter of Credit as a result of acts or omissions constituting
gross negligence or willful misconduct as determined by a court of competent
jurisdiction on the part of such Issuing Lender.
2.05 INCREASED COSTS. If at any time after the date of this
Agreement, the introduction of or any change in any applicable law, rule,
regulation, order, guideline or request or in the interpretation or
administration thereof by any governmental authority charged with the inter
pretation or administration thereof, or compliance by any Issuing Lender or any
Participant with any request or directive by any such authority (whether or not
having the force of law), or any change in generally accepted accounting
principles, shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of credit
issued by any Issuing Lender or participated in by any Participant, or (ii)
impose on any Issuing Lender or any Participant any other conditions relating,
directly or indirectly, to this Agreement or any Letter of Credit; and the
result of any of the foregoing is to increase the cost to any Issuing Lender or
any Participant of issuing, maintaining or participating in any Letter of
Credit, or reduce the amount of any sum received or receivable by any Issuing
Lender or any Participant hereunder or reduce the rate of return on its capital
with respect to Letters of Credit (except for changes in the rate of tax on, or
determined by reference to, the net income or profits of such Issuing Lender or
such Participant, or any franchise tax based on the net income or profits of
such Lender or Participant, in either case pursuant to the laws of the United
States of America, the jurisdiction in which it is organized or in which its
principal office or applicable lending office is located or any subdivision
thereof or therein), but without duplication of any amounts payable in respect
of Taxes pursuant to Section 4.04(a), then, upon demand to the Borrower by such
Issuing Lender or any Participant (a copy of which demand shall be sent by such
Issuing Lender or such Participant to the Administrative Agent)
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and subject to the provisions of Section 13.15 (to the extent applicable), the
Borrower shall pay to such Issuing Lender or such Participant such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction in the amount receivable or reduction on the rate of return on its
capital. Any Issuing Lender or any Participant, upon determining that any
additional amounts will be payable pursuant to this Section 2.05, will give
prompt written notice thereof to the Borrower, which notice shall include a
certificate submitted to the Borrower by such Issuing Lender or such Participant
(a copy of which certificate shall be sent by such Issuing Lender or such
Participant to the Administrative Agent), setting forth in reasonable detail the
basis for and the calculation of such additional amount or amounts necessary to
compensate such Issuing Lender or such Participant. The certificate required to
be delivered pursuant to this Section 2.05 shall, if delivered in good faith and
absent manifest error, be final and conclusive and binding on the Borrower.
SECTION 3. Commitment Commission; Fees; Reductions of Commitment.
3.01 FEES. (a) (i) The Borrower agrees to pay to the Administrative
Agent for distribution to each Non-Defaulting Lender with an Acquisition Loan
Commitment a commitment commission (the "AL Commitment Commission") for the
period from the Effective Date to but not including the Acquisition Facility
Expiry Date (or to but not including such earlier date as the Total Commitment
shall have been terminated), computed at a rate per annum for each day equal to
the Applicable Commitment Commission Percentage on the Acquisition Loan
Commitment of such Non-Defaulting Lender on such day. Accrued Acquisition Loan
Commitment Commission shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the Acquisition Facility Expiry Date or such
earlier date upon which the Total Commitment is terminated.
(ii) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Lender with a Revolving Loan Commitment a
commitment commission (the "RL Commitment Commission") for the period from the
Initial Borrowing Date to but not including the RL/AL Maturity Date (or to but
not including such earlier date as the Total Revolving Loan Commitment shall
have been terminated), computed at a rate per annum for each day equal to the
Applicable Commitment Commission Percentage on the Unutilized Revolving Loan
Commitment of such Non-Defaulting Lender on such day. Accrued Revolving Loan
Commitment Commission shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the RL/AL Maturity Date or such earlier date upon
which the Total Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Lender with a Revolving Loan Commitment
(based on their respective Percentages) a fee in respect of each Letter of
Credit issued hereunder (the "Letter of Credit Fee"), for the period from and
including the date of issuance of such Letter of Credit to and including the
termination of such Letter of Credit, computed at a rate per annum equal to the
Applicable Margin then in effect for Revolving Loans maintained as Eurodollar
Loans on the daily average Stated Amount of such Letter of Credit. Accrued
Letter of Credit Fees shall be due and payable quarterly in arrears on each
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<PAGE> 31
Quarterly Payment Date and upon the first day on or after the termination of the
Total Revolving Loan Commitment upon which no Letters of Credit remain
outstanding.
(c) The Borrower agrees to pay to the respective Issuing Lender, for
its own account, a facing fee in respect of each Letter of Credit issued for its
account hereunder (the "Facing Fee") for the period from and including the date
of issuance of such Letter of Credit to and including the termination of such
Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily
average Stated Amount of such Letter of Credit; PROVIDED that in no event shall
the annual Facing Fee with respect to any Letter of Credit be less than $500, it
being agreed that, on the date of issuance of any Letter of Credit and on each
anniversary thereof prior to the termination of such Letter of Credit, $500 will
be paid toward the next year's Facing Fees for such Letter of Credit, which
amount shall be credited in direct order to the Facing Fees which would
otherwise be payable with respect to such Letter of Credit in the succeeding
annual period. Accrued Facing Fees shall be due and payable quarterly in arrears
on each Quarterly Payment Date and on the date upon which the Total Revolving
Loan Commitment has been terminated and such Letter of Credit has been
terminated in accordance with its terms.
(d) The Borrower shall pay, upon each payment under, issuance of, or
amendment to, any Letter of Credit, such amount as shall at the time of such
event be the administrative charge which the respective Issuing Lender is
generally imposing in connection with such occurrence with respect to letters of
credit.
(e) The Borrower shall pay to each of the Agents, for their own
account, such other fees as have been agreed to in writing by the Borrower and
the Agents.
3.02 VOLUNTARY TERMINATION OF UNUTILIZED COMMITMENTS. (a) Upon at
least one Business Day's prior notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), the Borrower shall have the right, at any time or from time to
time, without premium or penalty, to terminate the Total Unutilized Revolving
Loan Commitment and/or the Total Acquisition Loan Commitment in each case, in
whole or in part, in a minimum amount of $500,000 and integral multiples of
$100,000 thereafter in the case of partial reductions to the Total Revolving
Loan Commitment or the Total Acquisition Loan Commitment, as the case may be,
PROVIDED that (i) each such reduction shall apply proportionately to permanently
reduce the Revolving Loan Commitment or Acquisition Loan Commitment, as the case
may be, of each Lender with such a Commitment and (ii) no such reduction to the
Total Unutilized Revolving Loan Commitment shall in any case be in an amount
which would cause the Revolving Loan Commitment of any Lender to be reduced (as
required by preceding clause (i)) by an amount which exceeds the remainder of
(x) the Unutilized Revolving Loan Commitment of such Lender as in effect
immediately before giving effect to such reduction minus (y) such Lender's
Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
(b) In the event of certain refusals by a Lender as provided in
Section 13.12(b) to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Lenders, the Borrower may, subject to the
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requirements of said Section 13.12(b) and upon five Business Days' written
notice to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Lenders), terminate
all of the Acquisition Loan Commitment and/or the Revolving Loan Commitment of
such Lender so long as, in the case of a termination of such Lender's Revolving
Loan Commitment all Revolving Loans, together with accrued and unpaid interest,
fees and all other amounts, owing to such Lender are repaid concurrently with
the effectiveness of such termination (at which time Schedule I shall be deemed
modified to reflect such changed amounts), and at such time, unless the
respective Lender continues to have other outstanding Loans hereunder, such
Lender shall no longer constitute a "Lender" for purposes of this Agreement,
except with respect to indemnification provisions under this Agreement
(including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and
13.06), which shall survive as to such repaid Lender.
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total Commitment
(and the Term Loan Commitment, the Acquisition Loan Commitment and the Revolving
Loan Commitment of each Lender) shall terminate in its entirety on June 30, 1998
unless the Initial Borrowing Date shall have occurred on or prior to such date.
(b) (i) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Lender) shall (i) terminate in its entirety on the Initial
Borrowing Date (after giving effect to the making of the Term Loans on such
date) and (ii) prior to the termination of the Total Term Loan Commitment as
provided in clause (i) above, be reduced from time to time to the extent
required by Section 4.02.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Acquisition Loan Commitment (and the
Acquisition Loan Commitment of each Lender) shall (i) be reduced on the date of
each Borrowing of Acquisition Loans hereunder, in each case after giving effect
to, and in an amount equal to, the Acquisition Loans made on such date, and (ii)
be reduced on the Acquisition Facility Reduction Date by an amount equal to 50%
of the Total Acquisition Loan Commitment immediately prior to giving effect to
such reduction and after giving effect to any reductions thereto pursuant to
clause (i) of this Section 3.03(c). Notwithstanding anything to the contrary
contained in this Agreement, the Total Acquisition Loan Commitment (and the
Acquisition Loan Commitment of each Lender) shall terminate in its entirety (if
not theretofore terminated) at 5:00 P.M. (New York time) on the Acquisition
Facility Expiry Date.
(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Lender) shall terminate in its entirety on the
RL/AL Maturity Date.
(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Initial Borrowing Date
upon which a mandatory prepayment of Loans pursuant to Sections 4.02(d) through
(h), inclusive, is required (and exceeds in amount the aggregate principal
amount of Loans then outstanding) or would be required if Loans were then
outstanding, to extent that but for the reduction provided for in this Section
3.03(e), the Borrower
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would be required to make an offer to purchase Senior Subordinated Notes and/or
Additional Subordinated Debt as a result of any event set forth in such
Sections, the Total Revolving Loan Commitment (and the Revolving Loan Commitment
of each Lender with such a Commitment) shall be permanently reduced by the
amount, if any, by which the amount required to be applied pursuant to said
Section (determined as if an unlimited amount of Loans were actually
outstanding) exceeds the aggregate principal amount of Loans then outstanding.
(f) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Commitment (and the Term Loan
Commitment, Acquisition Loan Commitment and Revolving Loan Commitment of each
Lender) shall terminate on any date on which a Change of Control shall occur.
(g) Each reduction to the Total Term Loan Commitment, the Total
Acquisition Loan Commitment and the Total Revolving Loan Commitment pursuant to
this Section 3.03 (or pursuant to Section 4.02) shall be applied proportionately
to reduce the Term Loan Commitment, the Acquisition Loan Commitment or the
Revolving Loan Commitment, as the case may be, of each Lender with such a
Commitment.
SECTION 4. Prepayments; Payments; Taxes.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions: (i) the Borrower
shall give the Administrative Agent prior to 3:00 P.M. (New York time) at its
Notice Office at least one Business Day's prior written notice (or telephone
notice promptly confirmed in writing) of its intent to prepay Loans (or same day
notice in the case of Swingline Loans provided such notice is given prior to
3:00 P.M. (New York time)) whether Term Loans, Acquisition Loans, Revolving
Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the
Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, which notice the Administrative
Agent shall promptly transmit to each of the Lenders; (ii) each prepayment shall
be in an aggregate principal amount of at least $500,000 (or $25,000 in the case
of Swingline Loans) or such lesser amount of a Borrowing which is outstanding,
PROVIDED that if any partial prepayment of Eurodollar Loans made pursuant to any
Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto, then such Borrowing may not be continued as a Borrowing of Eurodollar
Loans and any election of an Interest Period with respect thereto given by the
Borrower shall have no force or effect; (iii) at the time of any prepayment of
Eurodollar Loans pursuant to this Section 4.01 on any date other than the last
day of the Interest Period applicable thereto, the Borrower shall pay the
amounts required pursuant to Section 1.11; (iv) in the event of certain refusals
by a Lender as provided in Section 13.12(b) to consent to certain proposed
changes, waivers, discharges or terminations with respect to this Agreement
which have been approved by the Required Lenders, the Borrower may, upon five
Business Days' written notice to the Administrative Agent at its Notice Office
(which notice the Administrative Agent shall promptly transmit to each of the
Lenders) repay all Loans, together with
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accrued and unpaid interest, Fees, and other amounts owing to such Lender (or
owing to such Lender with respect to each Tranche which gave rise to the need to
obtain such Lender's individual consent) in accordance with said Section
13.12(b) so long as (A) in the case of the repayment of Revolving Loans of any
Lender pursuant to this clause (iv) the Revolving Loan Commitment of such Lender
is terminated concurrently with such repayment (at which time Schedule I shall
be deemed modified to reflect the changed Revolving Loan Commitments), and (B)
the consents required by Section 13.12(b) in connection with the repayment
pursuant to this clause (iv) have been obtained; and (v) except as expressly
provided in preceding clause (iv) and except with respect to prepayments of
Acquisition Loans which shall be applied PRO RATA based upon the AL Percentages
of Lenders with Acquisition Loans then outstanding (with the Borrower to
designate the Borrowing or Borrowings of Acquisition Loans to be prepaid,
subject to the foregoing provision), each prepayment in respect of any Loans
made pursuant to a Borrowing shall be applied PRO RATA among the Loans
comprising such Borrowing; PROVIDED that at the Borrower's election in
connection with any prepayment of Revolving Loans pursuant to this Section 4.01,
such prepayment shall not be applied to any Revolving Loan of a Defaulting
Lender. Each prepayment of principal of any Term Loans pursuant to this Section
4.01 shall be applied to reduce the then remaining TL Scheduled Repayments PRO
RATA based upon the then remaining principal amounts of the TL Scheduled
Repayments after giving effect to all prior reductions thereto. Each prepayment
of principal of Acquisition Loans (x) if made on or prior to the Acquisition
Facility Reduction Date, shall have no effect on the amortization of Acquisition
Loans as set forth in Section 4.02(c), (y) if made after the Acquisition
Facility Reduction Date and prior to or on the Acquisition Facility Expiry Date,
shall be applied, at the Borrower's election, (I) to reduce on a PRO RATA basis
the then remaining principal amounts of the AL Year 3 Scheduled Repayments after
giving effect to all prior reductions thereto or (II) to reduce Year 4 Reference
Amount as calculated on the date of such prepayment, and (z) if made after the
Acquisition Facility Expiry Date, shall be applied at the Borrower's election,
(I) to reduce on a PRO RATA basis the then remaining principal amounts of the AL
Year 3 Scheduled Repayments after giving effect to all prior reductions thereto
or (II) to reduce on a PRO RATA basis the then remaining principal amounts of
the AL Year 4 Scheduled Repayments after giving effect to all prior reductions
thereto, PROVIDED that if, as a result of an application described in subclause
(I) or (II) of clause (x) or (y) above, such applicable amounts shall have been
reduced to zero, the remainder of such prepayment shall be applied as provided
in the other such subclause.
4.02 MANDATORY REPAYMENTS AND COMMITMENT REDUCTIONS. (a) On any day
on which the sum of the aggregate outstanding principal amount of the Revolving
Loans, Swingline Loans and the Letter of Credit Outstandings exceeds the Total
Revolving Loan Commitment as then in effect, the Borrower shall prepay on such
day principal of Swingline Loans and, after the Swingline Loans have been repaid
in full, Revolving Loans in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Swingline Loans and Revolving Loans,
the aggregate amount of the Letter of Credit Outstandings exceeds the Total
Revolving Loan Commitment as then in effect, the Borrower shall pay to the
Administrative Agent at the Payment Office on such date an amount of cash or
Cash Equivalents equal to the amount of such excess (up to a maximum amount
equal to the Letter of Credit Outstandings at such time), such cash or Cash
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Equivalents to be held as security for all obligations of the Borrower hereunder
in a cash collateral account to be established by the Administrative Agent.
(b) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that principal amount of Term Loans, to the
extent then outstanding, as is set forth opposite such date (each such
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(i),
a "TL Scheduled Repayment," and each such date, a "TL Scheduled Repayment
Date"):
<TABLE>
<CAPTION>
TL
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
The last Business Day of June, 1999 $1,000,000
The last Business Day of September, 1999 $1,000,000
The last Business Day of December, 1999 $1,000,000
The last Business Day of March, 2000 $1,000,000
The last Business Day of June, 2000 $3,000,000
The last Business Day of September, 2000 $3,000,000
The last Business Day of December, 2000 $3,000,000
The last Business Day of March, 2001 $3,000,000
The last Business Day of June, 2001 $4,500,000
The last Business Day of September, 2001 $4,500,000
The last Business Day of December, 2001 $4,500,000
The last Business Day of March, 2002 $4,500,000
The last Business Day of June, 2002 $5,250,000
The last Business Day of September, 2002 $5,250,000
The last Business Day of December, 2002 $5,250,000
Term Loan Maturity Date $5,250,000
</TABLE>
(c) (i) In addition to any other mandatory repayments or commitment
reductions pur suant to this Section 4.02, on each date set forth below, the
Borrower shall be required to repay that percentage as is set forth opposite
such date multiplied by the aggregate principal amount of Acquisition Loans
(such amount, the "Year 3 Reference Amount") outstanding on the Acquisition
Facility Reduction Date (each such repayment, as the same may be reduced as
provided in Sections 4.01 and 4.02(i) and (j) an "AL Year 3 Scheduled
Repayment," and each such date, an "Initial AL Scheduled Repayment Date"):
<TABLE>
<CAPTION>
Initial AL Scheduled Repayment Date Percentage Of Year 3 Reference Amount
- ----------------------------------- -------------------------------------
<S> <C>
The last Business Day of June, 2001 6.25%
The last Business Day of September, 2001 6.25%
The last Business Day of December, 2001 6.25%
The last Business Day of March, 2002 6.25%
The last Business Day of June, 2002 6.25%
</TABLE>
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<PAGE> 36
<TABLE>
<S> <C>
The last Business Day of September, 2002 6.25%
The last Business Day of December, 2002 6.25%
The last Business Day of March, 2003 6.25%
The last Business Day of June, 2003 12.5%
The last Business Day of September, 2003 12.5%
The last Business Day of December, 2003 12.5%
The RL/AL Maturity Date 12.5%
</TABLE>
(ii) In addition to any other mandatory repayments or commitment
reductions pur suant to this Section 4.02, on the last Business Day of each
March, June, September and December, commencing in June of 2002 and ending in
December of 2003 and on the RL/AL Maturity Date, the Borrower shall be required
to repay an amount of Acquisition Loans equal to 12.5% multiplied by the
aggregate principal amount (such amount, at any time of calculation thereof, the
"Year 4 Reference Amount") of Acquisition Loans initially extended on or after
the Acquisition Facility Reduction Date and on or prior to the Acquisition
Facility Expiry Date (as such amount may be reduced pursuant to Section 4.01 and
4.02(i)) (each such repayment, as the same may be reduced as provided in
Sections 4.01 and 4.02(i) and (j) an "AL Year 4 Scheduled Repayment," and each
such date, an "Additional AL Scheduled Repayment Date").
(d) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within one Business Day following each
date after the Effective Date upon which the Borrower or any of its Subsidiaries
receives any proceeds from any sale or issuance of its equity (other than
proceeds received (x) on or prior to the Initial Borrowing Date as a result of
the Equity Contribution, (y) from the exercise of stock options granted to
management as permitted hereunder, and (z) issuance of common equity by a
Subsidiary of the Borrower to the Borrower or a Subsidiary Guarantor (the
proceeds described in such clauses (x), (y) and (z) collectively, the "Excluded
Proceeds")) an amount equal to 50% of the cash proceeds of the respective sale
or issuance (net of underwriting discounts and commissions and other direct
costs associated therewith, including, without limitation, legal fees and
expenses) shall be applied as a mandatory repayment of principal of outstanding
Loans (or, if the Initial Borrowing Date has not yet occurred, 100% of such
amounts shall be applied as a mandatory reduction to the Total Commitment) in
accordance with the requirements of Section 4.02(i) and (j); PROVIDED that the
Borrower shall not be required to comply with this Section 4.02(d) until such
time as the net proceeds from all such issuances of equity exceed $1,000,000.
(e) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within one Business Day following
each date after the Effective Date upon which the Borrower or any of its
Subsidiaries receives any proceeds from any incurrence by the Borrower or any of
its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness for
borrowed money permitted to be incurred pursuant to Section 9.04 as such Section
is in effect on the Effective Date), an amount equal to 100% of the cash
proceeds (net of underwriting discounts and commissions and other costs
associated therewith including, without limitation, legal fees and expenses) of
the respective incurrence of Indebtedness shall be applied as a mandatory
repayment
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of principal of outstanding Loans (or, if the Initial Borrowing Date has not yet
occurred, such amounts shall be applied as a mandatory reduction to the Total
Commitment) in accordance with the requirements of Sections 4.02(i) and (j).
(f) In addition to any other mandatory repayments or commitment
reductions pur suant to this Section 4.02, within two Business Days following
each date after the Effective Date upon which the Borrower or any of its
Subsidiaries receives proceeds from any sale of assets (including capital stock
and securities held thereby, but excluding (i) sales or transfers of inventory
in the ordinary course of business, (ii) sales or transfers of assets in
accordance with Sections 9.02(iii) and (vi) as originally in effect, and (iii)
sales of assets between the Borrower and its Wholly-Owned Subsidiaries and/or
sales of assets between Wholly-Owned Subsidiaries of the Borrower, in each case
to the extent permitted by Section 9.02), an amount equal to 100% of the Net
Sale Proceeds therefrom shall be applied as a mandatory repayment of principal
of outstanding Loans (or, if the Initial Borrowing Date has not yet occurred,
such amounts shall be applied as a mandatory reduction to the Total Commitment)
in accordance with the requirements of Sections 4.02(i) and (j), PROVIDED that
so long as no Default or Event of Default then exists, (i) with respect to no
more than (I) $2,000,000 in aggregate amount of consideration received in any
transaction or series of related transactions and (II) no more than $5,000,000
in the aggregate of such Net Sale Proceeds in any fiscal year of the Borrower,
such Net Sale Proceeds shall not be required to be so applied on such date to
the extent that no Default or Event of Default then exists and the Borrower
delivers a certificate to the Administrative Agent on or prior to such date
stating that such Net Sale Proceeds shall be used to purchase assets used or to
be used in, or, to the extent otherwise permitted by this Agreement, to acquire
the capital stock of a Person engaged and to be engaged in, the businesses
referred to in Section 9.01 within 360 days following the date of such asset
sale (which certificate shall set forth the estimates of the proceeds to be so
expended) and (ii) the Borrower shall not be required to comply with this clause
(f) until such time as the cumulative Net Sale Proceeds from all asset sales not
yet applied as a mandatory repayment hereunder equals or exceeds $2,000,000, and
PROVIDED FURTHER, that if all or any portion of such Net Sale Proceeds not so
applied to the repayment of Loans have not yet resulted in a requirement that
the Borrower make an offer to repurchase Senior Subordinated Notes and/or
Additional Subordinated Debt (a "Note Offer") and are either (A) not so used (or
contractually committed to be used to purchase assets) within such 360-day
period or (B) if committed to be used within such 360-day period and not so used
within two years after the date of the respective asset sale then, in either
such case, such remaining portion not used or committed to be used in the case
of preceding clause (A) and not used in the case of preceding clause (B) shall
be applied on the last day of such period or, if earlier, the date on which the
Borrower would be obligated to make a Note Offer with respect to such Asset Sale
as a mandatory repayment of principal of outstanding Loans in accordance with
the requirements of Section 4.02(i) and (j).
(g) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each Excess Cash Payment Date, an amount equal to 50% of the
Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as
a mandatory repayment of principal of outstanding Loans in accordance with the
requirements of Sections 4.02(i) and (j).
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<PAGE> 38
(h) In addition to any other mandatory repayments or commitment
reductions pursuant to this Section 4.02, within 30 days following each date
after the Initial Borrowing Date on which the Borrower or any of its
Subsidiaries receives any proceeds from any Recovery Event, an amount equal to
100% of the proceeds of such Recovery Event (net of reasonable costs including,
without limitation, legal costs and expenses, and taxes incurred in connection
with such Recovery Event) shall be applied as a mandatory repayment of principal
of outstanding Loans (or, if the Initial Borrowing Date has not yet occurred,
such amounts shall be applied as a mandatory reduction to the Total Commitment)
in accordance with the requirements of Sections 4.02(i) and (j), PROVIDED that
so long as no Default or Event of Default then exists, such proceeds shall not
be required to be so applied on such date to the extent that the Borrower has
delivered a certificate to the Administrative Agent on or prior to such date
stating that such proceeds shall be used or shall be committed to be used to
replace or restore any properties or assets in respect of which such proceeds
were paid within 360 days following the date of such Recovery Event (which
certificate shall set forth the estimates of the proceeds to be so expended),
and PROVIDED FURTHER, that if all or any portion of such proceeds not required
to be applied to the repayment of Loans are either (A) not so used or committed
to be so used within 360 days after the date of the respective Recovery Event or
(B) if committed to be used within 360 days after the date of receipt of such
Net Sale Proceeds and not so used within two years after the date of the
respective Recovery Event then, in either such case, such remaining portion not
used or committed to be used in the case of preceding clause (A) and not used in
the case of preceding clause (B) shall be applied on the last day of the
respective period above as a mandatory repayment of principal of outstanding
Loans in accordance with the requirements of Section 4.02(i) and (j).
(i) Each amount required to be applied to repay Loans (or to reduce
Commitments) pursuant to Sections 4.02(d), (e), (f), (g) and (h) shall be
applied FIRST, to repay Term Loans (or if the Initial Borrowing Date has not
occurred, to reduce the Total Term Loan Commitment); SECOND, after all Term
Loans shall have been repaid (and the Total Term Loan Commitment reduced to
zero), to repay Acquisition Loans; THIRD, after all Acquisition Loans shall have
been repaid, to repay Swingline Loans and FOURTH after all Swingline Loans shall
have been repaid, to repay Revolving Loans and, concurrently with the prepayment
described in THIRD and FOURTH above, to the extent provided in Section 3.03(e),
to reduce the Total Revolving Loan Commitment. The amount of each principal
repayment of Term Loans made as required by Sections 4.02(d), (e), (f), (g) and
(h) shall be applied to reduce the then remaining TL Scheduled Repayments PRO
RATA based upon the then remaining TL Scheduled Repayments after giving effected
to all prior reduction thereto. The amount of each principal repayment of
Acquisition Loans pursuant to this Section 4.02(i) shall be applied in the same
manner set forth in Section 4.01 with respect to voluntary prepayments of
Acquisition Loans.
(j) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans of the respective Tranche
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings of the respective Tranche pursuant to which made,
PROVIDED that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02
may only be made on the last day of an Interest Period applicable thereto unless
all Eurodollar
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<PAGE> 39
Loans of the respective Tranche with Interest Periods ending on such date of
required repayment and all Base Rate Loans of the respective Tranche have been
paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount with respect
to such Tranche, such Borrowing shall be converted at the end of the then
current Interest Period into a Borrowing of Base Rate Loans; and (iii) each
repayment of any Loans comprising a Borrowing shall be applied PRO RATA among
such Loans; PROVIDED FURTHER that, notwithstanding the foregoing clauses (i) -
(iii), prepayments of Acquisition Loans shall be applied PRO RATA based upon the
AL Percentages of Lenders with Acquisition Loans then outstanding. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
under Section 1.11.
(k) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the respective Maturity Date for such Loans.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agent for the account of the Lender or Lenders entitled
thereto not later than 12:00 Noon (New York time) on the date when due and shall
be made in Dollars in immediately available funds at the Payment Office of the
Administrative Agent, it being understood that written or facsimile transmission
notice by the Borrower to the Administrative Agent to make a payment from the
funds in the Borrower's account at the Payment Office shall constitute the
making of such payment to the extent of such funds held in such account. Any
payments under this Agreement or under any Note which are made later than 12:00
Noon (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder or under any Note shall
be stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable at the applicable rate during
such extension.
4.04 NET PAYMENTS; TAXES. (a) All payments made by any Credit Party
hereunder, or under any Note or other Credit Document will be made without
setoff, counterclaim or other defense. Except as provided in Section 4.04(b),
all such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any Excluded Taxes) and all interest, penalties or
similar liabilities with respect thereto (all such nonexcluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, (i) the sum
payable shall be increased by the amount necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholdings
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<PAGE> 40
or deductions for or on account of Taxes will not be less than the amount
provided for herein or in such Note, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount of such Taxes to the
relevant taxing authority in accordance with applicable law. If any amounts are
payable in respect of Taxes pursuant to the preceding sentence, the Borrower
agrees to reimburse each Lender, upon the written request of such Lender, for
taxes relating to such amounts imposed on or measured by the net income or net
profits of such Lender pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Lender is located or under
the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of such
Lender is located and for any withholding of taxes as such Lender shall
determine are payable by, or withheld from, such Lender in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
promptly, and in any event within 45 days after the date the payment of any
Taxes is due, certified copies of tax receipts, if any, issued by such taxing
authority, or other evidence reasonably acceptable to the Administrative Agent
evidencing such payment by the Borrower (or, if the Borrower has not received
such certified copies of tax receipts within such time period, then the Borrower
shall furnish such certified copies of tax receipts to the Administrative Agent
promptly, and in any event within 15 days after the Borrower has received such
certified copies of tax receipts). The Borrower agrees to indemnify and hold
harmless each Lender, and reimburse such Lender upon its written request, for
the amount of any Taxes so levied or imposed and paid by such Lender, other than
penalties, additions to tax, interest and expenses arising as a result of the
willful misconduct or gross negligence of such Lender. Such indemnification
shall be made promptly, and in any event within 30 days after the date upon
which such Lender makes written demand therefor, which demand shall identify the
nature and amount of Taxes for which indemnification is sought. In addition, the
Borrower agrees to pay any present and future stamp, documentary taxes or any
other excise, property, transfer or similar taxes, and any charges relating
thereto, arising from any payment made hereunder or from the execution,
delivery, enforcement or registration of, or otherwise in connection with, this
Agreement.
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Administrative Agent on or prior to the Effective Date, or in the case
of a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 1.13, 1.14 or 12.04 (unless the respective Lender
was already a Lender hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Lender is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i)
above, (x) a certificate substantially in the form of Exhibit E (any such
certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and
complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Lender's entitlement as of such date to a
complete exemption from United States withholding tax with respect
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<PAGE> 41
to payments of interest to be made under this Agreement and under any Note. In
addition, each Lender agrees that from time to time after the Effective Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will, but only
so long as such Lender or Eligible Transferee remains lawfully able to do so,
deliver to the Borrower and the Administrative Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the Administrative Agent of its
inability to deliver any such Form or Certificate. Notwithstanding any other
provision of this Section 4.04(b) and Section 12.04, a Lender or Eligible
Transferee shall be required to deliver any form and/or certification pursuant
to this Section 4.04(b) only if such Lender or Eligible Transferee is lawfully
able to do so and is legally entitled to claim an exemption from United States
withholding and is otherwise legally entitled to provide such form and/or
certification. Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 12.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Lender which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from or reduction in such deduction or
withholding except if such Lender or Eligible Transferee is not lawfully able to
deliver such forms and (y) the Borrower shall not be obligated pursuant to
Section 4.04(a) hereof to gross-up payments to be made to a Lender in respect of
income or similar taxes imposed by the United States if such Lender has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 4.04(b) except if such Lender
or Eligible Transferee is not lawfully able to deliver such forms. Subject to
Section 13.04(b), the Borrower agrees to pay additional amounts and to indemnify
each Lender in the manner set forth in Section 4.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in respect
of any amounts deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes that are effective after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
(c) If any Lender receives a refund in respect of any Taxes as to
which it has been indemnified by any of the Borrower pursuant to this Section
4.04, it shall promptly notify the Borrower of such refund and, within 30 days
of receipt, pay over such refund to the Borrower (to the extent of amounts that
have been paid by any of the Borrower under this Section 4.04 with respect to
such refund and not previously reimbursed), net of all reasonably documented
out-of-pocket expenses of such Lender and without interest (other than the
interest, if any, included in such refund net of any Taxes payable with respect
to receipt of such refund), provided that such Borrower,
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upon written request of the Lender agrees to return such refund (plus penalties,
interest or other charges) to such Lender in the event such bank is required to
repay such refund.
SECTION 5. CONDITIONS PRECEDENT TO LOANS. The obligation of each
Lender to make Loans, and the obligation of each Issuing Lender to issue Letters
of Credit, on the Initial Borrowing Date, is subject at the time of the making
of such Loans or the issuance of such Letters of Credit to the satisfaction of
the following conditions:
5.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Lenders requesting same the appropriate Term Note, Acquisition Note and/or
Revolving Note executed by the Borrower, and to the Swingline Lender the
Swingline Note executed by the Borrower, in each case in the amount, maturity
and as otherwise provided herein.
5.02 FEES, ETC. On the Initial Borrowing Date, the Borrower shall
have paid to the Agents and the Lenders all costs, fees and expenses (including,
without limitation, legal fees and expenses) payable to the respective Agents
and the Lenders to the extent then due.
5.03 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received (i) from Hutchins, Wheeler & Dittmar,
special counsel to the Borrower and its Subsidiaries, an opinion addressed to
each of the Agents and each of the Lenders and dated the Initial Borrowing Date
covering the matters set forth in Exhibit F and (ii) from Cox & Smith
Incorporated, special Texas counsel satisfactory to the Agents, an opinion which
(x) shall be addressed to each of the Agents and each of the Lenders and dated
the Initial Borrowing Date, (y) shall be in form and substance satisfactory to
the Agents and the Required Lenders and (z) shall cover the perfection of the
security interests granted pursuant to the Security Agreement and such other
matters incident to the transactions contemplated herein as the Agents may
reasonably request.
5.04 CORPORATE DOCUMENTS; PROCEEDINGS; ETC. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by the Chairman of the Board, the
President, any Vice President or the Treasurer of each Credit Party, and
attested to by the Secretary or any Assistant Secretary of such Credit Party, in
the form of Exhibit G with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws of such Credit Party and the
resolutions of such Credit Party referred to in such certificate, and the
foregoing shall be reasonably acceptable to the Agents.
(b) All corporate and legal proceedings and all material instruments
and agreements in connection with the transactions contemplated by this
Agreement and the other Documents shall be reasonably satisfactory in form and
substance to the Agents and the Required Lenders, and the Administrative Agent
shall have received all information and copies of all documents and papers,
including records of corporate proceedings, governmental approvals, good
standing certificates and bring-down telegrams or facsimiles, if any, which any
Agent reasonably may have requested in
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<PAGE> 43
connection therewith, such documents and papers where appropriate to be
certified by proper corporate or governmental authorities.
5.05 EMPLOYEE BENEFIT PLANS; SHAREHOLDERS' AGREEMENTS; MANAGEMENT
AGREEMENTS; COLLECTIVE BARGAINING AGREEMENTS; DEBT AGREEMENTS; ACQUISITION
DOCUMENTS; TAX SHARING AGREEMENTS. On the Initial Borrowing Date, there shall
have been made available for review by the Agents and by any Bank requesting
same true and correct copies of the following documents (which copies in the
case of the documents described in clauses (ii), (iii), (v), (vi) and (vii)
shall be certified by the President or any Vice President of the Borrower):
(i) all Plans and all Multiemployer Plans (and for each such plan
that is required to file an annual report on Internal Revenue Service Form
5500-series, a copy of the most recent such report (including, to the
extent required, the related financial and actuarial statements and
opinions and other supporting statements, certifications, schedules and
information), and for each such plan that is a "single-employer plan," as
defined in Section 4001(a)(15) of ERISA, the most recently prepared
actuarial valuation therefor) and any other "employee benefit plans," as
defined in Section 3(3) of ERISA, and any other material agreements, plans
or arrangements, with or for the benefit of current or former employees of
the Borrower or any of its Subsidiaries or any ERISA Affiliate (provided
that the foregoing shall apply in the case of any multiemployer plan, as
defined in 4001(a)(3) of ERISA, only to the extent that any document
described therein is in the possession of the Borrower or any of its
Subsidiaries or any ERISA Affiliate or reasonably available thereto from
the sponsor or trustee of any such plan) (collectively, the "Employee
Benefit Plans");
(ii) all agreements entered into by the Borrower or any of its
Subsidiaries governing the terms and relative rights of its capital stock
and any agreements entered into by shareholders relating to any such
entity with respect to its capital stock (collectively, the "Shareholders'
Agreements");
(iii) all agreements with members of, or with respect to, the
management of the Borrower or any of its Subsidiaries (collectively, the
"Management Agreements");
(iv) all collective bargaining agreements applying or relating to
any employee of the Borrower or any of its Subsidiaries (collectively, the
"Collective Bargaining Agreements");
(v) all agreements evidencing or relating to Indebtedness of the
Borrower or any of its Subsidiaries which is to remain outstanding after
giving effect to the incurrence of Loans on the Initial Borrowing Date
(collectively, the "Debt Agreements");
(vi) all tax sharing, tax allocation and other similar agreements
entered into by the Borrower or any of its Subsidiaries (collectively, the
"Tax Sharing Agreements"); and
(vii) the Visionworks Lease;
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<PAGE> 44
all of which Employee Benefit Plans, Shareholders' Agreements, Management
Agreements, Collective Bargaining Agreements, Debt Agreements, Tax Sharing
Agreements and the Visionworks Lease shall be in form and substance reasonably
satisfactory to the Agents and the Required Lenders and shall be in full force
and effect on the Initial Borrowing Date.
5.06 CONSUMMATION OF RECAPITALIZATION TRANSACTION. (a) On or prior
to the Initial Borrowing Date, there shall have been delivered to the Agents and
the Lenders true and correct copies of the Recapitalization Documents, and with
all such Recapitalization Documents to be in form and substance satisfactory to
the Agents and the Required Lenders. All Recapitalization Documents shall have
been duly executed and delivered by the parties thereto and shall be in full
force and effect. All conditions precedent to the consummation of the
Recapitalization Transaction as set forth in the Recapitalization Documents
shall have been satisfied in all material respects, and not waived except with
the consent (which will not be unreasonably withheld) of each Agent and the
Required Lenders, to the satisfaction of each Agent and the Required Lenders.
The Recapitalization Transaction shall have been, or shall substantially
contemporaneously (and in any event on the Initial Borrowing Date) be,
consummated in accordance with the Recapitalization Documents and all applicable
law (excluding immaterial violations of law which could not reasonably be
expected to have, in the aggregate for all such violations, a material adverse
effect on the consummation of the Recapitalization Transaction or a Material
Adverse Effect).
(b) On or prior to the Initial Borrowing Date, the Borrower shall
have received as equity contributions (x) approximately $77.0 million
(consisting of at least $65.0 million of cash contributed by THL and the THL
Affiliates and the remainder constituting a continuing equity investment by
certain shareholders of the Borrower which were shareholders prior to the
Initial Borrowing Date and an investment by certain members of management
(collectively, the "Additional Investors")), in return for which the Borrower
shall have issued 618,950 shares of Borrower Common Stock, as such number may be
adjusted for fractional shares (the "Common Equity Contribution") and (y)
approximately $30.0 million (consisting of at least $25.0 million of cash from
THL and its Affiliates and the remainder in constituting a continuing equity
investment by certain of the Additional Investors) in return for which the
Borrower shall have issued 300,000 shares of Borrower Preferred Stock, as such
number may be adjusted for fractional shares (the "Preferred Equity
Contribution," and together with the Common Equity Contribution, the "Equity
Contribution"). After giving effect to the consummation of the Recapitalization
Transaction, THL and the THL Affiliates shall own, collectively, in excess of
90% of each of the voting and economic interest in the Borrower. On or prior to
the Initial Borrowing Date there shall have been delivered to the Agent and the
Lenders true and correct copies of the Equity Contribution Documents which
documents shall be in form and substance satisfactory to the Agents and the
Required Lenders. All conditions precedent to the consummation of the Equity
Contribution (and each component thereof) as set forth in the Equity
Contribution Documents shall have been satisfied and not waived except with the
consent (which will not be unreasonably withheld) of each Agent and the Required
Lenders. The Equity Contribution shall have been consummated in accordance with
the Equity Contribution Documents and all applicable laws (excluding immaterial
violations of law which have not had, and
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could not reasonably be expected to have, in the aggregate for all such
violations, a material adverse effect on the consummation of the Equity
Contribution or a Material Adverse Effect).
(c) On or prior to the Initial Borrowing Date, the Borrower shall
have used all the cash proceeds of the Equity Contribution to make payments
owing in connection with the Recapitalization Transaction before (or
concurrently with) utilizing any proceeds of Loans pursuant to this Agreement
for such purpose.
5.07 SENIOR SUBORDINATED NOTES. (a) On or prior to the Initial
Borrowing Date, the Borrower shall have received aggregate gross cash proceeds
of $150,000,000 from the issuance of Senior Subordinated Notes. All terms and
conditions of the Senior Subordinated Notes and the documentation with respect
thereto (including, without limitation, the maturity thereof, the required
repayments with respect thereto, the covenants, events of default and
subordination provisions with respect thereto, and the interest rate payable
with respect thereto) shall be in form and substance reasonably satisfactory to
each Agent and the Required Lenders. On or prior to the Initial Borrowing Date,
each Lender shall have received copies of all Senior Subordinated Note Documents
entered into, or proposed to be entered into, in respect of all of the
foregoing, certified on behalf of the Borrower as true and complete by the
President or any Vice President of the Borrower.
(b) On or prior to the Initial Borrowing Date, the Borrower shall
have used all cash proceeds (net of any underwriting commissions, fees or other
expenses) described in preceding clause (a) to make payments owing in connection
with the Recapitalization Transaction before (or concurrently with) utilizing
any proceeds of Loans pursuant to this Agreement for such purpose. The cash
proceeds received on or prior to the Initial Borrowing Date from the Senior
Subordinated Notes, when added to the cash proceeds of the Equity Contribution
plus the aggregate principal amount of Term Loans and Revolving Loans permitted
to be incurred on the Initial Borrowing Date, shall be sufficient to effect the
Recapitalization Transaction and to pay all fees and expenses in connection
therewith.
5.08 EXISTING NOTE DEFEASANCE. On or prior to the Initial Borrowing
Date, the Borrower shall have (i) effected a defeasance of the Existing Notes
Indenture in accordance with the terms thereof including, without limitation, by
depositing with the trustee under the Existing Notes Indenture such amounts as
are required thereunder to effect the same, which defeasance shall result in the
elimination of the operating covenants contained in the Existing Notes Indenture
and (ii) shall have delivered irrevocable notice to the Existing Notes Trustee
that the Borrower shall redeem (the "Existing Notes Redemption") the entire
principal amount of Existing Notes on October 1, 1998 at the price provided
therefor in the Existing Notes Indenture as in effect on the Effective Date and
as permitted by the terms thereof (the "Existing Notes Defeasance"). All terms
and conditions of the Existing Notes Defeasance shall be reasonably satisfactory
to the Agents and, on or prior to the Initial Borrowing Date, there shall have
been delivered to the Agents and the Lenders true and correct copies of the
Defeasance Documents, which documents shall be in form and substance
satisfactory to the Agents and the Required Lenders and which documents, in the
case of any legal opinions, shall be addressed also to each Agent and each
Lender. All material conditions precedent
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to the consummation of the Existing Notes Defeasance (and each component
thereof) as set forth in the Defeasance Documents and the Existing Notes
Indenture shall have been satisfied and not waived except with the consent
(which will not be unreasonably withheld) of each Agent and the Required
Lenders. The Existing Notes Defeasance shall have been consummated in accordance
with the Defeasance Documents, the Existing Notes Indenture and all applicable
laws (excluding immaterial violations of law which have not had, and could not
reasonably be expected to have, in the aggregate for all such violations, a
material adverse effect on the consummation of the Existing Note Defeasance or a
Material Adverse Effect).
5.09 REFINANCING. (a) On or prior to the Initial Borrowing Date, the
total commitments in respect of the Existing Credit Agreement shall have been
terminated, and all loans and notes with respect thereto shall have been repaid
in full, together with interest thereon, all letters of credit issued thereunder
and foreign currency contracts contemplated thereunder shall have been
terminated and all other amounts (including premiums) owing pursuant to the
Existing Credit Agreement shall have been repaid in full and all documents in
respect of the Existing Credit Agreement and all guarantees with respect thereto
shall have been terminated and be of no further force and effect.
(b) On the Initial Borrowing Date, the creditors in respect of the
Existing Credit Agreement shall have terminated and released all security
interests and Liens on the assets owned by the Borrower and Subsidiaries. The
Administrative Agent shall have received such releases of security interests in
and Liens on the assets owned by the Borrower and its Subsidiaries as may have
been requested by the Administrative Agent, which releases shall be in form and
substance reasonably satisfactory the Administrative Agent. Without limiting the
foregoing, there shall have been delivered (i) proper termination statements
(Form UCC-3 or the appropriate equivalent) for filing under the UCC of each
jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to the Borrower or any of its Subsidiaries in
connection with the security interests created with respect to the Existing
Credit Agreement and the documentation related thereto, (ii) termination or
reassignment of any security interest in, or Lien on, any patents, trademarks,
copyrights, or similar interests of the Borrower or any of its Subsidiaries on
which filings have been made, (iii) terminations of all mortgages, leasehold
mortgages, deeds of trust and leasehold deeds of trust created with respect to
property of the Borrower or any of its Subsidiaries, in each case, to secure the
obligations in respect of the Existing Credit Agreement, all of which shall be
in form and substance reasonably satisfactory to the Agent, (iv) termination
notices and agreements with respect to all lockbox, warehousing, bailee and
similar agreements, duly acknowledged by all counterparties thereto, all of
which shall be in form and substance reasonably satisfactory to the
Administrative Agent, and (v) all collateral owned by the Borrower or any of its
Subsidiaries in the possession of any of the creditors in respect of the
Existing Credit Agreement or any collateral agent or trustee under any related
security document shall have been returned to the Borrower or such Subsidiary.
5.10 INDEBTEDNESS. Each element of the Transaction shall have been
consummated to the reasonable satisfaction of the Agents. After giving effect to
the consummation of the
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Transaction, the Borrower and its Subsidiaries shall have no outstanding
Indebtedness except (i) the Senior Subordinated Notes, (ii) the Loans, (iii) for
the period until October 1, 1998, the Existing Notes and (iv) such other
indebtedness, if any, as shall be permitted to remain outstanding by the Agents
and the Required Lenders and which is listed on Schedule V hereto.
5.11 SUBSIDIARIES GUARANTY. On the Initial Borrowing Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiaries Guaranty in the form of Exhibit H hereto (as modified, supplemented
or amended from time to time, the "Subsidiaries Guaranty").
5.12 PLEDGE AGREEMENT. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered a Pledge Agreement in
the form of Exhibit I (as modified, supplemented or amended from time to time,
the "Pledge Agreement") and shall have delivered to the Collateral Agent, as
pledgee, all the Pledged Securities, if any, referred to therein then owned by
such Credit Party, (x) endorsed in blank in the case of promissory notes
constituting Pledged Securities and (y) together with executed and undated stock
powers, in the case of capital stock constituting Pledged Securities.
5.13 SECURITY AGREEMENT. On the Initial Borrowing Date, each Credit
Party shall have duly authorized, executed and delivered a Security Agreement in
the form of Exhibit J (as modified, supplemented or amended from time to time,
the "Security Agreement") covering all of such Credit Party's present and future
Security Agreement Collateral, in each case together with:
(a) proper Financing Statements (Form UCC-1) fully executed for
filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported
to be created by the Security Agreement;
(b) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
that name any Credit Party as debtor and that are filed in the
jurisdictions referred to in clause (a) above, together with copies of
such other financing statements (none of which shall cover the Collateral
except to the extent evidencing Permitted Liens or in respect of which the
Collateral Agent shall have received termination statements (Form UCC-3)
or such other termination statements as shall be required by local law)
fully executed for filing;
(c) evidence of execution for post-closing filing and recordation of
all other recordings and filings of, or with respect to, the Security
Agreement as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests intended to
be created by such Security Agreement; and
(d) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Security Agreement have
been taken.
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5.14 CONSENT LETTER. On the Initial Borrowing Date, the
Administrative Agent shall have received a letter from CT Corporation System,
presently located at 1633 Broadway, New York, New York 10019, in form and
substance satisfactory to the Administrative Agent indicating its consent to its
appointment by each Credit Party as its agent to receive service of process as
specified in Section 13.08.
5.15 ADVERSE CHANGE, ETC. (a) On the Initial Borrowing Date, there
shall not have occurred or become known to the Agents any events, conditions
and/or contingencies that have had, or could reasonably be expected to have, a
Material Adverse Effect on the Borrower or on the Borrower and its Subsidiaries
taken as a whole since January 3, 1998.
(b) On or prior to the Initial Borrowing Date, all necessary
material governmental (domestic and foreign) and third party approvals and/or
consents in connection with the Transaction, the transactions contemplated by
the Credit Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect (other than those third party approvals with
respect to the Recapitalization not so obtained which approvals are not
material, individually or in the aggregate), and all applicable waiting periods
shall have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction or the transactions contemplated by this
Agreement. Additionally, there shall not exist any judgment, order, injunction
or other restraint prohibiting or imposing materially adverse conditions upon
the Transaction or the transactions contemplated by this Agreement.
5.16 LITIGATION. On the Initial Borrowing Date, no litigation by any
entity (private or governmental) shall be pending or threatened with respect to
the Transaction or this Agreement or any documentation executed in connection
therewith, or which has had, or could reasonably be expected to have, a
materially adverse effect on the Transaction or a Material Adverse Effect (after
giving effect to the Transaction).
5.17 SOLVENCY OPINION; ENVIRONMENTAL ANALYSES; INSURANCE. On or
before the Initial Borrowing Date, the Borrower shall cause to be delivered to
the Administrative Agent (i) a solvency opinion from Valuation Research
Corporation, which shall be addressed to each Agent and each of the Lenders and
dated the Initial Borrowing Date, setting forth the conclusion that, after
giving effect to the Transaction and the incurrence of all the financings
contemplated herein, the Borrower (on a stand alone basis) and the Borrower and
its Subsidiaries taken as a whole (on a consolidated basis), are not insolvent
and will not be rendered insolvent by the indebtedness incurred in connection
therewith, and will not be left with unreasonably small capital with which to
engage in their businesses and will not have incurred debts beyond their ability
to pay debts as they mature and (ii) certificates of insurance complying with
the requirements of Section 8.03 for the business and properties of the Borrower
and its Subsidiaries, in scope, form and substance reasonably satisfactory to
the Agents and the Required Lenders and naming the Collateral Agent as an
additional insured and/or loss payee, and stating that such insurance shall not
be canceled or revised without 30 days prior written notice by the insurer to
the Collateral Agent.
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5.18 PRO FORMA BALANCE SHEET; FINANCIAL STATEMENTS; PROJECTIONS. On
or prior to the Initial Borrowing Date, the Agents and each Lender shall have
received copies of the financial statements (including the PRO FORMA financial
statements) and Projections referred to in Sections 7.10(b) and (e).
SECTION 6. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligation
of each Lender to make Loans (including Loans made on the Initial Borrowing Date
but excluding Mandatory Borrowings made thereafter, which shall be made as
provided in Section 1.01(e)), and the obligation of an Issuing Lender to issue
any Letter of Credit, is subject, at the time of each such Credit Event (except
as hereinafter indicated), to the satisfaction of the following conditions:
6.01 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in any other Credit Document shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).
6.02 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior to the
making of each Loan (excluding Swingline Loans), the Administrative Agent shall
have received the notice required by Section 1.03(a). Prior to the making of any
Swingline Loan, the Swingline Lender shall have received the notice required by
Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Lender shall have received a
Letter of Credit Request meeting the requirements of Section 2.02.
The acceptance of the proceeds of each Credit Event shall constitute
a representation and warranty by the Borrower to each of the Agents and each of
the Lenders that all the conditions specified in Section 5 and in this Section 6
and applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Section 5 and in this Section 6, unless otherwise specified, shall be delivered
to the Administrative Agent at the Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders and shall be in form and substance reasonably satisfactory to the
Agents.
SECTION 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Lenders to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, the Borrower
makes the following representations, warranties and agreements in each case
after giving effect to the Transaction, all of which shall survive the execution
and delivery of this Agreement, the making of the Loans and the issuance of the
Letters of Credit (with the occurrence of each Credit Event being deemed to
constitute a representation and warranty that the matters specified in this
Section 6 are true and correct in all material respects on
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and as of the date of each such Credit Event, unless stated to relate to a
specific earlier date, in which case all representations and warranties
specifically relating to an earlier date shall be true and correct in all
material respects as of such earlier date):
7.01 CORPORATE STATUS. Each of the Credit Parties and each of the
Borrower's other Material Subsidiaries (i) is a duly organized and validly
existing corporation (or, in the case of any of the foregoing that is not a
corporation, other form of legal entity) in good standing under the laws of the
jurisdiction of its organization, (ii) has the corporate or other power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (iii) is duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified except for failures to be so qualified which,
either individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
7.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate or other power and authority to execute, deliver and carry out the
terms and provisions of each of the Documents to which it is a party and has
taken all necessary corporate or other action to authorize the execution,
delivery and performance of the each of such Documents. Each Credit Party has
duly executed and delivered each Document to which it is a party and each such
Document constitutes the legal, valid and binding obligation of such Credit
Party enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
7.03 NO VIOLATION. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will materially contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
(A) will conflict or be inconsistent with, or result in any breach of, any of
the terms, covenants, conditions or provisions of, or constitute a default
under, the Existing Notes Indenture or (B) will materially conflict or be
inconsistent with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or (other than
pursuant to the Security Documents) result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the property or assets
of the Borrower or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or any
other material agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject, except for such conflicts, inconsistencies,
breaches or defaults described in this clause (B) which, either individually or
in the aggregate, have not had, and could not reasonably be expected to have, a
Material Adverse Effect, or (iii) will violate any provision of the Certificate
of Incorporation or By-Laws of the Borrower or any of its Subsidiaries.
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7.04 LITIGATION. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower or any of its Subsidiaries, threatened,
with respect to the Borrower or any of its Subsidiaries (i) that have had, or
could reasonably be expected to have, a Material Adverse Effect or (ii) that
have had, or could reasonably be expected to have, a material adverse effect on
the rights or remedies of any Agent or the Lenders or on the ability of any
Credit Party to perform its respective obligations to the Agents or the Lenders
hereunder and under the other Credit Documents to which it is, or will be, a
party. Additionally, there does not exist any judgment, order or injunction
prohibiting or imposing material adverse conditions upon the occurrence of any
Credit Event.
7.05 USE OF PROCEEDS: MARGIN REGULATIONS. (a) The proceeds of all
Term Loans and Revolving Loans incurred on the Initial Borrowing Date shall be
utilized directly or indirectly (i) to finance a portion of the cash
consideration to be paid in connection with the Recapitalization Transaction,
and (ii) to pay the fees and expenses incurred in connection therewith.
(b) The proceeds of all Revolving Loans and Swingline Loans incurred
after the Initial Borrowing Date shall be utilized for working capital purposes
and other general corporate purposes of the Borrower and its Subsidiaries;
PROVIDED that (x) the proceeds of all Revolving Loans and/or Swingline Loans
incurred on the Visionworks Lease Expiry Date shall be utilized first to pay all
amounts owing in connection with the expiration of the Visionworks Lease, (y) no
more than $4,000,000 in aggregate principal amount of Revolving Loans and no
Swingline Loans may be incurred on the Initial Borrowing Date and (z) no
Revolving Loans or Swingline Loans may be incurred to finance Permitted
Acquisitions.
(c) The proceeds of all Acquisition Loans incurred on any date after
the Initial Borrowing Date shall be utilized directly or indirectly (i) to
finance the cash consideration to be paid in connection with one or more
Permitted Acquisitions consummated on such date and (ii) to pay the fees and
expenses incurred in connection therewith.
(d) Neither the making of any Loan, nor the use of the proceeds
thereof nor the occurrence of any other Credit Event, will violate or be
inconsistent with the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System and no part of the proceeds of any Loan
will be used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock.
7.06 GOVERNMENTAL APPROVALS. All orders, consents, approvals,
licenses, authorizations, and validations of, and filings, recordings or
registrations with, or exemptions by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, which may be required to
authorize, or is required in connection with, (i) the execution, delivery and
performance by the Borrower or any Subsidiary of any Document or (ii) the
legality, validity, binding effect or enforceability of any Document, have been
obtained or made.
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7.07 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
7.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
7.09 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as
a whole) heretofore or contemporaneously furnished by or on behalf of ECCA, the
Borrower or any of its Subsidiaries in writing to any Agent or any Lender
(including, without limitation, all information so furnished which is contained
in the Documents, the Offering Circular or in the Confidential Information
Memorandum dated April, 1998 for purposes of or in connection with this
Agreement, the other Credit Documents or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Persons in writing to any Agent or any
Lender will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided; PROVIDED that, with respect to projected financial
information, the Borrower makes only the representation set forth in Section
7.10(e) below.
7.10 FINANCIAL CONDITION, FINANCIAL STATEMENTs (a) On and as of the
Initial Borrowing Date, on a PRO FORMA basis after giving effect to the
Transaction and all other transactions contemplated by the Documents and to all
Indebtedness (including the Loans) incurred or assumed, and to be incurred or
assumed, and Liens created, and to be created, by each Credit Party in
connection therewith, with respect to the Borrower and its Subsidiaries (on a
consolidated basis) and the Borrower (on a stand alone basis) (x) the sum of the
assets, at a fair valuation, of each of the Borrower and its Subsidiaries (on a
consolidated basis) and of the Borrower (on a stand alone basis) will exceed its
or their debts, (y) it has not incurred, nor intended to, nor believes that it
will, incur, debts beyond its ability to pay such debts as such debts mature and
(z) it will have sufficient capital with which to conduct its business. For
purposes of this Section 7.10, "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) (i) The PRO FORMA (both immediately before and after giving
effect to the Transaction, the related financing thereof (including the Loans
and the Senior Subordinated Notes) and the other transactions contemplated
hereby and thereby) consolidated balance sheets of the Borrower and its
Subsidiaries taken as a whole as at the Initial Borrowing Date prepared on a
basis
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consistent with the Projections and copies of which have heretofore been
delivered to each Lender pursuant to Section 5.18 and (ii) the consolidated
balance sheets of the Borrower and its Subsidiaries at January 3, 1998 and the
related consolidated statements of income, stockholders' equity and cash flows
of the Borrower and its Subsidiaries for the fiscal year ended as of said date
(which financial statements have been audited by Ernst & Young LLP), copies of
which have heretofore been furnished to each Lender prior to the Effective Date
pursuant to Section 5.18, in each such case set forth in (i) and (ii) above are
true and correct in all material respects and present fairly in all material
respects the combined financial position of the Borrower and its Subsidiaries at
the date of said statements and the results for the period covered thereby (or,
in the case of the PRO FORMA balance sheets, present a good faith estimate of
the PRO FORMA consolidated financial condition of the Borrower and its
Subsidiaries both immediately before and immediately after giving effect to the
Transaction, and the related financing thereof at the date thereof). All such
financial statements described in clause (ii) above have been prepared in
accordance with GAAP consistently applied except to the extent provided in the
notes to said financial statements.
(c) Since January 3, 1998, nothing has occurred that has had or
could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 7.10(b) and the Indebtedness incurred under this Agreement, there
were as of the Initial Borrowing Date (and after giving effect to any Loans made
on such date), no liabilities or obligations with respect to the Borrower or any
of its Subsidiaries (whether absolute, accrued, contingent or otherwise and
whether or not due), and neither the Borrower nor any of its Subsidiaries know
of any basis for the assertion against the Borrower or any of its Subsidiaries
of any such liability or obligation, which, either individually or in the
aggregate, have had, or are or could be reasonably expected to have, a Material
Adverse Effect.
(e) The financial projections set forth in the Confidential
Information Memorandum dated April, 1998 (the "Projections"), which include the
projected results of the Borrower and its Subsidiaries for the five years ended
after the Initial Borrowing Date, have been prepared on a basis consistent with
the financial statements referred to in Section 7.01(a) and are based on good
faith estimates and assumptions made by the management of the Borrower and
believed reasonable and attainable at the time of execution of this Agreement,
and on the Initial Borrowing Date such management believed that the Projections
were reasonable and attainable and there are no statements or conclusions in any
of the Projections which are based upon or include information known to the
Borrower or any of its Subsidiaries to be misleading or which fail to take into
account material information including the matters reported therein, it being
recognized by the Agents and the Lenders, however, that projections as to future
events are not to be viewed as facts and that the actual results during the
period or periods covered by the Projections probably will differ from the
projected results and that such differences may be material.
7.11 SECURITY INTERESTS. On and after the Initial Borrowing Date,
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the
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Obligations and the other obligations purportedly secured thereby, a legal,
valid and enforceable (and, after effecting the filing referred to in the next
succeeding sentence, perfected) security interest in and Lien on all of the
Collateral subject thereto, superior to and prior to the rights of all third
Persons, and subject to no other Liens (except that the Security Agreement
Collateral, the Mortgaged Properties and the Collateral covered by the
Additional Security Documents may be subject to Permitted Liens relating
thereto), in favor of the Collateral Agent. No filings or recordings are
required in order to perfect the security interests created under any Security
Document except for filings or recordings required in connection with any such
Security Document which will be prepared for filing and delivered to the
Collateral Agent and which shall have been made on or prior to the Initial
Borrowing Date as contemplated by Section 5.13 or on or prior to the execution
and delivery thereof as contemplated by Sections 8.11 and 8.12. Each of the
Credit Parties party to a Security Document has good and valid title to all
Collateral described therein, free and clear of all Liens except those described
in this Section 9.03.
7.12 REPRESENTATIONS AND WARRANTIES IN OTHER DOCUMENTS. All
representations and warranties set forth in the other Documents were true and
correct in all material respects as of the time such representations and
warranties were made and shall be true and correct in all material respects as
of the Initial Borrowing Date as if such representations and warranties were
made on and as of such date, unless stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct in
all material respects as of such earlier date.
7.13 TRANSACTION. At the time of consummation thereof, all consents
and approvals of, and filings and registrations with, and all other actions in
respect of, all governmental agencies, authorities or instrumentality's required
to make or consummate the Transaction have been obtained, given, filed or taken
and are or will be in full force and effect (or effective judicial relief with
respect thereto has been obtained) except where the failure to obtain, give,
file, or take has not had, and could not reasonably be expected to have, a
Material Adverse Effect. All applicable waiting periods with respect thereto
have or, prior to the time when required, will have, expired without, in all
such cases, any action being taken by any competent authority which restrains,
prevents, or imposes material adverse conditions upon the Transaction.
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the Transaction, or the occurrence
of any Credit Event or the performance by any Credit Party of their obligations
under the Documents and all applicable laws. All actions taken by the Borrower
and its Subsidiaries pursuant to or in furtherance of the Transaction have been
taken, and the Transaction has been consummated, in accordance with the
respective Documents and all applicable laws.
7.14 COMPLIANCE WITH ERISA. (a) Except for any noncompliance,
liabilities, obligations and other matters or events that, individually or in
the aggregate, have not had, and could not reasonably be expected to have, a
Material Adverse Effect: each Plan is in substantial compliance with its terms
and with all applicable laws including, without limitation, ERISA and the Code;
no Reportable Event has occurred with respect to a Plan during the five year
period prior to the date on which this representation is made or deemed made
with respect to any Plan; no Multiemployer Plan is insolvent or in
reorganization; no Plan has an Unfunded Current Liability; no Plan has an
accumu-
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lated or waived funding deficiency, or has applied for a waiver of the minimum
funding standard or an extension of any amortization period within the meaning
of Section 412 of the Code during the five year period prior to the date on
which this representation is made or deemed made with respect to any Plan; all
contributions required to be made by the Borrower, any Subsidiary of the
Borrower, or any ERISA Affiliate with respect to each Plan, Multiemployer Plan
and Foreign Pension Plan have been timely made; neither the Borrower nor any of
its Subsidiaries nor any ERISA Affiliate has incurred any material liability to
or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975
or 4980 of the Code or reasonably expects to incur any material liability
(including any indirect, contingent or secondary liability) under any of the
foregoing Sections with respect to any Plan (other than liabilities of any ERISA
Affiliate which could not, by operation of law or otherwise, become a liability
of the Borrower or any of its Subsidiaries); no proceedings have been instituted
to terminate by the PBGC, or to appoint a trustee to administer, any Plan; no
condition exists which presents a material risk to the Borrower or any of its
Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of
a Plan pursuant to the foregoing provisions of ERISA and the Code; using
actuarial assumptions and computation methods consistent with subpart I of
subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and
its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer
plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of the most recent Credit Event, could not
reasonably be expected to result in a Material Adverse Effect; no lien has been
imposed under the Code or ERISA on the assets of the Borrower or any of its
Subsidiaries or any ERISA Affiliate or is likely to be imposed on account of any
Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any
Retiree Welfare Plan.
(b) Except for any noncompliance, liabilities or other matters or
events that, individually or in the aggregate, have not had, and could not
reasonably be expected to have, a Material Adverse Effect: any Foreign Pension
Plan has been maintained in substantial compliance with its terms and with the
requirements of any and all applicable laws, statutes rules, regulations and
orders and has been maintained, where required, in good standing with applicable
regulatory authorities; the Borrower and all of its Subsidiaries have performed
all obligations to be performed in connection with any Foreign Pension Plan and
any funding agreements therefor in a timely fashion; neither the Borrower nor
any of its Subsidiaries has incurred any obligation in connection with the
termination of or withdrawal from any Foreign Pension Plan; and the present
value of the accrued benefit liabilities (whether or not vested) under any
Foreign Pension Plan which is funded, determined on the basis of the most
recently completed actuarial valuation using actuarial assumptions, each of
which is reasonable, did not exceed the current value of the assets of such
Foreign Pension Plan, and for any Foreign Pension Plan which is not funded, the
obligations of such Foreign Pension Plan are properly accrued.
7.15 CAPITALIZATION. On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized and issued capital stock of the Borrower shall be as set forth on
Schedule VIII. All outstanding shares of capital stock of the
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Borrower have been duly and validly issued, are fully paid and nonassessable and
were not subject to any preemptive rights which were exercisable in connection
with the issuance thereof. On the Initial Borrowing Date and after giving effect
to the Transaction, the Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock,
except as set forth on Schedule VIII.
7.16 SUBSIDIARIES. On and after the Initial Borrowing Date and after
giving effect to the consummation of the Transaction, ECCA has been merged into
the Borrower in accordance with the Recapitalization Documents and the Borrower
has no Subsidiaries other than (i) the Subsidiaries listed on Schedule VII as
Subsidiaries remaining after the Initial Borrowing Date and (ii) new
Subsidiaries created in compliance with Section 9.15. Schedule VII correctly
sets forth, as of the Initial Borrowing Date and after giving effect to the
Transaction, the percentage ownership (direct and indirect) of the Borrower in
each class of capital stock of each of its Subsidiaries and also identifies the
direct owner thereof and whether such Subsidiary is a Domestic Subsidiary or
Foreign Subsidiary and whether such Subsidiary is a Material Subsidiary.
7.17 INTELLECTUAL PROPERTY. Each of the Borrower and each of its
Subsidiaries owns or holds, free from Liens, a valid license or otherwise has
the right to use all the patents, trademarks, service marks, trade names,
technology, know-how, copyrights, licenses, franchises and formulas or other
rights with respect to the foregoing that are used in the operation of the
business of the Borrower and each of its Subsidiaries as presently conducted
except where the failure to do so has not had, and could not reasonably be
expected to have, a Material Adverse Effect.
7.18 COMPLIANCE WITH STATUTES, ETC. The Borrower and each of its
Subsidiaries is in compliance with all applicable statutes. regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including compliance with all applicable Environmental Laws
with respect to any Real Property or governing its business and the requirements
of any permits issued under such Environmental Laws with respect to any such
Real Property or the operations of the Borrower or any of its Subsidiaries),
except such non-compliance as, individually or in the aggregate, has not had,
and could not reasonably be expected to have, a Material Adverse Effect.
7.19 ENVIRONMENTAL MATTERS. (a) Each of the Borrower and each of its
Subsidiaries has complied with, and on the date of each Credit Event is in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of the Borrower, past or threatened Environmental Claims against
the Borrower or any of its Subsidiaries or any Real Property owned or operated
by the Borrower or any of its Subsidiaries. To the best knowledge of the
Borrower, there are no facts, circumstances, conditions or occurrences on any
Real Property owned or operated by the Borrower or any of its Subsidiaries or,
on any property adjoining or in the vicinity of any such Real Property that
could reasonably be expected (i) to form the basis of an Environmental Claim
against the
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Borrower or any of its Subsidiaries or any such Real Property or (ii) to cause
any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by the Borrower or any
of its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, treated
or stored on, or transported to or from, any Real Property owned or operated by
the Borrower or any of its Subsidiaries where such generation, use, treatment or
storage has violated or given rise to any Environmental Claim under any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries in a manner that have formed or would reasonably be expected to
form the basis for an Environmental Claim against the Borrower or any of its
Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 7.19,
the representations made in this Section 7.19 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, has had, or could reasonably be expected to have, a
Material Adverse Effect.
(d) The representations and warranties in Section 7.18 and this
Section 7.19 are the sole and exclusive representations and warranties in this
Agreement relating to environmental matters.
7.20 PROPERTIES. All Real Property owned by the Borrower or any of
its Subsidiaries and all Leaseholds leased by the Borrower or any of its
Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, are correctly
set forth in Schedule III. Each of the Borrower and each of its Subsidiaries has
good and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned or leased by it, including all Real Property reflected
in Schedule III or in the financial statements referred to in Section 7.10(b)
(in each case, except as disposed of after the Initial Borrowing Date in
accordance with this Agreement), free and clear of all Liens, other than
Permitted Liens. The Borrower and its Subsidiaries have good and marketable
title to all other property owned by them, including all property reflected in
the financial statements referred to in Section 7.10(b) (except as otherwise
disposed of since the date of such balance sheet in the ordinary cause of
business, or, if disposed of after the Effective Date, as permitted by the terms
of this Agreement).
7.21 LABOR RELATIONS. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that has had, or could
reasonably be expected to have, a Material Adverse Effect. There is (i) no
unfair labor practice complaint pending against the Borrower or any of its
Subsidiaries or, to the best knowledge of the Borrower, threatened against any
of them, before the National Labor Relations Board or any other applicable
Government Authority, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against the Borrower
or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending
against the Borrower or any of its Subsidiaries or, to the best knowledge of the
Borrower, threatened against the
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Borrower or any of its Subsidiaries and (iii) to the best knowledge of the
Borrower, no union representation proceeding is pending or question exists, in
each case, with respect to the employees of the Borrower or any of its
Subsidiaries and, to the best knowledge of the Borrower, no union organizing
activities are taking place, except (with respect to any matter specified in
clause (i), (ii) or (iii) above, either individually or in the aggregate) such
as has not had, and could not reasonably be expected to have, a Material Adverse
Effect.
7.22 TAX RETURNS AND PAYMENTS. All domestic and foreign Federal,
state, provincial and other material returns, statements, forms and reports for
taxes (the "Returns") required to be filed by or with respect to the income,
properties or operations of the Borrower and/or any of its Subsidiaries have
been timely filed (taking into account all extensions of due dates) with the
appropriate taxing authority. The Returns accurately reflect all material
liabilities for taxes of the Borrower and its Subsidiaries for the periods
covered thereby. The Borrower and each of its Subsidiaries have paid all taxes
payable by them other than immaterial taxes and other taxes which are not yet
due and payable, and other than taxes contested in good faith and for which
adequate reserves have been established in accordance with GAAP and disclosed on
the financial statements of the Borrower. Except as disclosed in the financial
statements referred to in Section 7.10(b), there is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
the Borrower or any of its Subsidiaries, threatened by any authority regarding
any material taxes relating to the Borrower or any of its Subsidiaries. Neither
the Borrower nor any of its Subsidiaries has entered into an agreement or waiver
or been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of material taxes of the
Borrower or any of its Subsidiaries, or is aware of any circumstances that would
cause the taxable years or other taxable periods of the Borrower or any of its
Subsidiaries not to be subject to the normally applicable statute of
limitations. Neither the Borrower nor any of its Subsidiaries has provided, with
respect to themselves or property held by them, any consent under Section 341 of
the Code. Neither the Borrower nor any of its Subsidiaries has incurred, or will
incur, any material tax liability in connection with the Transaction and the
other transactions contemplated hereby.
7.23 EXISTING INDEBTEDNESS. Schedule V sets forth a true and
complete list of all Indebtedness of the Borrower and its Subsidiaries as of the
Initial Borrowing Date and which is to remain outstanding after giving effect to
the Transaction and the incurrence of Loans on such date excluding (i) the
Senior Subordinated Notes and (ii) the Loans and the Letters of Credit
(collectively, the "Existing Indebtedness"), in each case showing the aggregate
principal amount thereof and the name of the respective borrower and any other
entity which directly or indirectly guaranteed such debt.
7.24 SENIOR SUBORDINATED NOTES. On and after the issuance thereof,
the subordination provisions contained in the Senior Subordinated Note Documents
and any documents relating to the Additional Subordinated Debt (if any) are
enforceable against the Borrower, the respective Subsidiary Guarantors and the
holders thereof, and all Obligations and Guaranteed Obligations (as defined
herein and in the Guaranty) and all obligations of the Borrower in respect of
the Poth Loan
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are within the definition of "Senior Indebtedness," "Guarantor Senior
Indebtedness" and any similar term, as the case may be, included in such
subordination provisions.
SECTION 8. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit (other than any Letter of Credit, together with all Fees that have
accrued and will accrue thereon through the stated termination date of such
Letter of Credit, which have either been (a) cash collateralized in a manner
reasonably satisfactory to the respective Issuing Lender or (b) backstopped by a
letter of credit or other security acceptable to the respective Issuing Lender)
or Notes are outstanding and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations (other than any indemnities described
in Section 13.01 which are not then due and payable) incurred hereunder, are
paid in full:
8.01 INFORMATION COVENANTS. The Borrower will furnish to the
Administrative Agent (with copies sufficient for each Lender):
(a) MONTHLY REPORTS. Within 30 days after the end of each fiscal
month of the Borrower a statement of the Borrower setting forth the gross
and net sales figures, Consolidated EBITDA and store count for the
Borrower and its Subsidiaries for the preceding monthly period.
(b) QUARTERLY FINANCIAL STATEMENTS. Within the earlier of (A) 50
days after the close of each quarterly accounting period in each fiscal
year of the Borrower or (B) one Business Day following the filing of such
quarterly financial statements with the SEC, the consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such quarterly
accounting period and the related consolidated statements of income and
retained earnings and of cash flows for such quarterly accounting period
and for the elapsed portion of the fiscal year ended with the last day of
such quarterly accounting period, in each case, setting forth comparative
figures for the related periods in the prior fiscal year and, after
delivery of the first budget pursuant to Section 8.01(d), the budgeted
figures for such quarterly periods as set forth in the respective budget
delivered pursuant to Section 8.01(d); all of which shall be in reasonable
detail and certified by the chief financial officer or other Authorized
Officer of the Borrower that they fairly present in all material respects
the financial condition of the Borrower and its Subsidiaries as of the
dates indicated and the results of their operations and changes in their
cash flows for the periods indicated, subject to normal year-end audit
adjustments and the absence of footnotes.
(c) ANNUAL FINANCIAL STATEMENTS. Within the earlier of (A) 100 days
after the close of each fiscal year of the Borrower or (B) one Business
Day following the filing of such annual financial statements with the SEC,
the consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal year and the related consolidated statements of
income and retained earnings and of cash flows for such fiscal year and
setting forth comparative consolidated figures for the preceding fiscal
year and certified by Ernst & Young LLP or such other independent
certified public accountants of recognized national
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standing as shall be reasonably acceptable to the Administrative Agent, in
each case to the effect that such statements fairly present the financial
condition of the Borrower and its Subsidiaries as of the dates indicated
and the results of their operations and changes in cash flows, together
with a certificate of such accounting firm stating that in the course of
its regular audit of the business of the Borrower and its Subsidiaries,
which audit was conducted in accordance with generally accepted auditing
standards, no Default or Event of Default which has occurred and is
continuing has come to their attention, or if such a Default or an Event
of Default has come to their attention a statement as to the nature
thereof.
(d) BUDGETS. No later than 60 days following the commencement of the
first day of each fiscal year of the Borrower, a budget in form
satisfactory to the Agents (including budgeted statements of income
(including sources and uses of cash and balance sheets)) prepared by the
Borrower for (x) each of the four fiscal quarters of such fiscal year
prepared in detail and (y) the next year following such fiscal year
prepared in summary form, in each case, of the Borrower and its
Subsidiaries, accompanied by the statement of the chief financial officer
of the Borrower to the effect that, to the best of his knowledge, the
budget is a reasonable estimate for the period covered thereby.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 8.01(a), (b) and (c), a
certificate of the chief financial officer or other Authorized Officer of
the Borrower to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and
extent thereof, which certificate shall, in the case of any such financial
statements delivered in respect of a period ending on the last day of a
fiscal quarter or year of the Borrower set forth the calculations required
to establish whether the Borrower and its Subsidiaries were in compliance
with the provisions of Sections 9.09 through and including 9.12, as at the
end of such fiscal quarter or year, as the case may be (including a
schedule setting forth the calculations with respect to compliance with
such sections, which shall be in reasonable detail and certified by the
chief financial officer or other Authorized Officer). In addition, at the
time of the delivery of the financial statements provided for in Section
8.01(c), a certificate of the chief financial officer or other Authorized
Officer of the Borrower setting forth (i) the amount of, and calculations
required to establish the amount of, Excess Cash Flow for the Excess Cash
Flow Period ending on the last day of the respective fiscal year and the
Equity Proceeds Amount, if any at such time and (ii) the calculations
required to establish whether the Borrower was in compliance with Section
4.02(f) and (h) for the respective fiscal year.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days (or 10 Business Days in the case of clause (y)
below) after any officer of the Borrower obtains knowledge thereof, notice
of (x) the occurrence of any event which constitutes a Default or an Event
of Default, which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto and (y) the commencement of, or threat of, or any
significant development in, any litigation or
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governmental proceeding pending against the Borrower or any of its
Subsidiaries (i) in which the amount involved is $3,000,000 or more or
(ii) where there is a reasonable possibility of an adverse determination
and which could reasonably be expected to have a Material Adverse Effect,
or a material adverse effect on the ability of any Credit Party to perform
its respective obligations hereunder or under any other Credit Document.
(g) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each
final report or "management letter," if any, submitted to the Borrower or
any of its Subsidiaries by its independent accountants in connection with
any annual, interim or special audit made by them of the books of the
Borrower of any of its Subsidiaries.
(h) ENVIRONMENTAL MATTERS. Promptly after obtaining knowledge of any
of the following, written notice of one or more of the following
environmental matters, unless such environmental matters could not
individually or when aggregated result in a Material Adverse Effect:
(i) any pending or threatened material Environmental Claim
against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on or arising from any Real
Property owned or operated by the Borrower or any of its
Subsidiaries that (x) results in noncompliance by the Borrower or
any of its Subsidiaries with any applicable Environmental Law or (y)
could reasonably be anticipated to form the basis of an
Environmental Claim against the Borrower or any of its Subsidiaries
or any such Real Property;
(iii) any condition or occurrence on any Real Property owned
or operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to result in any liability under
Environmental Law;
(iv) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that could
reasonably be expected to cause such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability
by the Borrower or any of its Subsidiaries of such Real Property
under any Environmental Law; and
(v) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by the Borrower or any of its
Subsidiaries as required by any Environmental Law or any
governmental or other administrative agency; PROVIDED that in any
event the Borrower shall deliver to each Lender all notices of, or
relating to, a material matter or event received by it or any of
their respective Subsidiaries from any government or governmental
agency under, or pursuant to, CERCLA.
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All such notices shall describe in reasonable detail the nature of
the claim, investi gation, condition, occurrence or removal or remedial
action and the Borrower's or such Subsidiary's response thereto. In
addition, the Borrower agrees to provide the Lenders with copies of all
material written communications by the Borrower or any of its Subsidiaries
with any Person (other than its counsel) or Governmental Authority
relating to any of the matters set forth in clauses (i)-(v) above, and
such detailed reports relating to any of the matters set forth in clauses
(i)-(v) above as may reasonably be requested by the Administrative Agent
or the Required Lenders.
(i) OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the SEC by the
Borrower or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as the Borrower or any
of its Subsidiaries shall send generally to analysts, the holders of their
capital stock or of the Senior Subordinated Notes or Additional
Subordinated Debt (if any) in their capacity as such holders (in each case
to the extent not theretofore delivered to the Lenders pursuant to this
Agreement) and, with reasonable promptness, such other information or
documents (financial or otherwise) as any Agent on its own behalf or on
behalf of the Required Lenders may reasonably request from time to time.
8.02 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in conformity with generally accepted accounting
principles and all requirements of law shall be made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit, upon two Business Days' prior
notice to the chief financial officer or other Authorized Officer of the
Borrower (except when a Default or Event of Default has occurred and is
continuing, in which case, no notice shall be required), officers and designated
representatives of any Agent or any Lender (after notice to, and coordination
with, the Administra tive Agent) (at the expense of the applicable Agent or
Lender, except when a Default or Event of Default has occurred and is
continuing, in which case the Borrower shall pay such expenses), to visit and
inspect any of the properties or assets of the Borrower and any of its
Subsidiaries in whomsoever's possession, and to examine the books of account of
the Borrower and any of its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower and of any of its Subsidiaries with, and be advised as
to the same by, their officers and independent accountants, all at such
reasonable times and to such reasonable extent as any Agent or any Lender may
desire, PROVIDED that all such visits and inspections by any Lender in its
capacity as such shall be limited to ONE such inspection and visit per Lender in
each year (except when a Default or Event of Default has occurred and is
continuing, in which case there shall be no limitations on such inspections and
visits).
8.03 INSURANCE. (a) Schedule VI sets forth a true and complete
listing of all insurance maintained by the Borrower and its Subsidiaries as of
the Effective Date. The Borrower will, and will cause each of its Subsidiaries
to, at all times from and after the Effective Date maintain in full force and
effect insurance with reputable and solvent insurance carriers in such amounts,
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covering such risks and liabilities and with such deductibles or self-insured
retentions as are in accordance with normal industry practice, and shall furnish
to the Administrative Agent upon written request full information as to the
insurance so carried.
(b) The Borrower will, and will cause their respective Subsidiaries
to, at all times keep their respective property insured in favor of the
Collateral Agent, and all policies (including Mortgage Policies) or certificates
(or certified copies thereof) with respect to such insurance (and any other
insurance maintained by the Borrower or any of its Subsidiaries) (i) shall be
endorsed to the Collateral Agent's satisfaction for the benefit of the
Collateral Agent (including, without limitation, by naming the Collateral Agent
as loss payee or as an additional insured), (ii) shall state that such insurance
policies shall not be canceled without 30 days' prior written notice thereof by
the respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Secured Creditors, (iv) shall contain
the standard non-contributing mortgagee clause endorsement in favor of the
Collateral Agent with respect to hazard liability insurance, and (v) shall,
except in the case of public liability insurance, provide that any losses shall
be payable notwithstanding (A) any act or neglect of the Borrower or any of its
Subsidiaries, (B) the occupation or use of the properties for purposes more
hazardous than those permitted by the terms of the respective policy if such
coverage is obtainable at commercially reasonable rates and is of the kind from
time to time customarily insured against by Persons owning or using similar
property and in such amounts as are customary, (C) any foreclosure or other
proceeding relating to the insured properties or (D) any change in the title to
or ownership or possession of the insured properties.
(c) If the Borrower or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 8.03, or if the Borrower
or any of its Subsidiaries shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Administrative Agent and/or the
Collateral Agent shall have the right (but shall be under no obligation), upon
thirty days' advance notice to the Borrower or any of its Subsidiaries, as the
case may be, to procure such insurance and the Borrower agrees to reimburse the
Administrative Agent or the Collateral Agent as the case may be, for all costs
and expenses of procuring such insurance.
8.04 PAYMENT OF TAXES. The Borrower and each of its Subsidiaries
will file all income tax returns and other material tax returns required to be
filed by it, and pay and discharge all tax liabilities reflected thereon, and
will cause each of its Subsidiaries to pay and discharge, all other taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted under Section 9.03(i) or charge upon any properties of the Borrower or
any of its Subsidiaries; provided that neither the Borrower nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim (i) which is being contested in good faith and by proper proceedings if it
has maintained adequate reserves with respect thereto in accordance with GAAP,
or (ii) where the failure to pay such tax, assessment, charge, levy or claim has
not had, and could not reasonably be expected to have, a Material Adverse
Effect.
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8.05 CORPORATE FRANCHISES. The Borrower will do, and will cause each
of its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect (a) its existence and (b) except where the
failure to do so, individually or in the aggregate, has not had, and could not
reasonably be expected to have, a Material Adverse Effect or a material adverse
effect on the ability of any Credit Party to perform its obligations under any
Credit Document to which it is a party or on its rights, franchises and
authority to do business; PROVIDED, HOWEVER, that any transaction permitted by
Section 9.02 will not constitute a breach of this Section 8.05.
8.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) except for such noncompliances as, individually or in the aggregate,
have not had, and could not be reasonably expected to have, a Material Adverse
Effect or a material adverse effect on the ability of any Credit Party to
perform its obligations under any Credit Document to which it is a party.
8.07 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) The Borrower will pay,
and will cause each of its Subsidiaries to pay, all costs and expenses incurred
by it in keeping in compliance with all Environmental Laws, and will keep or
cause to be kept all Real Properties owned or operated by the Borrower or any of
its Subsidiaries free and clear of any Liens imposed pursuant to such
Environmental Laws; and (b) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of, Hazardous Materials
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, unless the failure to comply with the
requirements specified in clause (a) or (b) above, either individually or in the
aggregate, has not had, and could not reasonably be expected to have, a Material
Adverse Effect. If the Borrower or any of its Subsidiaries, or any tenant or
occupant of any Real Property owned or operated by the Borrower or any of its
Subsidiaries, cause or permit any intentional or unintentional act or omission
resulting in the presence or Release of any Hazardous Material (except in
compliance with applicable Environmental Laws), the Borrower agrees to
undertake, and/or to cause any of its Subsidiaries, tenants or occupants to
undertake, without any expense to the Lenders, any clean up, removal, remedial
or other action required pursuant to Environmental Laws to remove and clean up
any Hazardous Materials from any Real Property except where the failure to do so
has not had, and could not reasonably be expected to have, a Material Adverse
Effect, PROVIDED that neither the Borrower nor any of its Subsidiaries shall be
required to comply with any order or directive with respect to such removal or
clean up which is being contested in good faith and by proper proceedings so
long as it has maintained adequate reserves with respect to such compliance to
the extent required in accordance with GAAP.
(b) At the written request of the Administrative Agent or the
Required Lenders, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time,
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the Borrower will provide, at the Borrower's sole cost and expense, an
environmental site assessment report concerning any Real Property now or
hereafter owned or operated by the Borrower or any of its Subsidiaries, prepared
by an environmental consulting firm approved by the Administrative Agent,
indicating the presence or absence of Hazardous Materials and the potential cost
of any removal or remedial action in connection with any Hazardous Materials on
such Real Property; PROVIDED that such request may be made only if (i) there has
occurred and is continuing a Default or Event of Default, (ii) the
Administrative Agent or the Required Lenders reasonably believe that the
Borrower or any such Real Property is not in material compliance with
Environmental Law, or (iii) circumstances exist that reasonably could be
expected to form the basis of a material Environmental Claim against the
Borrower or any such Real Property. If the Borrower fails to provide the same
within 90 days after such request was made, the Administrative Agent may order
the same, and the Borrower shall grant and hereby grants to the Administrative
Agent and the Lenders and their agents reasonable access to such Real Property
and specifically grants the Administrative Agent and the Lenders an irrevocable
non-exclusive license, subject to the rights of tenants, to undertake such an
assessment, all at the Borrower's expense.
8.08 ERISA. As soon as possible and, in any event, within 10 days
after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following events to
the extent that one or more of such events is reasonably likely to result in a
liability to any one or more of the Borrower and its Subsidiaries in an
aggregate amount in excess of $3,000,000, the Borrower will deliver to each of
the Lenders a certificate of the chief financial officer of the Borrower setting
forth details as to such occurrence and the action, if any, which the Borrower,
such Subsidiary or such ERISA Affiliate is required or proposes to take,
together with a copy of any notices required or proposed to be given to or filed
with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred; that a contributing sponsor (as defined in Section
4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the
advance reporting requirement of PBGC Regulation Section 4043.61 (without regard
to subparagraph (b)(1) thereof), and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency has been incurred or an application may be or has
been made to the Secretary of the Treasury for a waiver or modification of the
minimum funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA with respect to a Plan; that a contribution required to be
made by the Borrower, a Subsidiary of the Borrower or any ERISA Affiliate to a
Plan, Multiemployer Plan or Foreign Pension Plan has not been timely made; that
a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings may be or have
been instituted by the PBGC to terminate or appoint a trustee to administer a
Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Multiemployer Plan; that the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate will or could reasonably
be expected to incur any liability (including any contingent or secondary
liability) to or on account of the termination of or withdrawal
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from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971,
or 4975 of the Code or Section 409, 502(i) or 502(l) of ERISA or with respect to
a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower
or any Subsidiary of the Borrower has or may incur any material liability under
any Retiree Welfare Plan or Foreign Pension Plan. At the request of any Lender,
the Borrower will deliver to such Lender a complete copy of the annual report
(Form 5500) of each Plan required to be filed with the Internal Revenue Service.
In addition to any certificates or notices delivered to the Lenders pursuant to
the first sentence hereof, copies of annual reports and any notices received by
the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate with
respect to any Plan or Foreign Pension Plan shall be delivered to the Lenders no
later than 10 days after the date such report has been filed with the Internal
Revenue Service or received by the Borrower or the Subsidiary or the ERISA
Affiliate. The Borrower and each of its applicable Subsidiaries shall ensure
that each Foreign Pension Plan administered by it or into which it makes
payments obtains or retains (as applicable) registered status under and as
required by applicable law and is administered in a timely manner in all
respects in compliance with all applicable laws except where the failure to do
any of the foregoing has not had, and could not be reasonably expected to result
in, a Material Adverse Effect.
8.09 GOOD REPAIR. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 9.09, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner consistent with prior
practice.
8.10 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower will, for
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on the Saturday closest to December 31 of
each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters
to end on in a manner consistent therewith.
8.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The Borrower will,
and will cause each of its Domestic Subsidiaries to, grant, to the extent
permitted by applicable law, to the Collateral Agent security interests and
mortgages in such assets and properties of the Borrower and its Domestic
Subsidiaries as are not covered by the original Security Documents, and as may
be requested from time to time by the Administrative Agent or the Required
Lenders. All such security interests and mortgages shall be granted pursuant to
documentation reasonably satisfactory in form and substance to the
Administrative Agent and shall constitute valid and enforceable perfected
security interests and mortgages superior to and prior to the rights of all
third Persons and subject to no other Liens except for Permitted Liens (i) at
the time of perfection thereof or (ii) arising and having priority by operation
of law. The Additional Security Documents or instruments related thereto shall
be duly recorded or filed in such manner and in such places as are required by
law to establish, perfect, preserve and protect the Liens in favor of the
Collateral Agent required to be granted pursuant to such Additional Security
Documents (it being understood that perfection of
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Liens on intellectual property shall not be required outside the United States)
and all taxes, fees and other charges payable in connection therewith shall be
paid in full by the Borrower.
(b) The Borrower will, and will cause each of its Domestic
Subsidiaries to, at the expense of the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, the
Borrower shall cause to be delivered to the Collateral Agent such opinions of
counsel, title insurance and other related documents as may be reasonable
requested by the Administrative Agent to assure themselves that this Section
8.11 has been complied with.
(c) If the Administrative Agent or the Required Lenders determine
that they are required by law or regulation to have appraisals prepared in
respect of the Real Property of the Borrower and its Subsidiaries constituting
Collateral, the Borrower shall provide to the Administrative Agent appraisals
which satisfy the applicable requirements of the Real Estate Appraisal Reform
Amendments of the Financial Institution Reform, Recovery and Enforcement Act of
1989 and which shall be in form and substance reasonably satisfactory to the
Administrative Agent.
(d) The Borrower agrees to cause each Domestic Subsidiary
established or created in accordance with Section 9.15 to execute and deliver a
guaranty of all Obligations and all obligations under Interest Rate Protection
or Other Hedging Agreements in substantially the form of the Subsidiaries
Guaranty.
(e) The Borrower agrees to pledge and deliver, or cause to be
pledged and delivered, all of the capital stock of each new Subsidiary
(excluding that portion of the voting stock of any Foreign Subsidiary which
would be in excess of 65% of the total outstanding voting stock of such Foreign
Subsidiary) established or created after the Effective Date, to the extent owned
by the Borrower or any Domestic Subsidiary, to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Pledge Agreement.
(f) The Borrower will cause each Domestic Subsidiary established or
created in accordance with Section 9.15 to grant to the Collateral Agent a first
priority (subject to Permitted Liens) Lien on property (tangible and intangible)
of such Subsidiary upon terms and with exceptions similar to those set forth in
the Security Documents as appropriate, and satisfactory in form and substance to
the Borrower, the Administrative Agent and Required Lenders. The Borrower shall
cause each such Domestic Subsidiary, at its own expense, to execute, acknowledge
and deliver, or cause the execution, acknowledgment and delivery of, and
thereafter register, file or record in any appropriate governmental office, any
document or instrument reasonably deemed by the Collateral Agent to be necessary
or desirable for the creation and perfection of the foregoing Liens. The
Borrower will cause each of such Domestic Subsidiaries to take all actions
reasonably requested by the Administrative Agent (including, without limitation,
the filing of UCC-1's) in connection with the granting of such security
interests.
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(g) The security interests required to be granted pursuant to this
Section 8.11 shall be granted pursuant to security documentation (which shall be
substantially similar to the Security Documents already executed and delivered
by the Borrower or its Subsidiaries, as applicable) or otherwise satisfactory in
form and substance to the Collateral Agent and the Borrower and shall constitute
valid and enforceable perfected security interests prior to the rights of all
third Persons and subject to no other Liens except such Liens as are permitted
by Section 9.03. The Additional Security Documents and other instruments related
thereto shall be duly recorded or filed in such manner and in such places and at
such times as are required by law to establish, perfect, preserve and protect
the Liens, in favor of the Collateral Agent for the benefit of the respective
Secured Creditors, required to be granted pursuant to the Additional Security
Documents and all taxes, fees and other charges payable in connection therewith
shall be paid in full by the Borrower. At the time of the execution and delivery
of the Additional Security Documents, the Borrower shall cause to be delivered
to the Collateral Agent such opinions of counsel, Mortgage Policies, title
surveys, real estate appraisals and other related documents as may be reasonably
requested by the Agents or the Required Lenders to assure themselves that this
Section 8.11 has been complied with.
(h) The Borrower agrees that each action required above by Section
8.11(a) shall be completed within 90 days after such action is requested to be
taken by either the Administrative Agent or the Required Lenders, PROVIDED that
in no event shall the Borrower be required to take any action, other than using
its reasonable commercial efforts, to obtain consents from third parties with
respect to its compliance with this Section 8.11. The Borrower further agrees
that each action required by Section 8.11(d), (e), (f) and (g) with respect to
the creation or acquisition of a new Subsidiary shall be completed
contemporaneously with (or, in the case of any documents or instruments to be
registered, filed or recorded, within 10 days of) the creation of such new
Subsidiary.
8.12 FOREIGN SUBSIDIARIES SECURITY. If following a change in the
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower reasonably acceptable to the Administrative Agent does not within 60
days after a written request from the Administrative Agent or the Required
Lenders deliver evidence, in form and substance satisfactory to the
Administrative Agent, the Required Lenders and the Borrower, with respect to any
Foreign Subsidiary which has not already had all of its stock pledged pursuant
to the Pledge Agreement that (i) a pledge of 66-2/3% or more of the total
combined voting power of all classes of capital stock of such Foreign Subsidiary
entitled to vote, (ii) the entering into by such Foreign Subsidiary of a
security agreement in substantially the form of the Security Agreement and (iii)
the entering into by such Foreign Subsidiary of a guaranty in substantially the
form of the Guaranty, in any such case would cause the undistributed earnings of
such Foreign Subsidiary as determined for Federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary's United States parent
for Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock not theretofore pledged pursuant to the
Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and
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in the case of a failure to deliver the evidence described in clause (ii) above,
such Foreign Subsidiary shall execute and deliver the Security Agreement (or
another security agreement in substantially similar form, if needed), granting
the Secured Creditors a security interest in all of such Foreign Subsidiary's
assets and securing the Obligations of the Borrowers under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement and,
in the event the Guaranty shall have been executed by such Foreign Subsidiary,
the obligations of such Foreign Subsidiary thereunder, and in the case of a
failure to deliver the evidence described in clause (iii) above, such Foreign
Subsidiary shall execute and deliver the Subsidiaries Guaranty (or another
guaranty in substantially similar form, if needed), guaranteeing the Obligations
of the Borrower under the Credit Documents and under any Interest Rate
Protection Agreement or Other Hedging Agreement, in each case to the extent that
the entering into of such Security Agreement or Guaranty is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 8.12 to be in form and substance reasonably
satisfactory to the Administrative Agent.
8.13 PERFORMANCE OF OBLIGATIONS. The Borrower will, and will cause
each of its Subsidiaries to, perform all of its obligations under the terms of
each mortgage, indenture, security agreement and other debt instrument by which
it is bound, except such non-performances as , individually or in the aggregate,
have not had, and could not reasonably be expected to have, a Material Adverse
Effect.
8.14 CONSUMMATION OF TRANSACTION. The Borrower shall take all
required action necessary to cause the Transaction to be consummated on the
Initial Borrowing Date, and all conditions precedent specified in Sections 5.06,
5.07, 5.08 and 5.09 to be satisfied on such date.
8.15 EXISTING NOTES REDEMPTION. The Borrower shall take all actions
necessary or advisable to effect the Existing Notes Redemption on October 1,
1998.
SECTION 9. NEGATIVE COVENANTS. The Borrower hereby covenants and
agrees that as of the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit (other than Letters of Credit, together with all Fees that have accrued
and will accrue thereon through the stated termination date of such Letters of
Credit, which have either been (a) cash collateralized in a manner reasonably
satisfactory to the applicable Issuing Lender or (b) backstopped by a letter of
credit or other security acceptable to the applicable Issuing Lender) or Notes
are outstanding and the Loans, together with interest, Fees and all other
Obligations (other than any indemnities described in Section 13.01 which are not
then due and payable) incurred hereunder, are paid in full:
9.01 BUSINESS. The Borrower will not, and will not permit any of its
Subsidiaries to, engage (directly or indirectly) in any business other than the
business in which the Borrower and its Subsidiaries are engaged on the Effective
Date and other businesses reasonably related thereto.
9.02 CONSOLIDATION, MERGER, PURCHASE OR SALE OF ASSETS, ETC. The
Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into
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any transaction of merger or consolidation, or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or any
part of its property or assets (other than inventory in the ordinary course of
business), or enter into any sale-leaseback transactions, or purchase or
otherwise acquire (in one or a series of related transactions) any part of the
property or assets (other than purchases or other acquisitions of inventory,
materials, equipment and intangible assets in the ordinary course of business)
of any Person (or agree to do any of the foregoing at any future time), except
that:
(i) the consummation of the Transaction shall be permitted;
(ii) Capital Expenditures by the Borrower and its Subsidiaries shall
be permitted to the extent not in violation of Section 9.09;
(iii) each of the Borrower and its Subsidiaries may in the ordinary
course of business, sell, lease or otherwise dispose of any assets which,
in the reasonable judgment of such Person, are obsolete, worn out or
otherwise no longer useful in the conduct of such Person's business;
(iv) advances, investments and loans may be made to the extent
permitted by Section 9.06;
(v) (i) the Visionworks Lease shall be permitted for the stated term
thereof and (ii) each of the Borrower and its Subsidiaries (x) may lease
(as lessee) real or personal property in the ordinary course of business
(so long as any such lease does not create a Capitalized Lease Obligation
except to the extent permitted by Section 9.04) and (y) may lease or
sublease property to third Persons which leases and subleases do not
interfere in any material respect with the business of the Borrower or any
of its Subsidiaries;
(vi) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse and in the ordinary course of business, accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof consistent with
customary industry practice (and not as part of any bulk sale);
(vii) licenses or sublicenses by the Borrower and its Subsidiaries of
software, copyrights, trademarks, patents, know-how and other intellectual
property in the ordinary course of business and which do not materially
interfere with the business of the Borrower or the Borrower and its
Subsidiaries taken as a whole shall be permitted;
(viii) the Borrower or any Domestic Wholly-Owned Subsidiary of the
Borrower may transfer or lease assets to or acquire or lease assets from
the Borrower or any other Domestic Wholly-Owned Subsidiary or any
Subsidiary may be merged or liquidated into the Borrower (as long as the
Borrower is the surviving corporation of such merger) or any other
Domestic Wholly-Owned Subsidiary of the Borrower so long as, in each such
case (x) the security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to
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the Security Documents in the assets so transferred shall be in full force
and effect and shall be perfected and of first priority to the extent
provided therein, and (y) any Indebtedness of, or Liens on the assets of,
the Subsidiary transferring assets or being dissolved or liquidated shall
be otherwise permitted to be incurred by, and to exist on the assets of,
such Wholly-Owned Domestic Subsidiary, pursuant to the other provisions
of this Agreement;
(ix) each of the Borrower and its Subsidiaries may sell, lease or
otherwise dispose of any equipment and other assets, to the extent not
otherwise permitted under any other clause of this Section 9.02, at the
fair market value thereof (as determined in good faith by the Borrower),
PROVIDED that the Net Sale Proceeds thereof (x) shall consist of at least
75% in cash, (y) to the extent required to do so by Section 4.02, shall be
applied by the Borrower to repay Loans and (z) do not exceed $5,000,000 in
the aggregate in any fiscal year of the Borrower;
(x) the Borrower and its Subsidiaries may sell or exchange any item
of equipment, so long as the purpose of each such sale or exchange is to
acquire (and results within 360 days before or after such sale or exchange
in the acquisition of) replacement items of equipment which are the
functional equivalent of the item of equipment so sold or exchanged; and
(xi) so long as no Default or Event of Default then exists or would
result there from, the Borrower and its Wholly-Owned Subsidiaries may
acquire assets or the capital stock of any Person (any such acquisition
permitted by this clause (xi), a "Permitted Acquisition"), PROVIDED that
(i) such Person (or the assets so acquired) was, immediately prior to such
acquisition, engaged (or used) primarily in the business permitted
pursuant to Section 9.01, (ii) if such acquisition is structured as a
stock acquisition, then either (A) the Person so acquired becomes a
Wholly-Owned Subsidiary of the Borrower or (B) such Person is merged with
and into a Wholly-Owned Subsidiary of the Borrower (with such Wholly-Owned
Subsidiary being the surviving corporation of such merger), and in any
case, all of the provisions of Section 9.15 have been complied with in
respect of such Person, (iii) any Liens or Indebtedness assumed or issued
in connection with such acquisition are otherwise permitted under Section
9.03 or 9.04, as the case may be, (iv) the only consideration paid in
connection with any such Permitted Acquisitions shall consist of (I)
borrowings of Acquisition Loans, (II) Net Sale Proceeds permitted to be
reinvested in accordance with Section 4.02(f), (III) net cash proceeds
from the issuance of common equity of the Borrower to the extent the
aggregate amount of same so used in connection with any Permitted
Acquisition shall not exceed the Equity Proceeds Amount at such time and
(IV) an amount equal to 50% of the Excess Cash Flow of the Borrower and
its Subsidiaries for the Excess Cash Flow Period then last ended LESS the
aggregate amount of any such Excess Cash Flow previously expended in
connection with Permitted Acquisitions, (v) as of the date of such
Permitted Acquisition and after giving effect thereto (including without
limitation, to the incurrence and assumption of all Indebtedness to be
incurred or assumed in connection therewith), the ratio of
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Consolidated Indebtedness at such time to Consolidated EBITDA for the Test
Period then last ended (determined on a PRO FORMA Basis) shall be less
than the Maximum Adjusted Leverage Ratio applicable at such time, and (vi)
the Borrower and its Subsidiaries are in compliance, after giving effect
to such acquisition and the incurrence or assumption of any Indebtedness
related thereto, with the covenants contained in Sections 9.09, 9.10, 9.11
and 9.12 for the Test Period than most recently ended on a PRO FORMA Basis
as if such Permitted Acquisition had been consummated on the first day of
such Test Period, (vii) such Permitted Acquisition shall be permitted
pursuant to the terms of the Senior Subordinated Note Documents and any
documents entered into in connection with any Additional Subordinated Debt
and (viii) at least five Business Days prior to the consummation of any
Permitted Acquisition, the Borrower shall deliver to each Agent a
certificate of its chief financial officer or other Authorized Officer
certifying (and showing the calculations therefor) compliance with the
foregoing clauses (i) through (vii).
To the extent the Required Lenders waive the provisions of this Section 9.02
with respect to the sale of any Collateral, or any Collateral is sold as
permitted by this Section 9.02, such Collateral shall be sold free and clear of
the Liens created by the Security Documents, and the Administrative Agent and
Collateral Agent shall be authorized to take any actions deemed appropriate in
order to effect the foregoing.
9.03 LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets (real or personal, tangible or intangible) of
the Borrower or any of its Subsidiaries, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable with recourse to the Borrower or any of
its Subsidiaries), or assign any right to receive income or permit the filing of
any financing statement under the UCC or any other similar notice of Lien under
any similar recording or notice statute; PROVIDED that the provisions of this
Section 9.03 shall not prevent the creation, incurrence, assumption or existence
of the following (Liens described below are herein referred to as "Permitted
Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with generally accepted accounting principles in the United
States (or the equivalent thereof in any country in which a Foreign
Subsidiary is doing business, as applicable);
(ii) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law, which were incurred in the ordinary
course of business and do not secure Indebtedness for borrowed money, such
as carriers', warehousemen's, materialmen's and mechanics' liens and other
similar Liens arising in the ordinary course of business, and (x) which do
not in the aggregate materially detract from the value of the property or
assets of the Borrower or the Borrower and its Subsidiaries taken as a
whole and do not materially impair the use thereof in the operation of the
business of the Borrower or the Borrower and
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its Subsidiaries taken as a whole or (y) which are being contested in good
faith by appropriate proceedings, which proceedings (or orders entered in
connection with such proceedings) have the effect of preventing the
forfeiture or sale of the property or assets subject to any such Lien;
(iii) Liens in existence on the Effective Date which are listed, and
the property subject thereto described, in Schedule IV, but only to the
respective date, if any, set forth in such Schedule IV for the removal and
termination of any such Liens, plus renewals and extensions of such Liens
to the extent set forth on Schedule IV, PROVIDED that (x) the aggregate
principal amount of the Indebtedness, if any, secured by such Liens does
not increase from that amount outstanding at the time of any such renewal
or extension and (y) any such renewal or extension does not encumber any
additional assets or properties of the Borrower or any of its
Subsidiaries;
(iv) Permitted Encumbrances;
(v) Liens created pursuant to this Agreement and the Security
Documents;
(vi) licenses, sublicenses, leases or subleases granted to other
Persons in the ordinary course of business not materially interfering with
the conduct of the business of the Borrower or any of its Subsidiaries;
(vii) Liens upon assets of the Borrower and its Subsidiaries subject to
Capitalized Lease Obligations to the extent permitted by Section 9.04,
PROVIDED that (x) such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and (y) the
Lien encumbering the asset giving rise to the Capitalized Lease Obligation
does not encumber any other asset (other than proceeds thereof) of the
Borrower or any Subsidiary of the Borrower;
(viii) Liens placed upon assets used in the ordinary course of business
of the Borrower or any of its Subsidiaries at the time of acquisition
thereof by the Borrower or any such Subsidiary or within 90 days
thereafter to secure Indebtedness incurred to pay all or a portion of the
purchase price thereof, PROVIDED that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens permitted by this
clause (viii) shall not at any time exceed $7,500,000, (y) the
Indebtedness secured by any such Lien does not exceed 100%, nor is less
than 70%, of the lesser of the fair market value and the purchase price of
the property being purchased at the time of incurrence of such
Indebtedness and (z) in all events, the Lien encumbering the assets so
acquired does not encumber any other asset (other than proceeds thereof)
of the Borrower or such Subsidiary;
(ix) easements, rights-of-way, restrictions (including zoning
restrictions), encroachments, protrusions and other similar charges or
encumbrances, and minor title deficiencies, in each case whether now or
hereafter in existence, not securing Indebtedness and not
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materially interfering with the conduct of the business of the Borrower or
the Borrower and its Subsidiaries taken as a whole;
(x) Liens arising from precautionary UCC financing statement filings
regarding operating leases entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(xi) Liens arising out of judgments or awards in circumstances not
constituting an Event of Default under Section 10.09;
(xii) statutory and common law landlords' liens under leases or
subleases to which the Borrower or any of its Subsidiaries is a party;
(xiii) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (x) in connection with workers'
compensation, unemployment insurance and other types of social security,
(y) to secure the performance of tenders, statutory obligations (other
than excise taxes), surety, stay, customs and appeal bonds, statutory
bonds, bids, leases, government contracts, trade contracts, performance
and return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money) or (z) to secure liability
for premiums to insurance carriers;
(xiv) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this Agreement;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure the payment of customs duties in connection with
the importation of goods;
(xvi) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Borrower or any of its Subsidiaries in the ordinary course of business
in accordance with the past practices of the Borrower and its Subsidiaries
prior to the Initial Borrowing Date;
(xvii) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, PROVIDED that (i) any Indebtedness that is secured by such
Liens is permitted to exist under Section 9.04(xiv), and (ii) such Liens
are not incurred in connection with, or in contemplation or anticipation
of, such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries;
(xviii) Liens on assets of Foreign Subsidiaries to secure Indebtedness
permitted to be outstanding pursuant to Section 9.04(xv) of this
Agreement;
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(xix) Until October 1, 1998, Liens encumbering the cash and investments
deposited on the Initial Borrowing Date with the Existing Notes Trustee to
effect the Existing Notes Defeasance; and
(xx) Liens not otherwise permitted by the foregoing clauses (i)
through (xix) to the extent attaching to properties and assets with an
aggregate fair value not in excess of, and securing liabilities not in
excess of, $5,000,000 in the aggregate at any time outstanding.
9.04 INDEBTEDNESS. The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Indebtedness of the Borrower pursuant to the Senior Subordinated
Notes and/or Additional Subordinated Debt in an aggregate principal amount
not to exceed $150,000,000 in the aggregate at any time outstanding so
long as any such Additional Subordinated Debt shall be permitted to be
incurred by the other provisions of this Agreement;
(iii) Until October 1, 1998, the Existing Notes in an aggregate
principal amount not to exceed $70,000,000 may remain outstanding;
(iv) Existing Indebtedness shall be permitted to the extent the same
is listed on Schedule V, but no refinancings or renewals thereof other
than as specifically contemplated by the Transaction and/or this
Agreement;
(v) Accrued expenses and current trade accounts payable incurred in
the ordinary course;
(vi) Indebtedness under non-speculative Interest Rate Protection
Agreements which may be entered into from time to time by the Borrower and
which the Borrower in good faith believes will provide protection against
fluctuations in interest rates with respect to outstanding floating rate
Indebtedness then outstanding, and permitted to remain outstanding,
pursuant to the other provisions of this Section 9.04;
(vii) Indebtedness evidenced by Capitalized Lease Obligations to the
extent permitted pursuant to Section 9.09, PROVIDED that in no event shall
the aggregate principal amount of Capitalized Lease Obligations permitted
by this clause (vii) exceed $7,500,000 at any time outstanding;
(viii) Indebtedness subject to Liens otherwise permitted under Section
9.03(viii), so long as the aggregate outstanding principal amount of all
such Indebtedness does not exceed $7,500,000;
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(ix) Intercompany Indebtedness of any Domestic Wholly-Owned Subsidiary
owing to the Borrower or any other Domestic Wholly-Owned Subsidiary, or of
the Borrower owing to any Domestic Wholly-Owned Subsidiary, to the extent
permitted by Section 9.06(vii);
(x) In addition to any Indebtedness permitted by the preceding clause
(ix), Indebtedness of any Wholly-Owned Subsidiary to the Borrower or
another Wholly-Owned Subsidiary constituting the purchase price in respect
of intercompany transfers of goods made in the ordinary course of business
to the extent not constituting Indebtedness for borrowed money;
(xi) Indebtedness evidenced by Other Hedging Agreements entered into
pursuant to Section 9.06(vi);
(xii) Indebtedness under performance bonds, letter of credit
obligations to provide security for worker's compensation claims and bank
overdrafts, in each case incurred in the ordinary course of business,
PROVIDED that any obligations arising in connection with such bank
overdraft Indebtedness is extinguished within five Business Days;
(xiii) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness, leases and any other obligation or liability permitted to be
incurred by Wholly-Owned Domestic Subsidiaries of the Borrower, and (y) by
Domestic Subsidiaries of the Borrower of Indebtedness, leases and any
other obligation or liability permitted to be incurred by the Borrower or
other Wholly-Owned Domestic Subsidiaries of the Borrower; PROVIDED that
the aggregate principal amount of indebtedness permitted by this clause
(xiii) shall not exceed $20,000,000 at any time outstanding;
(xiv) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition and existing at the time of consummation thereof (or
Indebtedness assumed at the time of a Permitted Acquisition of an asset
securing such Indebtedness), PROVIDED that such Indebtedness (x) was not
incurred in connection with, or in anticipation or contemplation of, such
Permitted Acquisition and (y) does not exceed in aggregate principal
amount for any Permitted Acquisition or group of related Permitted
Acquisitions, an amount equal to 20% of the fair market value of the
assets acquired in such Permitted Acquisition or Permitted Acquisitions;
(xv) Indebtedness consisting of (x) local loans from local lenders in
jurisdictions outside the United States to Foreign Subsidiaries located in
such jurisdictions; PROVIDED that the aggregate principal amount of all
such Indebtedness does not exceed $500,000 at any time outstanding and (y)
Indebtedness of the Borrower and its Domestic Subsidiaries consisting of
guarantees of the foregoing Indebtedness so long as the sum of (I) the
aggregate amount of Indebtedness so guaranteed at any time, (II) the
aggregate amount of investments made in Foreign Subsidiaries pursuant to
Section 9.06(xiv) after the Effective Date (without giving effect to any
write-offs or write-downs thereof) and (III) the aggregate amount of
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intercompany loans extended to Foreign Subsidiaries pursuant to Section
9.06(vii) hereof (without giving effect to any write-offs or write-downs
thereof) shall not exceed $2,000,000;
(xvi) Indebtedness of the Borrower pursuant to its guaranty of the Poth
Loan; and
(xvii) Additional Indebtedness of the Borrower and its Subsidiaries to
the extent not permitted by the foregoing clauses of this Section 9.04 not
to exceed $7,500,000 in aggregate principal amount at any time
outstanding.
9.05 DESIGNATED SENIOR DEBT. The Borrower will not, and will not
permit any of its Subsidiaries to, designate any Indebtedness (other than the
Obligations) as "Designated Senior Indebtedness", "Designated Guarantor Senior
Indebtedness" or any similar term for purposes of, and as defined in, the Senior
Subordinated Note Documents and the documents entered into in connection with
any Additional Subordinated Debt.
9.06 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, lend money
or credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents, except that the following shall be permitted:
(i) the Borrower and its Subsidiaries may acquire and hold accounts
receivables owing to any of them;
(ii) the Borrower and its Subsidiaries may acquire and hold cash and
Cash Equivalents;
(iii) the Borrower and its Subsidiaries may make loans and advances in
the ordinary course of business to their respective employees for moving,
travel and similar expenses so long as the aggregate principal amount
thereof at any time outstanding (determined without regard to any
write-downs or write-offs of such loans and advances) shall not exceed
$2,000,000;
(iv) the Borrower may enter into Interest Rate Protection Agreements
to the extent permitted in Section 9.04(vi);
(v) the Recapitalization Transaction may be effected on the Initial
Borrowing Date;
(vi) the Borrower may enter into and perform its obligations under
Other Hedging Agreements entered into in the ordinary course of business
and so long as any such Other Hedging Agreement is not speculative in
nature and is (x) related to income derived from foreign operations of the
Borrower or any Subsidiary or otherwise related to purchases
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permitted hereunder from foreign suppliers or (y) entered into to protect
the Borrower and/or its Subsidiaries against fluctuations in the prices of
raw materials used in their Businesses;
(vii) any Subsidiary may make intercompany loans to the Borrower or any
Wholly-Owned Subsidiary and the Borrower may make intercompany loans and
advances to any Wholly-Owned Subsidiary, PROVIDED that any promissory
notes evidencing such intercompany loans shall be pledged (and delivered)
by the Borrower or the respective Domestic Wholly-Owned Subsidiary that is
the lender of such intercompany loan as Collateral pursuant to the
applicable Pledge Agreement, PROVIDED FURTHER, that the aggregate amount
of intercompany loans from the Borrower or any Domestic Subsidiary to
Foreign Subsidiaries (without giving effect to any write-downs or
write-offs thereof) shall not when added to (I) the aggregate principal
amount of all Indebtedness guaranteed pursuant to Section 9.04(xv) then
outstanding and (II) the aggregate amount of investments in Foreign
Subsidiaries pursuant to Section 9.06(xiv) hereof (without giving effect
to any write-offs or write-downs thereof), exceed $2,000,000;
(viii) the Borrower and it Subsidiaries may sell or transfer assets to
the extent permitted by Section 9.02;
(ix) the Borrower may establish Subsidiaries to the extent permitted
by Section 9.15;
(x) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising
in the ordinary course of business;
(xi) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Schedule IX shall be permitted, without
giving effect to any additions thereto or replacements thereof;
(xii) (i) the Borrower may acquire and hold obligations of one or more
officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of the
Borrower Common Stock so long as no cash is paid by the Borrower or any of
its Subsidiaries in connection with the acquisition of any such
obligations, (ii) the Borrower may extend loans to officers and employees
of the Borrower and its Subsidiaries on or after the date on which any
such officers and employees exercise their options to purchase capital
stock of the Borrower issued to them in connection with the Transaction so
long as the proceeds of such loans are required to be promptly used by
such officers and employees to pay taxes payable by them as a result of
such exercise and (iii) investments consisting of loans by the Borrower or
its Subsidiaries to employees of the Borrower or its Subsidiaries made
solely for the purpose of funding purchases by such employees of Borrower
Common Stock shall be permitted; PROVIDED that the aggregate principal
amount at any time outstanding of the obligations and loans extended
pursuant to clauses (i), (ii) and (iii) shall not exceed $3,000,000;
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(xiii) Permitted Acquisitions shall be permitted;
(xiv) investments by the Borrower and its Subsidiaries in (A)
Wholly-Owned Domestic Subsidiaries of the Borrower and (B) in Wholly-Owned
Foreign Subsidiaries of the Borrower, so long as in the case of this
clause (B), the sum of (I) the aggregate amount of all such investments
since the Effective Date (without giving effect to any write-offs or
write-downs thereof), (II) the aggregate amount of all Indebtedness of
Foreign Subsidiaries guaranteed pursuant to Section 9.04(xv) then
outstanding plus (III) the aggregate amount of intercompany loans extended
to Foreign Subsidiaries pursuant to Section 9.06(vii) hereof (without
giving effect to any write-offs or write-downs thereof) shall not exceed
$2,000,000;
(xv) the Borrower may make cash investments in Wholly-Owned Domestic
Subsidiaries of the Borrower so long as the aggregate amount so invested
since the Effective Date does not exceed $5,000,000;
(xvi) investments by the Borrower and its Subsidiaries in
non-Wholly-Owned Subsidiaries and joint entities so long as (I) after
giving effect to such investment, the Borrower and its Subsidiaries are in
compliance with the covenants set forth in Section 9.09, 9.10, 9.11 and
9.12 for the Test Period then most recently ended on a PRO FORMA Basis as
if such investment had been consummated on the last day of such Test
Period, (II) such investment is permitted pursuant to the terms of the
Senior Subordinated Note Documents and pursuant to any documents entered
into in connection with any Additional Subordinated Debt and no such
Subsidiary or joint venture shall be obligated to, guarantee the Senior
Subordinated Notes or any Additional Subordinated Debt and (III) the
aggregate amount expended on all such investments after the Effective Date
shall not exceed $5,000,000;
(xvii) deposits made in the ordinary course of business to secure the
performance of leases shall be permitted; and
(xviii) additional investments of the Borrower and its Subsidiaries to
the extent not permitted by the foregoing clauses of this Section 9.06 not
to exceed $3,000,000 at any time.
9.07 DIVIDENDS. The Borrower shall not, and shall not permit any of
its Subsidiaries to, authorize, declare or pay any dividends (other than
dividends payable solely in common stock of the Borrower or any such Subsidiary,
as the case may be) or return any capital to, its stockholders or authorize or
make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of its capital
stock, now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Borrower will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Borrower or any Subsidiary, as the case
may be, now or hereafter outstanding (or any options or warrants or stock
appreciate rights issued by such Person with respect to its capital stock) (all
of the foregoing and including all payments made or required to be made by such
Person with respect to
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any stock appreciation rights, plans, equity incentive or achievement plans or
any similar plans or setting aside of any funds for the foregoing purposes,
"Dividends"), except that:
(i) any Subsidiary of the Borrower (x) may pay cash Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) if such
Subsidiary is not a Wholly-Owned Subsidiary, may pay cash Dividends to
its shareholders generally so long as the Borrower or its respective
Subsidiary which owns the equity interest or interests in the Subsidiary
paying such Dividends receives at least its proportionate share thereof
(based upon its relative holdings of equity interests in the Subsidiary
paying such Dividends and taking into account the relative preferences, if
any, of the various classes of equity interests in such Subsidiary);
(ii) Borrower Preferred Stock may be issued as a dividend on the
Borrower Preferred Stock;
(iii) so long as no Default or Event of Default shall have occurred or
shall result therefrom, the Borrower will be permitted to redeem or
repurchase, shares of its common stock or options in respect thereof, in
each case, in connection with the repurchase provisions under employee
stock option or stock purchase agreements or other agreements to
compensate management employees; PROVIDED that such redemptions or
repurchases pursuant to this clause (iii) shall not exceed $5,000,000 in
the aggregate after the Initial Borrowing Date; and
(iv) so long as no Default or Event of Default shall have occurred or
shall result therefrom, the Borrower will be permitted to make payments in
respect of any redemption, repurchase, acquisition, cancellation or other
retirement for value of shares of capital stock of the Borrower or
options, stock appreciation or similar securities, in each case held by
then current or former officers, directors or employees of the Borrower or
any of its Subsidiaries (or their estates or beneficiaries under their
estates) or by an employee benefit plan, upon the death, disability,
retirement or termination of employment of such officers, directors and
employees, not to exceed $2,500,000 in the aggregate in any fiscal year of
the Borrower and not to exceed $10,000,000 in the aggregate after the
Initial Borrowing Date.
9.08 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any transaction or series of
related transactions, whether or not in the ordinary course of business, with
any of its Affiliates or any of its Subsidiaries, other than in the ordinary
course of business and on terms and conditions substantially as favorable to the
Borrower or such Subsidiary as would reasonably be obtained by the Borrower or
such Subsidiary at that time in a comparable arm's-length transaction with a
Person other than an Affiliate, except that:
(i) Dividends may be paid to the extent provided in Section 9.07;
(ii) loans may be made and other transactions may be entered into
between the Borrower and its Subsidiaries to the extent permitted by
Sections 9.04 and 9.06;
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(iii) customary fees may be paid to non-officer directors of the
Borrower;
(iv) the Transaction shall be effected;
(v) the payment, on a quarterly basis, of management fees to THL
and/or THL Affiliates in accordance with the management agreement between
THL and/or THL Affiliates and the Borrower in an aggregate amount (for all
such Persons taken together) not to exceed $125,000 in any fiscal quarter
of the Borrower; PROVIDED that, the payment of such management fees in any
quarter in excess of $125,000 ("Additional Management Fees") shall be
permitted so long as (w) no Default or Event of Default shall then exist
or shall result therefrom, (x) on any date on which such Additional
Management Fees are paid, and after giving effect thereto, the ratio of
Consolidated Indebtedness at such time to Consolidated EBITDA for the Test
Period then last ended (determined on a PRO FORMA Basis) shall be less
than the Maximum Adjusted Leverage Ratio applicable at such time, (y) such
payment shall be permitted pursuant to the Senior Subordinated Note
Documents and the Additional Subordinated Debt (if any) and (z) in no
event shall the aggregate amount of management fees paid in any fiscal
quarter of the Borrower exceed $250,000;
(vi) the reimbursement of THL and/or THL Affiliates for their
reasonable out-of-pocket expenses incurred by them in connection with
performing management services to the Borrower and its Subsidiaries;
(vii) the payment of one time fees to THL and/or the THL Affiliates in
connection with each acquisition of a company or a line of business by the
Borrower or its Subsidiaries, such fees to be payable at the time of each
such acquisition and not to exceed 1% of the aggregate consideration paid
by the Borrower and its Subsidiaries for any such acquisition; and
(viii) the payment of consulting fees to Norman Matthews pursuant to a
consulting arrangement entered into on or prior to the Initial Borrowing
Date on an aggregate amount not to exceed $50,000 in any fiscal year of
the Borrower.
9.09 CAPITAL EXPENDITURES. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, make any Capital Expenditures, except that
(x) during the fiscal year (taken as one accounting period) ending on or about
December 31, 1998, the Borrower and its Subsidiaries may make Capital
Expenditures in an aggregate amount not to exceed $22,000,000 and (y) during
each fiscal year thereafter (taken as one accounting period), the Borrower and
its Subsidiaries may make Capital Expenditures in an aggregate amount not to
exceed $20,000,000; PROVIDED that for any fiscal year of the Borrower,
commencing with the fiscal year ending closest to December 31, 2000, in the
event the Consolidated EBITDA of the Borrower and its subsidiaries shall be less
than the Specified EBITDA Amount for such fiscal year (the amount of such
deficiency, the "EBITDA Shortfall"), the aggregate amount of Capital
Expenditures permitted in the next succeeding fiscal year shall equal
$20,000,000 LESS the EBITDA Shortfall.
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(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year (after giving effect to the
proviso thereto, but before giving effect to any increase in such permitted
expenditure amount pursuant to this clause (b)) is greater than the amount of
such Capital Expenditures made by the Borrower and its Subsidiaries during such
fiscal year, such excess (the "Rollover Amount") may be carried forward and
utilized to make Capital Expenditures in succeeding fiscal years, PROVIDED that
in no event shall the aggregate amount of Capital Expenditures made by the
Borrower and its Subsidiaries during any fiscal year pursuant to Section 9.09(a)
exceed 135% of the amount permitted with respect to such fiscal year in such
Section 9.09(a) (after giving effect to the proviso thereto).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the Net Sale Proceeds
of asset sales to the extent such proceeds are not required to be applied to
repay Loans pursuant to Section 4.02(f).
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance proceeds
received by the Borrower or any of its Subsidiaries from any Recovery Event so
long as such Capital Expenditures are to replace or restore any properties or
assets in respect of which such proceeds were paid within 360 days following the
date of the receipt of such insurance proceeds to the extent such insurance
proceeds are not required to be applied to repay Loans pursuant to Section
4.02(h).
(e) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) constituting Permitted
Acquisitions.
(f) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures at any time (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) with proceeds received from the
sale of common equity so long as at the time of the making of any such Capital
Expenditure, the aggregate amount to be expended in connection therewith does
not exceed the Equity Proceeds Amount at such time.
(g) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) in connection with the termination
of the Visionworks Lease on the Visionworks Lease Expiry Date.
9.10 CONSOLIDATED INTEREST COVERAGE RATIO. The Borrower will not
permit the Consolidated Interest Coverage Ratio for any period of four
consecutive fiscal quarters (or, if shorter, the period beginning on the Initial
Borrowing Date and ended on the last day of a fiscal quarter ended after the
Initial Borrowing Date), in each case taken as one accounting period, ended on
the
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last day of a fiscal quarter described below to be less than the amount set
forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended In, Or Closest To Ratio
- -------------------------------------- -----
<S> <C>
June, 1998 1.60:1.00
September, 1998 1.60:1.00
December, 1998 1.60:1.00
March, 1999 1.60:1.00
June, 1999 1.70:1.00
September, 1999 1.70:1.00
December, 1999 1.80:1.00
March, 2000 1.80:1.00
June, 2000 1.90:1.00
September, 2000 1.90:1.00
December, 2000 2.00:1.00
March, 2001 2.00:1.00
June, 2001 2.00:1.00
September, 2001 2.00:1.00
December, 2001 2.25:1.00
March, 2002 2.25:1.00
June, 2002 2.25:1.00
September, 2002 2.25:1.00
December, 2002 2.50:1.00
March, 2003 2.50:1.00
June, 2003 2.50:1.00
September, 2003 2.50:1.00
December, 2003 2.75:1.00
March, 2004 2.75:1.00
RL/AL Maturity Date 2.75:1.00
</TABLE>
9.11 MINIMUM CONSOLIDATED EBITDA. The Borrower will not permit
Consolidated EBITDA for any period of four consecutive fiscal quarters (in each
case taken as one accounting period), ended on the last day of any fiscal
quarter from the Effective Date to and including the fiscal quarter ending in or
closest to March, 2000, to be less than $32,500,000:
9.12 MAXIMUM LEVERAGE RATIO. The Borrower will not permit the
Leverage Ratio at any time during a fiscal quarter set forth below to be greater
than the ratio set forth opposite such fiscal quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended In, Or Closest To Ratio
- -------------------------------------- -----
<S> <C>
June, 1998 6.75:1.00
September, 1998 6.75:1.00
</TABLE>
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<PAGE> 84
<TABLE>
<CAPTION>
Fiscal Quarter Ended In, Or Closest To Ratio
- -------------------------------------- -----
<S> <C>
December, 1998 6.50:1.00
March, 1999 6.50:1.00
June, 1999 6.50:1.00
September, 1999 6.50:1.00
December, 1999 6.25:1.00
March, 2000 6.00:1.00
June, 2000 5.75:1.00
September, 2000 5.75:1.00
December, 2000 5.50:1.00
March, 2001 5.50:1.00
June, 2001 5.00:1.00
September, 2001 5.00:1.00
December, 2001 4.75:1.00
March, 2002 4.75:1.00
June, 2002 4.50:1.00
September, 2002 4.50:1.00
December, 2002 4.25:1.00
March, 2003 and thereafter 4.25:1.00
</TABLE>
9.13 LIMITATION ON PREPAYMENTS AND MODIFICATIONS OF INDEBTEDNESS;
MODIFICATIONS OF CERTIFICATE OF INCORPORATION, BY-LAWS AND CERTAIN OTHER
AGREEMENTS; ETC. The Borrower will not, and will not permit any of its
Subsidiaries to, (i) amend or modify, or permit the amendment or modification
of, any provision of the Existing Indebtedness, the Existing Notes, the Senior
Subordinated Notes or, if issued, any Additional Subordinated Debt or of any
agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating thereto except for any amendment
or modifications which are not in any way adverse to the interests of the
Lenders and are effected pursuant to documentation satisfactory in form and
substance to the Agents in their sole judgment, (ii) make (or give any notice in
respect thereof) any voluntary or optional payment or prepayment on or
redemption or acquisition for value of, or any prepayment or redemption as a
result of any asset sale, change of control or similar event of, any Existing
Indebtedness, Existing Notes (other than pursuant to the Existing Notes
Redemption) Senior Subordinated Notes or any Additional Subordinated Debt, (iii)
amend or modify, or permit the amendment or modification of, the
Recapitalization Agreement, any other Transaction Document or the Visionworks
Lease, except for amendments or modifications which are not in any way adverse
to the interests of the Lenders or (iv) amend, modify or change its Certificate
of Incorporation (including, without limitation, by the filing or modification
of any certificate of designation) or By-Laws, or any agreement entered into by
it, with respect to its capital stock (including any Shareholders' Agreement),
or enter into any new agreement with respect to its capital stock, other than
any amendments, modifications or changes pursuant to this clause (iv) or any
such new agreements pursuant to this clause (iv) which do not in any way
adversely affect the interests of the Lenders or such as are otherwise approved
by the Required Lenders, provided that (a) nothing in this Section 9.13 shall
prevent the Borrower or any of its Subsidiaries from amending its Certificate of
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<PAGE> 85
Incorporation or By-Laws to provide indemnification to any officer or director
of the Borrower or any such Subsidiary to the maximum extent permitted by Texas
law and provided that the Borrower may issue such capital stock as is provided
in Section 9.17; (b) the Senior Subordinated Notes may be repaid with the
proceeds of common stock of the Borrower to the extent permitted by the "equity
clawback" provisions of the Senior Subordinated Note Documents so long as (I) no
Default or Event of Default then exists or would exist after giving effect
thereto, (II) the aggregate amount of such proceeds expended in connection with
any such repayment does not exceed the Equity Proceeds Amount at such time and
(III) after giving effect to such repayment the Leverage Ratio (determined on a
PRO FORMA BASIS) would be less than 5.00:1.00 and (c) the Senior Subordinated
Notes may be repaid with the proceeds of the concurrent issuance of Additional
Subordinated Debt so long as (I) no Default or Event of Default then exists or
would exist after giving effect thereto, (II) the aggregate principal amount of
such Additional Subordinated Debt does not exceed the principal amount of Senior
Subordinated Notes refinanced thereby and (III) after giving effect to such
issuance, the Borrower and its Subsidiaries are in compliance with the covenants
contained in Sections 9.10, 9.11 and 9.12 for the Test Period most recently
ended on a PRO FORMA Basis as if such Additional Subordinated Debt had been
issued on the first day of such Test Period.
9.14 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower, (b) make loans or advances to the Borrower or any of the
Borrower's Subsidiaries or (c) transfer any of its properties or assets to the
Borrower or any of the Borrower's Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) this
Agreement and the other Credit Documents, (iii) the Debt Agreements, Senior
Subordinated Note Documents and Additional Subordinated Debt (if any), (iv)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of the Borrower or a Subsidiary of the Borrower, (v)
customary provisions restricting assignment of any licensing agreement entered
into by the Borrower or a Subsidiary of the Borrower in the ordinary course of
business, (vi) any holder of a Permitted Lien may restrict the transfer of the
asset or assets subject thereto and (vii) any Indebtedness incurred after the
Effective Date in accordance with the provisions of this Agreement may contain
restrictions which are not more restrictive than those contained in this
Agreement.
9.15 LIMITATION ON CREATION OF SUBSIDIARIES. The Borrower shall not
establish, create or acquire any additional Subsidiaries without the prior
written consent of the Required Lenders; PROVIDED that the Borrower and its
Wholly-Owned Domestic Subsidiaries (a) may make investments permitted under
Section 9.06 (xvi) without such consent and (b) may establish or create one or
more Wholly-Owned Subsidiaries of the Borrower without such consent so long as,
in the case of Subsidiaries created as provided in this clause (b) and in the
case of any Subsidiary created as contemplated in clause (a) but only in the
event such Subsidiary guarantees, or is required to guaranty, any amounts in
respect of the Senior Subordinated Notes or any Additional Subordinated
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<PAGE> 86
Debt, (i) 100% of the capital stock of any new Domestic Subsidiary (or all
capital stock of any new Foreign Subsidiary which is owned by any Credit Party,
except that not more than 65% of the voting stock of any such Foreign Subsidiary
shall be required to be so pledged) is upon the creation or establishment of any
such new Subsidiary pledged and delivered to the Collateral Agent for the
benefit of the Secured Creditors under the Pledge Agreement and (ii) upon the
creation or establishment of any such new Domestic Subsidiary such Domestic
Subsidiary executes the additional Security Documents and guaranty required to
be executed by it in accordance with Section 8.11.
9.16 MAINTENANCE OF CORPORATE SEPARATENESS, ETC. The Borrower will
not, and will not permit any of its Subsidiaries to, (a) fail to satisfy
customary corporate formalities, including, without limitation, (i) the holding
of regular board of directors' and shareholders' meetings, (ii) the maintenance
of separate corporate offices and records and (iii) the maintenance of separate
bank accounts in its own name; or (b) fail to act solely in its own corporate
name and through its authorized officers and agents.
9.17 LIMITATION ON ISSUANCE OF CAPITAL STOCK. (a) The Borrower will
not, and will not permit any of its Subsidiaries to issue (i) any preferred
stock (except for the issuance of the Borrower Preferred Stock on or prior to
the Initial Borrowing Date pursuant to the Equity Contribution Documents) and
the issuance of Borrower Preferred Stock as a dividend on Borrower Preferred
Stock then outstanding or (ii) any class of redeemable common stock.
(b) The Borrower will not permit any of its Subsidiaries to issue
any capital stock (including by way of sales of treasury stock) or any options
or warrants to purchase, or securities convertible into, capital stock, except
(i) for transfers and replacements of then outstanding shares of capital stock,
(ii) for stock splits, stock dividends and additional issuances which do not
decrease the percentage ownership of the Borrower or any of its Subsidiaries in
any class of the capital stock of such Subsidiary, (iii) in the case of Foreign
Subsidiaries of the Borrower, to qualify directors to the extent required by
applicable law, and (iv) Subsidiaries of the Borrower formed after the Effective
Date pursuant to Section 9.15 may issue capital stock to the Borrower or the
respective Subsidiary of the Borrower which is to own such stock in accordance
with the requirements of Section 9.15. All capital stock issued in accordance
with this Section 9.17(b) shall, to the extent required by the Pledge Agreement,
be delivered to the Collateral Agent for pledge pursuant to the Pledge
Agreement.
SECTION 10. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
10.01 PAYMENTS. The Borrower shall (i) default in the payment when
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more days, in the payment when due of any Unpaid Drawing,
any interest on any Loan or any Fees or any other amounts owing hereunder or
under any other Credit Document; or
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<PAGE> 87
10.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
10.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 8.01(f), 8.10, 8.11 or 9, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 10.01, 10.02 or clause (a) of this Section 10.03) contained in
this Agreement and such default shall continue unremedied for a period of at
least 30 days after notice to the defaulting party by any Agent or the Required
Lenders; or
10.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any Indebtedness (other than the Obligations) 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 a trustee or agent on behalf of such holder or holders) to cause (determined
without regard to whether any notice is required) any such Indebtedness to
become due prior to its stated maturity; or (b) any Indebtedness (other than the
Obligations) of the Borrower or any of its Subsidiaries shall be declared to be
due and payable, or shall be required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof, PROVIDED
that it shall not constitute an Event of Default pursuant to clause (a) or (b)
of this Section 10.04 unless the principal amount of any one issue of such
Indebtedness, or the aggregate amount of all such Indebtedness referred to in
clauses (a) and (b) above, exceeds $5,000,000 at any one time; or
10.05 BANKRUPTCY, ETC. The Borrower or any of its Material
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Material Subsidiaries and the
petition is not controverted within 10 days, or is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of the Borrower or any of its Material Subsidiaries; or the Borrower or
any of its Material Subsidiaries commences any other proceeding under any
reorganization, bankruptcy, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower or any of its
Material Subsidiaries, or there is commenced against the Borrower or any of its
Material Subsidiaries any such proceeding which remains undismissed for a period
of 60 days; or the Borrower or any of its Material Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Borrower or any of its Material
Subsidiaries suffers any appointment of any custodian or the like for it or any
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<PAGE> 88
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or the Borrower or any of its Material Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Material Subsidiaries for the purpose of
effecting any of the foregoing; or
10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, or Section 303 or 304 of ERISA, a Reportable Event shall have
occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of
a Plan subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan shall have had
a trustee appointed to administer such Plan, any Plan is terminated or shall
have been terminated or the subject of termination proceedings under ERISA, any
Plan shall have an Unfunded Current Liability, a contribution required to be
made to a Plan or a Foreign Pension Plan has not been timely made, the Borrower
or any of its Subsidiaries or any ERISA Affiliate has incurred or is likely to
incur a liability to or on account of a Plan under Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971, 4975, 4980 of the Code, or the Borrower or any of its Subsidiaries has
incurred liabilities pursuant to one or more Retiree Welfare Plan or Foreign
Pension Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) which lien, security interest or
liability which arises from such event or events has had, or, in the opinion of
the Required Lenders, could reasonably be expected to have, a Material Adverse
Effect; or
10.07 SECURITY DOCUMENTS. (a) Except in each case to the extent
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be, or shall
be asserted by any Credit Party not to be, in full force and effect, or shall
cease to give the Collateral Agent the Liens, rights, powers and privileges
purported to be created thereby in favor of the Collateral Agent, (including,
without limitation, a perfected security interest in, and Lien on, all of the
Collateral, other than Collateral with an aggregate value of less than or equal
to $1,000,000; PROVIDED that if the Borrower is notified by the Administrative
Agent of a lack of perfection with respect to any of the Collateral, the
Borrower will take such steps as are necessary or advisable to perfect the
Collateral Agent's security interest in such Collateral), or (b) any Credit
Party shall default in the due performance or observance of any term, covenant
or agreement on its part to be performed or observed pursuant to any such
Security Document and such default (except to the extent that same will
adversely affect the continued perfection and priority of the Liens created by
any such Security Document in Collateral with an aggregate value in excess of
$1,000,000, in which case clause (a) of this Section 10.07 will be applicable)
shall continue unremedied for a period of 30 days; or
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<PAGE> 89
10.08 GUARANTIES. Any Guaranty or any provision thereof shall cease
to be in full force and effect as to the relevant Subsidiary Guarantor (unless
such Subsidiary Guarantor is no longer a Subsidiary by virtue of a liquidation,
sale, merger or consolidation permitted by Section 9.02), or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under any
Guaranty or any Subsidiary Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Guaranty; or
10.09 JUDGMENTS. One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving a liability (to the
extent not paid or not fully covered by a reputable and solvent insurance
company) in excess of $5,000,000 for all such judgments and decrees and all such
judgments or decrees either shall be final and non-appealable or shall not have
been vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof; or
10.10 OWNERSHIP. A Change of Control shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Lenders, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of any Agent, any
Lender or the holder of any Note to enforce its claims against any Credit Party,
except as otherwise specifically provided for in this Agreement (PROVIDED that
if an Event of Default specified in Section 10.05 shall occur with respect to
the Borrower, the result which would occur upon the giving of written notice by
the Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon all Commitments of each Lender shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans and any Notes and all other
Obligations owing hereunder and thereunder (including Unpaid Drawings) to be,
whereupon the same shall become, forthwith due and payable without presentiment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent
to enforce), any or all of the Liens and security interests created pursuant to
the Security Documents; (iv) terminate any Letter of Credit which may be
terminated in accordance with its terms; (v) direct the Borrower to pay (and the
Borrower hereby agrees upon receipt of such notice, or upon the occurrence of
any Event of Default specified in Section 10.05, to pay) to the Collateral Agent
at the Payment Office such additional amounts of cash, to be held as security
for the Borrower's reimbursement obligations in respect of Letters of Credit
then outstanding, equal to the aggregate Stated Amount of all Letters of Credit
then outstanding; and (vi) apply any cash collateral as provided in Section
4.02(a).
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<PAGE> 90
SECTION 11. DEFINITIONS AND ACCOUNTING TERMS.
11.01 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"A Acquisition Loan" shall have the meaning provided in 1.01(b).
"Acquisition Commitment Assumption Agreement" shall mean and include
each Acquisition Commitment Assumption Agreement in the form of Exhibit C hereto
executed and delivered in accordance with Section 1.14 hereof.
"Acquisition Commitment Assumption Date" shall mean the date on
which each Additional Acquisition Commitment Assumption Agreement is delivered
to the Administrative Agent pursuant to Section 1.14 of this Agreement.
"Acquisition Facility Expiry Date" shall mean April 24, 2002.
"Acquisition Facility Reduction Date" shall mean April 24, 2001.
"Acquisition Loan" shall have the meaning provided in Section
1.01(b).
"Acquisition Loan Borrowing Date" shall mean one or more dates
occurring after the Effective Date and on or prior to the Acquisition Facility
Expiry Date on which Acquisition Loans are incurred hereunder.
"Acquisition Loan Commitment" shall mean with respect to each
Lender, the amount (if any) set forth opposite such Lender's name on Schedule I
hereto directly below the column entitled "Acquisition Loan Commitment" on the
Effective Date or with respect to a Lender's subsequently assuming its first
such Commitment after the Effective Date pursuant to Section 1.14, on the
applicable Acquisition Commitment Assumption Date, as the same may be (x)
increased from time to time pursuant to Section 1.14, (y) reduced from time to
time pursuant to Sections 3.02, 3.03, 4.02, and/or 10 or (z) adjusted from time
to time as a result of assignments to or from such Lender pursuant to Section
1.13 or 13.04(b).
"Acquisition Note" shall have the meaning provided in Section
1.05(d).
"Additional AL Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(c)(ii).
"Additional Collateral" shall mean all property (whether real or
personal) in which security interests are granted (or have been purported to be
granted) (and continue to be in effect at the time of determination) pursuant to
Section 8.11 or Section 8.12.
"Additional Investors" shall have the meaning provided in Section
5.06(b).
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<PAGE> 91
"Additional Management Fees" shall have the meaning provided in
Section 9.08(v).
"Additional Mortgage" shall mean and include each mortgage, deed of
trust or other security instrument with respect to Real Property executed in
accordance with Section 8.11 or Section 8.12.
"Additional Security Documents" shall mean all mortgages, pledge
agreements, security agreements and other security documents entered into
pursuant to Section 8.11 on Section 8.12 with respect to Additional Collateral.
"Additional Subordinated Debt" shall mean subordinated indebtedness
of the Borrower issued after the Initial Borrowing Date (i) which contains no
financial maintenance covenants or cross-default (as opposed to
cross-acceleration) provisions, (ii) which does not provide for any collateral
security, (iii) all of the terms and conditions of which (including, without
limitation, as to the issuer, interest rates, amortization, maturities,
covenants, defaults, remedies, sinking fund provisions, subordination provisions
and other terms), taken as a whole, are not less favorable to the Borrower or
the Lenders than those contained in the Senior Subordinated Notes, (iv) the
subordination provisions of which are no less favorable to the Lenders than
those contained in the Senior Subordinated Notes and (v) the documentation with
respect to which shall reflect the foregoing and shall otherwise be in form and
substance satisfactory to the Agents.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement, and shall include any successor thereto.
"Affiliate" shall mean, with respect to any Person, any other Person
(including, for purposes of Section 9.08 only, all directors, officers and
partners of such Person) directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person; PROVIDED, HOWEVER,
that for purposes of Section 9.08, an Affiliate of the Borrower shall include
any Person that directly or indirectly votes or has the power to vote more than
10% of any class of the capital stock of the Borrower and any officer or
director of the Borrower or any of its Subsidiaries. A Person shall be deemed to
control another Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" shall have the meaning set forth in the first paragraph of
this Agreement.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed or replaced from time to
time.
"AL Commitment Commission" shall have the meaning provided in
Section 3.01(a)(i).
"AL Percentage" of any Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the aggregate principal
amount of Acquisition Loans of such
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<PAGE> 92
Lender then outstanding and the denominator of which is the aggregate principal
amount of all Acquisition Loans then outstanding.
"AL Scheduled Repayment" shall mean AL Year 3 Scheduled Repayments
and AL Year 4 Scheduled Repayments.
"AL Scheduled Repayment Dates" shall mean Initial AL Scheduled
Repayment Dates and Additional AL Scheduled Repayment Dates.
"AL Year 3 Scheduled Repayment" shall have the meaning provided in
Section 4.02(c)(i).
"AL Year 4 Scheduled Repayment" shall have the meaning provided in
Section 4.02(c)(ii).
"Applicable Commitment Commission Percentage" shall mean, during
each Margin Adjustment Period beginning after the Initial Borrowing Date, the
percentage per annum set forth below opposite the respective Level indicated to
have been achieved on the applicable Start Date for such Margin Adjustment
Period (as shown on the respective officer's certificate delivered pursuant to
Section 8.01(e)) in accordance with the Requirements for the various Levels
specified in the table below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
APPLICABLE
LEVEL REQUIREMENTS COMMIT-
MENT COM-
MISSION
PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
1 The Leverage Ratio was equal to or less than 0.300%
3.25:1.00 on the last day of the Margin
Adjustment Test Period last ended.
- --------------------------------------------------------------------------------
2 The Leverage Ratio was greater than 3.25:1.00 0.375%
and equal to or less than or equal to 3.75:1.00
on the last day of the Margin Adjustment Test
Period last ended last ended.
- --------------------------------------------------------------------------------
3 The Leverage Ratio was greater than 3.75:1.00 0.375%
and equal to or less than 4.25:1.00 on the last
day of the Margin Adjustment Test Period last
ended.
- --------------------------------------------------------------------------------
4 The Leverage Ratio was greater than 4.25:1.00 0.500%
and equal to or less than 4.75:1.00 on the last
day of the Margin Adjustment Test Period last
ended.
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE> 93
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
APPLICABLE
LEVEL REQUIREMENTS COMMIT-
MENT COM-
MISSION
PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
5 Level 5 pricing shall apply at all times when 0.500%
the Requirements set forth above for Levels 1
through 4 are not met.
- --------------------------------------------------------------------------------
</TABLE>
; PROVIDED, HOWEVER, that Level 5 pricing shall also apply (x) from the period
from the Initial Borrowing Date to but excluding the first day of the first
Margin Adjustment Period occurring after the Initial Borrowing Date and (y) at
any time when any Default or Event of Default is in existence.
"Applicable Margin" shall mean during each Margin Adjustment Period
beginning after the Initial Borrowing Date, the percentage per annum set forth
below opposite the respective Level indicated to have been achieved on the
applicable Start Date for such Margin Adjustment Period (as shown on the
respective officer's certificate delivered pursuant to Section 8.01(e)) in
accordance with the Requirements for the various Levels specified in the table
below:
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<PAGE> 94
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
APPLICABLE APPLICABLE
LEVEL REQUIREMENTS MARGIN FOR MARGIN FOR
BASE RATE EURODOLLAR
LOANS LOANS
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
1 The Leverage Ratio was equal to or less than 0.25% 1.25%
3.25:1.00 on the last day of the Margin
Adjustment Test Period last ended
- --------------------------------------------------------------------------------
2 The Leverage Ratio was greater than 3.25:1.00 0.50% 1.50%
and equal to or less than 3.75:1.00 on the last
day of the Margin Adjustment Test Period last
ended
- --------------------------------------------------------------------------------
3 The Leverage Ratio was greater than 3.75:1.00 0.75% 1.75%
and equal to or less than 4.25:1.00 on the last
day of the Margin Adjustment Test Period last
ended
- --------------------------------------------------------------------------------
4 The Leverage Ratio was greater than 4.25:1.00 1.00% 2.00%
and equal to or less than 4.75:1.00 on the last
day of the Margin Adjustment Test Period last
ended
- --------------------------------------------------------------------------------
5 Level 5 pricing shall apply at all times when 1.25% 2.25%
the requirements set forth above for Levels I
through 4 are not met
- --------------------------------------------------------------------------------
</TABLE>
; PROVIDED, HOWEVER, that Level 5 pricing shall also apply (x) from the period
from the Initial Borrowing Date to but excluding the first day of the first
Margin Adjustment Period occurring after the Initial Borrowing Date and (y) at
any time when any Default or Event of Default is in existence.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Assuming Lender" shall have the meaning set forth in Section 1.14.
"Authorized Officer" shall mean any senior officer of the Borrower
or a Subsidiary Borrower designated as such in writing to the Administrative
Agent by the Borrower, in each case to the extent reasonably acceptable to the
Administrative Agent.
"B Acquisition Loan" shall have the meaning provided in Section
1.01(b).
"Bankruptcy Code" shall have the meaning provided in Section 10.05.
"Base Rate" shall mean for any day, a rate of interest per annum
equal to the higher of (i) the Prime Lending Rate for such day and (ii) the
overnight Federal Funds Rate for such day plus 1/2 of 1%.
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"Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each
Loan designated or deemed designated as such by the Borrower at the time of the
incurrence thereof or conversion thereto.
"Borrower" shall have the meaning set forth in the first paragraph
of this Agreement.
"Borrower Common Stock" shall mean the common stock of the Borrower.
"Borrower Preferred Stock" shall mean the Series A Preferred Stock
of the Borrower, par value $.01 per share.
"Borrowing" shall mean the borrowing of one Type of Loan of a single
Tranche from all the Lenders (other than any Lender which has not funded its
share of a Borrowing in accordance with this Agreement) having Commitments of
the respective Tranche (or from the Swingline Lender in the case of Swingline
Loans) on a given date (or resulting from a conversion or conversions on such
date) having in the case of Eurodollar Loans the same Interest Period, PROVIDED
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company in its individual capacity.
"Business Day" shall mean (i) with respect to any borrowing, payment
or rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday)
on which banks generally are open in New York for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States dollars are carried on in the London interbank market and (ii) for all
other purposes, a day (other than a Saturday or Sunday) on which banks generally
are open in New York for the conduct of substantially all of their commercial
lending activities.
"Calculation Period" shall mean the Test Period most recently ended
on prior to the date that any determination is required to be made hereunder on
a PRO FORMA Basis.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken at
the amount thereof accounted for as indebtedness in accordance with such
principles.
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"Cash Equivalents" shall mean, as to any Person, (i) securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) time deposits, certificates of
deposit and bankers' acceptances of any commercial bank having, or which is the
principal banking subsidiary of a bank holding company organized under the laws
of the United States, any State thereof, the District of Columbia or any foreign
jurisdiction rated at least A-1 or the equivalent by Standard & Poor's
Corporation or at least P-1 or the equivalent by Moody's Investors Service,
Inc., with maturities of not more than one year from the date of acquisition by
such Person, (iii) repurchase obligations with a term of not more than 90 days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (ii) above,
(iv) commercial paper issued by any Person incorporated in the United States
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 not more than one year after the date of acquisition by such
Person, (v) investments in money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (i) through (iv)
above and (vi) demand deposit accounts maintained in the ordinary course of
business, in each case to the extent constituting a "Cash Equivalent" under, and
as defined in, the Senior Subordinated Notes and the Additional Subordinated
Debt (if any).
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. Sec. 9601 ET SEQ.
"Change of Control" shall mean (a) prior to the date of an initial
registered public offering by the Borrower of its common stock, the Permitted
Holders shall cease to own on a fully diluted basis in the aggregate at least
51% of the economic and voting interest in the Borrower's capital stock free of
Liens except Liens granted by individuals who are principals or employees of THL
to secure personal financing arrangements so long as the holders of such Liens
do not exercise or attempt to exercise rights in respect of such stock, (b) on
or after the date of an initial registered public offering by the Borrower of
its common stock, (A) any other Person or "group" (within the meaning of Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the
Initial Borrowing Date) shall own more than 20% of the voting and/or economic
interest in the Borrower's capital stock, (B) the Board of Directors of the
Borrower shall cease to consist of a majority of Continuing Directors or (C) the
Permitted Holders shall cease to own on a fully diluted basis in the aggregate
at least 30% of the economic and voting interest in the Borrower's capital stock
free of Liens except Liens granted by individuals who are employees of THL to
secure personal financing arrangements so long as the holders of such Liens do
not exercise or attempt to exercise rights in respect of such stock, or (c) a
"change of control" or similar event shall occur as provided in the Senior
Subordinated Note Indenture or in any document relating to the Additional
Subordinated Debt (if any).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are
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to the Code, as in effect at the date of this Agreement and any subsequent
provisions of the Code, amendatory thereof, supplemental thereto or substituted
therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purported to be
granted) pursuant to any Security Document, including, without limitation, all
Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged
Properties, all cash and Cash Equivalents delivered as collateral pursuant to
Section 4.02 or 10 hereof and all Additional Collateral, if any.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the meaning provided
in Section 5.05.
"Commitment" shall mean any of the commitments of any Lender, I.E.,
whether the Term Loan Commitment, Acquisition Loan Commitment or Revolving Loan
Commitment.
"Commitment Commission" shall mean and include the RL Commitment
Commission and the AL Commitment Commission.
"Common Equity Contribution" shall have the meaning provided in
Section 5.06(b).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of the Borrower and its Subsidiaries at such
time determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
consolidated current liabilities of the Borrower and its Subsidiaries at such
time, but excluding (i) the current portion of any Indebtedness under this
Agreement and any other long-term Indebtedness which would otherwise be included
therein, (ii) accrued but unpaid interest with respect to the Indebtedness
described in clause (i), (iii) the current portion of Indebtedness constituting
Capitalized Lease Obligations and (iv) deferred income taxes.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income of the Company and its Subsidiaries determined as provided in the
definition of Consolidated Net Income, before total interest expense (whether
cash or non-cash) and provisions for taxes based on income, and determined (i)
without giving effect to any extraordinary gains or losses but with giving
effect to gains or losses from sales of assets sold in the ordinary course of
business, (ii) without giving effect to nonrecurring cash and non-cash charges
in an aggregate amount not to exceed $20,000,000 (for all periods combined),
(iii) without giving effect to any non-cash charges deducted in determining
Consolidated Net Income for such period related to the issuance by the Borrower
of stock, warrants or options to management (or any exercise of any such
warrants or options), and (iv) without giving effect to management fees
permitted to be paid to THL and the THL Affiliates pursuant to Section 9.08
PROVIDED that for purposes of any calculation pursuant to Section 9.08(v),
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Consolidated EBIT shall give effect to any Additional Management Fees previously
paid or then contemplated to be paid at the time of such calculation.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation, amortization and,
without duplication, other non-cash expenses that were deducted in determining
Consolidated EBIT for such period, PROVIDED that for purposes of the definition
of the Consolidated Interest Coverage Ratio, the Leverage Ratio and for purposes
of calculating the ratio set forth in Sections 9.02(xii) and 9.08(v) only, (x)
for the Test Period ending June 30, 1998, Consolidated EBITDA shall be the
actual Consolidated EBITDA for the fiscal quarter of the Borrower ending on or
about June 30, 1998 (taken as one accounting period) multiplied by 4, (y) for
the Test Period ending on or about September 30, 1998, Consolidated EBITDA shall
be the actual Consolidated EBITDA for the period of two fiscal quarters ending
on or about June 30, 1998 and September 30, 1998 (taken as one accounting
period) multiplied by 2, and (z) for the Test Period ending on or about December
31, 1998, Consolidated EBITDA shall be the actual Consolidated EBITDA for the
period of three consecutive fiscal quarters ending on or about June 30, 1998,
September 30, 1998 and December 31, 1998 (taken as one accounting period)
multiplied by 4/3.
"Consolidated Indebtedness" shall mean, as at any date of
determination, the aggregate stated balance sheet amount of all Indebtedness
(but including in any event the then outstanding principal amount of all Loans,
and the Senior Subordinated Notes, any Additional Subordinated Debt, all
Capitalized Lease Obligations and all Letter of Credit Outstandings) of the
Borrower and its Subsidiaries but, until October 1, 1998, excluding Indebtedness
represented by the Existing Notes on a consolidated basis as determined in
accordance with GAAP.
"Consolidated Interest Coverage Ratio" shall mean, for any period,
the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated
Interest Expense for such period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Borrower and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Company and its
Subsidiaries, including, without limitation, (i) all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, and (ii) net costs or benefits under Interest Rate
Protection Agreements, but excluding, however, amortization of original issue
discount, amortization of any payments made to obtain any Interest Rate
Protection Agreement, deferred financing costs and any interest expense on
deferred compensation arrangements and any non-cash interest to the extent
included in total interest expense; PROVIDED that for purposes of the definition
of Consolidated Interest Coverage Ratio only, (x) for the Test Period ending on
or about June 30, 1998, Consolidated Interest Expense shall be the actual
Consolidated Interest Expense for the fiscal quarter of the Borrower ending on
or about June 30, 1998 (taken as one accounting period) multiplied by 4, (y) for
the Test Period ending on or about September 30, 1998, Consolidated Interest
Expense shall be the actual Consolidated Interest Expense for the period of two
fiscal quarters ending on or about June 30, 1998 and September 30, 1998 (taken
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as one accounting period) multiplied by 2, and (z) for the Test Period ending on
or about December 31, 1998, Consolidated Interest Expense shall be the actual
Consolidated Interest Expense for the period of three consecutive fiscal
quarters ending on or about June 30, 1998, September 30, 1998 and December 31,
1998 (taken as one accounting period) multiplied by 4/3.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss) after provision for taxes but before any pay-in-kind or non-cash
accumulating dividends on the Borrower Preferred Stock of the Borrower and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period, but excluding any unrealized losses and gains for such period
resulting from mark-to-market of Other Hedging Agreements; PROVIDED, HOWEVER,
that (A) there shall be excluded (without duplication) (i) income (or loss) of
any Person in which any other Person (other than such Person or any of its
consolidated Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or
subject to subclause (iii) below) any of its consolidated Subsidiaries by such
other Person during such period, (ii) the income (or loss) of any Person during
such period accrued prior to the date it becomes a consolidated Subsidiary of
such Person or is merged into or consolidated with such Person or any of its
consolidated Subsidiaries, (iii) the income of any consolidated Subsidiary or
the Borrower to the extent attributable to minority interests held therein by
Persons other than the Borrower and its Wholly-Owned Subsidiaries, and (iv) the
income of any consolidated Subsidiary or the Borrower during such period to the
extent that the declaration or payment of dividends or similar distributions by
that consolidated Subsidiary of such income is not at the tine permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or the Borrower or any of its other Subsidiaries, (B) for purposes of
determining compliance with Section 9.12 and the definitions of Applicable
Commitment Commission Percentage and Applicable Margin there shall be included
(to the extent not already included) in determining Consolidated Net Income for
any period the net income (or loss) of any Person, business, property or asset
acquired during such period pursuant to a Permitted Acquisition and not
subsequently sold or otherwise disposed or by the Borrower or one of its
Subsidiaries during such period (each Person, business, property or asset
acquired and not subsequently disposed of during such period, an "Acquired
Entity or Business') based on the actual net income (or loss) of such Acquired
Entity or Business for the entire period (including the portion thereof
occurring prior to such acquisition) and (C) for purposes of calculating
Consolidated Net Income for any period, Consolidated Net Income shall be
adjusted for factually supportable and identifiable PRO FORMA cost savings
related to cost of goods sold, selling, general administrative or occupancy
expenses for such period, in each case, that are directly attributable to the
acquisition of an Acquired Entity or Business (it being understood that in order
for the Borrower to adjust Consolidated Net Income pursuant to this clause (C),
the Borrower shall deliver to the Agent and the Banks a certificate of the chief
financial officer or other Authorized Officer demonstrating in reasonable detail
such factually supportable and identifiable cost savings).
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly
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or indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) 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 holder of such primary obligation against loss in respect thereof;
PROVIDED, HOWEVER, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and any products warranties extended in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made (or, if the less, the
maximum amount of such primary obligation for which such Person may be liable
pursuant to the terms of the instrument evidencing such Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Continuing Directors" shall mean the (i) directors of the Borrower
on the Initial Borrowing Date and (ii) each other director, if such director's
nomination for election to the Board of Directors of the Borrower is recommended
by a majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof pursuant to the terms of this Agreement, each
Note, each Security Document and the Subsidiaries Guaranty and, after the
execution and delivery thereof, each additional guaranty or security document
executed pursuant to Section 8.11 or Section 8.12.
"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean the Borrower, each Subsidiary Guarantor
and any other Subsidiary which at any time executes and delivers any Credit
Document as required by this Agreement.
"Debt Agreements" shall have the meaning provided in Section 5.05.
"Defeasance Documents" shall mean all documents entered into or
distributed in connection with the Existing Notes Defeasance.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
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"Dividend" shall have the meaning provided in Section 9.07.
"Documents" shall mean the Credit Documents and the Transaction
Documents.
"Dollars" and the sign "$" shall each mean lawful money of the
United States.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
incorporated or organized in the United States or any State or territory
thereof.
"Domestic Wholly-Owned Subsidiary" shall mean each Domestic
Subsidiary which is a Wholly-Owned Subsidiary of the Borrower.
"Drawing" shall have the meaning provided in Section 2.04(b).
"ECCA" shall mean ECCA Merger Corp., a Delaware corporation.
"Effective Date" shall have the meaning provided in Section 13.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution, fund or other Person which regularly purchases interests
in loans or extensions of credit of the types made pursuant to this Agreement,
any other Person which would constitute a "qualified institutional buyer" within
the meaning of Rule 144A under the Securities Act as in effect on the Effective
Date and any other "accredited investor" (as defined in Regulation D of the
Securities Act).
"Employee Benefit Plans" shall have the meaning provided in Section
5.05.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law (hereafter "Claims") or any permit issued to
the Company or any of its Subsidiaries under any such Law, including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief arising from alleged injury or threat of
injury to health, safety or the environment, as a result of a release or
threatened release of Hazardous Materials.
"Environmental Law" shall mean any domestic or foreign, federal,
state, provincial or local statute, law, rule, regulation, ordinance, code or
applicable and binding rule of common law now or hereafter in effect and in each
case as amended, and any applicable judicial or administrative order, consent,
decree or judgment (for purposes of this definition (collectively, "Laws")),
relating to the environment, or Hazardous Materials or health and safety to the
extent such health and safety issues arise under the Occupational Safety and
Health Act of 1970, as amended, or any such similar Laws.
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"Equity Contribution" shall have the meaning provided in Section
5.06(b).
"Equity Contribution Documents" shall mean and include any and all
subscription agreements and similar agreements, the certificate of designation
with respect to the Borrower Preferred Stock and all other documents entered
into or delivered in connection with the Common Equity Contribution and/or the
Preferred Equity Contribution.
"Equity Proceeds Amount" shall mean, on any date in connection with
any transaction, an amount equal to (i) 50% of the aggregate amount of net cash
proceeds (other than Excluded Proceeds) received by the Borrower from the
issuance of its common equity after the Initial Borrowing Date LESS the sum of
the aggregate amount of such proceeds expended on or prior to such date (before
giving effect to the transaction then being considered) (x) to effect Permitted
Acquisitions, (y) to effect Capital Expenditures pursuant to Section 9.09(f)
hereof and (z) to repay Senior Subordinated Notes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Borrower or a Subsidiary of the Borrower would
be deemed to be a "single employer" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
Eurodollar Loan" shall mean each Loan (excluding Swingline Loans)
designated as such by the Borrower at the time of the incurrence thereof or
conversion thereto.
"Eurodollar Rate" shall mean the sum of (i) the quotient of (a) the
rate determined by the Administrative Agent to be the rate at which deposits in
U.S. dollars are offered by BTCo to first-class banks in the London interbank
market at approximately 11 a.m. (London time) two Business Days prior to the
first day of the Interest Period applicable to such Eurodollar Loan, in the
approximate amount of BTCo's relevant Eurodollar Loan and having a maturity
approximately equal to the Interest Period applicable to such Eurodollar Loan
divided by (b) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves required by applicable law)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D). The Eurodollar Rate shall be
rounded to the next higher multiple of 1/100 of 1% if the rate is not such a
multiple.
"Event of Default" shall have the meaning provided in Section 10.
"Excess Cash Flow" shall mean, for any period (i) the sum of (A)
Consolidated Net Income for such period plus (B) the amount of all non-cash
charges (including, without limitation,
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or duplication, depreciation, amortization and non-cash interest expense, but
excluding those non-cash charges that had the effect of decreasing Working
Capital for such period) included in determining Consolidated Net Income for
such period plus (C) the decrease, if any, in Working Capital from the first day
to the last day of such period, minus (ii) the sum (without duplication) of (A)
any non-cash credits (including from sales or other dispositions of assets)
included in determining Consolidated Net Income for such period, (B) gains from
sales or other dispositions of assets (other than sales of inventory in the
ordinary course of business) included in determining Consolidated Net Income for
such period, (C) an amount equal to (1) all Capital Expenditures (other than
Capital Expenditures made pursuant to Section 9.09(c), (d), (e), (f) or (g))
made during such period that are not financed by Indebtedness (including
Capitalized Lease Obligations but excluding Loans hereunder) plus (or minus, if
negative) (2) the Rollover Amount for such period to be carried forward to the
next period less the Rollover Amount (if any) for the preceding period carried
forward to the current period, (D) the amount expended in respect of Permitted
Acquisitions during such period, except to the extent constituting Capital
Expenditures or financed with Indebtedness, (E) the aggregate principal amount
of permanent principal payments of Indebtedness for borrowed money of the
Company and its Subsidiaries (other than (I) repayments of Indebtedness in
connection with the Refinancing or the Existing Notes Redemption or with the
proceeds of the Indebtedness or equity or with the proceeds of asset sales or
Recovery Events and (II) repayments of Loans, PROVIDED that repayments of Loans
shall be deducted in determining Excess Cash Flow if such repayments were (x)
required as a result of a Scheduled Repayment under Section 4.02(b) or (c), or
(y) made as a voluntary prepayment with internally generated funds (but in the
case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to
the extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment)) during such period, (F) non-cash charges added back in a previous
period pursuant to clause (i) (B) above to the extent any such charge has become
a cash item in the current period, (G) the increase, if any, in Working Capital
from the first day to the last day of such period, (H) any cash disbursements
made against noncurrent liabilities (such as transition reserves and deferred
taxes) to the extent not deducted in determining Consolidated Net Income for
such period and (I) the amount of expenditures which are not classified as
Capital Expenditures but which were capitalized and not expensed during such
period.
"Excess Cash Payment Date" shall mean the date occurring 90 days
after the last day of each fiscal year of the Borrower (beginning with its
fiscal year ending closest to December 31, 1998).
"Excess Cash Payment Period" shall mean, with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Excluded Proceeds" shall have the meaning provided in Section
4.02(d).
"Excluded Taxes" shall mean (a) all taxes (including franchise
taxes), levies, imposts, duties, charges, fees, deductions and withholdings
imposed on or measured by net income or capital, in each case, imposed:
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(i) by the United States or any political subdivision or taxing
authority thereof or therein; or
(ii) by any jurisdiction under the laws of which any Agent, Lender or
lending office is organized or controlled, or in which its lending office
is located, or in which its principal office is located or any political
subdivision or taxing authority thereof or therein; or
(b) any withholding tax imposed by reason of the failure of any
Agent or Lender to comply with its obligations, if any, under Section 4.04
hereof.
"Existing Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of October 7, 1993, among the Borrower, Credit
Agricole Indosuez (formerly Banque Indosuez, New York Branch), as Agent and the
lending institutions party thereto, and the documents related thereto in each
case as in effect on the Effective Date.
"Existing Indebtedness" shall have the meaning provided in Section
7.23.
"Existing Notes" shall mean the 12% Senior Notes of the Borrower due
2003.
"Existing Notes Defeasance" shall have the meaning provided in
Section 5.08.
"Existing Notes Indenture" shall mean the Indenture, dated as of
October 7, 1993, between Eye Care Holdings, Inc. and the Existing Notes Trustee
in the form delivered to the Lenders prior to the Initial Borrowing Date, as
such Indenture shall be amended in accordance with the terms hereof and thereof.
"Existing Notes Redemption" shall have the meaning provided in
Section 5.08.
"Existing Notes Trustee" shall mean the United States Trust Company
of New York, or any successor thereto, as Trustee under the Existing Notes
Indenture.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11 a.m. (New York
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion. Any change to the Base Rate due to
a change in the Federal Funds Rate shall be effective as of the opening of
business on the effective date of such change in the Federal Funds Rate.
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"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuating fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America and into
which the Borrower or any of its Subsidiaries makes, or is obliged by law on
behalf of its employees to make payments, which plan, fund or other similar
program provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated under the laws of any jurisdiction other than the United States
of America, any State thereof, the United States Virgin Islands or Puerto Rico.
"Fourth Year AL Facility Amount" shall mean the amount calculated on
the Acquisition Facility Reduction Date which is equal to (I) (x) $50,000,000
LESS (y) the aggregate amount of Acquisition Loan Commitments assumed after the
Effective Date and prior to such Acquisition Facility Reduction Date pursuant to
Section 1.14 hereof DIVIDED BY (II) two.
"GAAP" shall have the meaning provided in Section 13.07(a).
"Governmental Authority" shall mean the government of the United
States of America, any other nation or any political subdivision thereof,
whether state, provincial, or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
"Guaranteed Obligations" shall mean all obligations of the Borrower
(i) to each Lender for the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of the principal and interest on
each Loan made by such Lender and each Note (if any) issued by the Borrower to
such Lender, and Loans made, under the Credit Agreement and all reimbursement
obligations and Unpaid Drawings with respect to Letters of Credit, together with
all the other obligations and liabilities (including, without limitation,
indemnities, fees and interest thereon) of the Borrower to such Lender now
existing or hereafter incurred under, arising out of or in connection with the
Credit Agreement or any other Credit Document and the due performance and
compliance with all the terms, conditions and agreements contained in the Credit
Documents by the Borrower and (ii) to each Lender and each Affiliate of a Lender
which enters into an Interest Rate Protection or Other Hedging Agreement with
the Borrower, the full and prompt payment when due (whether by acceleration or
otherwise) of all obligations of the Borrower owing under any such Interest Rate
Protection or Other Hedging Agreement, whether now in existence or hereafter
arising, and the due performance and compliance with all terms, conditions and
agreements contained therein.
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"Guaranty" shall mean the Subsidiaries Guaranty and any other
guarantee executed and delivered by a Subsidiary of the Borrower pursuant to
Section 8.11 or Section 8.12.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Highest Lawful Rate" shall mean, with respect to any indebtedness
owed to any Lender hereunder or under any other Credit Document, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received by such Lender with respect
to such indebtedness under applicable law.
"Immaterial Subsidiary" shall mean, at any time, any subsidiary,
direct or indirect, that (a) has less than 5% of the consolidated assets of the
Borrower and its consolidated Subsidiaries as of the last day of the most
recently ended Test Period and (b) has less than 5% of the Consolidated EBITDA
of the Borrower and its consolidated Subsidiaries for the Test Period most
recently ended; PROVIDED that if more than one subsidiary is deemed an
Immaterial Subsidiary pursuant to this definition, all Immaterial Subsidiaries
shall be considered to be a single consolidated subsidiary for purposes of
determining whether the conditions specified above are satisfied.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and, without duplication, all
unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of
the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this
definition secured by any Lien on any property owned by such Person, whether or
not such Indebtedness has been assumed by such Person (to the extent of the
value of the respective property), (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, I.E., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person and (vii) all
obligations under any Interest Rate Protection Agreement or Other Hedging
Agreement or under any similar type of agreement; PROVIDED that Indebtedness
shall not include trade payables and accrued expenses, in each case arising in
the ordinary course of business.
"Initial AL Scheduled Repayment Date" shall have the meaning
provided in Section 4.02(c)(i).
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"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the Borrowing of Term Loans hereunder occurs.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement, interest
rate hedging agreement, interest rate floor agreement or other similar agreement
or arrangement.
"Issuing Lender" shall mean the Administrative Agent and any Lender
which at the request of the Borrower and with the consent of the Administrative
Agent (which shall not be unreasonably withheld) agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing Letters of
Credit pursuant to Section 2.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Subsidiaries incurred in the ordinary course of business with
respect to insurance obligations and workers' compensation, surety bonds and
other similar statutory obligations and (ii) such other obligations of the
Borrower or any of its Subsidiaries as are reasonably acceptable to the
Administrative Agent and the Letter of Credit Issuer and otherwise are permitted
to exist pursuant to the terms of this Agreement.
"Leaseholds" of any Person means all the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Lender" shall mean each financial institution listed on Schedule I,
as well as any Person which becomes a "Lender" hereunder pursuant to Section
1.13, 1.14 or 13.04(b).
"Lender Default" shall mean (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.03(c) or (ii) a Lender having notified in writing the Borrower
and/or the Administrative Agent that it does not intend to comply with its
obligations under Section 1.01 or Section 2.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum
(without duplication) of (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the amount of all Unpaid Drawings.
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"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any date of determination, the ratio
of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test
Period last ended.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Acquisition Loan, each
Revolving Loan and each Swingline Loan.
"Majority Lenders" of any Tranche shall mean those Non-Defaulting
Lenders which would constitute the Required Lenders under, and as defined in,
this Agreement if all outstanding Obligations of the other Tranches under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Management Agreements" shall have the meaning provided in Section
5.05.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(e).
"Margin Adjustment Period" shall mean each period which shall
commence on a date occurring after the first date occurring at least six months
following the Initial Borrowing Date on which the financial statements are
delivered pursuant to Section 8.01(b) or (c) for a fiscal quarter or year, as
the case may be, which ends at least six months after the Initial Borrowing Date
and which Margin Adjustment Period shall end on the earlier of (i) the date of
actual delivery of the next financial statements pursuant to Section 8.01(b) or
(c) and (ii) the latest date on which the next financial statements are required
to be delivered pursuant to Section 8.01(b) or (c).
"Margin Adjustment Test Period" shall mean, with respect to each
Margin Adjustment Period, the Test Period ended on the last day of the fiscal
quarter or year, as the case may be, for which financial statements were last
delivered or required to be delivered pursuant to Section 8.01(b) or (c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on
the business, properties, assets, liabilities or condition (financial or
otherwise) of the Borrower (on a stand alone basis) or of the Borrower and its
Subsidiaries taken as a whole (on a consolidated basis).
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"Material Subsidiary" means any Subsidiary of the Borrower, direct
or indirect other than an Immaterial Subsidiary.
"Maturity Date" shall mean, with respect to any Tranche of Loans,
the Term Loan Maturity Date, the RL/AL Maturity Date or the Swingline Expiry
Date, as the case may be.
"Maximum Adjusted Leverage Ratio" shall mean at any time during a
fiscal quarter set forth below, the ratio set forth opposite such fiscal quarter
below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended In Or Closest To Ratio
------------------------------------- -----
<S> <C>
June, 1998 6.25:1.00
September, 1998 6.25:1.00
December, 1998 6.00:1.00
March, 1999 6.00:1.00
June, 1999 6.00:1.00
September, 1999 6.00:1.00
December, 1999 5.75:1.00
March, 2000 5.50:1.00
June, 2000 5.25:1.00
September, 2000 5.25:1.00
December, 2000 5.00:1.00
March, 2001 5.00:1.00
June, 2001 4.50:1.00
September, 2001 4.50:1.00
December, 2001 4.25:1.00
March, 2002 4.25:1.00
June, 2002 4.00:1.00
September, 2002 4.00:1.00
December, 2002 3.75:1.00
March, 2003 and thereafter 3.75:1.00
</TABLE>
"Maximum Swingline Amount" shall mean $5,000,000.
"Merger " shall have the meaning provided in the Recapitalization
Agreement.
"Minimum Borrowing Amount" shall mean (x) with respect to each
Borrowing of Eurodollar Loans, $1,000,000, (y) with respect to each Borrowing of
Base Rate Loans (other than Swingline Loans), $500,000, and (z) with respect to
each Borrowing of Swingline Loans, $50,000.
"Mortgage", after the execution and delivery thereof, shall include
each Additional Mortgage.
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"Mortgage Policies" shall mean mortgage title insurance policies on
each Mortgaged Property issued by title insurers, and having other terms
(including any exceptions and endorsements thereon) reasonably satisfactory to
the Collateral Agent.
"Mortgaged Property", after the execution and delivery of any
Additional Mortgage, shall include the respective additional property subject
thereto.
"Multiemployer Plan" shall mean any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Borrower or any of its
Subsidiaries has any liability or contributes (or has at any time within the
past five years contributed to or had any liability to contribute).
"Net Sale Proceeds" shall mean for any sale of assets, the gross
cash proceeds (including any cash received by way of deferred payment pursuant
to a promissory note, receivable or otherwise, but only as and when received)
received from any sale of assets, net of (i) reasonable transaction costs
(including, without limitation, any underwriting, brokerage or other customary
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith), (ii) payments of
unassumed liabilities relating to the assets sold at the time of, or within 90
days after, the date of such sale, (iii) the amount of such gross cash proceeds
required to be used to repay any Indebtedness (other than Indebtedness of the
Lenders pursuant to this Agreement) which is secured by the respective assets
which were sold, (iv) the estimated marginal increase in income taxes paid, or
which are estimated to be payable by the Borrower's consolidated group with
respect to the fiscal year in which the sale occurs as a result of such sale and
(v) the amount of any reserves established by the Borrower and its Subsidiaries
to fund contingent liabilities reasonably estimated to be payable during the
year that such sale of assets occurred for the next succeeding year that are
directly attributable to such sale of assets; PROVIDED that if any such reserves
are terminated or the amount is reduced, the amount of such eliminated reserves
shall be deemed Net Sale Proceeds on the date so terminated or reduced.
"Non-Defaulting Lender" shall mean and include each Lender other
than a Defaulting Lender.
"Note" shall mean each Term Note, each Acquisition Note, each
Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, NY 10006, Attention: Keith Stimson or
such other office as the Administrative Agent may hereafter designate in writing
as such to the other parties hereto.
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"Obligations" shall mean all amounts owing to any of the Agents, the
Collateral Agent or any Lender pursuant to the terms of this Agreement or any
other Credit Document.
"Offering Circular" shall mean the Offering Circular dated April 17,
1998, and prepared in connection with the Senior Subordinated Notes.
"Other Hedging Agreement" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency or
commodity values.
"Participant" shall have the meaning provided in Section 2.03(a).
"Payment Office" shall mean the office of the Administrative Agent
located at 130 Liberty Street, New York, New York 10006, or such other office as
the Administrative Agent may hereafter designate in writing as such to the other
parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Lender at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Lender at such time and the denominator of which is the Total
Revolving Loan Commitment at such time and, PROVIDED that if the Percentage of
any Lender is to be determined after the Total Revolving Loan Commitment has
been terminated, then the Percentages of the Lenders shall be determined
immediately prior (and without giving effect) to such termination.
"Permitted Acquisitions" shall have the meaning provided in Section
9.02(xi).
"Permitted Encumbrance" shall mean, with respect to any Mortgaged
Property, such exceptions to title as are set forth in the title insurance
policy or title commitment delivered with respect thereto, all of which
exceptions must be acceptable to the Agents in their reasonable judgment, which
acceptance will not be unreasonably withheld.
"Permitted Holders" shall mean (a) THL, THL Affiliates, THL
Investors and those certain members of the management of the Borrower who are
Additional Investors as of the Initial Borrowing Date, and (b) with respect to
the Common Stock so purchased, senior management employees and directors of the
Borrower who acquire common stock of the Borrower within 90 days after the
Initial Borrowing Date for an aggregate purchase price not in excess of
$5,000,000.
"Permitted Liens" shall have the meaning provided in Section 9.03.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, limited liability company, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
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"Plan" shall mean any employee pension benefit plan (within the
meaning of Section 3(2) of ERISA) which is maintained or contributed to by the
Borrower or any of its Subsidiaries, or for which the Borrower or any of its
Subsidiaries has any liability or contingent liability, other than a
Multiemployer Plan.
"Pledge Agreement" shall have the meaning provided in Section 5.12.
"Pledge Agreement Collateral" shall mean all "Collateral" as defined
in each of the Pledge Agreements.
"Pledged Securities" shall mean "Pledged Securities" as defined in
the Pledge Agreement.
"Poth Loan" shall mean the loan to Dr. Daniel Poth in connection
with his previous purchase of the stock of Hour Eyes Doctors of Optometry, P.C.,
as the same may be amended or modified from time to time pursuant to the terms
hereof and thereof, provided that the aggregate principal amount of such loan
shall not exceed $1,000,000.
"Preferred Equity Contribution" shall have the meaning provided in
Section 5.06(b).
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"PRO FORMA Basis" in connection with any calculation of compliance
with any financial covenant or financial term, the calculation thereof after
giving effect on a pro forma basis to (w) if the relevant period to be tested
includes any period occurring prior to the Initial Borrowing Date, the
consummation of the Transaction as if the same had occurred on the first day of
such period, (x) the assumption, incurrence or issuance of any Indebtedness
(other than revolving Indebtedness, except to the extent same is incurred to
finance the Transaction or to refinance other outstanding Indebtedness) after
the first day of the relevant Calculation Period as if such Indebtedness had
been incurred (and the proceeds thereof applied) on the first day of the
relevant Calculation Period and (y) the permanent repayment of any Indebtedness
(other than revolving Indebtedness unless accompanied by a corresponding
commitment reduction) after the first day of the relevant Calculation Period as
if such Indebtedness had been retired, redeemed or repurchased on the first day
of the relevant Calculation Period, with the following rules to apply in
connection therewith:
(i) all Indebtedness (x) (other than revolving Indebtedness, except to the
extent same is incurred to finance the Transaction or to refinance other
outstanding Indebtedness) assumed, incurred or issued after the first day of the
relevant Calculation Period (whether incurred to refinance Indebtedness or
otherwise) shall be deemed to have been incurred or issued (and the
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proceeds thereof applied) on the first day of the respective Calculation period
and remain outstanding through the date of determination and (y) (other than
revolving Indebtedness unless accompanied by a corresponding commitment
reduction) permanently retired or redeemed after the first day of the relevant
Calculation Period shall be deemed to have been retired or redeemed on the first
day of the respective Calculation Period and remain retired through the date of
determination; and
(ii) all Indebtedness assumed to be outstanding pursuant to preceding
clause (i) shall be deemed to have borne interest at (x) the rate applicable
thereto, in the case of fixed rate Indebtedness or (y) the rates which would
have been applicable thereto during the respective period when same was deemed
outstanding, in the case of floating rate Indebtedness (although interest
expense with respect to any Indebtedness for periods while same was actually
outstanding during the respective shall be calculated using the actual rates
applicable thereto while same was actually outstanding).
"Projections" shall have the meaning provided in Section 7.10(e).
"PSD Interest Period" shall mean an Interest Period commencing on or
after the fifth day following the Initial Borrowing Date and prior to the
earlier of (A) the 65th day after the Initial Borrowing Date and (b) the
Syndication Date, each of which Interest Periods must satisfy the requirements
of Section 1.09(v).
"Quarterly Payment Date" shall mean the last Business Day of May,
August, November and February occurring after the Initial Borrowing Date.
"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. Sec. 6901 ET SEQ.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization Agreement" shall mean the Agreement and Plan of
Recapitalization, dated as of March 6, 1998, among the Borrower, ECCA and the
sellers party thereto, as in effect on the Initial Borrowing Date and as the
same may be amended, modified or supplemented from time to time pursuant to the
terms hereof and thereof.
"Recapitalization Documents" shall mean the Recapitalization
Agreement and all other documents entered into or delivered in connection with
the Recapitalization Agreement.
"Recapitalization Transaction" shall mean, collectively, the
transactions to occur on or prior to the Closing (as defined in the
Recapitalization Agreement) pursuant to the Recapitalization Documents,
including without limitation (x) the consummation of (i) the Merger and (ii) the
Equity Contribution, and (y) the payment of all fees and expenses to be paid on
or prior to such Closing or the Initial Borrowing Date and owing in connection
with the foregoing.
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"Recovery Event" shall mean the receipt by the Borrower or any of
its Subsidiaries of any cash insurance proceeds or condemnation award payable
(i) by reason of theft, loss, physical destruction or damage or any other
similar event with respect to any property or assets of the Borrower or any of
its Subsidiaries and (ii) under any policy of insurance maintained by the
Borrower and its Subsidiaries or required to be so maintained under Section
8.03.
"Refinancing" shall mean the refinancing and repayment in full of
all amounts outstanding under, and the termination in full of all commitments
and letters of credit in respect of, the Existing Credit Agreement.
"Register" shall have the meaning provided in Section 13.17.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migration into the environment.
"Replaced Lender" shall have the meaning provided in Section 1.13.
"Replacement Lender" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Lenders" shall mean Non-Defaulting Lenders, the sum of
whose outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term
Loan Commitments), Acquisition Loans, Acquisition Loan Commitments and Revolving
Loan Commitments (or after the termination thereof, outstanding Revolving Loans
and Percentage of Swingline Loans and Letter of Credit Outstandings) represent
an amount greater than 50% of the sum of all outstanding Term Loans (or, if
prior to the Initial Borrowing Date, Term Loan Commitments), Acquisition Loans,
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Acquisition Loan Commitments of Non-Defaulting Lenders and the Total Revolving
Loan Commitment (or after the termination thereof, the sum of the then total
outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate
Percentages of all Non-Defaulting Lenders of the total outstanding Swingline
Loans and Letter of Credit Outstandings at such time).
"Retiree Welfare Plan" shall mean any employee welfare benefit plan
(within the meaning of section 3(1) of ERISA) which provides benefits to retired
or other former employees of the Borrower or any of its Subsidiaries (other than
continuation of group health plan coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or pursuant to applicable state law).
"Returns" shall have the meaning provided in Section 7.22.
"Revolving Loan" shall have the meaning provided in Section 1.01(c).
"Revolving Loan Commitment" shall mean, for each Lender, the amount
set forth opposite such Lender's name in Schedule I hereto directly below the
column entitled "Revolving Loan Commitment," as same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted
from time to time as a result of assignments to or from such Lender pursuant to
Section 1.13 or 13.04(b).
"Revolving Note" shall have the meaning provided in Section 1.05(d).
"RL Commitment Commission" shall have the meaning provided in
Section 3.01(a)(ii).
"RL/AL Maturity Date" shall mean April 24, 2004.
"Rollover Amount" shall have the meaning provided in Section
9.09(b).
"Scheduled Repayments" shall mean TL Scheduled Repayments and AL
Scheduled Repayments.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).
"Secured Creditors" shall have the meaning assigned that term in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Agreement" shall have the meaning provided in Section
5.13.
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"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Document" shall mean the Pledge Agreement, the Security
Agreement and, after the execution and delivery thereof, each Additional
Mortgage and each Additional Security Document.
"Senior Subordinated Note Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Note Indenture and all other
documents executed and delivered with respect to the Senior Subordinated Notes
or Senior Subordinated Note Indenture.
"Senior Subordinated Note Indenture" shall mean the indenture dated
as of April 24, 1998, between the Borrower and the Senior Subordinated Note
Indenture Trustee, as in effect on the Effective Date and as thereafter amended
from time to time in accordance with the requirements thereof and of this
Agreement.
"Senior Subordinated Note Indenture Trustee" shall mean United
States Trust Company of New York or any Successor thereto as trustee under the
Senior Subordinated Note Indenture.
"Senior Subordinated Notes" shall mean the Borrower's 9 1/8% Senior
Subordinated Notes due 2008 and Floating Interest Rate Subordinated Term
Securities due 2008, in each case issued pursuant to the Senior Subordinated
Note Indenture, as such notes may be modified, supplemented or amended from time
to time pursuant to the terms hereof and thereof.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.05.
"Specified EBITDA Amount" shall mean (x) for the fiscal year of the
Borrower ending closest to December 31, 2000, $42,500,000, (y) for the fiscal
year of the Borrower ending closest to December 31, 2001, $47,500,000, and (z)
for the fiscal year of the Borrower ending closest to December 31, 2002,
$52,500,000.
"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Stated Amount" of each Letter of Credit shall, at any time, mean
the maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"Start Date" shall mean, with respect to any Margin Adjustment
Period, the first day of such Margin Adjustment Period.
"Subsidiaries Guaranty" shall have the meaning provided in Section
5.11.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a
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majority of the directors of such corporation (irrespective of whether or not at
the time stock of any class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
owned by such Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Subsidiaries of such Person has more than a 50% equity
interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
designated as a "Subsidiary Guarantor" on Schedule VII hereto or which executes
a guarantee after the Initial Borrowing Date pursuant to Section 8.11 or Section
8.12.
"Swingline Expiry Date" shall mean the date which is two Business
Days prior to the RL/AL Maturity Date.
"Swingline Lender" shall mean BTCo.
"Swingline Loan" shall have the meaning provided in Section 1.01(d).
"Swingline Note" shall have the meaning provided in Section 1.05(d).
"Syndication Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Syndication Date" shall mean that date upon which the
Administrative Agent determines in its sole discretion (and notifies the
Borrower) that the primary syndication (and resultant addition of institutions
as Lenders pursuant to Section 13.04) has been completed.
"Tax Sharing Agreement" shall have the meaning provided in Section
5.05.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, for each Lender, the amount set
forth opposite such Lender's name in Schedule I hereto directly below the column
entitled "Term Loan Commitment," as same may be (x) reduced from time to time
pursuant to Sections 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a
result of assignments to or from such Lender pursuant to Section 1.13 or 13.04.
"Term Loan Maturity Date" shall mean April 24, 2003.
"Term Note" shall have the meaning provided in Section 1.05(d).
"Test Period" shall mean, except as otherwise provided in the
definitions of Consolidated EBITDA and Consolidated Interest Expense, each
period of four consecutive fiscal
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quarters of the Borrower then last ended taken as one accounting period, ended
after the Initial Borrowing Date.
"THL" shall mean Thomas H. Lee Company, a sole proprietorship
located in Massachusetts.
"THL Affiliates" shall mean any Affiliate of THL, PROVIDED that for
purpose of the definition of "Change of Control," the term THL Affiliate shall
not include any portfolio company of either THL or any Affiliate of THL.
"THL Investor" shall mean and include Thomas H. Lee Equity Fund IV,
L.P. or any limited or general partner, stockholder, officer, or employee of
such THL Investor or any officer or employee of THL.
"TL Scheduled Repayment" shall have the meaning provided in Section
4.02(b).
"TL Scheduled Repayment Date" shall have the meaning provided in
Section 4.02(b).
"Total Acquisition Loan Commitment" shall mean, at any time, the sum
of the Acquisition Loan Commitments of each of the Lenders.
"Total Available Revolving Loan Commitment" shall mean, (x) at any
time prior to the Visionworks Lease Expiry Date, an amount (not less than zero)
equal to the Total Revolving Loan Commitment at such time less $10,000,000 and
(y) at any time thereafter, the Total Revolving Loan Commitment.
"Total Commitments" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"Total Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving Loan Commitments of each of the Lenders.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Term Loan Commitments of each of the Lenders.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding plus the then aggregate amount of
Letter of Credit Outstandings.
"Trade Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being four separate Tranches,
I.E., Term Loans, Acquisition Loans, Revolving Loans and Swingline Loans.
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"Transaction" shall mean, collectively, (i) the Recapitalization
Transaction, (ii) the Refinancing, (iii) the Existing Notes Defeasance, (iv) the
incurrence of Loans and the issuance of the Senior Subordinated Notes on the
Initial Borrowing Date and (v) the payment of fees and expenses owing in
connection with the foregoing.
"Transaction Documents" shall mean, collectively, (i) the
Recapitalization Documents, (ii) the documents entered into in connection with
the Refinancing, (iii) the Senior Subordinated Note Documents, (iv) the Equity
Contribution Documents and (v) the Defeasance Documents.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, I.E., whether a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year, determined in accordance
with actuarial assumptions at such time consistent with Statement of Financial
Accounting Standards No. 87, exceeds the market value of the assets allocable
thereto.
"United States" and "U.S." shall each mean the United States of
America.
"Unpaid Drawing" shall have the meaning provided for in Section
2.04(a).
"Unutilized Revolving Loan Commitment" with respect to any Lender,
at any time, shall mean such Lender's Revolving Loan Commitment at such time
less the sum of (i) the aggregate outstanding principal amount of Revolving
Loans made by such Lender and (ii) such Lender's Percentage of the Letter of
Credit Outstandings in respect of Letters of Credit issued under this Agreement.
"Visionworks Lease" shall mean Sublease, dated as of March 29, 1994,
between Eckerd Corporation and Visionworks, Inc., as the same may be amended or
modified pursuant to the terms hereof and thereof.
"Visionworks Lease Expiry Date" shall mean the date on which the
Visionworks Lease expires and the Borrower makes all payments required in
connection with the expiration thereof as provided in such Visionworks Lease.
"Voting Stock" shall mean any class or classes of capital stock of
the Borrower pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the Board of
Directors of the Borrower.
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"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal numbers of shares required to be held by others under
applicable law) is at the time owned by such Person and/or one or more
Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association,
joint venture or other entity in which such Person and/or one or more
Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Working Capital" at any time shall mean Consolidated Current Assets
(but excluding therefrom all cash and Cash Equivalents) less Consolidated
Current Liabilities.
"Year 4 Reference Amount" shall have the meaning provided in Section
4.02(c)(ii).
SECTION 12. THE AGENTS.
12.01 APPOINTMENT. The Lenders hereby designate Bankers Trust
Company as Administrative Agent (for purposes of this Section 12, the term
"Administrative Agent" shall include Bankers Trust Company (and/or any of its
affiliates) in its capacity as Collateral Agent pursuant to the Security
Documents) to act as specified herein and in the other Credit Documents. The
Lenders hereby designate Merrill Lynch Capital Corporation as Syndication Agent
to act as specified herein and in the other Credit Documents. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agents to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the respective Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
Each of the Agents may perform any of its duties hereunder by or through its
respective officers, directors, agents, employees or affiliates.
12.02 NATURE OF DUTIES. No Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. None of the Agents nor any of their respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by the respective such Person's
gross negligence or willful misconduct. The duties of each Agent shall be
mechanical and administrative in nature; no Agent shall have by reason of this
Agreement or any other Credit Document a fiduciary relationship in respect of
any Lender or the holder of any Note; and nothing in this Agreement or any other
Credit Document, expressed or implied, is intended to or shall be so construed
as to impose upon any Agent any obligations in respect of this Agreement or any
other Credit Document except as expressly set forth herein or therein.
12.03 LACK OF RELIANCE ON THE AGENTS. Independently and without
reliance upon any Agent, each Lender and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Borrower
and its Subsidiaries in connection with the making and the continuance of the
Loans
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and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of the Borrower and its Subsidiaries and,
except as expressly provided in this Agreement, no Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. No Agent shall be responsible to any Lender or the
holder of any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of the
Borrower and its Subsidiaries or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Credit Document, or the financial
condition of the Borrower and its Subsidiaries or the existence or possible
existence of any Default or Event of Default.
12.04 CERTAIN RIGHTS OF THE AGENTS. If any Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Lenders; and such Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender or the holder
of any Note shall have any right of action whatsoever against any Agent as a
result of such Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required
Lenders.
12.05 RELIANCE. Each Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and its duties hereunder and thereunder, upon advice of counsel selected by such
Agent.
12.06 INDEMNIFICATION. To the extent any Agent is not reimbursed and
indemnified by the Borrower the Lenders will reimburse and indemnify such Agent,
in proportion to their respective "percentages" as used in determining the
Required Lenders, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by such Agent in performing its respective duties hereunder or under
any other Credit Document, in any way relating to or arising out of this
Agreement or any other Credit Document; PROVIDED that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Agent's gross negligence or willful misconduct.
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12.07 EACH AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to make Loans under this Agreement, each Agent shall have the rights
and powers specified herein for a "Lender" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Lenders," "Required Lenders," "holders of Notes" or any similar terms
shall, unless the context clearly otherwise indicates, include each Agent in its
individual capacity. Each Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if they were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Lenders.
12.08 HOLDERS. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or endorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
12.09 RESIGNATION BY THE AGENTS. (a) The Administrative Agent may
resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 20 Business Days' prior
written notice to the Borrower and the Lenders. Such resignation shall take
effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below. Each other Agent may
resign from the performance of all of its functions and duties hereunder and/or
under the other Credit Documents at any time by giving notice to the Borrower,
the Administrative Agent and the Lenders. Such resignation shall take effect
upon delivery of such notice.
(b) Upon any such notice of resignation by the Administrative Agent,
the Lenders shall appoint a successor Administrative Agent hereunder or
thereunder who shall be a commercial bank or trust company reasonably acceptable
to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 20 Business Day period, the Administrative Agent, with the
consent of the Borrower (which shall not be unreasonably withheld or delayed),
shall then appoint a commercial bank or trust company with capital and surplus
of not less than $500,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Lenders appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 30th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Agents (if one or more so agrees), or
if there are no Agents or no Agent so agrees, then the Required Lenders, shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under
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any other Credit Document until such time, if any, as the Required Lenders
appoint a successor Administrative Agent as provided above.
SECTION 13. MISCELLANEOUS.
13.01 PAYMENT OF EXPENSES, ETC. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of (a) the Agents (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the preparation, execution and delivery of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto relating to the syndication of Commitments hereunder or
requested by any Credit Party, and of the Agents in connection with their
syndication efforts with respect to this Agreement and of (b) the Agents and,
following and during the continuation of an Event of Default, each of the
Lenders in connection with the enforcement of this Agreement and the other
Credit Documents and the documents and instruments referred to herein and
therein (including, without limitation, the reasonable fees and disbursements of
counsel for the Agents and, following and during the continuation of an Event of
Default, for each of the Lenders, PROVIDED that the Borrower shall be obligated
to pay the fees and disbursements of only one counsel to the Agents and the
Lenders pursuant to this clause (i)(b) unless an Agent or Lender notifies the
Borrower that it reasonably believes that its legal position differs from the
other Agents or Lenders or that it may be subject to different claims or
defenses than the other Agents and Lenders, in which case the Borrower will also
pay the reasonable fees and disbursements of counsel of such Agent or Lender;
(iii) pay and hold each of the Lenders harmless from and against any and all
present and future stamp, excise and other similar taxes with respect to the
foregoing matters and save each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Lender) to pay such taxes; and (iv)
indemnify each Agent and each Lender, and each of their respective officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all liabilities, obligations (including removal or
remedial actions), losses, damages, penalties, claims, actions, judgments,
suits, costs, expenses and disbursements (including reasonable attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed against
any of them as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
any Agent or any Lender is a party thereto) related to the entering into and/or
performance of this Agreement or any other Credit Document or the use of any
Letter of Credit or the proceeds of any Loans hereunder or the consummation of
any transactions contemplated in any Document (including, without limitation,
the Transaction), or in any other Credit Document or the exercise of any of
their rights or remedies provided herein or in the other Credit Documents, or
(b) the actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any Real Property owned
or at any time operated by the Borrower or any of its Subsidiaries, the
generation, storage, transportation, handling or disposal of Hazardous Materials
at any location, whether or not owned or operated by the Borrower or any of its
Subsidiaries, the non-compliance of any Real Property with foreign, federal,
state and local laws, regulations, and ordinances (including applicable
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permits thereunder) applicable to any Real Property, or any Environmental Claim
asserted against the Borrower, any of its Subsidiaries or any Real Property
owned or at any time operated by the Borrower or any of its Subsidiaries,
including, in each case, without limitation, the reasonable fees and
disbursements of counsel and other consultants incurred in connection with any
such investigation, litigation or other proceeding (but, also in each case,
excluding any losses, liabilities, claims, damages or expenses to the extent
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Agents or any Lender set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall make the maximum contribution to the payment and satisfaction of each of
the indemnified liabilities which is permissible under applicable law.
13.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Lender is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to the Borrower
or to any other Person, any such notice being hereby expressly waived, to set
off and to appropriate and apply any and all deposits (general or special) and
any other Indebtedness at any time held or owing by such Lender (including,
without limitation, by branches and agencies of such Lender wherever located) to
or for the credit or the account of any Credit Party against and on account of
the Obligations and liabilities of the Borrower or such Credit Party, as
applicable, to such Agent or such Lender under this Agreement or under any of
the other Credit Documents, including, without limitation, all interests in
Obligations purchased by such Lender pursuant to Section 13.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such
Lender shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
13.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, facsimile or cable communication) and mailed, telexed,
telecopied, cabled or delivered: if to the Borrower, at the Borrower's address
specified opposite its signature below; if to any Lender, at its address
specified opposite its name on Schedule II below; and if to the Administrative
Agent, at its Notice Office; or, as to any Credit Party or any of the Agents, at
such other address as shall be designated by such party in a written notice to
the other parties hereto and, as to each Lender, at such other address as shall
be designated by such Lender in a written notice to the Borrower and the Agents.
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied or cabled or sent by overnight courier, be effective when deposited
in the mails or delivered to the overnight courier, prepaid and properly
addressed for delivery on such or the next Business Day, or sent by telex,
telegraph, cable or telecopier, except that notices and communications to the
Agents and the Borrower shall not be effective until received by the Agents or
the Borrower, as the case may be.
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13.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; PROVIDED, HOWEVER, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Lenders and, PROVIDED
FURTHER, that, although any Lender may transfer, assign or grant participations
in its rights hereunder, such Lender shall remain a "Lender" for all purposes
hereunder (and may not transfer or assign all or any portion of its Commitments
hereunder except as provided in Section 13.04(b)) and the transferee, assignee
or participant, as the case may be, shall not constitute a "Lender" hereunder
and, PROVIDED FURTHER, that no Lender shall transfer or grant any participation
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any Loan,
Note or Letter of Credit (unless such Letter of Credit is not extended beyond
the Revolving Loan Maturity Date) in which such participant is participating, or
reduce the rate or extend the time of payment of interest or Fees thereon
(except (x) in connection with a waiver of applicability of any post-default
increase in interest rates and (y) that any amendment or modification to the
financial definitions in this Agreement shall not constitute a reduction in the
rate of interest for purposes of this clause (i)) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Commitment shall
not constitute a change in the terms of such participation, and that an increase
in any Commitment or Loan shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof), (ii) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement or (iii) release all or
substantially all of the Collateral under all of the Security Documents (except
as expressly provided in the Credit Documents) supporting the Loans hereunder in
which such participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any of the
other Credit Documents (the participant's rights against such Lender in respect
of such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Lender had not sold such
participation.
(b) Notwithstanding the foregoing, any Lender (or any Lender
together with one or more other Lenders) may (x) assign all or a portion of its
Revolving Loan Commitment or its Acquisition Loan Commitment (and related
outstanding Obligations hereunder), its outstanding Term Loans (or, if prior to
the Initial Borrowing Date, its Term Loan Commitment) and/or its outstanding
Acquisition Loans to (I) its parent company and/or any affiliate of such Lender
which is at least 50% owned by such Lender or its parent company, (II) to one or
more Lenders or (III) in the case of any Lender that is a fund that invests in
bank loans, any other fund that invests in bank loans and is managed or advised
by the same investment advisor of such Lender or by an Affiliate of such
investment advisor or (y) assign all, or if less than all, a portion equal to at
least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders,
of such Revolving Loan Commitments, Acquisition Loan Commitment and/or
outstanding principal amount of Acquisition Loans and Term Loans (or, if prior
to the Initial Borrowing Date, Term Loan Commitment)
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hereunder to one or more Eligible Transferees (treating any fund that invests in
bank loans and any other fund that invests in bank loans and is managed or
advised by the same investment advisor of such fund or by an Affiliate of such
investment advisor as a single Eligible Transferee), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Assumption Agreement, PROVIDED that, (i) at such time Schedule I shall be
deemed modified to reflect the Commitments (and/or outstanding Loans, as the
case may be) of such new Lender and of the existing Lenders, (ii) upon surrender
of the old Notes, new Notes will be issued, at the Borrower's expense, to such
new Lender and to the assigning Lender upon the request of such new Lender or
assigning Lender to the extent it is retaining any Commitments or Leases, such
new Notes to be in conformity with the requirements of Section 1.05 (with
appropriate modifications) to the extent needed to reflect the revised
Commitments (and/or outstanding Loans, as the case may be), (iii) the consent of
the Administrative Agent and so long as no Default under Section 10.05 and no
Event of Default then exists, the Borrower, shall be required in connection with
any such assignment (each of which consents shall not be unreasonably withheld
or delayed) and (iv) the Administrative Agent shall receive at the time of each
such assignment pursuant to preceding clause (y), from the assigning or assignee
Lender, the payment of a non-refundable assignment fee of $3,500. To the extent
of any assignment pursuant to this Section 13.04(b), the assigning Lender shall
be relieved of its obligations hereunder with respect to its assigned
Commitments. At the time of each assignment pursuant to this Section 13.04(b) to
a Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
Federal income tax purposes, the respective assignee Lender shall provide to the
Borrower and the Agent the appropriate Internal Revenue Service Forms (and, if
applicable, a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To
the extent that an assignment of all or any portion of a Lender's Commitments
and related outstanding Obligations pursuant to Section 1.13 or this Section
13.04(b) would, at the time of such assignment, result in increased costs under
Section 1.10, 1.11 or 4.04 from those being charged by the respective assigning
Lender prior to such assignment, then the Borrower shall not be obligated to pay
such increased costs (although the Borrower shall be obligated to pay any other
increased costs of the type described above resulting from changes after the
date of the respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Lender from such Federal Reserve Bank.
13.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any Agent or any Lender or any holder of any Note in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between the Borrower or any other Credit Party and any Agent
or any Lender or the holder of any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under any other Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights, powers and remedies herein or in any other Credit
Document expressly provided are cumulative and not exclusive of any rights,
powers or remedies which any Agent or any Lender or the holder of any Note would
otherwise have. No notice
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to or demand on any Credit Party in any case shall entitle any Credit Party to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Agent or any Lender or the holder of
any Note to any other or further action in any circumstances without notice or
demand.
13.06 PAYMENTS PRO RATA. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Borrower or any Subsidiary Guarantor in
respect of any Obligations hereunder, it shall distribute such payment to the
Lenders (other than any Lender that has consented in writing to waive its PRO
RATA share of any such payment) PRO RATA based upon their respective shares, if
any, of the Obligations with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees,
of a sum which with respect to the related sum or sums received by other Lenders
is in a greater proportion than the total of such Obligation then owed and due
to such Lender bears to the total of such Obligation then owed and due to all of
the Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Credit Party to
such Lenders in such amount as shall result in a proportional participation by
all the Lenders in such amount; PROVIDED that if all or any portion of such
excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 13.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
13.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
(or the equivalent thereof in any country in which a Foreign Subsidiary is doing
business, as applicable) consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); PROVIDED that, except as otherwise specifically
provided herein, all computations of Excess Cash Flow and all computations
determining compliance with Section 4.02 and Sections 9.09 through 9.12,
inclusive, shall utilize accounting principles and policies in conformity with
those used to prepare the historical financial statements delivered to the
Lenders for the first fiscal year of the Borrower ended January 3, 1998 (with
the foregoing generally accepted accounting principles, subject to the preceding
proviso, herein called "GAAP"), except that such computations shall not, in any
event, (i) give effect to purchase accounting adjustments required or permitted
by APB 16
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(including non-cash write-up and non-cash charges relating to inventory and
fixed assets, in each case arising in connection with the Borrower), and APB 17
(including non-cash charges relating to intangibles and goodwill arising in
connection with the Borrower) and (ii) without duplication to the other
adjustments provided herein, give effect to any charges in connection with
accounting for the Transaction.
(b) All computations of interest, Commitment Commission and Fees
hereunder shall be made on the basis of a year of 360 days (except for Base Rate
Loans where the rate of interest is based on the Prime Lending Rate, in which
case such computation shall be made on the basis of 365 or 366 days, as the case
may be) for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest, Commitment Commission
or Fees are payable.
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE
PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION
SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK
10019 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE
FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH
ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL
CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY AGREES TO DESIGNATE A
NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION SATISFACTORY TO THE AGENT UNDER THIS AGREEMENT. THE
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT
PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
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PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
13.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower and each of the Lenders shall
have signed a counterpart hereof (whether the same or different counterparts)
and shall have delivered the same to the Administrative Agent or, in the case of
the Lenders, shall have given to the Administrative Agent telephonic (confirmed
in writing), written or telex notice (actually received) at such office that the
same has been signed and mailed to it. The Administrative Agent will give the
Borrower and each Lender prompt written notice of the occurrence of the
Effective Date.
13.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
13.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Lenders, PROVIDED that no such change, waiver, discharge or termination
shall, without the consent of each Lender (other than a Defaulting Lender) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the RL/AL Maturity Date, or reduce the
rate or extend the time of payment of interest or Fees thereon (except
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(x) in connection with the waiver of applicability of any post-default increase
in interest rates and (y) that any amendment or modification to the financial
definitions in this Agreement shall not constitute a reduction in the rate of
interest for purposes of this clause (i)), or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) release all or substantially
all of the Collateral (except as expressly provided in the Credit Documents)
under all the Security Documents, (iii) amend, modify or waive any provision of
this Section 13.12, (iv) reduce the percentage specified in the definition of
Required Lenders (it being understood that, (x) without the consent of any
Lender (other than such institution assuming an Acquisition Loan Commitment),
additional extensions of credit resulting from the assumption of additional
Acquisition Loan Commitments as set forth in Section 1.14 as in effect on the
Effective Date and (y) with the consent of the Required Lenders, additional
extensions of credit pursuant to this Agreement, in each such case, may be
included in the determination of the Required Lenders on substantially the same
basis as the extensions of Term Loans, Acquisition Loans, the Acquisition Loan
Commitments and the Revolving Loan Commitments are included on the Effective
Date) or (v) consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement; PROVIDED FURTHER, that no such
change, waiver, discharge or termination shall (u) increase the Commitments of
any Lender over the amount thereof then in effect without the consent of such
Lender (it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or Events of Default or of a mandatory reduction
in the Total Commitment shall not constitute an increase of the Commitment of
any Lender, and that an increase in the available portion of any Commitment of
any Lender shall not constitute an increase in the Commitment of such Lender),
(v) without the consent of the Swingline Lender or, in the case of Letters of
Credit, the respective Issuing Lender, amend, modify or waive any provision of
Section 2 or alter its rights or obligations with respect to Letters of Credit
or Swingline Loans, (w) without the consent of each Agent affected thereby,
amend, modify or waive any provision of Section 12 as same applies to such Agent
or any other provision as same relates to the rights or obligations of such
Agent, (x) without the consent of the Collateral Agent, amend, modify or waive
any provision relating to the rights or obligations of the Collateral Agent, or
(y) without the consent of (I) the Majority Lenders of the respective Tranche,
reduce the amount of, or extend the date of, any Scheduled Repayment applicable
to such Tranche and (II) the Majority Lenders of each Tranche which is being
allocated a lesser prepayment, repayment or commitment reduction as a result of
the actions described below (or without the consent of the Majority Lenders of
each Tranche in the case of an amendment to the definition of Majority Lenders),
amend the definition of Majority Lenders (it being understood that (x) without
the consent of any Lender (other than such institution assuming an Acquisition
Loan Commitment), additional extensions of credit resulting from the assumption
of additional Acquisition Loan Commitments as set forth in Section 1.14 as in
effect on the Effective Date, and (y) with the consent of the Requird Lenders,
additional extensions of credit pursuant to this Agreement, in each such case,
may be included in the determination of the Majority Lenders on substantially
the same basis as the extensions of Term Loans, Acquisition Loans, the
Acquisition Loan Commitments and the Revolving Loan Commit ments are included on
the Effective Date) or alter the required application of any prepayments or
repayments (or commitment reductions), as between the various Tranches, pursuant
to Section 4.01(a) or 4.02 (excluding Sections 4.02(b) and (c)) (although (x)
the Required Lenders may waive, in whole or in part, any such prepayment,
repayment or commitment reduction, so long as the
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application, as amongst the various Tranches, of any such prepayment, repayment
or commitment reduction which is still required to be made is not altered and
(y) if an additional Tranche or Tranches of Term Loans are extended after the
Initial Borrowing Date with the consent of the Required Lenders as required
above, such Tranches may be included on a pro rata basis in the various
prepayments or repayments of Term Loans required pursuant to Sections 4.01(a)
and 4.02 (excluding Sections 4.02(b) and (c) and any section providing Scheduled
Repayments for any new Tranche of Term Loans).
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a),
the consent of the Required Lenders is obtained but the consent of one or more
of such other Lenders whose consent is required is not obtained, then the
Borrower shall have the right, so long as all non-consenting Lenders whose
individual consent is required are treated as described in either clauses (A) or
(B) below, to either (A) replace each such non-consenting Lender or Lenders (or,
at the option of the Borrower if the respective Lender's consent is required
with respect to less than all Tranches of Loans (or related Commitments), to
replace only the respective Tranche or Tranches of Commitments and/or Loans of
the respective non-consenting Lender which gave rise to the need to obtain such
Lender's individual consent) with one or more Replacement Lenders pursuant to
Section 1.13 so long as at the time of such replacement, each such Replacement
Lender consents to the proposed change, waiver, discharge or termination or (B)
terminate such non-consenting Lender's Acquisition Loan Commitment or Revolving
Loan Commitment (if such Lender's consent is required as a result of its
Acquisition Loan Commitment or Revolving Loan Commitment) and/or repay each
outstanding Acquisition Loans or Term Loans of such Lender which gave rise to
the need to obtain such Lender's consent, in accordance with Sections 3.02(b)
and/or 4.01(iv), PROVIDED that, unless the Commitments are terminated, and Loans
repaid, pursuant to preceding clause (B) are immediately replaced in full at
such time through the addition of new Lenders or the increase of the Commitments
and/or outstanding Loans of Existing Lenders (who in each case must specifically
consent thereto), then in the case of any action pursuant to preceding clause
(B) the Required Lenders (determined before giving effect to the proposed
action) shall specifically consent thereto, PROVIDED further, that in any event
the Borrower shall not have the right to replace a Lender, terminate its
Revolving Loan Commitment or Acquisition Loan Commitment or repay its Loans
solely as a result of the exercise of such Lender's rights (and the withholding
of any required consent by such Lender) pursuant to the second proviso to
Section 13.12(a).
13.13 SURVIVAL. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject
to Section 13.15 (to the extent applicable), survive the execution, delivery and
termination of this Agreement and the Notes and the making and repayment of the
Loans.
13.14 DOMICILE OF LOANS. Each Lender may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or Affiliate of such
Lender. Notwithstanding anything to the contrary contained herein, to the extent
that a transfer of Loans pursuant to this Section 13.14 would,
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at the time of such transfer, result in increased costs under Section 1.10,
1.11, 2.05 or 4.04 from those being charged by the respective Lender prior to
such transfer, then the Borrower shall not be obligated to pay such increased
costs (although the Borrower shall be obligated to pay any other increased costs
of the type described above resulting from changes after the date of the
respective transfer).
13.15 LIMITATION ON ADDITIONAL AMOUNTS, ETC. Notwithstanding
anything to the contrary contained in Sections 1.10, 1.11, 2.05 or 4.04 of this
Agreement, unless a Lender gives notice to the Borrower that it is obligated to
pay an amount under any such Section within one year after the later of (x) the
date the Lender incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital or (y) the date such Lender has actual knowledge of its incurrence of
the respective increased costs, Taxes, loss, expense or liability, reductions in
amounts received or receivable or reduction in return on capital, then such
Lender shall only be entitled to be compensated for such amount by the Borrower
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the
extent the costs, Taxes, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital are incurred or
suffered on or after the date which occurs one year prior to such Lender giving
notice to the Borrower that it is obligated to pay the respective amounts
pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This
Section 13.15 shall have no applicability to any Section of this Agreement other
than said Sections 1.10, 1.11, 2.05 and 4.04.
13.16 CONFIDENTIALITY. (a) Subject to the provisions of clause (b)
of this Section 13.16, each Lender agrees that it will use its reasonable
efforts not to disclose without the prior consent of the Borrower (other than to
its employees, auditors, professional advisors or counsel, to affiliates or to
another Lender if the Lender or such Lender's holding or parent company in its
sole discretion determines that any such party should have access to such
information, provided such Persons shall be subject to the provisions of this
Section 13.16 to the same extent as such Lender) any information with respect to
the Borrower or any of its Subsidiaries which is now or in the future furnished
pursuant to this Agreement or any other Credit Document and which is designated
by the Borrower to the Lenders in writing as confidential, PROVIDED that any
Lender may disclose any such information (a) as has become generally available
to the public other than by virtue of a breach of this Section 13.16(a) by the
respective Lender, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Lender or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors or
to the National Association of Insurance Commissioners (to the extent necessary
to receive the benefits of any law or regulation governing such Lender's
investments), (c) as may be required or appropriate in respect to any summons or
subpoena or in connection with any litigation, (d) in order to comply with any
law, order, regulation or ruling applicable to such Lender, (e) to the Agents or
the Collateral Agent, (f) to the National Association of Insurance Commissioners
or any similar organization or any nationally recognized rating agency that
requires access to information about such Lender's investment portfolio in
connection with ratings issued with respect to such Lender, (g) to any
prospective or actual transferee or participant in connection with any
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contemplated assignment, transfer or participation of any of the Notes or
Commitments or any interest therein by such Lender and (h) to any direct or
indirect counterparty with a Lender or its affiliate in a swap agreement with
respect to such Lender's Loans, PROVIDED that in he case of clauses (g) and (h)
such prospective transferee agrees to be bound by the confidentiality provisions
contained in this Section 13.16.
(b) The Borrower hereby acknowledges and agrees that each Lender may
share with any of its affiliates any information related to the Borrower or any
of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its Subsidiaries,
provided such Persons shall be subject to the provisions of this Section 13.16
to the same extent as such Lender).
13.17 REGISTER. The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for purposes of this Section
13.17, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Lenders, the Loans made by each of
the Lenders and each repayment in respect of the principal amount of the Loans
of each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of the Commitments of such
Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Administrative Agent with respect to
ownership of such Commitments and Loans and prior to such recordation all
amounts owing to the transferor with respect to such Commitments and Loans shall
remain owing to the transferor. The registration of assignment or transfer of
all or part of any Commitments and Loans shall be recorded by the Administrative
Agent on the Register only upon the acceptance by the Administrative Agent of a
properly executed and delivered Assignment and Assumption Agreement pursuant to
Section 13.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for acceptance and registration
of assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Lender shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Lender and/or
the new Lender. The Borrower agrees to indemnify the Administrative Agent from
and against any and all losses, claims, damages and liabilities of whatsoever
nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 13.17 except
when caused by the gross negligence or willful misconduct of the Administrative
Agent.
13.18 USURY LAWS. (a) It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
the parties hereto stipulate and agree that none of the terms and provisions
contained in the Notes, this Agreement, or any of the other Credit Documents
shall ever be construed to create a contract to pay to any Lender for the use,
forbearance, or detention of money at a rate in excess of the Highest Lawful
Rate applicable to such Lender, and that for purposes hereof, "interest" shall
include the aggregate of all charges or other consideration which constitute
interest under applicable laws and are contracted for, taken, reserved,
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charged, or received under any of this Agreement, the Notes, or the other Credit
Documents or otherwise in connection with the transactions contemplated by this
Agreement. Further, if the transactions contemplated hereby would be usurious as
to any Lender under laws applicable to it then, in that event, notwithstanding
anything to the contrary in the Notes, this Agreement or in any other Credit
Document or agreement entered into in connection with or as security for the
Notes, it is agreed as follows: the aggregate of all consideration which
constitutes interest under law applicable to each such Lender that is contracted
for, taken, reserved, charged, or received by such Lender under the Notes, this
Agreement, or under any of the other aforesaid Credit Documents or agreements or
otherwise in connection with the Notes shall under no circumstances exceed the
maximum amount allowed by the law applicable to such Lender, and any excess
shall be credited by such Lender on the principal amount of the Indebtedness of
the Borrower owed to such Lender (or, if the principal amount of such
Indebtedness shall have been paid in full, to the extent such interest has been
received by a Lender, it shall be refunded by such Lender to the Borrower). The
provisions of this Section 13.18(a) shall control over all other provisions of
this Agreement, the Notes, and the other Credit Documents which may be in
apparent conflict herewith. The parties further stipulate and agree that,
without limitation on the foregoing, all calculations of the rate or amount of
interest contracted for, taken, reserved, charged or received under any of this
Agreement, the Notes, and the other Credit Documents which are made for the
purpose of determining whether such rate or amount exceed the Highest Lawful
Rate shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocting, and spreading during the period of the full stated term of
the Indebtedness, and if longer and if permitted by applicable law, until
payment in full, all interest at any time so contracted for, taken, reserved,
charged, or received.
(b) If at any time the effective rate of interest any Lender's Notes
would exceed the Highest Lawful Rate applicable to such Lender (taking into
account the interest rate applicable to such Indebtedness pursuant to the other
provisions of this Agreement, plus all additional charges and consideration
which have been contracted for, taken, reserved, charged, or received under this
Agreement, such Lender's Notes and the other Credit Documents, or any of them,
and which additional charges or consideration (the "Additional Charges")
constitute interest with respect to such Indebtedness), the effective interest
rate to apply to such Indebtedness made by a Lender shall be limited to the
Highest Lawful Rate, but any subsequent reductions in the interest rate
applicable to such Indebtedness owed to such Lender shall not reduce the
effective interest rate to apply to such Indebtedness owed to such Lender below
the Highest Lawful Rate applicable to such Lender until the total amount of
interest accrued on such Indebtedness equals the amount of interest which would
have accrued if the Interest Rate from time to time applicable to such
Indebtedness owed to such Lender had at all times been in effect with respect to
such Indebtedness pursuant to the other provisions of this Agreement and if the
Lender had collected all Additional Charges called for under this Agreement, the
Notes, and the other Credit Documents. If at maturity or final payment of such
Lender's Notes the total amount of interest accrued on such Lender's Notes
(including amounts designated as "interest" plus any Additional Charges which
constitute interest with respect to such Lender's Notes, and taking into account
the limitations of the first sentence of this Section 13.18(b)) is less than the
total amount of interest which would have accrued if the interest rate or
interest rates applicable to the Indebtedness from time to time outstanding
under such Lender's Notes had at all
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times been in effect pursuant to the other provisions of this Agreement, then
the respective Borrower agrees, to the fullest extent permitted by the laws
applicable to such Lender, to pay to such Lender an amount equal to the
difference between (i) the lesser of (1) the amount of interest which would have
accrued on such lender's Notes if the Highest Lawful Rate had at all times been
in effect (but excluding, for purposes of calculating such amount of interest,
any Additional Charges which constitute interest with respect to such Lender's
Notes), or (2) the amount of interest which would have accrued on such lender's
Notes if the interest rate or interest rates applicable to the Indebtedness from
time to time outstanding under such Lender's Notes had at all times been in
effect pursuant to the other provisions of this Agreement (including amounts
designated as "interest" plus any Additional Charges which constitute interest
with respect to such lender's Notes) less (ii) the amount of interest actually
accrued on such lender's Notes (including amounts designated as "interest" plus
any Additional Charges which constitute interest with respect to such Lender's
Notes).
13.19 MISCELLANEOUS. The parties hereto acknowledge and agree that
the maximum aggregate amount of the commitments hereunder on the Initial
Borrowing Date and permitted in the future under this Agreement as in effect on
the Initial Borrowing Date equals $190,000,000.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
<PAGE> 137
officers to execute and deliver this Agreement as of the date first above
written.
2
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ADDRESS
3
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11103 West Avenue EYE CARE CENTERS OF
San Antonio, TX 78213 AMERICA, INC.
By: /S/ MARK PEARSON
-------------------------
Title: Chief Financial Officer
4
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5
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6
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7
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SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
REVOLVING LOAN TERM LOAN ACQUISITION LOAN
BANK COMMITMENT COMMITMENT COMMITMENT
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Bankers Trust Company $3,625,000.00 $5,696,428.58 $5,178,571.42
Merrill Lynch Capital Corporation $3,625,000.00 $5,696,428.58 $5,178,571.42
Creditanstalt Corporate Finance, $3,000,000.00 $4,714,285.71 $4,285,714.29
Inc.
Fleet National Bank $3,000,000.00 $4,714,285.71 $4,285,714.29
NationsBank of Texas $3,000,000.00 $4,714,285.71 $4,285,714.29
BankBoston, N.A. $2,250,000.00 $3,535,714.29 $3,214,285.71
The Long-Term Credit Bank of $2,250,000.00 $3,535,714.29 $3,214,285.71
Japan, Limited, New York Branch
Societe Generale $2,250,000.00 $3,535,714.29 $3,214,285.71
Bank of Nova Scotia $2,000,000.00 $3,142,857.14 $2,857,142.86
City National Bank $2,000,000.00 $3,142,857.14 $2,857,142.86
Compagnie Financiere de CIC et $2,000,000.00 $3,142,857.14 $2,857,142.86
de L'Union Europeenne
Credit Lyonnais New York Branch $2,000,000.00 $3,142,857.14 $2,857,142.86
Heller Financial, Inc. $2,000,000.00 $3,142,857.14 $2,857,142.86
Royal Bank of Canada $2,000,000.00 $3,142,857.14 $2,857,142.86
- -----------------------------------------------------------------------------------------------------------------------
TOTALS $35,000,000.00 $55,000,000.00 $50,000,000.00
=======================================================================================================================
</TABLE>
8
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9
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10
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11
<PAGE> 147
SCHEDULE II
BANK ADDRESSES
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Telephone No.: (212) 250-9535
Telecopier No.: (212) 669-1533
Attention: Mr. Keith Stimson
Merrill Lynch Capital Corporation World Financial Center
c/o Merrill Lynch & Co. North Tower
250 Vesey Street
New York, NY 10128
Telephone No.: (212) 449-1000
Telecopier No.: (212) 449-1885
Attention: Mr. Ben Lau
Mr. Sarang R. Gadkari
Creditanstalt Corporate Finance, Inc. Two Ravinia Drive
Suite 1680
Atlanta, GA 30346
Telephone No.: (770) 390-1850
Telecopier No.: (770) 390-1851
Attention: Mr. John Taylor
Fleet National Bank One Federal Street
MS: MA OF DO3C
Boston, MA 02110
Telephone No.: (617) 346-4889
Telecopier No.: (617) 346-4806
Attention: Mr. James Silva
NationsBank of Texas 300 Convent
San Antonio, TX 78205-3701
Telephone No.: (210) 270-5300
Telecopier No.: (210) 270-5569
Attention: Mr. D. Kirk McDonald
12
<PAGE> 148
BankBoston, N.A. 100 Federal Street
MS: 01-08-05
Boston, MA 02110-2016
Telephone No.: (617) 434-8223
Telecopier No.: (617) 434-4929
Attention: Mr. Greg Clark
The Long-Term Credit Bank of 165 Broadway
Japan, Limited, New York Branch 49th Floor
New York, NY 10006
Telephone No.: (212) 335-4523
Telecopier No.: (212) 335-4524
Attention: Akira Iwamoto
Societe Generale 1221 Avenue of the Americas
New York, NY 10020
Telephone No.: (212) 278-6435
Telecopier No.: (212) 278-6178
Attention: Mr. Jose Gutierrez
Bank of Nova Scotia 28 State Street
12th Floor
Boston, MA 02109
Telephone No.: (617) 624-7612
Telecopier No.: (617) 954-2177
Attention: Mr. Steve Foley
City National Bank 400 North Roxbury Drive
Beverly Hills, CA 90210
Telephone No.: (310) 888-6132
Telecopier No.: (310) 888-6549
Attention: Mr. Kim Bingham
Compagnie Financiere de CIC et 520 Madison Avenue
de L'Union Europeenne 37th Floor
New York, NY 10022
Telephone No.: (212) 715-4413
Telecopier No.: (212) 715-4535
Attention: Mr. Sean Mounier
13
<PAGE> 149
Credit Lyonnais New York Branch 1301 Avenue of the Americas
New York, NY 10019-6022
Telephone No.: (212) 261-7000
Telecopier No.: (212) 459-3170
Attention: Mr. Mark Koneval
Heller Financial, Inc. 500 West Monroe Street
Chicago, IL 60661
Telephone No.: (312) 441-7035
Telecopier No.: (312) 441-7357
Attention: Mr. Patrick Hayes
Royal Bank of Canada 600 Wilshire Blvd.
Suite 800
Los Angeles, CA 90017
Telephone No.: (213) 955-5300
Telecopier No.: (213) 955-5350
Attention: Mr. Athar Khan
14
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
SECTION 1. Amount and Terms of Credit.......................................1
1.01 The Commitments...............................................1
1.02 Minimum Amount of Each Borrowing..............................4
1.03 Notice of Borrowing...........................................4
1.04 Disbursement of Funds.........................................5
1.05 Evidence of Debt; Notes.......................................5
1.06 Conversions...................................................7
1.07 Pro Rata Borrowings...........................................8
1.08 Interest......................................................8
1.09 Interest Periods..............................................9
1.10 Increased Costs, Illegality, etc.............................10
1.11 Compensation.................................................12
1.12 Change of Lending Office.....................................13
1.13 Replacement of Lenders.......................................13
1.14 Additional Acquisition Loan Commitments......................14
SECTION 2. Letters of Credit...............................................15
2.01 Letters of Credit............................................15
2.02 Letter of Credit Requests....................................16
2.03 Letter of Credit Participations..............................17
2.04 Agreement to Repay Letter of Credit Drawings.................19
2.05 Increased Costs..............................................20
SECTION 3. Commitment Commission; Fees; Reductions of Commitment...........20
3.01 Fees.........................................................20
3.02 Voluntary Termination of Unutilized Commitments..............21
3.03 Mandatory Reduction of Commitments...........................22
SECTION 4. Prepayments; Payments; Taxes....................................23
4.01 Voluntary Prepayments........................................23
4.02 Mandatory Repayments and Commitment Reductions...............25
4.03 Method and Place of Payment..................................29
4.04 Net Payments; Taxes..........................................29
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
SECTION 5. Conditions Precedent to Loans..................................32
5.01 Execution of Agreement; Notes...............................32
5.02 Fees, etc...................................................32
5.03 Opinions of Counsel.........................................32
5.04 Corporate Documents; Proceedings; etc.......................32
5.05 Employee Benefit Plans; Shareholders' Agreements;
Management Agreements; Collective Bargaining Agreements;
Debt Agreements; Acquisition
Documents; Tax Sharing Agreements..........................33
5.06 Consummation of Recapitalization Transaction................34
5.07 Senior Subordinated Notes...................................35
5.08 Existing Note Defeasance.....................................35
5.09 Refinancing.................................................36
5.10 Indebtedness................................................36
5.11 Subsidiaries Guaranty.......................................36
5.12 Pledge Agreement............................................36
5.13 Security Agreement..........................................37
5.14 Consent Letter..............................................37
5.15 Adverse Change, etc.........................................37
5.16 Litigation..................................................38
5.17 Solvency Opinion; Environmental Analyses; Insurance.........38
5.18 Pro Forma Balance Sheet; Financial Statements; Projections..38
SECTION 6. Conditions Precedent to All Credit Events......................38
6.01 No Default; Representations and Warranties..................38
6.02 Notice of Borrowing; Letter of Credit Request...............39
SECTION 7. Representations, Warranties and Agreements.....................39
7.01 Corporate Status............................................39
7.02 Corporate Power and Authority...............................39
7.03 No Violation................................................40
7.04 Litigation..................................................40
7.05 Use of Proceeds: Margin Regulations.........................40
7.06 Governmental Approvals......................................41
7.07 Investment Company Act......................................41
7.08 Public Utility Holding Company Act..........................41
7.09 True and Complete Disclosure................................41
7.10 Financial Condition, Financial Statements...................42
7.11 Security Interests..........................................43
7.12 Representations and Warranties in Other Documents...........43
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
7.13 Transaction..................................................43
7.14 Compliance with ERISA........................................44
7.15 Capitalization...............................................45
7.16 Subsidiaries.................................................45
7.17 Intellectual Property........................................45
7.18 Compliance with Statutes, etc................................45
7.19 Environmental Matters........................................46
7.20 Properties...................................................46
7.21 Labor Relations..............................................47
7.22 Tax Returns and Payments.....................................47
7.23 Existing Indebtedness........................................47
7.24 Senior Subordinated Notes....................................48
SECTION 8. Affirmative Covenants...........................................48
8.01 Information Covenants........................................48
8.02 Books, Records and Inspections...............................51
8.03 Insurance....................................................52
8.04 Payment of Taxes.............................................52
8.05 Corporate Franchises.........................................53
8.06 Compliance with Statutes, etc................................53
8.07 Compliance with Environmental Laws...........................53
8.08 ERISA........................................................54
8.09 Good Repair..................................................55
8.10 End of Fiscal Years; Fiscal Quarters.........................55
8.11 Additional Security; Further Assurances......................55
8.12 Foreign Subsidiaries Security................................57
8.13 Performance of Obligations...................................58
8.14 Consummation of Transaction..................................58
8.15 Existing Notes Redemption....................................58
SECTION 9. Negative Covenants..............................................58
9.01 Business.....................................................58
9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.......58
9.03 Liens........................................................61
9.04 Indebtedness.................................................63
9.05 Designated Senior Debt.......................................65
9.06 Advances, Investments and Loans..............................65
9.07 Dividends....................................................68
9.08 Transactions with Affiliates.................................69
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
9.09 Capital Expenditures.........................................70
9.10 Consolidated Interest Coverage Ratio.........................71
9.11 Minimum Consolidated EBITDA..................................72
9.12 Maximum Leverage Ratio.......................................72
9.13 Limitation on Prepayments and Modifications of Indebtedness;
Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc....................73
9.14 Limitation on Certain Restrictions on Subsidiaries...........73
9.15 Limitation on Creation of Subsidiaries.......................74
9.16 Maintenance of Corporate Separateness, etc...................74
9.17 Limitation on Issuance of Capital Stock......................74
SECTION 10. Events of Default..............................................75
10.01 Payments....................................................75
10.02 Representations, etc........................................75
10.03 Covenants...................................................75
10.04 Default Under Other Agreements..............................75
10.05 Bankruptcy, etc.............................................76
10.06 ERISA.......................................................76
10.07 Security Documents..........................................77
10.08 Guaranties..................................................77
10.09 Judgments...................................................77
10.10 Ownership...................................................77
SECTION 11. Definitions and Accounting Terms...............................78
11.01 Defined Terms...............................................78
SECTION 12. The Agents.....................................................06
12.01 Appointment.................................................06
12.02 Nature of Duties............................................07
12.03 Lack of Reliance on the Agents..............................07
12.04 Certain Rights of the Agents................................07
12.05 Reliance....................................................08
12.06 Indemnification.............................................08
12.07 Each Agent in its Individual Capacity.......................08
12.08 Holders.....................................................08
12.09 Resignation by the Agents...................................08
SECTION 13. Miscellaneous..................................................09
13.01 Payment of Expenses, etc....................................09
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
13.02 Right of Setoff.............................................110
13.03 Notices.....................................................111
13.04 Benefit of Agreement........................................111
13.05 No Waiver; Remedies Cumulative..............................113
13.06 Payments Pro Rata...........................................113
13.07 Calculations; Computations..................................114
13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL.......................................114
13.09 Counterparts................................................115
13.10 Effectiveness...............................................115
13.11 Headings Descriptive........................................115
13.12 Amendment or Waiver; etc....................................116
13.13 Survival....................................................117
13.14 Domicile of Loans...........................................118
13.15 Limitation on Additional Amounts, etc.......................118
13.16 Confidentiality.............................................118
13.17 Register....................................................119
13.18 Usury Laws..................................................119
13.19 Miscellaneous...............................................121
</TABLE>
<TABLE>
<S> <C>
SCHEDULE I Commitments (sec.sec. 3.02, 4.01, 11.01,
13.04(b))
SCHEDULE II Bank Addresses (sec. 13.03)
SCHEDULE III Real Property (sec.sec. 5.14, 7.11, 7.20)
SCHEDULE IV Existing Liens (sec. 9.03)
SCHEDULE V Existing Indebtedness (sec.sec. 5.10, 7.23,
9.04)
SCHEDULE VI Insurance (sec. 8.03)
SCHEDULE VII Subsidiaries (sec.sec. 7.16)
SCHEDULE VIII Capitalization (sec. 7.15)
SCHEDULE IX Investments (sec. 9.06)
EXHIBIT A Notice of Borrowing (sec. 1.03(a))
EXHIBIT B-1 Term Note (sec. 1.05(d))
EXHIBIT B-2 Acquisition Note (sec. 1.05(d))
EXHIBIT B-3 Revolving Note (sec. 1.05(d))
EXHIBIT B-4 Swingline Note (sec. 1.05(d))
EXHIBIT C Acquisition Commitment Assumption Agreement
(sec. 1.14)
</TABLE>
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<TABLE>
<S> <C>
EXHIBIT D Letter of Credit Request (sec. 2.02(a))
EXHIBIT E Section 4.04(b)(ii) Certificate
(sec. 4.04(b)(ii))
EXHIBIT F Opinion of Hutchins, Wheeler & Dittmar
(sec. 5.03)
EXHIBIT G Officers' Certificate (sec. 5.04(a))
EXHIBIT H Subsidiaries Guaranty (sec. 5.11)
EXHIBIT I Pledge Agreement (sec. 5.12)
EXHIBIT J Security Agreement (sec. 5.13)
EXHIBIT K Assignment and Assumption Agreement
(sec.sec. 1.13, 13.04(b), 13.17)
</TABLE>
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EXHIBIT A
NOTICE OF BORROWING
____, 19__
Bankers Trust Company, as
Administrative Agent for the Lenders
party to the Credit Agreement
referred to below
130 Liberty Street
New York, New York 10006
Attention: Joe Regan
Ladies and Gentlemen:
The undersigned, Eye Care Centers of America, Inc. (the "Borrower"), refers to
the Credit Agreement, dated as of April 23, 1998 (as amended from time to time,
the "Credit Agreement", the terms defined therein being used herein as therein
defined), among Eye Care Centers of America, Inc., various Lenders from time to
time party thereto, Bankers Trust Company, as Administrative Agent for such
Lenders, and Merrill Lynch Capital Corporation, as Syndication Agent, and hereby
gives you notice, irrevocably, pursuant to Section 1.03(a) of the Credit
Agreement, that the undersigned hereby requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section 1.03(a) of the
Credit Agreement:
(i) The Business Day of the Proposed Borrowing is ____________.(1)
(ii) The aggregate principal amount of the Proposed Borrowing is
$_________.
(iii) The Proposed Borrowing is to consist of [Term Loans]
[Acquisition Loans] [Revolving Loans] [Swingline Loans].
(iv) The Loans to be made pursuant to the Proposed Borrowing shall
be initially maintained as [Base Rate Loans] [Eurodollar Loans].
- --------
(1) Shall be a Business Day at least one Business Day in the case of Base Rate
Loans and three Business Days in the case of Eurodollar Loans, in each case,
after the date hereof.
<PAGE> 157
(v) The initial Interest Period for the Proposed Borrowing is
month(s)___.(2)
The undersigned hereby certifies that the following statements are
true and correct on the date hereof, and will be true and correct on the date of
the Proposed Borrowing:
(A) the representations and warranties contained in the Credit
Documents are and will be true and correct in all material respects, both before
and after giving effect to the Proposed Borrowing and to the application of the
proceeds thereof, as though made on such date (it being understood and agreed
that any representation or warranty which by its terms is made as of a specified
date shall be required to be true and correct in all material respects only as
of such specified date); and
(B) no Default or Event of Default has occurred and is continuing,
or would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
EYE CARE CENTERS OF AMERICA, INC.
By
---------------------------------
Name:
Title:
- ----------
(2) To be included for a Proposed Borrowing of Eurodollar Loans.
2
<PAGE> 158
EXHIBIT B-1
TERM NOTE
$5,696,428.58 New York, New York
April 24, 1998
FOR VALUE RECEIVED, EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or
its registered assigns (the "Lender"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Administrative Agent") located at 130 Liberty Street, New York, N.Y.
10006, on the Term Loan Maturity Date (as defined in the Agreement referred to
below) the principal sum of FIVE MILLION SIX HUNDRED NINETY SIX THOUSAND FOUR
HUNDRED TWENTY EIGHT DOLLARS AND FIFTY EIGHT CENTS ($5,696,428.58) or, if less,
the then unpaid principal amount of all Term Loans (as defined in the Agreement)
made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Term Notes referred to in the Credit
Agreement, dated as of April 23, 1998, among Eye Care Centers of America, Inc.,
various lending institutions from time to time party thereto, Bankers Trust
Company, as Administrative Agent, and Merrill Lynch Capital Corporation, as
Syndication Agent (as from time to time in effect, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by the Security Documents (as defined in
the Agreement) and is entitled to the benefits of each Guaranty (as defined in
the Agreement). As provided in the Agreement, this Note is subject to voluntary
prepayment and mandatory repayment prior to the Term Loan Maturity Date, in
whole or in part, as provided in the Agreement and Term Loans may be converted
from one Type (as defined in the Agreement) into another Type to the extent
provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 159
Exhibit B-1
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
EYE CARE CENTERS OF
AMERICA, INC.
By:
--------------------
Title:
<PAGE> 160
EXHIBIT B-2
ACQUISITION NOTE
$5,178,571.42 New York, New York
April 24, 1998
FOR VALUE RECEIVED, EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or
its registered assigns (the "Lender"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Adminsitrative Agent") located at 130 Liberty Street, New York, N.Y.
10006, on the RL/AL Maturity Date (as defined in the Agreement referred to
below) the principal sum of FIVE MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND FIVE
HINDRED SEVENTY ONE DOLLARS AND FORTY TWO CENTS ($5,178,571.42) or, if less, the
then unpaid principal amount of all Acquisition Loans (as defined in the
Agreement) made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Acquisition Notes referred to in the Credit
Agreement, dated as of April 23, 1998, among Eye Care Centers of America, Inc.,
various lending institutions from time to time party thereto, Bankers Trust
Company, as Administrative Agent, and Merrill Lynch Capital Corporation, as
Syndication Agent (as from time to time in effect, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by the Security Documents (as defined in
the Agreement) and is entitled to the benefits of each Guaranty (as defined in
the Agreement). As provided in the Agreement, this Note is subject to voluntary
prepayment and mandatory repayment prior to the RL/AL Maturity Date, in whole or
in part, as provided in the Agreement and Acquisition Loans may be converted
from one Type (as defined in the Agreement) into another Type to the extent
provided in the Agreement.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 161
Exhibit B-2
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
EYE CARE CENTERS OF
AMERICA, INC.
By
Title:
<PAGE> 162
EXHIBIT B-3
REVOLVING NOTE
$3,625,000.00 New York, New York
April 24, 1998
FOR VALUE RECEIVED, EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or
its registered assigns (the "Lender"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Adminsitrative Agent") located at 130 Liberty Street, New York, N.Y.
10006, on the RL/AL Maturity Date (as defined in the Agreement referred to
below) the principal sum of THREE MILLION SIX HUNDRED TWENTY FIVE THOUSAND
DOLLARS ($3,625,000.00) or, if less, the then unpaid principal amount of all
Revolving Loans (as defined in the Agreement) made by the Lender pursuant to the
Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Revolving Notes referred to in the Credit
Agreement, dated as of April 23, 1998, among Eye Care Centers of America, Inc.,
various lending institutions from time to time party thereto, Bankers Trust
Company, as Administrative Agent, and Merrill Lynch Capital Corporation, as
Syndication Agent (as from time to time in effect, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by the Security Documents (as defined in
the Agreement) and is entitled to the benefits of each Guaranty (as defined in
the Agreement). As provided in the Agreement, this Note is subject to voluntary
prepayment and mandatory repayment prior to the RL/AL Maturity Date, in whole or
in part, as provided in the Agreement and Revolving Loans may be converted from
one Type (as defined in the Agreement) into another Type to the extent provided
in the Agreement.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 163
Exhibit B-3
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
EYE CARE CENTERS OF
AMERICA, INC.
By
Title:
<PAGE> 164
EXHIBIT B-4
SWINGLINE NOTE
$5,000,000.00 New York, New York
April 24, 1998
FOR VALUE RECEIVED, EYE CARE CENTERS OF AMERICA, INC., a Texas
corporation (the "Borrower"), hereby promises to pay to BANKERS TRUST COMPANY or
its registered assigns (the "Bank"), in lawful money of the United States of
America in immediately available funds, at the office of Bankers Trust Company
(the "Administrative Agent") located at 130 Liberty Street, New York, N.Y.
10006, on the Swingline Expiry Date (as defined in the Agreement referred to
below) the principal sum of FIVE MILLION DOLLARS ($5,000,000.00) or, if less,
the then unpaid principal amount of all Swingline Loans (as defined in the
Agreement) made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 1.08 of the Agreement.
This Note is the Swingline Note referred to in the Credit Agreement,
dated as of April 23, 1998, among Eye Care Centers of America, Inc., various
Lenders from time to time party thereto, Bankers Trust Company, as
Administrative Agent for such Lender, and Merrill Lynch Capital Corporation, as
Syndication Agent (as from time to time in effect, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by the Security Documents (as defined in
the Agreement) and is entitled to the benefits of each Guaranty (as defined in
the Agreement). This Note is subject to voluntary prepayment and mandatory
prepayment prior to the Swingline Expiry Date, in whole or in part, as provided
in the Agreement.
In case an Event of Default (as defined in the Agreement) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
<PAGE> 165
Exhibit B-4
Page 2
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
EYE CARE CENTERS OF
AMERICA, INC.
By
Title:
<PAGE> 166
EXHIBIT C
FORM OF ACQUISITION COMMITMENT ASSUMPTION AGREEMENT
[Letterhead of Bank]
_____________, 199__
Eye Care Centers of America, Inc.
11103 West Avenue
San Antonio, Texas 78213
RE ACQUISITION LOAN COMMITMENTS
Gentlemen:
Reference is hereby made to the Credit Agreement, dated as of April
23, 1998, among Eye Care Centers of America, Inc., various lending institutions
from time to time party thereto, Bankers Trust Company, as Administrative Agent,
and Merrill Lynch Capital Corporation, as Syndication Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement"). Unless
otherwise defined herein, capitalized terms used herein shall have the
respective meanings set forth in the Credit Agreement.
We hereby commit to provide $____________ of the Total Acquisition
Loan Commitment (our "New Commitment"), on the terms and subject to the
conditions set forth in the Credit Agreement.
[We (i) confirm that we have received a copy of the Credit Agreement
and the other Credit Documents, together with copies of the financial statements
referred to therein and such other documents and information as we have deemed
appropriate to make our own credit analysis and decision to enter into this
Acquisition Commitment Assumption Agreement; (ii) agree that we will,
independently and without reliance upon the Administrative Agent or any other
Lender or Agent and based on such documents and information as we shall deem
appropriate at the time, continue to make our own credit decisions in taking or
not taking action under the Credit Agreement; (iii) appoint and authorize the
Administrative Agent and the Collateral Agent to take such action as agent on
our behalf and to exercise such powers under the Credit Agreement and the other
Credit Documents as are delegated to the Administrative Agent and the Collateral
Agent, as the case may be, by the terms thereof, together with such powers as
are reasonably incidental thereto; [and] (iv) agree that we will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by us as a Lender[; and (v) to the
extent legally entitled to do so, attaches the forms
<PAGE> 167
EXHIBIT C
Page 2
described in Section 13.04(b) of the Credit Agreement.](1) Upon the delivery of
a fully executed original hereof to the Administrative Agent, we shall be a
party to the Credit Agreement and, to the extent provided in this Acquisition
Commitment Assumption Agreement, have the rights and obligations of a Lender
thereunder and under the other Credit Documents.](2)
You may accept this letter by signing the enclosed copies in the
space provided below, and returning one copy of same to us and delivering one
copy of same to the Administrative Agent before the close of business on
____________, 19__. If you do not so accept this letter, our New Commitment
shall be deemed cancelled.
- ----------
(1) Insert bracketed language if the lending institution is organized under the
laws of a jurisdiction outside the United States.
(2) Insert bracketed language if the lending institution is not already a
Lender.
<PAGE> 168
EXHIBIT C
Page 3
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AND MAY BE MODIFIED ONLY IN WRITING.
Very truly yours,
[NAME OF LENDER]
By:
-------------------
Title:
Agreed and Accepted
this____day of_____, 19__:
EYE CARE CENTERS OF AMERICA, INC.
By:
--------------------------------
Title:
Consented to by:
BANKERS TRUST COMPANY,
as Administrative Agent
By:
----------------------------------
Title:
<PAGE> 169
EXHIBIT D
LETTER OF CREDIT REQUEST
No. 1 Dated 2
---- ----
Bankers Trust Company, as Administrative Agent under the Credit Agreement (as
amended, modified or supplemented from time to time, the "Credit
Agreement"), dated as of April 23, 1998, among Eye Care Centers of America,
Inc., various lending institutions from time to time party thereto, Bankers
Trust Company, as Administrative Agent, and Merrill Lynch Capital
Corporation, as Syndication Agent
130 Liberty Street
New York, New York 10006
Attention: Keith Stimson
[Name and Address of applicable Issuing Lender
Attention: ]
--------------------------
Dear Sirs:
We hereby request that [name of proposed Issuing Bank], in its individual
capacity, issue a [Standby] [Trade] Letter of Credit for the account of the
undersigned on (3) (the "Date of Issuance") in the aggregate stated amount of
(4) The requested Letter of Credit shall be denominated in Dollars.
For purposes of this Letter of Credit Request, unless otherwise
defined herein, all capitalized terms used herein which are defined in the
Credit Agreement shall have the respective meaning provided therein.
The beneficiary of the requested Letter of Credit will be (5) , and
such Letter of Credit will be in support of (6) and will have a stated
expiration date of (7) .
- ----------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request.
(3) Date of Issuance which shall be at least five Business Days after the date
of this Letter of Credit Request (or such shorter period as is acceptable
to the respective Issuing Lender).
(4) Aggregate initial stated amount of Letter of Credit.
(5) Insert name and address of beneficiary.
(6) Insert description of L/C Supportable Indebtedness and describe obligation
to which it relates in the case of Standby Letters of Credit and a description
of the sellers and sale of goods or
(continued...)
<PAGE> 170
EXHIBIT D
Page 2
We hereby certify that:
(1) the representations and warranties contained in the Credit
Documents will be true and correct in all material respects on the
Date of Issuance, both before and after giving effect to the
issuance of the Letter of Credit requested hereby (it being
understood and agreed that any representation or warranty which by
its terms is made as of a specified date shall be required to be
true and correct in all material respects only as of such specified
date); and
(2) no Default or Event of Default has occurred and is
continuing nor, after giving effect to the issuance of the Letter of
Credit requested hereby, would such a Default or an Event of Default
occur.
Copies of all relevant documentation with respect to the
supported transaction are attached hereto.
EYE CARE CENTERS OF AMERICA, INC.
By
------------------------
Title:
- ----------
(continued...)
materials which is being supported in the case of Trade Letters of Credit.
(7) Insert last date upon which drafts may be presented which may not be later
than (i) in the case of Trade Letters of Credit, the earlier of (x) the
date which occurs 180 days after the Date of Issuance and (y) the date
which is 30 days prior to the Maturity Date or (ii) in the case of Standby
Letters of Credit, the earlier of (x) the date which occurs 12 months
after the Date of Issuance (although any such Standby Letter of Credit may
be extendible for successive periods of up to 12 months, on terms
acceptable to the Issuing Lender thereof) and (y) the tenth Business Day
prior to the RL/AL Maturity Date.
<PAGE> 171
EXHIBIT E
SECTION 4.04(B)(II) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of April
23, 1998, among Eye Care Centers of America, Inc., various lending institutions
from time to time party thereto, Bankers Trust Company, as Administrative Agent,
and Merrill Lynch Capital Corporation, as Syndication Agent (the "Credit
Agreement"). Pursuant to the provisions of Section 4.04(b)(ii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF BANK]
By:
-------------------
Title:
<PAGE> 172
EXHIBIT F
[HWD Letterhead]
April 24, 1998
Bankers Trust Company, as Administrative Agent
130 Liberty Street
New York, NY 10006
Merrill Lynch Capital Corporation, as Syndication Agent
North Tower
250 Vessey Street
New York, NY 10028
And Each of the Lenders Party to the Credit Agreement
referred to below
Ladies and Gentlemen:
We have acted as special counsel to Eye Care Centers of America, Inc., a
Texas corporation (the "Borrower"), in connection with the negotiation,
execution and delivery of a Credit Agreement, dated as of April 23, 1998 (the
"Credit Agreement"), by and among the Borrower, the Lenders party thereto (the
"Lenders"), Bankers Trust Company, as Administrative Agent, and Merrill Lynch
Capital Corporation, as Syndication Agent, and certain other documents
contemplated by the Credit Agreement. We have also acted as special counsel to
the Subsidiaries of the Borrower identified on SCHEDULE A attached hereto (the
"Subsidiaries"), each of which is identified as a Subsidiary Guarantor under the
Credit Agreement.
The opinions expressed below are furnished to you on and as of the Initial
Borrowing Date pursuant to Section 5.03 of the Credit Agreement. Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Credit Agreement.
In connection with our representation of the Borrower and the Subsidiaries
as described above, we have examined originals, or copies identified to our
satisfaction as being true copies, of the following:
1. The Credit Agreement;
<PAGE> 173
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 2
2. The Notes;
3. The Security Agreement, including the Assignment of Security Interest
in United States Trademark and Patents;
4. The Pledge Agreement;
5. The Subsidiaries Guaranty;
6. The Guaranty, dated as of April 24, 1998, of the Borrower to the
Administrative Agent entered into in connection with the Poth Loan (the "Poth
Guaranty");
7. The Transaction Documents;
8. The certificate or articles of incorporation or similar charter
documents of the Borrower and each of the Subsidiaries, each as amended to date
and certified by the Secretary of State of the state where each such entity is
incorporated;
9. The by-laws of the Borrower and each of the Subsidiaries, each as
amended to date and certified by the respective clerk or secretary of each such
entity;
10. Resolutions of the Directors of the Borrower and each of the
Subsidiaries, in each case certified by the respective secretary or clerk of
each such entity, approving the transactions contemplated by the Credit
Documents to which such entity is a party;
11. Certificates of the Secretary of State of Texas as to the Borrower and
the Secretary of State of the states listed on SCHEDULE A hereto where each of
the respective Subsidiaries is incorporated, in each case regarding the legal
existence and corporate good standing of such entity and dated as of a recent
date; and
12. Copies of financing statements, executed by the Borrower and various
of the Subsidiaries, to be filed in those filing offices listed in SCHEDULE B
attached hereto (the "Filing Offices") pursuant to the Uniform Commercial Code
("UCC") as in effect on the date hereof in the various states listed on SCHEDULE
B in which such Filing Offices are located (the "Applicable States"), in each
case naming the Borrower or one or more of the Subsidiaries as Debtor and
<PAGE> 174
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 3
Collateral Agent as secured party with respect to the Security Agreement
Collateral (as so described, the "Financing Statements").
For purposes of this opinion, (i) the agreements, documents and instruments
referred to in clauses (1) through (6) above are sometimes referred to as the
"Loan Documents", (ii) the Borrower and the Subsidiaries are sometimes referred
to as the "Loan Parties", (iii) the Subsidiaries which are incorporated in the
State of Texas are sometimes referred to in this letter as the "Texas
Subsidiaries", and (iv) the Subsidiaries which are incorporated in states other
than the State of Texas are sometimes referred to in this letter as "Other
Subsidiaries".
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such agreements and instruments, corporate
records, certificates of public officials and of officers of the Loan Parties,
and such other documents and records and such matters of law as we have deemed
necessary as a basis for the opinions set forth below. As to questions of fact
material to such opinions, we have relied, without independent verification,
upon certificates of public officials and of officers of the Loan Parties,
copies of which have been delivered to you, and the factual accuracy and
completeness of all the representations and warranties made by the parties to
the Loan Documents and the other documents executed by Borrower and the
Subsidiaries in connection with the transactions contemplated by the Loan
Documents. The opinion expressed in paragraph 1 below as to the valid existence
and corporate good standing of each of the Other Subsidiaries is as of the date
of the certificates relating to such entities referred to in clause (11) above
and is based solely on such certificates.
As used in this opinion and unless otherwise specified herein, the phrases
"to our knowledge," "known to us" and the like refer to the actual present
knowledge of lawyers currently in this firm who have performed substantive legal
services on behalf of Borrower and the Subsidiaries in connection with the
transactions referred to herein, without any independent investigation or file
or docket review.
For purposes of this opinion, we have assumed, with your permission and
without independent verification, (a) the genuineness of all signatures (except
for signatures of executing officers of the Loan Parties), (b) the legal
capacity of all natural persons who have signed documents examined by us, and
(c) the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies.
<PAGE> 175
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 4
We are members of the Bar of The Commonwealth of Massachusetts and, except
to the extent specifically set forth hereinbelow, we express no opinion as to
the laws of any jurisdiction other than the federal laws of the United States of
America and the laws of The Commonwealth of Massachusetts. With respect to our
opinions set forth in paragraphs 1 and 2 below as to the general corporate power
and authority of each Other Subsidiary and the due authorization by such Other
Subsidiary of the execution, delivery and performance of the Loan Documents to
which it is a party by all requisite corporate action, such opinions are based
solely upon our examination of the text of the respective business corporation
act or statute in effect in the state where such Other Subsidiary is
incorporated, as listed in SCHEDULE C attached hereto (individually, a
"Corporation Statute" and collectively, the "Corporation Statutes"), together
with our examination of the charter documents, bylaws and corporate resolutions
recited in clauses (8), (9) and (10) above. Also, our opinions set forth in
paragraphs 4(ii), 5 and 12 are based on our examination of all or certain of the
Corporation Statutes, to the extent stated in such opinion paragraphs or
relevant to the subject matter thereof. With respect to our opinions set forth
in paragraphs 10 and 11 below as they relate to the perfection of security
interests in the Pledged Securities as held by the Collateral Agent in the State
of New York and in any Security Agreement Collateral located in the Applicable
States, such opinions are based solely upon our review of a compilation of the
UCC as in effect in each such jurisdiction as set forth in the UNIFORM LAWS
ANNOTATED, West Publishing Co. (as supplemented, 1997), and not upon any special
expertise in or independent review of the laws of such jurisdictions.
We call to your attention that the Loan Documents provide that they are to
be governed by and construed in accordance with the laws of the State of New
York, as to which we have no knowledge, have made no independent investigation
and express no opinion. Accordingly, our opinion set forth in paragraph 3 below
is based on the assumption, with your consent and without verification, that the
laws of the State of New York applicable to the Loan Documents are the same as
the laws of The Commonwealth of Massachusetts in all respects.
Each of you is also receiving additional opinions from local or special
counsel with respect to the transactions contemplated by the Credit Agreement,
as follows:
(i) the opinion of the firm of Cox & Smith, Incorporated, of San
Antonio, Texas, with respect to (a) the valid existence and
corporate good standing of the Borrower and the Texas Subsidiaries,
(b) the requisite corporate power and authority of the Borrower and
the Texas Subsidiaries to own and operate their respective
properties and enter into and perform their respective obligations
under
<PAGE> 176
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 5
the Loan Documents to which they are a party, (c) the due corporate
authorization by the Borrower and the Texas Subsidiaries of the
execution, delivery and performance of the Loan Documents, (d) the
enforceability in Texas of the choice of law provision of the Credit
Agreement, as such provision relates to usury matters, (e) the
absence of any violation of Texas law or of the charter or By-laws
of the Borrower and the Texas Subsidiaries as a result of the
execution, delivery and performance by the Borrower and the Texas
Subsidiaries of the Credit Documents, (f) the consummation of the
Merger in accordance with Texas law, and (g) the perfection under
the UCC as in effect in the State of Texas of the security interest
created by the Security Agreement in such portion of the Security
Agreement Collateral as may be located in, or require filing in,
Texas; and
(ii) the opinion of the firm of Weingarten, Schurgin, Gagnebin & Hayes,
L.L.P., of Boston, Massachusetts, with respect to the perfection of
a security interest on behalf of the Collateral Agent in patents and
trademarks held by the Borrower and the Subsidiaries by appropriate
filings in the U.S. Patent and Trademark Office.
We express no opinion as to the matters addressed by the special or local
opinions identified hereinabove, and we have relied upon such opinions where
relevant for the purposes of expressing the opinions set forth in this letter.
Based upon the foregoing and in reliance thereon and subject to the
assumptions, limitations, qualifications and exceptions set forth below, we are
of the opinion that:
1. Each Other Subsidiary is a corporation validly existing and in
corporate good standing under the laws of its jurisdiction of incorporation.
Each Other Subsidiary has all requisite corporate power and authority to own and
operate its properties and to carry on its business in which to our knowledge it
is presently engaged or proposed to be engaged, and to enter into and perform
its obligations under each Loan Document to which it is a party.
2. The execution and delivery by each Other Subsidiary and the performance
by each Other Subsidiary of its obligations under each Loan Document to which it
is a party have been duly authorized by all requisite corporate action by each
such Other Subsidiary.
3. Each Loan Document to which each Loan Party is a party has been duly
executed and delivered by such Loan Party and each such Loan Document
constitutes the valid and
<PAGE> 177
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 6
binding obligation of such Loan Party, enforceable against such Loan Party in
accordance with its terms.
4. The execution and delivery by each Loan Party and the performance by
each Loan Party of its obligations under each Loan Document to which it is a
party and the consummation of the transactions pursuant thereto do not (i)
violate the charter documents or By-laws of the Other Subsidiaries, (ii) violate
any federal or Massachusetts law, statute, rule or regulation or any provision
of the Corporation Statute to which it is subject or, to our knowledge, any
order of any court or governmental agency specifically naming or otherwise
binding upon any Loan Party, or (iii) violate or constitute a breach or default
under any term or provision of the Existing Notes Indenture or, to our
knowledge, any other mortgage, indenture, contract or agreement to which any
Loan Party is a party or, to our knowledge, result in the creation or imposition
of any Lien upon any of the properties or assets of any Loan Party, other than
pursuant to the Security Documents.
5. No governmental consents, approvals, authorizations, registrations,
declarations or filings (other than such of the foregoing as (a) have been
obtained or completed prior to the closing of the transactions contemplated by
the Loan Documents or (b) are filings required to perfect security interests
pursuant to the Security Documents) are required by any Loan Party in connection
with the execution, delivery and performance by any Loan Party of the Loan
Documents or in order to make the Loan Documents the valid, binding and
enforceable obligations of each Loan Party which is a party thereto.
6. The making of the Loans and the application of the proceeds thereof by
Borrower, as provided in the Credit Agreement, do not violate Regulation G (12
CFR Part 207), Regulation T (12 CFR Part 220), Regulation U (12 CFR Part 221) or
Regulation X (12 CFR Part 224) of the Board of Governors of the Federal Reserve
System.
7. No Loan Party is (a) an "investment company" or a company "controlled"
by an "investment company," as such terms are defined in the Investment Company
Act of 1940, as amended, (b) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or an "affiliate" of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Act of 1935, or (c) subject to regulation under the Federal
Power Act or the Interstate Commerce Act.
<PAGE> 178
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 7
8. The subordination provisions set forth in the Senior Subordinated Note
Indenture are enforceable against the Borrower, the Subsidiaries and the holders
of the Subordinated Notes in accordance with such Senior Subordinated Note
Indenture. All Obligations and Guaranteed Obligations under the Loan Documents
and all "Guaranteed Obligations" (as defined in the Poth Guaranty), to the
extent that each of them constitute payment obligations, are within the
definition of "Senior Indebtedness", "Guarantor Senior Indebtedness" and
"Designated Senior Indebtedness", as the case may be, included in such
subordinated provisions.
9. To our knowledge, based solely upon a review of (i) those corporate
stock records and minute books of the Subsidiaries which were made available to
us, (ii) certain originals or copies of stock certificates previously issued by
the Subsidiaries and remaining outstanding or previously cancelled, as the case
may be, and (iii) corporate transactional documents relating to the original
acquisition by the Borrower or any of its Subsidiaries of the capital stock of
any Subsidiary, and an inquiry of appropriate officers of the Borrower and the
Subsidiaries, ANNEX A to the Pledge Agreement correctly sets forth the direct
and indirect ownership interests of record of the Borrower and each of the
Subsidiaries, as the case may be, in and to each class of capital stock of each
of the Subsidiaries as of the Initial Borrowing Date.
10. Assuming the delivery to and the continuing possession by the
Collateral Agent in the State of New York of the Pledged Securities with
appropriate executed stock powers or note endorsements, (i) the security
interest created in favor of the Collateral Agent under the Pledge Agreement
constitutes a valid and enforceable perfected security interest in such Pledged
Securities under the UCC as in effect in the State of New York, and (ii) no
filings or recordings are required in order to perfect such security interest in
the Pledged Securities. Assuming that neither the Collateral Agent nor any
Lender has notice of any adverse claim as to the Pledged Securities, the
Collateral Agent will hold the aforesaid security interest free of any adverse
claims.
11. The Security Agreement creates in favor of the Collateral Agent a
valid and enforceable security interest in those items and types of Security
Agreement Collateral in which a security interest may be created under Article 9
of the UCC. The Financing Statements have been duly executed and delivered by
each Loan Party named therein, and, as to the Other Subsidiaries, such execution
and delivery have been duly authorized by all requisite corporate action. Upon
the due filing of the Financing Statements duly executed by Borrower and the
Subsidiaries in the respective Filing Offices as specified in SCHEDULE B
attached hereto, such security interest will be perfected under the UCC as in
effect in each of the Applicable States in
<PAGE> 179
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 8
that portion of the Security Agreement Collateral in which a security interest
is perfected by the filing of financing statements under the UCC as in effect in
such Applicable State.
12. The Recapitalization Transaction, the Refinancing and the issuance of
the Senior Subordinated Notes have each been consummated in accordance with the
terms of the respective Transaction Documents applicable thereto. The
Recapitalization Transaction has been consummated in accordance with the
Delaware General Corporate Law, to the extent the same is applicable thereto.
13. The Existing Notes Defeasance has been consummated in accordance with
the Existing Notes Indenture.
14. There are to our knowledge no actions, suits, or proceedings pending
or overtly threatened against any Loan Party (i) with respect to any aspect of
the Transaction or seeking to enjoin or prevent the consummation of any aspect
of the Transaction, or (ii) with respect to any Indebtedness for borrowed money
known to us of the Borrower or any of its Subsidiaries.
The opinions contained herein are subject to the following conditions and
qualifications:
(A) We have not been requested to render, and with your permission we do
not express, an opinion as to the application of any fraudulent conveyance,
fraudulent transfer, fraudulent obligation or similar laws.
(B) We express no opinion as to any provision of the Loan Agreement to the
extent it provides that the Lender may set off and apply any deposits at any
time held, or any other indebtedness at any time owing, by such Lender or
participant to or for the account of any Loan Party.
(C) Our opinions in paragraphs 2, 10 and 11 above, with respect to the
validity, binding effect and enforceability of the agreements or provisions
thereof referred to in such paragraphs, are subject to the following: (i)
bankruptcy, insolvency, reorganization, moratorium, receivership and other laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights, (ii) the effect of general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, whether considered in a proceeding in equity or at law, and to the
discretion of the court before which any such proceeding may be
<PAGE> 180
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 9
brought, (iii) public policy considerations or court decisions which may limit
the rights of any party to obtain certain remedies and to indemnification,
including indemnification for tortious or criminal acts or violations of law,
and (iv) our assumptions that the parties to the Loan Documents other than the
Loan Parties have each duly authorized, executed and delivered such Loan
Documents and all other relevant documents and instruments, and that each of the
parties to the Loan Documents other than the Loan Parties has all requisite
power and authority to enter into and perform its respective obligations in
connection with the transactions described in the Loan Documents to which it is
a party.
(D) Our opinions set forth in paragraphs 10 and 11 above are limited to
Articles 8 and 9 of the UCC as in effect in the Applicable States. Accordingly,
those opinion paragraphs do not address (i) laws of any Applicable State, other
than Articles 8 and/or 9, as the case may be, of the UCC, (ii) collateral of a
type not subject to Articles 8 and/or 9, as the case may be, of the UCC, and
(iii) under ss.9-103 of the UCC, what law governs perfection of the security
interests granted in the Security Agreement Collateral covered by this opinion
letter.
(E) Our opinion in paragraph 4 as to compliance with statutes, rules and
regulations (other than the Corporation Statutes) is limited to those that, in
our experience, are normally applicable to transactions of the type contemplated
by the Loan Documents.
The opinions set forth in this letter are limited to the specific issues
addressed herein and to statutes, regulations, rules, decisions, decrees and
facts existing on the date hereof. In rendering such opinions, we disclaim any
obligation to advise any party to whom this opinion is addressed of any change
in any of these sources of law or of any subsequent legal or factual
developments which might affect any matters addressed or opinions set forth
herein.
This opinion is being furnished only to the addressees of this letter
and is solely for their benefit and the benefit of their assignees and
participants under the Credit Agreement in
<PAGE> 181
Bankers Trust Coompany, as Administrative Agent
Merrill Lynch Capital Corporation, as Syndication Agent
And Each Of the Lenders Party to the Credit Agreenmet
refered to below
April 24, 1998
Page 10
connection with the transactions being undertaken thereunder. This opinion may
not be relied upon for any other purpose, or relied upon by any other person,
firm or corporation, for any purpose, without our prior written consent.
Very truly yours,
/s/ Hutchins, Wheeler & Dittmar
Hutchins, Wheeler & Dittmar
A Professional Corporation
<PAGE> 182
SCHEDULE A TO HUTCHINS, WHEELER & DITTMAR OPINION
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION
NAME OF INCORPORATION
---- ----------------
<S> <C>
Eye Care Holdings, Inc. Delaware
Enclave Advancement Group,Inc. Texas
ECCA Managed Vision Care, Inc. Texas
Visionworks Holdings, Inc. Florida
Visionworks, Inc. Florida
Visionworks Properties, Inc. Florida
Visionary Retail Management, Inc. Delaware
Visionary Properties, Inc. Delaware
Visionary MSO, Inc. Delaware
The Samit Group, Inc. Delaware
Hour Eyes, Inc. Maryland
Skylab Optical, Inc. Virgina
Metropolitan Vision Services, Inc. Virgina
</TABLE>
<PAGE> 183
SCHEDULE B TO HUTCHINS, WHEELER & DITTMAR OPINION
A. Listing of Applicable States
Alabama
Arizona
District of Columbia
Florida
Idaho
Iowa
Kansas
Louisiana
Maryland
Missippi
Missouri
Nebraska
New York
New Mexico
North Carolina
Ohio
Oklahoma
Oregon
South Carolina
Ohio
Oklahoma
Oregon
South Carolina
Tennessee
Virginia
Washington
<PAGE> 184
SCHEDULE B TO HUTCHINS, WHEELER & DITTMAR OPINION
B. Listing of Filling Offices
SEE ATTACHED CHART.
<PAGE> 185
Eye Care Centers of America
UCC-1 FILING CHART
1104031-0060
Secured Party:
Bankers Trust Company,
<TABLE>
<CAPTION>
=====================================================================================================================
State FILED WITH: DEBTOR NAME:
=====================================================================================================================
<S> <C> <C>
VIRGINIA State Corporation Commission Eye Care Centers Of America, Inc.
The Samit Group, Inc.
Hour Eyes, Inc.
Skylab Optical, Inc.
Metropolitan Vision Services, Inc.
DEBTOR ADDRESS FOR VIRGINIA FILINGS:
5568 General Washington Drive
Alexandria, Va 22312
- ---------------------------------------------------------------------------------------------------------------------
LOUISIANA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Bossier County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Calcasieu County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Caddo County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
<PAGE> 186
<TABLE>
=====================================================================================================================
<S> <C> <C>
Jefferson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lafayette County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Ouachita County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
East Baton Rouge County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Orleans County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Saint Tammany County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Rapides County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
OKLAHOMA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Cleveland County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Oklahoma County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Tulsa County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
FLORIDA Secretary Of State Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Escambia County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Bay County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Okaloosa County Eye Care Centers Of America, Inc.
Visionworks, Inc.
=====================================================================================================================
</TABLE>
2
<PAGE> 187
<TABLE>
=====================================================================================================================
<S> <C> <C>
Pinellas County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Sarasota County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Palm Beach County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Orange County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Seminole County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Broward County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Polk County Eye Care Centers Of America, Inc.
Visionworks, Inc.
=====================================================================================================================
</TABLE>
3
<PAGE> 188
<TABLE>
=====================================================================================================================
<S> <C> <C>
Pasco County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Dade County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Duval County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Clay County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Leon County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lee County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Collier County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
4
<PAGE> 189
<TABLE>
=====================================================================================================================
<S> <C> <C>
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Hillsborough County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Brevard County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Volusia County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Monroe County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
ALABAMA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Houston County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Mobile County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Morgan County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
NEVADA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Clark County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
IDAHO Secretary Of State Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
5
<PAGE> 190
<TABLE>
=====================================================================================================================
<S> <C> <C>
Ada County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Twin Falls County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Kootenai County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
NEW MEXICO Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Dona Ana County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Bernalillo County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Santa Fe County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
ARIZONA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Coconino County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Maricopa County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
KANSAS Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Sedgwick County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Johnson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA Secretary Of State Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Mecklenburg County Eye Care Centers Of America, Inc.
Visionworks, Inc.
=====================================================================================================================
</TABLE>
6
<PAGE> 191
<TABLE>
=====================================================================================================================
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Guilford County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Forsyth County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Wake County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
New Hanover County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Henderson County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Rowan County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Buncombe County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA Secretary Of State Eye Care Centers Of America, Inc.
Visionworks, Inc.
=====================================================================================================================
</TABLE>
7
<PAGE> 192
<TABLE>
=====================================================================================================================
<S> <C> <C>
Greenville County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Richland County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Spartanburg County Eye Care Centers Of America, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
NEBRASKA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Douglas County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
IOWA Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Pottawattamie County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
MISSOURI Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Jackson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Buchanan County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
TENNESSEE Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Williamson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Davidson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Shelby County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
8
<PAGE> 193
<TABLE>
=====================================================================================================================
<S> <C> <C>
MISSISSIPPI Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Madison County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Hinds County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Forrest County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
OHIO Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Cuyahoga County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lake County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Summit County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lorain County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
OREGON Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Linn County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Jackson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Multnomah County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lane County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Marion County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Washington County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
MARYLAND Secretary Of State Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
-9-
<PAGE> 194
<TABLE>
=====================================================================================================================
<S> <C> <C>
Visionary Retail Management, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Montgomery County Eye Care Centers Of America, Inc.
Visionary Retail Management, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Anne Arundel County Eye Care Centers Of America, Inc.
Visionary Retail Management, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Prince Geo County Eye Care Centers Of America, Inc.
Visionary Retail Management, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Charles County Eye Care Centers Of America, Inc.
Visionary Retail Management, Inc.
Visionworks, Inc.
- ---------------------------------------------------------------------------------------------------------------------
TEXAS Secretary Of State Eye Care Centers Of America, Inc.
Eye Care Holdings, Inc.
Enclave Advancement Group, Inc.
Ecca Managed Vision Care, Inc.
Visionworks Holdings, Inc.
=====================================================================================================================
</TABLE>
-10-
<PAGE> 195
<TABLE>
=====================================================================================================================
<S> <C> <C>
Visionworks, Inc.
Visionworks Properties, Inc.
Visionary Retail Management, Inc.
Visionary Properties, Inc.
Visionary Mso, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Collin County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Dallas County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Ector County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Midland County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Tarrant County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Harris County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Bexar County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Cameron County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Victoria County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Hidalgo County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Denton County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Wichita County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Mclennon County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
-11-
<PAGE> 196
<TABLE>
=====================================================================================================================
<S> <C> <C>
Smith County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Lubbock County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Gregg County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Tom Green County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Travis County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Webb County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Galveston County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Jefferson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Brazoria County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Potter County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Williamson County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Fort Bend County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Nueces County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Bell County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Brazos County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Taylor County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
-12-
<PAGE> 197
<TABLE>
=====================================================================================================================
<S> <C> <C>
WASHINGTON Recorder Of The Deeds Of The Eye Care Centers Of America, Inc.
D.C. District Visionary Retail Management, Inc.
- ---------------------------------------------------------------------------------------------------------------------
WASHINGTON Secretary Of State Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Spokane County Eye Care Centers Of America, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Clarke County Eye Care Centers Of America, Inc.
=====================================================================================================================
</TABLE>
-13-
<PAGE> 198
SCHEDULE C TO HUTCHINS, WHEELER & DITTMAR OPINION
LISTING OF CORPORATION STATUTES
<TABLE>
<CAPTION>
Name Of Jurisdiction Of Incorporation Title Of Corporation Statute
- ------------------------------------- ----------------------------
<S> <C>
Delaware Delaware Corporation Law Annotated tit 8.
chapter 1 sec.sec. 101-330.
Florida Florida General Corporation Act
sec.sec. 607.001-607.414
Maryland Maryland General Corporation Law sec.sec. 1-
101-3-709
Virginia Virginia Stock Corporation Act sec.sec. 13.1-
601-13.1-780
</TABLE>
<PAGE> 199
EXHIBIT G
FORM OF OFFICER'S CERTIFICATE
[NAME OF CREDIT PARTY]
Officers' Certificate
I, the undersigned, [Chairman of the Board/President/Vice
President/Treasurer] of [NAME OF CREDIT PARTY], a corporation organized and
existing under the laws of the State of ___________ (the "Company"), do hereby
certify, as such officer and not individually, that:
1. This Certificate is furnished pursuant to Section 5.04 of the
Credit Agreement, dated as of April 23, 1998, among Eye Care Centers of America,
Inc., various lending institutions from time to time party thereto, Bankers
Trust Company, as Administrative Agent, and Merrill Lynch Capital Corporation,
as Syndication Agent (such Credit Agreement, as in effect on the date of this
Certificate, being herein called the "Credit Agreement"). Unless otherwise
defined herein, capitalized terms used in this Certificate shall have the
meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers of the
Company, each holds the office of the Company set forth opposite his name and
has held such office since __________, 19__.(1) The signature written opposite
the name and title of each such officer is his correct signature.
<TABLE>
<CAPTION>
Name(2) Office Signature
<S> <C> <C>
--------------- ------------- ---------------
--------------- ------------- ---------------
--------------- ------------- ---------------
--------------- ------------- ---------------
</TABLE>
3. Attached hereto as Exhibit A is a certified copy of the
Certificate of Incorporation of the Company as filed in the Office of the
Secretary of State of the State of
- ----------
(1) Insert a date prior to the time of any corporate action relating to the
Credit Agreement or any other Credit Document.
(2) Include name, office and signature of each officer who will sign any Credit
Document, including the officer who will sign the certification at the end of
this Certificate.
<PAGE> 200
EXHIBIT G
__________ on ___________, 19__, together with all amendments thereto adopted
through the date hereof.
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws of the Company which were duly adopted, are in full force and effect on
the date hereof, and have been in effect since _____________, 19__.
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions which were duly adopted on __________, 19__ [by unanimous written
consent of the Board of Directors of the Company] [by a meeting of the Board of
Directors of the Company at which a quorum was present and acting throughout],
and said resolutions have not been rescinded, amended or modified. Except as
attached hereto as Exhibit C, no resolutions have been adopted by the Board of
Directors of the Company which deal with the execution, delivery or performance
of any of the Credit Documents or any other Documents to which the Company is
party.
[6. On the date hereof, all of the conditions in Sections 5.02,
5.05, 5.06, 5.07, 5.08, 5.09, 5,10, 5.16, 5.17 and 6.01 of the Credit Agreement
have been satisfied.]
7. Attached hereto as Exhibit D is a list of all Recapitalization
Documents, true and correct copies of which have been provided to the Agents.
8. Attached hereto as Exhibit E is a list of all Refinancing
Documents, true and correct copies of which have been provided to the Agents.
9. Attached hereto as Exhibit F is a list of all Employee Benefit
Plans of the Company and its Subsidiaries and the other documents referred to in
Section 5.05(i), true and correct copies of which have been provided to the
Agents.
10. Attached hereto as Exhibit G is a list of all Collective
Bargaining Agreements of the Company and its Subsidiaries, true and correct
copies of which have been provided to the Agents.
11. Attached hereto as Exhibit H is a list of all Debt Agreements of
the Company and its Subsidiaries, true and correct copies of which have been
provided to the Agents.
12. Attached hereto as Exhibit I is a list of all Shareholders'
Agreements of the Company and its Subsidiaries, true and correct copies of which
have been provided to the Agents.
13. Attached hereto as Exhibit J is a list of all Management
Agreements of the Company and its Subsidiaries, true and correct copies of which
have been provided to the Agents.
-2-
<PAGE> 201
EXHIBIT G
14. Attached hereto as Exhibit K is a list of all Tax Allocation
Agreements of the Company and its Subsidiaries, true and correct copies of which
have been provided to the Agent.
15. Attached hereto as Exhibit L is a list of all documents related
to the Visisonworks Lease of the Company and its subsidiaries, true and correct
copies of which have been provided to the Agents.
16. Attached hereto as Exhibit M is a list of all Documents, true
and correct copies of which have been provided to the Agents.
17. Attached hereto as Exhibit N is a list of all Subordinated Notes
Documents, true and correct copies of which have been provided to the
Agents.(3)
[7.][18.] On the date hereof, the representations and warranties
contained in the Credit Agreement and in the other Credit Documents to which the
Company is a party are true and correct in all material respects, both before
and after giving effect to each Credit Event to occur on the date hereof and the
application of the proceeds thereof (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
[7.][19.] On the date hereof, no Default or Event of Default has
occurred and is continuing under any Credit Document to which the Company is a
party or would result from the Credit Events to occur on the date hereof or from
the application of the proceeds thereof.
[8.][20.] There is no proceeding for the dissolution or liquidation
of the Company or, to the knowledge of the Company, threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
__________, 1998.
[NAME OF CREDIT PARTY]
By:
-------------------------
Name:
Title:
- ----------
(3) Insert bracketed items 6 through 17 in the Certificate delivered by the
Borrower only.
-3-
<PAGE> 202
EXHIBIT G
[NAME OF CREDIT PARTY]
I, the undersigned, [Secretary/Assistant Secretary] of the Company, do hereby
certify, as such officer and not individually, that:
1. [Name of Person making above certifications] is the duly elected
and qualified [Chairman of the Board/President/Vice President/Treasurer] of the
Company and the signature above is his genuine signature.
2. The certifications made by [name of Person making above
certifications] in Items 2, 3, 4, 5 and [8][20] above are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of
________, 1998.
--------------------------------------
Name:
Title:
-4-
<PAGE> 203
[CONFORMED AS EXECUTED]
EXHIBIT H
SUBSIDIARIES GUARANTY
GUARANTY, dated as of April 24, 1998 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each, a "Guarantor" and, together with any other entity that
becomes a party hereto pursuant to Section 25 hereof, the "Guarantors"), to
BANKERS TRUST COMPANY, as Collateral Agent, for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, terms used
herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, Eye Care Centers of America, Inc. (the "Borrower"), various
lending institutions party thereto from time to time (the "Lenders"), Bankers
Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), and Merrill Lynch Capital
Corporation, as Syndication Agent have entered into a Credit Agreement, dated as
of April 23, 1998 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the making of Loans to the Borrower and the
issuance of, and participation in, Letters of Credit for the account of the
Borrower, all as contem plated therein (the Lenders, the Administrative Agent,
the Syndication Agent are herein called the "Bank Creditors");
WHEREAS, Bankers Trust Company, in its individual capacity (together
with its successors, participants and assigns, the "Poth Creditors"), has made a
loan in an aggregate principal amount of $1,000,000 to Dr. Daniel Poth (the
"Poth Loan") pursuant to a Note, dated April 24, 1998 (the "Poth Note") which
Poth Loan and all obligations relating thereto have been guaranteed by the
Borrower pursuant to that certain Guaranty, dated as of April 24, 1998, executed
by the Borrower (the "Poth Guaranty");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Lenders or any affiliate thereof (each such Lender or
affiliate, even if the respective Lender subsequently ceases to be a Lender
under the Credit Agreement for any reason, together with such Lender's or
affiliate's successors and assigns, if any, collectively, the "Other Creditors,"
and together with the Bank Creditors and the Poth Creditors, the "Secured
Creditors");
WHEREAS, each Guarantor is a Subsidiary of the Borrower;
<PAGE> 204
WHEREAS, it is a condition to the making of Loans and issuing of
Letters of Credit under the Credit Agreement and to the making of the Poth Loan
that each Guarantor shall have executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence of
the Poth Loan and of Loans to the Borrower and the issuance of Letters of Credit
pursuant to the Credit Agreement and the entering into of Interest Rate
Protection Agreements or Other Hedging Agreements and, accordingly, desires to
execute this Guaranty in order to (i) satisfy the condi tions described in the
preceding paragraph and (ii) induce (x) the Lenders to make Loans and issue
Letters of Credit to the Borrower , (y) the Poth Creditors to extend the Poth
Loan, and (z) the Other Creditors to enter into Interest Rate Protection
Agreements or Other Hedging Agreements with the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Secured Creditors and hereby covenants and agrees with each
Secured Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees: (i) to the Bank Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Loans made to, and any Notes issued
by, the Borrower under the Credit Agreement and all reimbursement obligations
and Unpaid Drawings with respect to Letters of Credit and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Bank Creditors under the Credit Agreement (including,
without limitation, indemnities, Fees and interest thereon (including any
interest accruing after the commencement of any bankruptcy, insolvency,
receivership or similar proceeding, whether or not such interest is an allowed
claim against the debtor in any such proceeding)) and the other Credit Documents
to which the Borrower is a party, whether now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any such
other Credit Document and the due performance and compliance with the terms of
the Credit Documents by the Borrower (all such principal, interest, liabilities
and obligations under this clause (i), except to the extent consisting of
obligations or liabilities with respect to Interest Rate Protection Agreements
or Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations"); (ii) to each Poth Creditor the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of (x)
the principal of and interest on the Poth Loan and the Poth Note and (y) all
other obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the
Borrower now existing or hereafter incurred under, arising out of or in
connection with, the Poth Loan (including, without limitation, indemnities, fees
and interest thereon (including any interest accruing after the commencement of
any bankruptcy, insolvency, receivership or similar
-2-
<PAGE> 205
proceeding, whether or not such interest is an allowed claim against the debtor
in any such proceeding)) and the other documents entered into in connection with
the Poth Loan, whether now existing or hereafter incurred under, arising out of
or in connection with the Poth Loan or any such document and the due performance
and compliance with the terms of such documents by Dr. Daniel Poth and the
Borrower (all such principal, interest, liabilities and obligations under this
clause (ii) being herein collectively called the "Poth Obligations"); and (iii)
to each Other Creditor the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities owing by the Borrower to one
or more Other Creditors under any Interest Rate Protection Agreements or Other
Hedging Agreements, whether now in existence or hereafter arising, and the due
performance and compliance by the Borrower with all terms, conditions and
agreements contained therein (all such obligations and liabilities being herein
collectively called the "Other Obligations", and together with the Credit
Document Obligations and the Poth Obligations are herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that
this Guaranty is a guarantee of payment and not of collection, and that the
Secured Creditors may enforce this Guaranty up to the full amount of the
Guaranteed Obligations against such Guarantor without proceeding against any
other Guarantor, the Borrower, against any security for the Guaranteed
Obligations, or under any other guaranty covering all or a portion of the
Guaranteed Obligations.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations to the Secured Creditors whether or not due or payable by
the Borrower upon the occurrence in respect of the Borrower or any Subsidiary of
any of the events of the type specified in Section 10.05 of the Credit
Agreement, and unconditionally and irrevocably, jointly and severally, promises
to pay such Guaranteed Obligations to the Secured Creditors, or order, on
demand, in lawful money of the United States.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed Obligations
of the Borrower whether executed by such Guarantor, any other Guarantor, any
other guarantor or by any other party, and the liability of each Guarantor
hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the Borrower or by any other party, (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the Guaranteed Obligations, (c) any payment on or in
reduction of any such other guaranty or under taking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, (e)
any payment made to any Secured Creditor on the Guaranteed Obligations which any
Secured Creditor repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any
-3-
<PAGE> 206
such proceeding, (f) any action or inaction by the Secured Creditors as
contemplated in Section 6 hereof, or (g) any invalidity, irregularity or
unenforceability of all or part of the Guaranteed Obligations or of any security
therefor.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower, and
a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Bor rower or other circumstance which
operates to toll any statute of limitations as to the Borrower shall operate to
toll the statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and waives promptness, diligence, presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Administrative Agent or any
other Secured Creditor against, and any other notice to, any party liable
thereon (including such Guarantor or any other guarantor or the Borrower).
6. Any Secured Creditor may (except as shall be required by
applicable statute and cannot be waived) at any time and from time to time
without the consent of, or notice to, any Guarantor, without incurring
responsibility to such Guarantor, without impairing or releasing the obligations
of such Guarantor hereunder, upon or without any terms or conditions and in
whole or in part:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew, increase, accelerate or alter,
any of the Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the guaranty
herein made shall apply to the Guaranteed Obligations as so changed,
extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
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(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities constituting Guaranteed Obligations to the
Secured Creditors regardless of what liabilities remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents , any document entered into in
connection with the Poth Loan or any of the instruments or agreements
referred to therein, or otherwise amend, modify or supplement any of the
Interest Rate Protection Agreements or Other Hedging Agreements, the
Credit Documents or any of such other documents, instruments or
agreements;
(g) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against the
Borrower or any other person to recover full indemnity for any payments
made pursuant to this Guaranty; and/or
(h) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors.
7. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
dis charge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
8. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Secured Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exer cise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies which any Secured Creditor would otherwise have. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Secured Creditor to any other or further action in
any circumstances without notice or demand. It is not necessary for any Secured
Creditor to inquire into the
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capacity or powers of the Borrower or any of its Subsidiaries or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the Guaranteed Obligations; and such
indebtedness of the Borrower to any Guarantor, if the Administrative Agent,
after an Event of Default has occurred and is continuing, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Secured
Creditors and be paid over to the Administrative Agent for the benefit of the
Secured Creditors on account of the Guaranteed Obligations, but without
affecting or impairing in any manner the liability of such Guarantor under the
other provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination. Without limiting
the generality of the foregoing, each Guarantor hereby agrees with the Secured
Creditors that it will not exercise any right of subrogation which it may at any
time otherwise have as a result of this Guaranty (whether contractual, under
Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed
Obligations have been irrevocably paid in full in cash.
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10. (a) Each Guarantor waives any right (except as shall be required
by applicable statute or law and cannot be waived) to require the Secured
Creditors to: (i) proceed against the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party; (ii) proceed against or exhaust
any security held from the Borrower, any other Guarantor, any other guarantor of
the Borrower or any other party; or (iii) pursue any other remedy in the Secured
Creditors' power whatsoever. Each Guarantor waives (to the fullest extent
permitted by applicable law) any defense based on or arising out of any defense
of the Borrower, any other Guarantor, any other guarantor of the Borrower or any
other party other than payment in full of the Guaranteed Obligations, including,
without limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Borrower or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Secured Creditors
may, at their election, foreclose on any security held by the Administrative
Agent, the Collateral Agent or the other Secured Creditors by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Secured Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor waives
any defense arising out of any such election by the Secured Creditors, even
though such election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of such Guarantor against the Borrower
or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incur ring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Secured Creditors shall have
no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
11. The Secured Creditors agree that this Guaranty may be enforced
only by the action of the Administrative Agent or the Collateral Agent, in each
case acting upon the instructions of the Required Lenders (or, after the date on
which all Credit Document Obligations have been paid in full, the holders of at
least a majority of the outstanding Other Obligations) and that no other Secured
Creditor shall have any right individually to seek to enforce or to enforce this
Guaranty or to realize upon the security to be granted by the Security
Documents, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent or the Collateral Agent or the holders of
at least a majority of the outstanding Other Obligations, as the case may be,
for the benefit of the Secured Creditors upon the terms of this
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Guaranty and the Security Documents. The Secured Creditors further agree that
this Guaranty may not be enforced against any director, officer, employee, or
stockholder of any Guarantor (except to the extent such stockholder is also a
Guarantor hereunder).
12. In order to induce the Lenders to make Loans and issue Letters
of Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor (i) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged
and presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction
where the conduct of its business requires such qualification except for
failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(b) Such Guarantor has the corporate power and authority to execute,
deliver and perform the terms and provisions of this Guaranty and each
other Credit Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by
it of each such Credit Document. Such Guarantor has duly executed and
delivered this Guaranty and each other Credit Document to which it is a
party, and each such Credit Document constitutes the legal, valid and
binding obligation of such Guarantor enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law).
(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty or any other Credit Document to which it is a party, nor
compliance by it with the terms and provisions hereof and thereof, (i)
will materially contravene any provision of any applicable provision of
any law, statute, rule or regulation, or any order, writ, injunction or
decree of any court or governmental instrumentality, (ii) (A) will
conflict or be inconsistent with, or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default
under, the Existing Notes Indenture or (B) will materially conflict with
or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except
pursuant to the Security Documents) upon any of the property or assets of
such Guarantor or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement, or
any other material agreement or other instrument to which such Guarantor
or any of its
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Subsidiaries is a party or by which it or any of its property or assets is
bound or to which it may be subject, except for such conflicts,
inconsistencies, breaches or defaults described in this clause (B) which,
either individually or in the aggregate, have not had, and could not
reasonably be expected to have, a Material Adverse Effect or (iii) will
violate any provision of the certificate of incorporation or by-laws (or
equivalent organizational documents) of such Guarantor or any of its
Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have
been obtained or made), or exemption by, any governmental or public body
or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance
of this Guaranty or any other Credit Document to which such Guarantor is a
party or (ii) the legality, validity, binding effect or enforceability of
this Guaranty or any other Credit Document to which such Guarantor is a
party.
(e) There are no actions, suits or proceedings (private or
governmental) pending or, to the best knowledge of such Guarantor,
threatened (i) with respect to any Credit Documents to which such
Guarantor is a party or (ii) with respect to such Guarantor that have had,
or could reasonably be expected to have, (a) a Material Adverse Effect or
(b) a material adverse effect on the rights or remedies of the Secured
Creditors or the ability of such Guarantor to perform its respective
obligations to the Secured Creditors hereunder and under the other Credit
Documents to which it is a party.
13. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Commitment and all Interest Rate
Protection Agreements or Other Hedging Agreements, when no Loan, no Note nor
Letter of Credit remains outstanding and neither the Poth Loan nor the Poth Note
remain outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 8 or 9 of the Credit
Agreement, and so that no Default or Event of Default, is caused by the actions
of such Guarantor or any of its Subsidiaries.
14. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of each Secured Creditor in
connection with the enforcement of this Guaranty and any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) employed by any of the
Secured Creditors).
15. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and either (x) the Required Lenders (or to
the extent required by Section 13.12 of the Credit Agreement, with the written
consent of each Lender) at all times prior to the time on
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which all Credit Document Obligations have been paid in full, (y) the holders of
at least a majority of the outstanding Poth Obligations at all times after the
time on which all Credit Document Obligations have been paid in full, or (z) the
holders of at least a majority of the outstanding Other Obligations at all times
after the time on which all Credit Document Obligations and all Poth Obligations
have been paid in full; PROVIDED, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class (as defined below)
of Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors (as defined below)
of such Class of Secured Creditors (it being understood that the addition or
release of any Guarantor hereunder shall not constitute a change, waiver,
discharge or termination affecting any Guarantor other than the Guarantor so
added or released). For the purpose of this Guaranty the term "Class" shall mean
each class of Secured Creditors, I.E., whether (x) the Bank Creditors as holders
of the Credit Document Obligations, (y) the Poth Creditors as holders of the
Poth Obligations, or (z) the Other Creditors as the holders of the Other
Obligations. For the purpose of this Guaranty, the term "Requisite Creditors" of
any Class shall mean each of (x) with respect to the Credit Document
Obligations, the Required Lenders (or to the extent required by Section 13.12 of
the Credit Agreement, each Lender) and (y) with respect to the Other Obligations
or Poth Obligations, the holders of at least a majority of all Poth Obligations
or obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements, as the case may be.
16. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents, Interest Rate Protection Agreements or Other
Hedging Agreements and each document relating to the Poth Loan has been made
available to its principal executive officers and such officers are familiar
with the contents thereof.
17. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agreement or Other
Hedging Agreement continuing after any applicable grace period), each Secured
Creditor is hereby authorized at any time or from time to time, without notice
to any Guarantor or to any other Person, any such notice being expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by such Secured
Creditor to or for the credit or the account of such Guarantor but in any event
excluding assets held in trust for any such Person, against and on account of
the obligations and liabilities of such Guarantor to such Secured Creditor under
this Guaranty, irrespective of whether or not such Secured Creditor shall have
made any demand hereunder and although said obligations, liabilities, deposits
or claims, or any of them, shall be contingent or unmatured. Each Secured
Creditor acknowledges and agrees that the provisions set forth in this Section
17 are subject to the sharing provisions set forth in Section 13.06 of the
Credit Agreement.
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18. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at its address set forth opposite its signature
below and (iii) in the case of any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Guarantor; or in any case at
such other address as any of the Persons listed above may hereafter notify the
others in writing.
19. If claim is ever made upon any Secured Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected in good faith by
such payee with any such claimant (including the Borrower), then and in such
event each Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon such Guarantor, notwithstanding any revocation
hereof or other instrument evidencing any liability of the Borrower, and such
Guarantor shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
20. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Guaranty or any other Credit Document to which any
Guarantor is a party may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York, and, by
execution and delivery of this Guaranty, each Guarantor hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
irrevocably designates, appoints and empowers CT Corporation System, with
offices on the date hereof at 1633 Broadway, New York, New York 10019 as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. If for any reason such designee, appointee and agent shall cease to
be available to act as such, each Guarantor agrees to designate a new designee,
appointee and agent in the State of New York on the terms and for the purposes
of this provision satisfactory to the Administrative Agent. Each Guarantor
further irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such Guarantor at
its address set forth opposite its signature below, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right of
any of the
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Secured Creditors to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against each Guarantor in any
other jurisdiction.
(B) Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Credit Document to which such Guarantor is a party brought in the courts
referred to in clause (A) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that such action or proceeding brought
in any such court has been brought in an inconvenient forum.
(C) EACH GUARANTOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF
THE BENEFITS OF THIS GUARANTY) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS TO WHICH SUCH GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of (except to the Borrower or any of
its Subsidiaries) or liquidated in compliance with the requirements of Section
9.02 of the Credit Agreement (or such sale or other disposition or liquidation
has been approved in writing by the Required Lenders) and the proceeds of such
sale, disposition or liquidation are applied in accordance with the provisions
of the Credit Agreement, and such guarantor is released or is concurrently being
released from its guaranty entered into in respect of the Senior Subordinated
Notes and the Additional Subordinated Debt, to the extent applicable, such
Guarantor shall be released from this Guaranty and this Guaranty shall, as to
each such Guarantor or Guarantors, terminate, and have no further force or
effect (it being understood and agreed that the sale of one or more Persons that
own, directly or indirectly, all of the capital stock or partnership interests
of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes
of this Section 21).
22. To the extent that any Guarantor shall be required hereunder to
pay a portion of the Guaranteed Obligations which shall exceed the greater of
(i) the amount of the economic benefit actually received by such Guarantor from
the incurrence of the Loans and the issuance of Letters of Credit under the
Credit Agreement and the entering into of Interest Rate Protection Agreements or
Other Hedging Agreements and (ii) the amount which such Guarantor would
otherwise have paid if such Guarantor had paid the aggregate amount of the
Guaranteed Obligations (excluding the amount thereof repaid by the Borrower and
the other Guarantors) in the same proportion as such Guarantor's net worth at
the date enforcement hereunder is sought bears to the aggregate net worth of all
the Guarantors at the date enforcement hereunder is sought (the "Contribution
Percentage"), then such Guarantor shall have a right of contribution against
each other Guarantor who has made payments in respect of the Guaranteed
Obligations to and including the date enforcement hereunder is sought in an
aggregate amount less than such other Guarantor's Contribution Percentage of the
aggregate payments made to and including the date
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enforcement hereunder is sought by all Guarantors in respect of the Guaranteed
Obligations; PROVIDED, that no Guarantor may take any action to enforce such
right until the Guaranteed Obligations have been indefeasibly paid in full and
the Total Commitments, the Poth Note, all Letters of Credit and all Interest
Rate Protection Agreements and Other Hedging Agreements have been terminated, it
being expressly recognized and agreed by all parties hereto that any Guarantor's
right of contribution arising pursuant to this Section 22 against any other
Guarantor shall be expressly junior and subordinate to such other Guarantor's
obligations and liabilities in respect of the Guaranteed Obligations and any
other obligations owing under this Guaranty. All parties hereto recognize and
agree that, except for any right of contribution arising pursuant to this
Section 22, each Guarantor who makes any payment in respect of the Guaranteed
Obligations shall have no right of contribution or subrogation against any other
Guarantor in respect of such payment. Each of the Guarantors recognizes and
acknowledges that the rights to contribution arising hereunder shall constitute
an asset in favor of the party entitled to such contribution. In this
connection, each Guarantor has the right to waive its contribution right against
any Guarantor to the extent that after giving effect to such waiver such
Guarantor would remain solvent, in the determination of the Required Banks.
23. Each Guarantor hereby confirms that it is its intention that
this Guaranty not constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Code, the Uniform Fraudulent Conveyance Act or any similar
Federal or state law. To effectuate the foregoing intention, each Guarantor
hereby irrevocably agrees that the Guaranteed Obligations guaranteed by such
Guarantor shall be limited to such 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 pursuant to any agreement providing for an equitable
contribution among such Guarantor and the other Guarantors, result in the
Guaranteed Obligations of such Guarantor in respect of such maximum amount not
constituting a fraudulent transfer or conveyance.
24. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Administrative
Agent.
25. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense, and on the same basis as payments
are made by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement.
26. It is understood and agreed that any Subsidiary of the Borrower
that is required to execute a counterpart of this Guaranty after the date hereof
pursuant to the Credit Agreement shall automatically become a Guarantor
hereunder by executing a counterpart hereof and delivering the same to the
Administrative Agent.
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* * *
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address:
11103 West Avenue EYE CARE HOLDINGS, INC.
San Antonio, TX 78213 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue ENCLAVE ADVANCEMENT
San Antonio, TX 78213 GROUP, INC., as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue ECCA MANAGED VISION
San Antonio, TX 78213 CARE, INC., as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONWORKS HOLDINGS, INC.,
San Antonio, TX 78213 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
<PAGE> 218
11103 West Avenue VISIONWORKS, INC.,
San Antonio, TX 78213 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONWORKS PROPERTIES,
San Antonio, TX 78213 INC., as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONARY RETAIL
San Antonio, TX 78213 MANAGEMENT, INC.,
Attention: Douglas C. Shepard as a Guarantor
Telephone No.: (210) 524-6538
Facsimile No.: (210) 340-0123 By: /s/ Mark Pearson
-------------------------
Title: Treasurer
11103 West Avenue VISIONARY PROPERTIES, INC.,
San Antonio, TX 78213 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONARY MSO, INC.,
San Antonio, TX 78213 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
<PAGE> 219
5568 General Washington Drive THE SAMIT GROUP, INC.,
Alexandria, VA 22312 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive HOUR EYES, INC.,
Alexandria, VA 22312 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive SKYLAB OPTICAL, INC.,
Alexandria, VA 22312 as a Guarantor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive METROPOLITAN VISION
Alexandria, VA 22312 SERVICES, INC.,
Attention: Douglas C. Shepard as a Guarantor
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
<PAGE> 220
Accepted and Agreed to:
BANKERS TRUST COMPANY,
as Administrative Agent and
Collateral Agent
By: /s/ Anthony LoGrippo
-------------------------
Title: Vice President
<PAGE> 221
[CONFORMED AS EXECUTED]
EXHIBIT I
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 24, 1998 (as amended, modified
or supplemented from time to time, this "Agreement") made by each of the
undersigned (each a "Pledgor" and, together with any other entity that becomes a
party hereto pursuant to Section 23 hereof, the "Pledgors"), to BANKERS TRUST
COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of the Secured
Creditors (as defined below). Except as otherwise defined herein, capitalized
terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Eye Care Centers of America, Inc. (the "Borrower"), various
lending institutions from time to time party thereto (the "Lenders"), Bankers
Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), and Merrill Lynch Capital
Corporation, as Syndication Agent (the "Syndication Agent") have entered into a
Credit Agreement, dated as of April 23, 1998 (the "Credit Agreement"), providing
for the making of Loans and the issuance of, and participation in, Letters of
Credit as contemplated therein and Bankers Trust Company, in its individual
capacity (together with its successors, participants and assigns, the "Poth
Creditors"), has made a loan in an aggregate principal amount of $1,000,000 to
Dr. Daniel Poth (the "Poth Loan") pursuant to a Note, dated April 24, 1998 (the
"Poth Note") which Poth Loan and all obligations relating thereto have been
guaranteed by the Borrower pursuant to that certain Guaranty, dated as of April
24, 1998, executed by the Borrower (the "Poth Guaranty") (as used herein, the
terms "Credit Agreement", "Poth Note" and "Poth Guaranty" means the Credit
Agreement, Poth Note or Poth Guaranty, as the case may be, described above in
this paragraph, as the same may be amended, modified, extended, renewed,
replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring the Indebtedness under
such agreement or any successor agreements) (the Lenders, the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Pledgee are herein
called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Lenders or any affiliate thereof (each such Lender or
affiliate, even if the respective Lender subsequently ceases to be a Lender
under the Credit Agreement for any reason, together with
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such Lender's or affiliate's successors and assigns, if any, collectively, the
"Other Creditors," and together with the Bank Creditors and the Poth Creditors,
the "Secured Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guaranteed to the Secured Creditors the
payment when due of all Guaranteed Obligations as described therein;
WHEREAS, it is a condition to the making of Loans and the issuance
of Letters of Credit under the Credit Agreement and to the making of the Poth
Loan that each Pledgor shall have executed and delivered this Agreement; and
WHEREAS, each Pledgor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement, the
incurrence of the Poth Loan and the entering into of Interest Rate Protection
Agreements or Other Hedging Agreements and, accordingly, each Pledgor desires to
enter into this Agreement in order to satisfy the conditions described in the
preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Pledgor, the receipt and sufficiency of which are hereby
acknowledged, each Pledgor hereby makes the following representations and
warranties to the Pledgee for the benefit of the Secured Creditors and hereby
covenants and agrees with the Pledgee for the benefit of the Secured Creditors
as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) of such Pledgor to the
Bank Creditors, whether now existing or hereafter incurred under, arising
out of, or in connection with the Credit Agreement and the other Credit
Documents to which such Pledgor is a party (including without limitation
(x) in the case of the Borrower, all such obligations and indebtedness of
the Borrower under the Credit Agreement and (y) in the case of each other
Pledgor, all such obligations and indebtedness under the Guaranty to which
such Pledgor is a party) and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained in the
Credit Agreement and such other Credit Documents (all such obligations and
liabilities under this clause (i), except to the extent consisting of
obligations or indebtedness with respect to Interest Rate Protection
Agreements or Other Hedging Agreements, being herein collectively called
the "Credit Document Obligations");
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<PAGE> 223
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) and liabilities of such
Pledgor to the Poth Creditors, whether now existing or hereafter incurred
under, arising out of or in connection with, the Poth Loan and the other
documents entered into by such Pledgor in connection therewith (including,
without limitation (x) in the case of the Borrower, all such obligations
and indebtedness of the Borrower under the Poth Guaranty and (y) in the
case of each other Pledgor, all obligations of such Pledgor under the
Guaranty to which such Pledgor is a party in respect of the Poth Loan (all
such obligations and liabilities under this clause (ii) being herein
collectively called the "Poth Obligations");
(iii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) owing by such Pledgor to
the Other Creditors under, or with respect to, any Interest Rate
Protection Agreement or Other Hedging Agreement, whether such Interest
Rate Protection Agreement or Other Hedging Agreement is now in existence
or hereafter arising, and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements contained therein
(all such obligations and liabilities described in this clause (iii) being
herein collectively called the "Other Obligations");
(iv) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral (to the extent provided for in the Credit Documents);
(v) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of such Pledgor referred
to in clauses (i), (ii), (iii) and (iv) above, after an Event of Default
(as such term is defined in the Security Agreement) shall have occurred
and be continuing, the reasonable expenses of retaking, holding, preparing
for sale or lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder,
together with reasonable attorneys' fees and court costs; and
(vi) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement.
All such obligations, liabilities, sums and expenses set forth in clauses (i)
through (vi) of this Section 1 being herein collectively called the
"Obligations," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
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<PAGE> 224
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i)
the term "Stock" shall mean (x) with respect to corporations incorporated under
the laws of the United States or any State or territory thereof (each a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time owned by any Pledgor of any Foreign Corporation, provided that, subject to
Section 8.12 of the Credit Agreement, such Pledgor shall not be required to
pledge hereunder, and nothing herein shall be deemed to constitute a pledge
hereunder of, more than 65% of the total combined voting power of all classes of
capital stock of any Foreign Corporation entitled to vote; (ii) the term "Notes"
shall mean all promissory notes from time to time issued to, or held by, each
Pledgor; and (iii) the term "Securities" shall mean all of the Stock and Notes.
Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary
of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto;
(ii) the Stock held by such Pledgor consists of the number and type of shares of
the stock of the corporations as described in Annex A hereto; (iii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex A hereto; (iv) the Notes held by
such Pledgor consist of the promissory notes described in Annex B hereto where
such Pledgor is listed as the Lender; (v) such Pledgor is the holder of record
and sole beneficial owner of the Stock and the Notes held by such Pledgor and
there exist no options or preemption rights in respect of any of such Stock; and
(vi) on the date hereof, such Pledgor owns no other Securities.
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<PAGE> 225
3. PLEDGE OF SECURITIES, ETC.
3.1. PLEDGE. To secure the Obligations of such Pledgor and for the
purposes set forth in Section 1 hereof, each Pledgor hereby (i) grants to the
Pledgee a security interest in all of the Collateral (as defined herein) owned
by such Pledgor, (ii) pledges and deposits as security with the Pledgee the
Securities owned by such Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank by such Pledgor in
the case of Notes and accompanied by undated stock powers duly executed in blank
by such Pledgor (and accompanied by any transfer tax stamps required in
connection with the pledge of such Securities) in the case of Stock, or such
other instruments of transfer as are reasonably acceptable to the Pledgee and
(iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the
Pledgee all of such Pledgor's right, title and interest in and to such
Securities (and in and to the certificates or instruments evidencing such
Securities), to be held by the Pledgee upon the terms and conditions set forth
in this Agreement.
3.2. SUBSEQUENTLY ACQUIRED SECURITIES. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will promptly
thereafter pledge and deposit such Securities (or certificates or instruments
representing such Securities) as security with the Pledgee and deliver to the
Pledgee certificates or instruments therefor, duly endorsed in blank in the case
of such Notes, and accompanied by undated stock powers duly executed in blank by
such Pledgor (and accompanied by any transfer tax stamps required in connection
with the pledge of such Securities) in the case of such Stock, or such other
instruments of transfer as are reasonably acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by a principal
executive officer of such Pledgor describing such Securities and certifying that
the same has been duly pledged with the Pledgee hereunder. Subject to Section
8.12 of the Credit Agreement, no Pledgor shall be required at any time to pledge
hereunder any Stock which is more than 65% of the total combined voting power of
all classes of capital stock of any Foreign Subsidiary entitled to vote.
3.3. UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the relevant
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, Article 8 of the New York Uniform
Commercial Code, if applicable). Each Pledgor further agrees to take such
actions as the Pledgee deems reasonably necessary or desirable to effect the
foregoing and to permit the Pledgee to exercise any of its rights and remedies
hereunder.
3.4. DEFINITIONS OF PLEDGED STOCK; PLEDGED NOTES; PLEDGED SECURITIES
AND COLLATERAL. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock;" all Notes at any time
pledged or required to be pledged hereunder are
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<PAGE> 226
hereinafter called the "Pledged Notes;" all Pledged Stock and Pledged Notes
together are called the "Pledged Securities;" and the Pledged Securities,
together with all proceeds thereof, including any securities and moneys received
and at the time held by the Pledgee hereunder, are hereinafter called the
"Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or
assigned in blank or in favor of the Pledgee or any nominee or nominees of the
Pledgee or a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
shall have occurred and be continuing an Event of Default, each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities owned by it, and to give consents, waivers or
ratifications in respect thereof, PROVIDED, that no vote shall be cast or any
consent, waiver or ratification given or any action taken which would violate or
be inconsistent with any of the terms of this Agreement, the Credit Agreement,
any other Credit Document, the Poth Note or the Poth Guaranty, or any document
relating thereto or any Interest Rate Protection Agreement or Other Hedging
Agreement (collectively, the "Secured Debt Agreements"). All such rights of each
Pledgor to vote and to give consents, waivers and ratifications shall cease in
case an Event of Default has occurred and is continuing, and Section 7 hereof
shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall
have occurred and be continuing an Event of Default, all cash dividends and
distributions payable in respect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the respective Pledgor. The
Pledgee shall be entitled to receive directly, and to retain as part of the
Collateral:
(i) all other or additional stock or other securities (other than
cash) paid or distributed by way of dividend or otherwise, as the case may
be, in respect of the Pledged Stock;
(ii) all other or additional stock or other securities paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(iii) all other or additional stock or other securities or property
which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.
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Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 hereof shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of such Pledgor and shall be
promptly paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF EVENTS OF DEFAULT. If there shall have
occurred and be continuing an Event of Default, then and in every such case, the
Pledgee shall be entitled to (i) exercise all of the rights, powers and remedies
(whether vested in it by this Agreement, any other Secured Debt Agreement or by
law) for the protection and enforcement of its rights in respect of the
Collateral, (ii) exercise all the rights and remedies of a secured party under
the Uniform Commercial Code and (iii) without limitation, exercise the following
rights, which each Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (each Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to do
so); and
(e) at any time and from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time
or place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Pledgee
in its absolute discretion may determine, PROVIDED that at least 10 days'
prior notice of the time and place of any such sale shall be given to such
Pledgor. The Pledgee shall not be obligated to make any such sale of
Collateral regardless of whether any such notice of sale has theretofore
been given. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale
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hereunder, and all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of the Secured
Creditors may bid for and purchase all or any part of the Collateral so
sold free from any such right or equity of redemption. Neither the Pledgee
nor any other Secured Creditor shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor
shall any of them be under any obligation to take any action whatsoever
with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Pledgee provided for in this Agreement or any other Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. No notice to or demand
on any Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the
rights of the Pledgee or any other Secured Creditor to any other or further
action in any circumstances without notice or demand. The Secured Creditors
agree that this Agreement may be enforced only by the action of the Pledgee
acting upon the instructions of the Required Lenders (or, after the date on
which all Credit Document Obligations have been paid in full, the holders of at
least the majority of the outstanding Poth Obligations, or after the date on
which all Credit Document Obligations and all Poth Obligations have been paid in
full, the holders of at least the majority of the outstanding Other Obligations)
and that no other Secured Creditor shall have any right individually to seek to
enforce or to enforce this Agreement or to realize upon the security to be
granted hereby, it being understood and agreed that such rights and remedies may
be exercised by the Pledgee or the holders of at least a majority of the
outstanding Poth Obligation or Other Obligations, as the case may be, for the
benefit of the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Pledgee hereunder, shall be applied to the payment of the
Obligations in the manner provided in Section 7.4 of the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
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10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor and their respective successors, assigns, employees, agents and
servants (individually an "Indemnitee," and collectively the "Indemnitees") from
and against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, and (ii) to
reimburse each Indemnitee for all costs and expenses, including reasonable
attorneys' fees, in each case growing out of or resulting from this Agreement or
the exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other Secured Debt Agreement (but excluding any claims, demands,
losses, judgments and liabilities or expenses to the extent incurred by reason
of gross negligence or willful misconduct of such Indemnitee). In no event shall
the Pledgee be liable, in the absence of gross negligence or willful misconduct
on its part, for any matter or thing in connection with this Agreement other
than to account for moneys actually received by it in accordance with the terms
hereof. If and to the extent that the obligations of any Pledgor under this
Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make
the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees
that it will join with the Pledgee in executing and, at such Pledgor's own
expense, file and refile under the Uniform Commercial Code or other applicable
law such financing statements, continuation statements and other documents in
such offices as the Pledgee may deem necessary and wherever required by law in
order to perfect and preserve the Pledgee's security interest in the Collateral
and hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
such Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem necessary to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's discretion
to take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to carry out the provisions of this Agreement.
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13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed by each Secured Creditor that
by accepting the benefits of this Agreement each such Secured Creditor
acknowledges and agrees that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and in Section 12 of the Credit Agreement.
14. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the terms of the Credit Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. Each
Pledgor represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Pledged
Securities pledged by it hereunder, subject to no Lien (except the Lien created
by this Agreement and other Permitted Liens); (ii) it has full corporate power,
authority and legal right to pledge all the Pledged Securities pledged by it
pursuant to this Agreement; (iii) this Agreement has been duly authorized,
executed and delivered by such Pledgor and constitutes a legal, valid and
binding obligation of such Pledgor enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws generally affecting creditors' rights and by equitable principles
(regardless of whether enforcement is sought in equity or at law); (iv) no
consent of any other party (including, without limitation, any stockholder or
creditor of such Pledgor or any of its Subsidiaries) and no consent, license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with (except as have been obtained or made),
any governmental authority is required to be obtained by such Pledgor in
connection with the execution, delivery or performance of this Agreement, the
validity or enforceability of this Agreement, the perfection or enforceability
of the Pledgee's security interest in the Collateral or except for compliance
with or as may be required by applicable securities laws, the exercise by the
Pledgee of any of its rights or remedies provided herein; (v) the execution,
delivery and performance of this Agreement by such Pledgor will not violate any
provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, applicable to such Pledgor, or of the certificate of incorporation or
by-laws (or equivalent organizational documents) of such Pledgor or of any
securities issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, lease, deed of trust, loan agreement, credit agreement or
other material agreement, contract, or instrument to which such Pledgor or any
of its Subsidiaries is a party or which purports to be binding upon such Pledgor
or any of its Subsidiaries or upon any of their respective assets and
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will not result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of such Pledgor or any of
its Subsidiaries except as contemplated by this Agreement; (vi) all the shares
of Stock have been duly and validly issued, are fully paid and non-assessable
and were not issued subject to any options to purchase, preemptive or similar
rights and, in the case of all such capital stock other than the Borrower
Preferred Stock, do not contain preemptive rights; (vii) each of the Pledged
Notes constitutes, or when executed by the obligor thereof will constitute, the
legal, valid and binding obligation of such obligor, enforceable in accordance
with its terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
and (viii) the pledge, assignment and delivery to the Pledgee of the Securities
(other than uncertificated securities) pursuant to this Agreement creates a
valid and perfected first priority Lien in the Securities, and the proceeds
thereof, subject to no other Lien or to any agreement purporting to grant to any
third party a Lien on the property or assets of the Pledgor which would include
the Securities. Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever in
accordance with the Credit Documents; and such Pledgor covenants and agrees that
it will have like title to and right to pledge any other property at any time
hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend the right thereto and security interest therein of the Pledgee and the
Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument including, without limitation, this Agreement;
(iii) any furnishing of any additional security to the Pledgee or its assignee
or any acceptance thereof or any release of any security by the Pledgee or its
assignee; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement or any term thereof; or (v) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to any Pledgor or any Subsidiary
of any Pledgor, or any action taken with respect to this Agreement by any
trustee or receiver, or by any court, in any such proceeding, whether or not
such Pledgor shall have notice or knowledge of any of the foregoing.
-11-
<PAGE> 232
17. REGISTRATION, ETC. (a) If there shall have occurred and be
continuing an Event of Default then, and in every such case, upon receipt by any
Pledgor from the Pledgee of a written request or requests that such Pledgor
cause any registration, qualification or compliance under any Federal or state
securities law or laws to be effected with respect to all or any part of the
Pledged Stock, such Pledgor as soon as practicable and at its expense will cause
such registration to be effected (and be kept effective) and will cause such
qualification and compliance to be declared effected (and be kept effective) as
may be so requested and as would permit or facilitate the sale and distribution
of such Pledged Stock, including, without limitation, registration under the
Securities Act of 1933, as then in effect (or any similar statute then in
effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements, PROVIDED, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Pledgee to be kept
advised in writing as to the progress of each such registration, qualification
or compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of such Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related registration statement,
notification or the like) or by any omission (or alleged omission) to state
therein (or in any related registration statement, notification or the like) a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing (or
failed to be furnished) to such Pledgor by the Pledgee or such other Secured
Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7 hereof, and such Pledged Securities or the part thereof to be sold
shall not, for any reason whatsoever, be effectively registered under the
Securities Act of 1933, as then in effect, the Pledgee may, in its sole and
absolute discretion, sell such Pledged Securities or part thereof by private
sale in such manner and under such circumstances as the Pledgee may deem
necessary or advisable in order that such sale may legally be effected without
such registration. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale, and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility
-12-
<PAGE> 233
or liability for selling all or any part of the Pledged Securities at a price
which the Pledgee, in its sole and absolute discretion, in good faith deems
reasonable under the circumstances, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after registration as aforesaid.
18. TERMINATION; RELEASE. (a) After the Termination Date (as defined
below), this Agreement and the security interest created hereby shall terminate
(provided that all indemnities set forth herein including, without limitation,
in Section 11 hereof shall survive any such termination), and the Pledgee, at
the request and expense of any Pledgor, will execute and deliver to such Pledgor
a proper instrument or instruments acknowledging the satisfaction and
termination of this Agreement, and will duly assign, transfer and deliver to
such Pledgor (without recourse and without any representation or warranty) such
of the Collateral as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement, together with any moneys at the time held
by the Pledgee or any of its sub-agents hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Commitment and all
Interest Rate Protection Agreements or Other Hedging Agreements have been
terminated, no Note under the Credit Agreement is outstanding (and all Loans
have been repaid in full), the Poth Loan has been repaid in full, all Letters of
Credit have been terminated and all Obligations then owing have been paid in
full.
(b) In the event that any part of the Collateral is sold or
otherwise disposed of (except to the Borrower or any of its Subsidiaries) in
connection with a sale permitted by Section 9.02 of the Credit Agreement or
otherwise released pursuant to the Credit Agreement or at the direction of the
Required Lenders (or all Lenders if required by Section 13.12 of the Credit
Agreement) and the proceeds of such sale or sales or from such release are
applied in accordance with the provisions of Section 4.02 of the Credit
Agreement, to the extent required to be so applied, the Pledgee, at the request
and expense of any Pledgor, will duly assign, transfer and deliver to such
Pledgor (without recourse and without any representation or warranty) such of
the Collateral (and releases therefor) as is then being (or has been) so sold or
released and has not theretofore been released pursuant to this Agreement.
(c) At any time that a Pledgor desires that the Pledgee assign,
transfer and deliver Collateral (and releases therefor) as provided in Section
18(a) or (b) hereof, it shall deliver to the Pledgee a certificate signed by an
executive officer of such Pledgor stating that the release of the respective
Collateral is permitted pursuant to such Section 18(a) or (b).
(d) The Pledgee shall have no liability whatsoever to any other
Secured Creditor as the result of any release of Collateral by it in accordance
with this Section 18.
19. NOTICES, ETC. All notices and communications hereunder shall be
sent or delivered by mail, telex, telecopy or overnight courier service and all
such notices and communications shall, when mailed, telexed, telecopied or sent
by overnight courier, be effective
-13-
<PAGE> 234
when deposited in the mails or delivered to the overnight courier, prepaid and
properly addressed for delivery on such or the next Business Day, or sent by
telex or telecopier, except that notices and communications to the Pledgee shall
not be effective until received by the Pledgee. All notices and other
communications shall be in writing and addressed as follows:
(a) if to any Pledgor, at the address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Telephone No.: (212) 250-4169
Telecopier No.: (212) 250-7351
Attention: Joe Regan
(c) if to any Bank Creditor, either (x) to the Administrative Agent,
at the address of the Administrative Agent specified in the Credit
Agreement or (y) at such address as such Bank Creditor shall have
specified in the Credit Agreement;
(d) if to any Poth Creditor, (a) at such address as such Poth
Creditor shall have specified in writing to the Pledgors and the Pledgee,
and (b) in the case of Bankers Trust Company, at:
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Telephone No.: (212) 215-9777
Telecopier No.: (212) 250-4488
Attention: Errol Harris
(e) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to the Pledgors and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of either (x) the Required Lenders (or all of
the Lenders, to the extent required by Section 13.12 of the Credit Agreement) at
all times prior to the time on which all Credit Document Obligations have been
paid in full, (y) the holders at least a majority of the
-14-
<PAGE> 235
outstanding Poth Obligations at all time after the time on which all Credit
Document Obligations have been paid in full, or (z) the holders of at least a
majority of the outstanding Other Obligations at all times after the time on
which all Credit Document Obligations and Poth Obligations have been paid in
full); PROVIDED, that any change, waiver, modification or variance affecting the
rights and benefits of a single Class (as defined below) of Secured Creditors
(and not all Secured Creditors in a like or similar manner) shall also require
the written consent of the Requisite Creditors (as defined below) of such
affected Class. For the purpose of this Agreement, the term "Class" shall mean
each class of Secured Creditors, I.E., whether (i) the Bank Creditors as holders
of the Credit Document Obligations, (ii) Poth Creditors as holders of the Poth
Obligations, or (iii) the Other Creditors as the holders of the Other
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (i) with respect to the Credit Document
Obligations, the Required Lenders (ii) with respect to Poth Obligations, the
holders of at least 51% of all Poth Obligation from time to time outstanding,
and (iii) with respect to the Other Obligations, the holders of 51% of all
obligations outstanding from time to time under the Interest Rate Protection
Agreements or Other Hedging Agreements.
21. MISCELLANEOUS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of and be enforceable by each of the parties hereto and its successors
and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement
are for purposes of reference only and shall not limit or define the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which shall constitute one instrument. In
the event that any provision of this Agreement shall prove to be invalid or
unenforceable, such provision shall be deemed to be severable from the other
provisions of this Agreement which shall remain binding on all parties hereto.
22. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreement and otherwise in writing in connection herewith or
therewith.
23. ADDITIONAL PLEDGORS. Any Subsidiary of the Borrower established
or created after the date hereof and that is required to execute a counterpart
of this Agreement pursuant to the Credit Agreement shall automatically become a
Pledgor hereunder by executing a counterpart hereof and delivering the same to
the Pledgee.
***
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<PAGE> 236
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address: EYE CARE CENTERS OF
AMERICA, INC.,
11103 West Avenue as a Pledgor
San Antonio, TX 78213
Attention: Douglas C. Shepard
By: /s/ Mark Pearson
-------------------------
Telephone No.: (210) 524-6538
Facsimile No.: (210) 340-0123 Title: Treasurer
11103 West Avenue EYE CARE HOLDINGS, INC.
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue ENCLAVE ADVANCEMENT
San Antonio, TX 78213 GROUP, INC., as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue ECCA MANAGED VISION
San Antonio, TX 78213 CARE, INC., as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
<PAGE> 237
11103 West Avenue VISIONWORKS HOLDINGS, INC.,
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONWORKS, INC.,
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONWORKS PROPERTIES, INC.,
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONARY RETAIL
San Antonio, TX 78213 MANAGEMENT, INC.,
Attention: Douglas C. Shepard as a Pledgor
Telephone No.: (210) 524-6538
Facsimile No.: (210) 340-0123 By: /s/ Mark Pearson
-------------------------
Title: Treasurer
<PAGE> 238
11103 West Avenue VISIONARY PROPERTIES, INC.,
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
11103 West Avenue VISIONARY MSO, INC.,
San Antonio, TX 78213 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
Facsimile No.: (210) 340-0123 -------------------------
Title: Treasurer
5568 General Washington Drive THE SAMIT GROUP, INC.,
Alexandria, VA 22312 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive HOUR EYES, INC.,
Alexandria, VA 22312 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
<PAGE> 239
5568 General Washington Drive SKYLAB OPTICAL, INC.,
Alexandria, VA 22312 as a Pledgor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive METROPOLITAN VISION
Alexandria, VA 22312 SERVICES, INC.,
Attention: Douglas C. Shepard as a Pledgor
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
BANKERS TRUST COMPANY,
as Pledgee
By: /s/ Anthony LoGrippo
-------------------------
Title: Vice President
<PAGE> 240
ANNEX A
to
PLEDGE
AGREEMENT
LIST OF STOCK
I. Eye Care Centers of America, Inc.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Name of Issuing Number of Shares of
Corporation Type Of Shares Shares Capital Stock
- ----------- -------------- ------ -------------
<S> <C> <C> <C>
</TABLE>
II. NAME OF PLEDGOR
<TABLE>
<CAPTION>
Percentage of
Outstanding
Name of Issuing Number of Shares of
Corporation Type Of Shares Shares Capital Stock
- ----------- -------------- ------ -------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 241
ANNEX B
to
PLEDGE
AGREEMENT
LIST OF NOTES
I. EYE CARE CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
Principal Amount Maturity Date
Obligor (if any) (if any)
- ------- -------- --------
<S> <C> <C>
</TABLE>
II. NAME OF PLEDGOR
<TABLE>
<CAPTION>
Principal Amount Maturity Date
Obligor (if any) (if any)
- ------- -------- --------
<S> <C> <C>
</TABLE>
<PAGE> 242
[CONFORMED AS EXECUTED]
EXHIBIT J
================================================================================
SECURITY AGREEMENT
among
EYE CARE CENTERS OF AMERICA, INC.
CERTAIN SUBSIDIARIES OF
EYE CARE CENTERS OF AMERICA, INC.,
and
BANKERS TRUST COMPANY,
as Collateral Agent
<PAGE> 243
================================================================================
Dated as of April 24, 1998
================================================================================
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<PAGE> 244
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 24, 1998 among each of the
undersigned (each an "Assignor" and, together with any other entity that becomes
a party hereto pursuant to Section 10.13 hereof, the "Assignors") and Bankers
Trust Company, as Collateral Agent (the "Collateral Agent"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement (as defined
below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Eye Care Centers of America, Inc. (the "Borrower"), various
lending institutions from time to time party thereto (the "Lenders"), Bankers
Trust Company, as Administrative Agent (together with any successor
administrative agent, the "Administrative Agent"), and Merrill Lynch Capital
Corporation, as Syndication Agent (the "Syndication Agent") have entered into a
Credit Agreement, dated as of April 23, 1998 (the "Credit Agreement"), providing
for the making of Loans and the issuance of, and participation in, Letters of
Credit, as contemplated therein and Bankers Trust Company, in its individual
capacity (together with its successors, assigns and participants, the "Poth
Creditors"), has made a loan in an aggregate principal amount of $1,000,000 to
Dr. Daniel Poth (the "Poth Loan") pursuant to a Note, dated April 24, 1998 (the
"Poth Note") which Poth Loan and all obligations relating thereto have been
guaranteed by the Borrower pursuant to that certain Guaranty, dated as of April
24, 1998, executed by the Borrower (the "Poth Guaranty") (as used herein, the
terms "Credit Agreement", "Poth Note" and "Poth Guaranty" means the Credit
Agreement, Poth Note and Poth Guaranty, as the case may be, described above in
this paragraph as the same may be amended, modified, extended, renewed,
replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring the Indebtedness under
such agreement or any successor agreement) (the Lenders, the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Collateral Agent
are herein called the "Bank Creditors");
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements or Other Hedging Agreements
with one or more Lenders or any affiliate thereof (each such Lender or
affiliate, even if the respective Lender subsequently ceases to be a Lender
under the Credit Agreement for any reason, together with such Lender's or
affiliate's successors and assigns, if any, collectively, the "Other Creditors,"
and together with the Bank Creditors and the Poth Creditors, the "Secured
Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each Subsidiary
Guarantor has jointly and severally guaranteed to the Secured Creditors the
payment when due of all Guaranteed Obligations as described therein;
<PAGE> 245
WHEREAS, it is a condition precedent to the making of Loans and the
issuance of Letters of Credit under the Credit Agreement and to the making of
the Poth Loan that each Assignor shall have executed and delivered this
Agreement; and
WHEREAS, each Assignor will obtain benefits from the incurrence of
Loans and the issuance of Letters of Credit under the Credit Agreement, the
incurrence of the Poth Loan and the entering into of Interest Rate Protection
Agreements or Other Hedging Agreements and, accordingly, each Assignor desires
to execute this Agreement to satisfy the conditions described in the preceding
paragraph;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Assignor, the receipt and sufficiency of which are hereby
acknowledged, each Assignor hereby makes the following representations and
warranties to the Collateral Agent for the benefit of the Secured Creditors and
hereby covenants and agrees with the Collateral Agent for the benefit of the
Secured Creditors as follows:
ARTICLE I
SECURITY INTERESTS
1.1. GRANT OF SECURITY INTERESTS. (a) As security for the prompt and
complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority (subject only to
Permitted Liens (i) existing on the date hereof or (ii) otherwise having
priority under applicable law) in all of the right, title and interest of such
Assignor in, to and under all of the following, whether now existing or
hereafter from time to time acquired: (i) each and every Receivable, (ii) all
Contracts, together with all Contract Rights arising thereunder, (iii) all
Inventory, (iv) all Equipment, (v) all Marks, together with the registrations
and right to all renewals thereof, and the goodwill of the business of such
Assignor symbolized by the Marks, (vi) all Patents and Copyrights, and all
reissues, renewals or extensions thereof, (vii) all computer programs of such
Assignor and all intel lectual property rights therein and all other proprietary
information of such Assignor, including, but not limited to, trade secrets,
(viii) all other Goods, General Intangibles, Chattel Paper, Documents,
Instruments and other assets of such Assignor, (ix) the Cash Collateral Account
and all moneys, securities and Instruments deposited or required to be deposited
in such Cash Collateral Account and (x) all Proceeds and products of any and all
of the foregoing (all of the above, collectively, the "Collateral").
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. POWER OF ATTORNEY. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise) to act, require,
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<PAGE> 246
demand, receive, compound and give acquittance for any and all moneys and claims
for moneys due or to become due to such Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem to be necessary or advisable to protect the
interests of the Secured Creditors, which appointment as attorney is coupled
with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. NECESSARY FILINGS. All filings, registrations and recordings in
any jurisdiction (other than filings or recordings in respect of vehicles for
which a filing under the UCC will fail to perfect a security interest) necessary
or appropriate to create, preserve and perfect the security interest granted by
such Assignor to the Collateral Agent hereby in respect of the Collateral have
been accomplished and the security interest granted to the Collateral Agent
pursuant to this Agreement in and to the Collateral creates a perfected security
interest therein prior to the rights of all other Persons therein (subject only
to Permitted Liens (i) existing on the date hereof or (ii) otherwise having
priority under applicable law) and is entitled to all the rights, priorities and
benefits afforded by the Uniform Commercial Code or other relevant law as
enacted in any relevant jurisdiction in the United States to perfected security
interests, in each case to the extent that the Collateral consists of the type
of property in which a security interest may be perfected by filing a financing
statement under the Uniform Commercial Code as enacted in any relevant
jurisdiction in the United States or in the United States Patent and Trademark
Office or the United States Copyright Office.
2.2. NO LIENS. Such Assignor is, and as to Collateral acquired by it
from time to time after the date hereof such Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any other Person (other than Permitted
Liens), and such Assignor shall defend the Collateral to the extent of its
rights therein against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
2.3. OTHER FINANCING STATEMENTS. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than in respect of Permitted Liens), and so long
as the Total Commitment has not been terminated or any Letter of Credit or Note
remains outstanding or any of the Obligations remain unpaid or any Interest Rate
Protection Agreement or Other Hedging Agreement remains in effect or any
Obligations are owed with respect thereto, such Assignor will not execute or
authorize to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except financing statements filed or to
be filed
-3-
<PAGE> 247
in respect of and covering the security interests granted hereby by such
Assignor or as permitted by the Credit Agreement.
2.4. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of
such Assignor is located, as of the date hereof, at the address or addresses
indicated on Annex A hereto for such Assignor. Such Assignor will not move its
chief executive office except to such new location as such Assignor may
establish in accordance with the last sentence of this Section 2.4. The
originals of all documents evidencing all Receivables and Contract Rights and
Trade Secret Rights of such Assignor and the only original books of account and
records of such Assignor relating thereto are, and will continue to be, kept at
such chief executive office, at one or more of the other record locations set
forth on Annex A hereto or at such new locations as such Assignor may establish
in accordance with the last sentence of this Section 2.4. All Receivables and
Contract Rights of such Assignor are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above or such new
location established in accordance with the last sentence of this Section 2.4.
No Assignor shall establish new locations for such offices until (i) it shall
have given to the Collateral Agent not less than 30 days' prior written notice
of its intention to do so, clearly describing such new location and providing
such other information in connection therewith as the Collateral Agent may
reasonably request, (ii) with respect to such new location, it shall have taken
all action, reasonably satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect and
(iii) the Collateral Agent shall have received evidence that all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.5. LOCATION OF INVENTORY AND EQUIPMENT. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor. Each Assignor agrees that
all Inventory and Equipment now held or subsequently acquired by it shall be
kept at (or shall be in transport to) any one of the locations shown on Annex B
hereto, or such new location as such Assignor may establish in accordance with
the last sentence of this Section 2.5. Any Assignor may establish a new location
for Inventory and Equipment if (i) it shall have given to the Collateral Agent
not less than 30 days' prior written notice of its intention so to do, clearly
describing such new location and providing such other information in connection
therewith as the Collateral Agent may request, (ii) with respect to such new
location, it shall have taken all action reasonably satisfactory to the
Collateral Agent to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and in
full force and effect and (iii) the Collateral Agent shall have received
evidence that all other actions (including, without limitation, the payment of
all filing fees and taxes, if any, payable in connection with such filings) have
been taken, in order to perfect (and maintain the perfection and priority of)
the security interest granted hereby.
2.6. RECOURSE. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of
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such Assignor contained herein, in the other Credit Documents, in the Interest
Rate Protection Agreements or Other Hedging Agreements and otherwise in writing
in connection herewith or therewith.
2.7. TRADE NAMES; CHANGE OF NAME. No Assignor has or operates in any
jurisdiction under, or in the preceding five years has had or has operated in
any jurisdiction under, any trade names, fictitious names or other names except
its legal name and such other trade or fictitious names as are listed on Annex C
hereto with respect to each jurisdiction in which such names were used for such
Assignor. No Assignor shall change its legal name or assume or operate in any
jurisdiction under any trade, fictitious or other name except those names listed
on Annex C hereto for such Assignor and new names established in accordance with
the last sentence of this Section 2.7. No Assignor shall assume or operate in
any jurisdiction under any new trade, fictitious or other name until (i) it
shall have given to the Collateral Agent not less than 30 days' prior written
notice of its intention so to do, clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may request, (ii)
with respect to such new name, it shall have taken all action to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect and
(iii) the Collateral Agent shall have received evidence that all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that each such Receivable, and all records, papers and
documents delivered to the Collateral Agent relating thereto (if any) are what
they purport to be, and that all papers and documents (if any) relating thereto
(i) will represent the genuine, legal, valid and binding obligation of the
account debtor evidencing indebtedness unpaid and owed by the respective account
debtor arising out of the performance of labor or services or the sale or lease
and delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the account debtor
named therein (other than copies created for general accounting purposes), (iii)
will evidence true and valid obligations, enforceable in accordance with their
respective terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law) and
(iv) will be in compliance and will conform in all material respects with all
applicable federal, state and local laws and applicable laws of any relevant
foreign jurisdiction.
3.2. MAINTENANCE OF RECORDS. Each Assignor will keep and maintain at
its own cost and expense accurate and complete records of its Receivables and
Contracts, including, but not
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limited to, the originals of all documentation (including each Contract) with
respect thereto, records of all payments received, all credits granted thereon,
all merchandise returned and all other dealings therewith, and such Assignor
will make the same available to the Collateral Agent for inspection, on such
Assignor's premises and at such Assignor's own cost and expense, from time to
time as the Collateral Agent may reasonably request upon reasonable notice to
such Assignor. Upon the occurrence and during the continuance of an Event of
Default, at the request of the Collateral Agent, such Assignor shall, at its own
cost and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by such Assignor). Upon the occurrence and during the continuance of an Event of
Default, if the Collateral Agent so directs, such Assignor shall legend, in form
and manner satisfactory to the Collateral Agent, its Receivables and the
Contracts, as well as books, records and documents (if any) of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. DIRECTION TO ACCOUNT DEBTORS; CONTRACTING PARTIES; ETC. Upon
the occurrence and during the continuance of an Event of Default, if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in the preceding
clause (x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent as such Assignor.
Without notice to or assent by any Assignor, the Collateral Agent may apply any
or all amounts then in, or thereafter deposited in, the Cash Collateral Account
in the manner provided in Section 7.4 of this Agreement. The costs and expenses
(including attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor.
3.4. MODIFICATION OF TERMS; ETC. Except in the ordinary course of
business and except as may be permitted by and in accordance with the provisions
hereof and of the Credit Agreement, no Assignor shall rescind or cancel any
indebtedness evidenced by any Receivable or under any Contract, or modify any
term thereof or make any adjustment with respect thereto, or extend or renew the
same, or compromise or settle any dispute, claim, suit or legal proceeding
relating thereto, or sell any Receivable or Contract, or interest therein,
without the prior written consent of the Collateral Agent. Each Assignor will
duly fulfill all obligations on its part to be fulfilled under or in connection
with the Receivables and Contracts and will do nothing to impair the rights of
the Collateral Agent in the Receivables or Contracts.
3.5. COLLECTION. Each Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection
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procedures) any and all amounts owing under or on account of such Receivable or
Contract, and apply promptly upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Receivable or under such Contract,
except that, prior to the occurrence of an Event of Default, any Assignor may
allow in the ordinary course of business as adjustments to amounts owing under
its Receivables and Contracts (i) an extension or renewal of the time or times
of payment, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services or for other reasons which such Assignor finds
appropriate in accordance with reasonable business judgment. The reasonable
costs and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor.
3.6. INSTRUMENTS. If any Assignor owns or acquires any Instrument,
such Assignor will within ten Business Days notify the Collateral Agent thereof,
and upon request by the Collateral Agent will promptly deliver such Instrument
(other than checks payable to any Assignor and processed in the ordinary course
of business) to the Collateral Agent appropriately endorsed to the order of the
Collateral Agent as further security hereunder.
3.7. ASSIGNORS REMAIN LIABLE UNDER RECEIVABLES. Anything herein to
the contrary notwithstanding, the Assignors shall remain liable under each of
the Receivables to observe and perform all of the conditions and obligations to
be observed and performed by them thereunder, all in accordance with the terms
of any agreement giving rise to such Receivables. Neither the Collateral Agent
nor any other Secured Creditor shall have any obligation or liability under any
Receivable (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Collateral Agent or any other Secured
Creditor of any payment relating to such Receivable pursuant hereto, nor shall
the Collateral Agent or any other Secured Creditor be obligated in any manner to
perform any of the obligations of any Assignor under or pursuant to any
Receivable (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by them
or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to them or to which they may be entitled at any
time or times.
3.8. ASSIGNORS REMAIN LIABLE UNDER CONTRACTS. Anything herein to the
contrary notwithstanding, the Assignors shall remain liable under each of the
Contracts to observe and perform all of the conditions and obligations to be
observed and performed by them thereunder, all in accordance with and pursuant
to the terms and provisions of each Contract. Neither the Collateral Agent nor
any other Secured Creditor shall have any obligation or liability under any
Contract by reason of or arising out of this Agreement or the receipt by the
Collateral Agent or any other Secured Creditor of any payment relating to such
contract pursuant hereto, nor shall the Collateral Agent or any other Secured
Creditor be obligated in any manner to perform any of the obligations of any
Assignor under or pursuant to any Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any performance by any party
under any Contract, to present or file any
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claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to them or to which they may be
entitled at any time or times.
3.9. FURTHER ACTIONS. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use the Marks listed in Annex D hereto for such Assignor and that
said listed Marks include all United States marks and applications for
registrations of United States marks in the United States Patent and Trademark
Office that such Assignor owns or uses in connection with its business as of the
date hereof and that said registrations are valid, subsisting and have not been
cancelled. Each Assignor represents and warrants that it owns, is licensed to
use or otherwise has the right to use all material Marks that it uses. Each
Assignor further warrants that it is aware of no third party claim that any
aspect of such Assignor's present or contemplated business operations infringes
or will infringe any trademark, service mark or trade name. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use all U.S. trademark registrations and applications listed in
Annex D hereto and that said registrations are valid, subsisting, have not been
cancelled and that such Assignor is not aware of (i) any third-party claim that
any of said registrations is invalid or unenforceable, (ii) any reason that any
of said registrations is invalid or unenforceable, or (iii) any reason that any
of said applications will not pass to registration. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the con tinuance of an Event of Default, any document
which may be required by the United States Patent and Trademark Office in order
to effect an absolute assignment of all right, title and interest of such
Assignor in each Mark, and record the same.
4.2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by the
Credit Agreement each Assignor hereby agrees not to divest itself of any right
under any Mark absent prior written approval of the Collateral Agent.
4.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or diluting or otherwise
violating in any material respect any of such Assignor's rights in and to any
Mark material to such Assignor's Business, or with respect to any party claiming
that such Assignor's use of any Mark material to such Assignor's Business
violates in any material respect any property right of that party. Each Assignor
further agrees, unless otherwise agreed by the Collateral Agent,
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diligently to prosecute any Person infringing any significant Mark owned by such
Assignor in accordance with reasonable business practices.
4.4. PRESERVATION OF MARKS. Except as otherwise permitted by the
Credit Agreement each Assignor agrees to use its significant Marks in interstate
commerce during the time in which this Agreement is in effect, sufficiently to
preserve such Marks as trademarks or service marks under the laws of the United
States.
4.5. MAINTENANCE OF REGISTRATION. Except as otherwise permitted by
the Credit Agreement each Assignor shall, at its own expense, diligently process
all documents in accordance with applicable law to maintain trademark
registrations, including but not limited to affidavits of use and applications
for renewals of registration in the United States Patent and Trademark Office
for all of its significant registered Marks, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Collateral Agent.
4.6. FUTURE REGISTERED MARKS. If any Mark registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate, such Assignor shall deliver to the Collateral Agent
a copy of such certificate, and an assignment for security in such Mark, to the
Collateral Agent and at the expense of such Assignor, confirming the assignment
for security in such Mark to the Collateral Agent hereunder, the form of such
security to be substantially the same as the form hereof or in such other form
as may be reasonably satisfactory to the Collateral Agent.
4.7. REMEDIES. If an Event of Default shall occur and be continuing,
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks and the goodwill of the
business associated therewith, together with all trademark rights and rights of
protection to the same, vested in the Collateral Agent for the benefit of the
Secured Creditors, in which event such rights, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged
and notarized and record said absolute assignment with the applicable agency;
(ii) take and use or sell the Marks and the goodwill of such Assignor's business
symbolized by the Marks and the right to carry on the business and use the
assets of such Assignor in connection with which the Marks have been used; (iii)
in connection with the exercise of any of the other remedies provided for in
this Agreement or any other Security Document, direct such Assignor to refrain,
in which event such Assignor shall refrain, from using the Marks in any manner
whatsoever, directly or indirectly, and, if requested by the Collateral Agent,
change such Assignor's corporate name to eliminate therefrom any use of any
Mark; and (iv) direct such Assignor to execute such other and further documents
that the Collateral Agent may reasonably request to further confirm the
foregoing and to transfer ownership of the Marks and registrations and any
pending trademark application in the United States Patent and Trademark Office
to the Collateral Agent.
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ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES. Each Assignor
represents and warrants that it is the true and lawful owner or licensee of all
rights in (i) all United States trade secrets and proprietary information
necessary to operate the business of such Assignor (the "Trade Secret Rights"),
(ii) the Patents listed in Annex E hereto for such Assignor and that said
Patents include all United States patents and applications for United States
patents that such Assignor owns as of the date hereof and (iii) the Copyrights
listed in Annex F hereto for such Assignor and that said Copyrights constitute
all the United States copyrights registered with the United States Copyright
Office and applications to United States copyrights that such Assignor now owns.
Each Assignor further warrants that it has no knowledge of any third party claim
that any aspect of such Assignor's present or contemplated business operations
infringes or will infringe any patent or any copyright or such Assignor has
misappropriated any trade secret or proprietary information. Each Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of any Event of Default, any
document which may be required by the United States Patent and Trademark Office
or United States Copyright Office, as the case may be, in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
5.2. LICENSES AND ASSIGNMENTS. Except as otherwise permitted by the
Credit Agreement each Assignor hereby agrees not to divest itself of any right
under any Patent or Copyright absent prior written approval of the Collateral
Agent.
5.3. INFRINGEMENTS. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe in any significant
Patent or Copyright or to any claim that the practice of any significant Patent
or the use of any significant Copyright violates any property right of a third
party, or with respect to any misappropriation of any significant Trade Secret
Right or any claim that practice of any significant Trade Secret Right violates
any property right of a third party. Each Assignor further agrees, absent
direction of the Collateral Agent to the contrary, diligently to prosecute
except as otherwise permitted by the Credit Agreement, any Person infringing any
significant Patent or Copyright or any Person misappropriating any significant
Trade Secret Right to the extent that such Assignor reasonably believes that
such infringement is material to its business.
5.4. MAINTENANCE OF PATENTS OR COPYRIGHTS. Except as otherwise
permitted by the Credit Agreement, at its own expense, each Assignor shall make
timely payment of all post-issuance fees required to maintain in force rights
under each significant Patent or Copyright, absent prior written consent of the
Collateral Agent.
5.5. PROSECUTION OF PATENT OR COPYRIGHT APPLICATION. Except as
otherwise permitted by the Credit Agreement, at its own expense, each Assignor
shall diligently prosecute all
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applications for (i) significant Patents listed in Annex E hereto and (ii)
significant Copyrights listed in Annex F hereto, in each case for such Assignor.
5.6. OTHER PATENTS OR COPYRIGHTS. Within 30 days of the acquisition
or issuance of a Patent or Copyright or of filing of an application for a Patent
or Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy
of said certificate or registration of, or application for, said Patent or
Copyright, as the case may be, with an assignment for security as to such Patent
or Copyright, as the case may be, to the Collateral Agent and at the expense of
such Assignor, confirming the assignment for security, the form of such
assignment for security to be substantially the same as the form attached
hereto.
5.7. REMEDIES. If an Event of Default shall occur and be continuing,
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof to
execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) in connection with the exercise of
any of the other remedies provided for in this Agreement or any other Security
Document, take and practice or sell the Patents and Copyrights; (iii) in
connection with the exercise of any of the other remedies provided for in this
Agreement or any other Security Document, direct such Assignor to refrain, in
which event such Assignor shall refrain, from practicing the Patents and
Copyrights directly or indirectly; and (iv) direct such Assignor to execute such
other and further documents as the Collateral Agent may request further to
confirm the foregoing and to transfer ownership of the Patents and Copyrights to
the Collateral Agent for the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. PROTECTION OF COLLATERAL AGENT'S SECURITY. Each Assignor will
do nothing to impair the rights of the Collateral Agent in the Collateral. Each
Assignor will at all times keep its Inventory and Equipment insured in favor of
the Collateral Agent, at such Assignor's own expense to the extent and in the
manner provided in the Credit Agreement; all policies or certificates with
respect to such insurance (and any other insurance maintained by such Assignor)
(i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of
the Collateral Agent (including, without limitation, by naming the Collateral
Agent as additional insured or loss payee), (ii) shall state that such insurance
policies shall not be cancelled or revised without at least 30 days' prior
written notice thereof by the insurer to the Collateral Agent and (iii) shall
provide that the respective insurers irrevocably waive any and all rights of
subrogation with respect to the Collateral Agent and the Secured Creditors. The
Collateral Agent shall, at the time such proceeds of such insurance are
distributed to the Secured Creditors, apply such proceeds in accordance with
Section 7.4 hereof (it being understood that the receipt and distribution of
such proceeds shall be subject to the provisions of Section 4.02 of the Credit
Agreement). Each Assignor assumes all liability and responsibility in
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connection with the Collateral acquired by it and the liability of such Assignor
to pay the Obligations shall in no way be affected or diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to such Assignor.
6.2. WAREHOUSE RECEIPTS NON-NEGOTIABLE. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such Assignor shall request that such
warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as
such term is used in Section 7-104 of the Uniform Commercial Code as in effect
in any relevant jurisdiction or under other relevant law).
6.3. FURTHER ACTIONS. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
reasonably deems appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. FINANCING STATEMENTS. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time request or as are necessary or desirable in the opinion of the Collateral
Agent to establish and maintain a valid, enforceable and first priority
perfected security interest, subject only to Permitted Liens (i) existing on the
date hereof or (ii) otherwise having priority under applicable law, in the
Collateral as provided herein and in the other rights and security contemplated
hereby all in accordance with the Uniform Commercial Code as enacted in any and
all relevant jurisdictions or any other relevant law. Each Assignor will pay any
applicable filing fees, recordation taxes and related expenses relating to its
Collateral. Each Assignor hereby authorizes the Collateral Agent to file any
such financing statements without the signature of such Assignor where permitted
by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT. Each Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without notice
or process of law, and for that purpose may enter upon such
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Assignor's premises where any of the Collateral is located and remove the same
and use in connection with such removal any and all services, supplies, aids and
other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the terms
of such agreement, instrument or other obligation directly to the Collateral
Agent and may exercise any and all remedies of such Assignor in respect of such
Collateral;
(iii) withdraw all moneys, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with Section
7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or direct
the relevant Assignor to sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof, and, in each case, take possession of the
proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the Collateral
Agent at any place or places designated by the Collateral Agent in which event
such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or
places so designated by the Collateral Agent and there delivered to the
Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by the
Collateral Agent as provided in Section 7.2 hereof;
(z) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to protect the same
and to preserve and maintain them in good condition; and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents and Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent shall in
its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Administrative Agent or the Collateral Agent, in each case acting upon
the instructions of the Required Lenders (or, after the date on which all Credit
Document Obligations have been paid in full, the holders of at least a majority
of the outstanding Poth Obligations or, after the date on which all Credit
Document Obligations and Poth Obligations have been paid in full, the holders of
at least the majority of the outstanding Other Obligations) and that no other
Secured Creditor shall have any
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right individually to seek to enforce or to enforce this Agreement or to realize
upon the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Administrative Agent or the
Collateral Agent or the holders of at least a majority of the outstanding Other
Obligations, as the case may be, for the benefit of the Secured Creditors upon
the terms of this Agreement.
7.2. REMEDIES; DISPOSITION OF THE COLLATERAL. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. To the extent permitted by any such
requirement of law, the Collateral Agent and the other Secured Creditors may bid
for and become the purchaser of the Collateral or any item thereof, offered for
sale in accordance with this Section without accountability to the relevant
Assignor. If, under mandatory requirements of applicable law, the Collateral
Agent shall be required to make disposition of the Collateral within a period of
time which does not permit the giving of notice to the relevant Assignor as
hereinabove specified, the Collateral Agent need give such Assignor only such
notice of disposition as shall be reasonably prac ticable in view of such
mandatory requirements of applicable law. Each Assignor agrees to do or cause to
be done all such other acts and things as may be reasonably necessary to make
such sale or sales of all or any portion of the Collateral valid and binding and
in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
7.3. WAIVER OF CLAIMS. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF
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ANY OF THE COLLATERAL, and each Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by the Collateral Agent's taking of
possession of any of the Collateral except any damages which are the direct
result of the Collateral Agent's gross negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral Agent's
rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law in
order to prevent or delay the enforcement of this Agreement or the absolute sale
of the Collateral or any portion thereof, and each Assignor, for itself and all
who may claim under it, insofar as it or they now or hereafter lawfully may,
hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the relevant Assignor
therein and thereto, and shall be a perpetual bar both at law and in equity
against such Assignor and against any and all Persons claiming or attempting to
claim the Collateral so sold, optioned or realized upon, or any part thereof,
from, through and under such Assignor.
7.4. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or
Additional Security Documents require proceeds of collateral under such Security
Documents to be applied in accordance with the provisions of this Agreement, the
Pledgee or Mortgagee under such other Security Document) upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iv) and (v) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding Primary
Obligations (as defined below) shall be paid to the Secured Creditors as
provided in Section 7.4(e) hereof, with each Secured Creditor receiving an
amount equal to its outstanding Primary Obligations or, if the proceeds are
insufficient to pay in full all such Primary Obligations, its Pro Rata Share (as
defined below) of the amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding Secondary Obligations (as defined below) shall be paid to the
Secured Creditors as provided in Section 7.4(e) hereof, with each Secured
Creditor receiving an amount equal to its outstanding Secondary Obligations or,
if the proceeds are insufficient to pay in full all such Secondary Obligations,
its Pro Rata Share of the amount remaining to be distributed; and
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(iv) fourth, to the extent proceeds remain after the application
pursuant to the preceding clauses (i), (ii) and (iii) and following the
termination of this Agreement pursuant to Section 10.8 hereof, to the relevant
Assignor or, to the extent directed by such Assignor or a court of competent
jurisdiction, to whomever may be lawfully entitled to receive such surplus.
(b) For purposes of this Agreement, (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which is
the then outstanding amount of all Primary Obligations or Secondary Obligations,
as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the
Credit Document Obligations, all principal of, and interest on, all Loans, all
Unpaid Drawings theretofore made (together with all interest accrued thereon),
and the aggregate Stated Amounts of all Letters of Credit issued under the
Credit Agreement, and all Fees, (ii) in the case of Poth Obligations, all
principal of and interest on the Poth Loan and all fees payable in respect
thereof and (iii) in the case of the Other Obligations, all amounts due under
the Interest Rate Protection Agreements or Other Hedging Agreements (other than
indemnities, fees (including, without limitation, attorneys' fees) and similar
obligations and liabilities) and (z) "Secondary Obligations" shall mean all
Obligations other than Primary Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations (with the amount to be
applied by any Secured Creditor to its Primary Obligations to be applied (x)
first, to interest and (y) second, to any other Primary Obligations) and (ii)
second, to their Secondary Obligations. If any payment to any Secured Creditor
of its Pro Rata Share of any distribution would result in overpayment to such
Secured Creditor, such excess amount shall instead be distributed in respect of
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
the other Secured Creditors, with each Secured Creditor whose Primary
Obligations or Secondary Obligations, as the case may be, have not been paid in
full to receive an amount equal to such excess amount multiplied by a fraction
the numerator of which is the unpaid Primary Obligations or Secondary
Obligations, as the case may be, of such Secured Creditor and the denominator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of all Secured Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that if
the Bank Creditors are to receive a distribution on account of undrawn amounts
with respect to Letters of Credit issued under the Credit Agreement (which shall
only occur after all outstanding Loans and Unpaid Drawings with respect to such
Letters of Credit have been paid in full), such amounts shall be paid to the
Administrative Agent under the Credit Agreement and held by it, for the equal
and ratable benefit of the Bank Creditors, as cash security for the repayment of
Obligations owing to the Bank Creditors as such. If any amounts are held as cash
security pursuant to the immediately preceding sentence, then upon the
termination of all outstanding Letters of Credit, and after the application of
all such cash security to the repayment of all Obligations owing to the Bank
Creditors
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after giving effect to the termination of all such Letters of Credit, if there
remains any excess cash, such excess cash shall be returned by the
Administrative Agent to the Collateral Agent for distribution in accordance with
Section 7.4(a) hereof.
(e) Except as set forth in Section 7.4(c) hereof, all payments
required to be made to the Bank Creditors hereunder shall be made to the
Administrative Agent under the Credit Agreement for the account of the Bank
Creditors and all payments required to be made to the Other Creditors hereunder
shall be made directly to the respective Other Creditor.
(f) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Administrative Agent under the Credit Agreement and (ii) the Other Creditors for
a determination (which the Administrative Agent, each Other Creditor and the
Secured Creditors agree (or shall agree) to provide upon request of the
Collateral Agent) of the outstanding Obligations owed to the Bank Creditors or
the Other Creditors, as the case may be. Unless it has actual knowledge
(including by way of written notice from a Bank Creditor or an Other Creditor)
to the contrary, the Administrative Agent under the Credit Agreement, in
furnishing information pursuant to the preceding sentence, and the Collateral
Agent, in acting hereunder, shall be entitled to assume that (x) no Secondary
Obligations are owing to any Bank Creditor or Other Creditor and (y) no Interest
Rate Protection Agreement or Other Hedging Agreement, or Other Obligations in
respect thereof, are in existence.
(g) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the sums referred to in
clause (a) of this Section 7.4 with respect to the relevant Assignor.
7.5. REMEDIES CUMULATIVE. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements, the other
Credit Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover expenses, including attorneys' fees, and the amounts thereof shall be
included in such judgment.
7.6. DISCONTINUANCE OF PROCEEDINGS. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by
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foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case the relevant Assignor, the
Collateral Agent and each holder of any of the Obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest created under this Agreement, and all rights,
remedies and powers of the Collateral Agent shall continue as if no such
proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. INDEMNITY. (a) Each Assignor jointly and severally agrees to
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any Interest Rate Protection
Agreement or Other Hedging Agreement, any other Credit Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), the violation of the laws of any
country, state or other governmental body or unit, any tort (including, without
limitation, claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage), or contract claim; provided that no Indemnitee
shall be indemnified pursuant to this Section 8.1(a) for losses, damages or
liabilities to the extent caused by the gross negligence or willful misconduct
of such Indemnitee. Each Assignor agrees that upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, suit or judgment, the relevant Assignor shall
assume full responsibility for the defense thereof. Each Indemnitee agrees to
use its best efforts to promptly notify the relevant Assignor of any such
assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
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expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b)
hereof, each Assignor agrees, jointly and severally, to pay, indemnify and hold
each Indemnitee harmless from and against any loss, costs, damages and expenses
which such Indemnitee may suffer, expend or incur in consequence of or growing
out of any misrepresentation by any Assignor in this Agreement, any Interest
Rate Protection Agreement or Other Hedging Agreement, any other Credit Document
or in any writing contemplated by or made or delivered pursuant to or in
connection with this Agreement, any Interest Rate Protection Agreement or Other
Hedging Agreement, or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
8.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Loans under, and any Notes issued under, the Credit Agreement, the termination
of all Interest Rate Protection Agreements or Other Hedging Agreements and the
payment of all other Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Administrative Agent" shall have the meaning provided in the
recitals to this Agreement.
"Agreement" shall mean this Security Agreement, as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Borrower" shall have the meaning provided in the recitals to this
Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Creditors.
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"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of
this Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreement or Other Hedging Agreement), but excluding any contract to
the extent that the terms thereof prohibit (after giving effect to any approvals
or waivers) the assignment of, or granting a security interest in, such contract
(it being understood and agreed, however, that notwithstanding the foregoing,
all rights to payment for money due or to become due pursuant to any such
excluded contract shall be subject to the security interests created by this
Agreement).
"Copyrights" shall mean any United States or foreign copyright owned
by any Assignor, including any registrations of any Copyrights, in the United
States Copyright Office or the equivalent thereof in any foreign country, as
well as any application for a United States copyright registration now or
hereafter made with the United States Copyright Office by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals
to this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time,
or both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto; PROVIDED that the Equipment
shall not include any Equipment, that as of the date
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hereof, serves as security for any Existing Indebtedness permitted by the Credit
Agreement to remain outstanding as of the date hereof, but only to the extent
that (and so long as) the terms of such Existing Indebtedness specifically
prohibit the granting of a prior, PARI PASSU and junior Lien and security
interest in such Equipment, and then only so long as any such Existing
Indebtedness remains outstanding and shall be permitted to remain outstanding
pursuant to the terms of the Credit Agreement after which time such Equipment
shall be subject to the security interest and Liens created by this Agreement.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all products and proceeds of whatever
sort and wherever located and any portion thereof which may be returned,
rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's
customers, and shall specifically include all "inventory" as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor.
"Lenders" shall have the meaning provided in the recitals to this
Agreement.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any
United States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration of any trademarks
and service marks, or the equivalent thereof in any foreign country, in the
United States Patent and Trademark Office and any trade dress including logos
and/or designs used by any Assignor in the United States or any foreign country.
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"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document to which it is a party and the due
performance and compliance by each Assignor with the terms of each such Credit
Document (all such obligations and liabilities under this clause (i), except to
the extent consisting of obligations or indebtedness with respect to Interest
Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations"); (ii) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of each Assignor now existing or hereafter incurred under, arising out of or in
connection with, the Poth Loan, including, all obligations of such Assignor
under the Guaranty to which such Assignor is a party in respect of the Poth Loan
(all such obligations and liabilities under this clause (ii) being herein
collectively called the "Poth Obligations"); (iii) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor now existing or hereafter incurred under, arising out of or in con
nection with any Interest Rate Protection Agreement or Other Hedging Agreement
with the Secured Creditors including, in the case of Assignors other than the
Borrower, all obligations of such Assignor under the Guaranty to which such
Assignor is a party in respect of Interest Rate Protection Agreements or Other
Hedging Agreements (all such obligations and liabilities under this clause (iii)
being herein collectively called the "Other Obligations"); (iv) any and all sums
advanced by the Collateral Agent in order to preserve the Collateral or preserve
its security interest in the Collateral; (v) in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of any Assignor referred to in clauses (i), (ii) and (iii) above, after an Event
of Default shall have occurred and be continuing, the reasonable expenses of
re-taking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of
its rights hereunder, together with reasonable attorneys' fees and court costs;
and (vi) all amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement under Section 8.1 of this Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which
any Assignor now or hereafter has title and any divisions or continuations
thereof, as well as any application for a United States or foreign patent now or
hereafter made by any Assignor.
"Poth Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Poth Guaranty" shall have the meaning provided in the recitals to
this Agreement.
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"Poth Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX..
"Poth Loan" shall have the meaning provided in the recitals to this
Agreement.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or any Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Receivables" shall mean any "account" as such term is defined in
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and
indemnifications on, or of, any of the foregoing, (d) all powers of attorney for
the execution of any evidence of indebtedness or security or other writing in
connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Requisite Creditors" shall have the meaning provided in Section
10.2 of this Agreement.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
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<PAGE> 267
"Secured Creditors" shall have the meaning provided in the recitals
to this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8
of this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. NOTICES. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, NY 10006
Telephone No.: (212) 250-4169
Telecopier No.: (212) 250-7351
Attention: Joe Regan
(c) if to any Bank Creditor (other than the Collateral Agent), at
such address as such Bank Creditor shall have specified in the Credit Agreement;
(d) if to any Poth Creditor, (a) at such address as such Poth
Creditor shall have specified in writing to each Assignor and the Collateral
Agent, and (b) in the case of Bankers Trust Company, at:
Bankers Trust Company
130 Liberty Street, 14th Floor
New York, New York 10006
Telephone No.: (212) 215-9777
Telecopier No.: (212) 250-4488
Attention: Errol Harris
(e) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
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<PAGE> 268
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby and the
Collateral Agent (with the consent of either (x) the Required Lenders or, to the
extent required by Section 13.12 of the Credit Agreement, all of the Lenders, at
all times prior to the time on which all Credit Document Obligations have been
paid in full, (y) the holders of at least a majority of the Poth Obligations at
all times after the time on which all Credit Document Obligations have been paid
in full or (z) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
and all Poth Obligations have been paid in full); PROVIDED, that any change,
waiver, modification or variance affecting the rights and benefits of a single
Class of Secured Creditors (and not all Secured Creditors in a like or similar
manner) shall also require the written consent of the Requisite Creditors of
such Class of Secured Creditors. For the purpose of this Agreement, the term
"Class" shall mean each class of Secured Creditors, I.E., whether (x) the Bank
Creditors as holders of the Credit Document Obligations, (y) the Poth Creditors
as holders of the Poth Obligations, or (z) the Other Creditors as the holders of
the Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Lenders, (y) with respect to the Poth
Obligations, the holders of at least a majority of all Poth Obligations from
time to time outstanding, and (y) with respect to the Other Obligations, the
holders of at least a majority of all obligations outstanding from time to time
under the Interest Rate Protection Agreements or Other Hedging Agreements.
10.3. OBLIGATIONS ABSOLUTE. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; (c) any
renewal, extension, amendment or modification of or addition or supplement to or
deletion from any Credit Document or any Interest Rate Protection Agreement or
Other Hedging Agreement or any security for any of the Obligations; (d) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such agreement or instrument including, without limitation, this
Agreement; (e) any furnishing of any additional security to the Collateral Agent
or its assignee or any acceptance thereof or any release of any security by the
Collateral Agent or its assignee; or (f) any limitation on any party's liability
or obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement or
any term thereof; whether or not any Assignor shall have notice or knowledge of
any of the foregoing.
10.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and each other Secured Creditor and their respective
successors and assigns; PROVIDED, that no Assignor may transfer or assign any or
all of its rights or obligations hereunder without the prior written consent
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<PAGE> 269
of the Collateral Agent. All agreements, statements, representations and
warranties made by each Assignor herein or in any certificate or other
instrument delivered by such Assignor or on its behalf under this Agreement
shall be considered to have been relied upon by the Secured Creditors and shall
survive the execution and delivery of this Agreement, the other Credit Documents
and the Interest Rate Protection Agreements or Other Hedging Agreements
regardless of any investigation made by the Secured Creditors or on their
behalf.
10.5. HEADINGS DESCRIPTIVE. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
10.6. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
10.7. ASSIGNOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of any Assignor under or with
respect to any Collateral.
10.8. TERMINATION; RELEASE. (a) After the Termination Date, this
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note under the Credit Agreement is
outstanding (and all Loans have been repaid in full), all Letters of Credit have
been terminated, the Poth Loan has been paid in full and all Obligations then
owing have been paid in full.
(b) In the event that any part of the Collateral is sold (except to
the Borrower or any of its Subsidiaries) in connection with a sale permitted by
Section 9.02 of the Credit Agreement or otherwise released at the direction of
the Required Lenders (or all Lenders if required by Section 13.12 of the Credit
Agreement) and the proceeds of such sale or sales or from such release are
applied in accordance with the provisions of Section 4.02 of the Credit
Agreement, to the extent required to be so applied, such Collateral will be sold
free and clear of the Liens created by this Agreement and the Collateral Agent,
at the request and expense of the relevant Assignor, will duly
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<PAGE> 270
assign, transfer and deliver to such Assignor (without recourse and without any
representation or warranty) such of the Collateral as is then being (or has
been) so sold or released and has not theretofore been released pursuant to this
Agreement and will promptly execute and deliver to such Assignor a proper
instrument or instruments (including UCC termination statements on form UCC- 3)
acknowledging the release of such Collateral pursuant to this Agreement.
(c) At any time that an Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 10.8(a) or (b), as the case may be, it shall
deliver to the Collateral Agent a certificate signed by an Authorized Officer of
such Assignor stating that the release of the respective Collateral is permitted
pursuant to such Section 10.8(a) or (b), as the case may be.
(d) The Collateral Agent shall have no liability whatsoever to any
other Secured Creditor as a result of any release of Collateral by it in
accordance with this Section 10.8.
10.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
10.10. 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.
10.11. THE COLLATERAL AGENT. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and otherwise under this Agreement, are
only those expressly set forth in this Agreement and Section 12 of the Credit
Agreement. The Collateral Agent shall act hereunder and thereunder on the terms
and conditions set forth herein and in Section 12 of the Credit Agreement.
10.12. BENEFIT OF AGREEMENT. This Agreement shall be binding upon
the parties hereto and their respective successors and assigns and shall inure
to the benefit of and be enforceable by each of the parties hereto and its
successors and assigns.
10.13. ADDITIONAL ASSIGNORS. Any such Subsidiary established or
created after the date hereof and that is required to execute a counterpart of
this Agreement pursuant to the Credit Agreement shall automatically become an
Assignor hereunder by executing a counterpart hereof and delivering the same to
the Collateral Agent.
* * *
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<PAGE> 271
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
Address:
11103 West Avenue EYE CARE CENTERS OF
San Antonio, TX 78213 AMERICA, INC.
Attention: Douglas C. Shepard as Assignor
Telephone No.: (210) 524-6538
By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123
Title: Treasurer
11103 West Avenue EYE CARE HOLDINGS, INC.
San Antonio, TX 78213 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
11103 West Avenue ENCLAVE ADVANCEMENT
San Antonio, TX 78213 GROUP, INC., as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Title: Treasurer
Facsimile No.: (210) 340-0123
11103 West Avenue ECCA MANAGED VISION
San Antonio, TX 78213 CARE, INC., as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Title: Treasurer
Facsimile No.: (210) 340-0123
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<PAGE> 272
11103 West Avenue VISIONWORKS HOLDINGS, INC.,
San Antonio, TX 78213 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
11103 West Avenue VISIONWORKS, INC.,
San Antonio, TX 78213 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
11103 West Avenue VISIONWORKS PROPERTIES,
San Antonio, TX 78213 INC., as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
11103 West Avenue VISIONARY RETAIL
San Antonio, TX 78213 MANAGEMENT, INC.,
Attention: Douglas C. Shepard as Assignor
Telephone No.: (210) 524-6538
By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123
Title: Treasurer
11103 West Avenue VISIONARY PROPERTIES, INC.,
San Antonio, TX 78213 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
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<PAGE> 273
11103 West Avenue VISIONARY MSO, INC.,
San Antonio, TX 78213 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (210) 524-6538 By: /s/ Mark Pearson
-------------------------
Facsimile No.: (210) 340-0123 Title: Treasurer
5568 General Washington Drive THE SAMIT GROUP, INC.,
Alexandria, VA 22312 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive HOUR EYES, INC.,
Alexandria, VA 22312 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive SKYLAB OPTICAL, INC.,
Alexandria, VA 22312 as Assignor
Attention: Douglas C. Shepard
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
5568 General Washington Drive METROPOLITAN VISION
Alexandria, VA 22312 SERVICES, INC.,
Attention: Douglas C. Shepard as Assignor
Telephone No.: (800) 453-2020 By: /s/ Mark Pearson
Facsimile No.: (703) 941-2785 -------------------------
Title: Treasurer
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<PAGE> 274
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ Anthony LoGrippo
-------------------------
Title: Vice President
-31-
<PAGE> 275
ANNEX A to
SECURITY AGREEMENT
SCHEDULE OF CHIEF EXECUTIVE OFFICES
AND OTHER RECORD LOCATIONS
<PAGE> 276
ANNEX B to
SECURITY AGREEMENT
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
<PAGE> 277
ANNEX C to
SECURITY AGREEMENT
SCHEDULE OF TRADE AND FICTITIOUS NAMES
<PAGE> 278
ANNEX D to
SECURITY AGREEMENT
SCHEDULE OF MARKS
<PAGE> 279
ANNEX E to
SECURITY AGREEMENT
SCHEDULE OF PATENTS AND APPLICATIONS
<PAGE> 280
ANNEX F to
SECURITY AGREEMENT
SCHEDULE OF COPYRIGHTS AND APPLICATIONS
<PAGE> 281
ANNEX G to
SECURITY AGREEMENT
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of
which are hereby acknowledged, [Name of Assignor], a __________ corporation (the
"Assignor") with principal offices at ____________________________, hereby
assigns and grants to Bankers Trust Company, as Collateral Agent, with principal
offices at 130 Liberty Street, New York, New York 10006 (the "Assignee"), a
security interest in (i) all of the Assignor's right, title and interest in and
to the United States trademarks, trademark registrations and trademark
applications (the "Marks") set forth on Schedule A attached hereto, (ii) all of
the Assignor's right, title and interest in and to the United States patents and
pending patent applications (the "Patents") set forth on Schedule B attached
hereto, in each case together with (iii) all Proceeds (as such term is defined
in the Security Agreement referred to below) and products of the Marks and
Patents, (iv) the goodwill of the businesses with which the Marks are associated
and (v) all causes of action arising prior to or after the date hereof for
infringement of any of the Marks and Patents or unfair competition regarding the
same.
THIS ASSIGNMENT OF SECURITY INTEREST is made to secure the
satisfactory performance and payment of all the Obligations of the Assignor, as
such term is defined in the Security Agreement among the Assignor, the other
assignors from time to time party thereto and the Assignee, dated as of April
__, 1998 (as amended from time to time, the "Security Agreement").
<PAGE> 282
ANNEX G
Page 2
Upon the occurrence of the Termination Date (as defined in the Security
Agreement), the Assignee shall, upon such satisfaction, execute, acknowledge,
and deliver to the Assignor an instrument in writing releasing the security
interest in the Marks and Patents acquired under this Assignment of Security
Interest.
This Assignment of Security Interest has been granted in conjunction
with the security interest granted to the Assignee under the Security Agreement.
The rights and remedies of the Assignee with respect to the security interest
granted herein are without prejudice to, and are in addition to those set forth
in the Security Agreement, all terms and provisions of which are incorporated
herein by reference. In the event that any provisions of this Assignment of
Security Interest are deemed to conflict with the Security Agreement, the
provisions of the Security Agreement shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Security Interest as of the ____ day of _________, 199__.
[NAME OF ASSIGNOR], Assignor
BY:
--------------------------
NAME:
TITLE:
-2-
<PAGE> 283
ANNEX G
Page 2
BANKERS TRUST COMPANY,
as Collateral Agent, Assignee
BY:
--------------------------
NAME:
TITLE:
-3-
<PAGE> 284
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 199_, before me personally came
_________________________ who, being by me duly sworn, did state as follows:
that [s]he is _______________ of [Name of Assignor], that [s]he is authorized to
execute the foregoing Assignment of Security Interest on behalf of said
corporation and that [s]he did so by authority of the Board of Directors of said
corporation.
-------------------------
Notary Public
<PAGE> 285
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of _________, 199_, before me personally came
_____________________________ who, being by me duly sworn, did state as follows:
that [s]he is __________________ of Bankers Trust Company, that [s]he is
authorized to execute the foregoing Assignment of Security Interest on behalf of
said corporation and that [s]he did so by authority of the Board of Directors of
said corporation.
-------------------------
Notary Public
<PAGE> 286
SCHEDULE A
<TABLE>
<CAPTION>
MARK REG. NO. REG. DATE
---- -------- ---------
<S> <C> <C>
</TABLE>
<PAGE> 287
SCHEDULE B
<TABLE>
<CAPTION>
PATENT PATENT NO. ISSUE DATE
------ ---------- ----------
<S> <C> <C>
</TABLE>
<PAGE> 288
ANNEX H
ASSIGNMENT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Assignor], a _______________ corporation (the
"Assignor"), having its chief executive office at ________________________,
_________________, is the owner of all right, title and interest in and to the
United States copyrights and associated United States copyright registrations
and applications for registration set forth in Schedule A attached hereto;
WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its
principal offices at 130 Liberty Street, New York, New York 10006 (the
"Assignee"), desires to acquire a security interest in, and lien upon, all of
Assignor's right, title and interest in and to Assignor's copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Assignor is willing to assign and grant to the Assignee
a security interest in, and lien upon, the copyrights and copyright
registrations and applications therefor described above.
NOW, THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, and subject to the terms and
conditions of the Security Agreement, dated as of April __, 1998, made by the
Assignor, the other assignors from time to time party thereto and the Assignee
(as amended from time to time, the "Security Agreement"), the Assignor hereby
assigns and grants to the Assignee a security interest in, and lien upon, all of
Assignor's right, title and interest in and to Assignor's copyrights and
copyright registrations and
<PAGE> 289
ANNEX H
applications therefor set forth in Schedule A attached hereto (the
"Copyrights"), together with (i) all Proceeds (as such term is defined in the
Security Agreement referred to below) of the Copyrights, and (ii) all causes of
action arising prior to or after the date hereof for infringement of any
Copyright.
This Assignment of Security Interest is made to secure the
satisfactory performance and payment of all Obligations (as such term is defined
in the Security Agreement) of the Assignor and shall be effective as of the date
of the Security Agreement. Upon the occurrence of the Termination Date (as such
term is defined in the Security Agreement), the Assignee shall, upon such
satisfaction, execute, acknowledge, and deliver to Assignor an instrument in
writing releasing the security interest in the Copyrights acquired under this
Assignment of Security Interest.
This Assignment of Security Interest has been granted in conjunction
with the security interest granted to the Assignee under the Security Agreement.
The rights and remedies of the Assignee with respect to the security interest
granted herein are without prejudice to, and are in addition to those set forth
in the Security Agreement, all terms and provisions of which are incorporated
herein by reference. In the event that any provisions of this Assignment are
deemed to conflict with the Security Agreement, the provisions of the Security
Agreement shall govern.
-5-
<PAGE> 290
IN WITNESS WHEREOF, the undersigned have executed this Assignment of
Security Interest at New York, New York as of the __ day of ____________, 199_.
<PAGE> 291
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ________, 199_ before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Assignor], that [s]he is authorized to execute
the foregoing Assignment of Security Interest on behalf of said corporation and
that [s]he did so by authority of the Board of Directors of said corporation.
-------------------------
Notary Public
<PAGE> 292
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of ________, 199_ before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
_______________ of Bankers Trust Company, that [s]he is authorized to execute
the foregoing Assignment of Security Interest on behalf of said corporation and
that [s]he did so by authority of the Board of Directors of said corporation.
-------------------------
Notary Public
<PAGE> 293
SCHEDULE A
COPYRIGHTS
<TABLE>
<CAPTION>
REGISTRATION PUBLICATION
NUMBERS DATE COPYRIGHT TITLE
------- ---- ---------------
<S> <C> <C>
</TABLE>
<PAGE> 294
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
SECURITY INTERESTS...........................................................2
1.1. Grant of Security Interests......................................2
1.2. Power of Attorney................................................2
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS............................3
2.1. Necessary Filings................................................3
2.2. No Liens.........................................................3
2.3. Other Financing Statements.......................................3
2.4. Chief Executive Office; Records..................................3
2.5. Location of Inventory and Equipment..............................4
2.6. Recourse.........................................................4
2.7. Trade Names; Change of Name......................................4
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS....................................5
3.1. Additional Representations and Warranties........................5
3.2. Maintenance of Records...........................................5
3.3. Direction to Account Debtors; Contracting Parties; etc...........6
3.4. Modification of Terms; etc.......................................6
3.5. Collection.......................................................6
3.6. Instruments......................................................7
3.7. Assignors Remain Liable Under Receivables........................7
3.8. Assignors Remain Liable Under Contracts..........................7
3.9. Further Actions..................................................7
ARTICLE IV
(1)
<PAGE> 295
Page
----
SPECIAL PROVISIONS CONCERNING TRADEMARKS.....................................8
4.1. Additional Representations and Warranties........................8
4.2. Licenses and Assignments.........................................8
4.3. Infringements....................................................8
4.4. Preservation of Marks............................................8
4.5. Maintenance of Registration......................................9
4.6. Future Registered Marks..........................................9
4.7. Remedies.........................................................9
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS........................................9
5.1. Additional Representations and Warranties........................9
5.2. Licenses and Assignments........................................10
5.3. Infringements...................................................10
5.4. Maintenance of Patents or Copyrights............................10
5.5. Prosecution of Patent or Copyright Application..................10
5.6. Other Patents or Copyrights.....................................10
5.7. Remedies........................................................11
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL........................................11
6.1. Protection of Collateral Agent's Security.......................11
6.2. Warehouse Receipts Non-negotiable...............................11
6.3. Further Actions.................................................12
6.4. Financing Statements............................................12
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT................................12
7.1. Remedies; Obtaining the Collateral Upon Default.................12
7.2. Remedies; Disposition of the Collateral.........................13
7.3. Waiver of Claims................................................14
7.4. Application of Proceeds.........................................15
7.5. Remedies Cumulative.............................................17
7.6. Discontinuance of Proceedings...................................17
(2)
<PAGE> 296
Page
----
ARTICLE VIII
INDEMNITY...................................................................18
8.1. Indemnity.......................................................18
8.2. Indemnity Obligations Secured by Collateral; Survival...........19
ARTICLE IX
DEFINITIONS.................................................................19
ARTICLE X
MISCELLANEOUS...............................................................24
10.1. Notices........................................................24
10.2. Waiver; Amendment..............................................24
10.3. Obligations Absolute...........................................25
10.4. Successors and Assigns.........................................25
10.5. Headings Descriptive...........................................26
10.6. Governing Law..................................................26
10.7. Assignor's Duties..............................................26
10.8. Termination; Release...........................................26
10.9. Counterparts...................................................27
10.10. Severability..................................................27
10.11. The Collateral Agent..........................................27
10.12. Benefit of Agreement..........................................27
10.13. Additional Assignors..........................................27
ANNEX A Schedule of Chief Executive Offices and Other Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade and Fictitious Names
ANNEX D Schedule of Marks
ANNEX E Schedule of Patents and Applications
ANNEX F Schedule of Copyrights and Applications
ANNEX G Assignment of Security Interest in United States Trademarks and Patents
ANNEX H Assignment of Security Interest in United States Copyrights
(3)
<PAGE> 297
EXHIBIT K
ASSIGNMENT AND ASSUMPTION AGREEMENT
Date: _______ __, 19__
Reference is made to the Credit Agreement described in Item 2 of
Annex I hereto (as such Credit Agreement may hereafter be amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"). Unless defined
in Annex I hereto, terms defined in the Credit Agreement are used herein as
therein defined. _____________________ (the "Assignor") and _________________
(the "Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I hereto (the "Assigned Share") of all of
the outstanding rights and obligations under the Credit Agreement relating to
the facilities listed in Item 4 of Annex I hereto, including, without
limitation, [(x) in the case of any assignment of all or any portion of the
Total Term Loan Commitment, all rights and obligations with respect to the
Assigned Share of such Total Term Loan Commitment,](1) [(y) in the case of any
assignment of all or any portion of the Total Acquisition Loan Commitment, all
rights and obligations with respect to the Assigned Share of such Total
Acquisition Loan Commitment,](2) and (z) in the case of any assignment of all or
any portion of the Total Revolving Loan Commitment, all rights and obligations
with respect to the Assigned Share of such Total Revolving Loan Commitment and
of any outstanding Revolving Loans, Swingline Loans and Letters of Credit. After
giving effect to such sale and assignment, the Assignee's Revolving Loan
Commitment[, Term Loan Commitment],(3) [Acquisition Loan Commitment](4) and the
amount of the outstanding Term Loans, Acquisition Loans and Revolving Loans
owing to the Assignee will be as set forth in Item 4 of Annex I hereto.
- --------
(1) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Term Loan Commitment.
(2) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Total Acquisition Loan Commitment.
(3) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Term Loan Commitment.
(4) Delete bracketed language in Assignment and Assumption Agreements executed
after the termination of the Acquisition Loan Commitment.
<PAGE> 298
EXHIBIT K
Page 2
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) 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 other Credit Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement or the
other Credit Documents or any other instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its Subsidiaries or the performance or observance by the Borrower or any of its
Subsidiaries of any of their obligations under the Credit Agreement or the other
Credit Documents to which they are a party or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein 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 Assumption Agreement; (ii) agrees
that it will, independently and without reliance upon the Administrative Agent,
the Assignor or any other Lender or Agent and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is an Eligible Transferee under Section 13.04(b) of the
Credit Agreement; (iv) appoints and authorizes the Administrative Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Administrative Agent and the Collateral Agent, as the case may
be, by the terms thereof, together with such powers as are reasonably incidental
thereto; [and] (v) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be performed by it as a Lender[; and (vii) to the extent legally entitled to
do so, attaches the forms described in Section 13.04(b) of the Credit
Agreement](5).
4. Following the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee, an executed original hereof
(together with all attachments) will be delivered to the Administrative Agent.
This Assignment and Assumption Agreement shall be effective, unless otherwise
specified in Item 5 of Annex I hereto (the "Settlement Date"), upon the receipt
of the consent of the Administrative Agent and the Borrower to the extent
required by Section 13.04(b) of the Credit Agreement, receipt by the
Administrative Agent of the administrative
- --------
(5) Include if the Assignee is organized under the laws of a jurisdiction
outside of the United States.
<PAGE> 299
EXHIBIT K
Page 3
fee referred to in such Section 13.04(b), and the registration of the transfer
as provided by Section 13.17 of the Credit Agreement.
5. Upon the Settlement Date of this Assignment and Assumption
Agreement, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Assumption Agreement, have the rights and
obligations of a Lender thereunder and under the other Credit Documents and (ii)
the Assignor shall, to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement and the other Credit Documents except with respect to
indemnification provisions under the Credit Agreement (including without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06).
6. It is agreed that the Assignee shall be entitled to (x) all
interest on the Assigned Share of the Loans at the rates specified in Item 6 of
Annex I; (y) all Commitment Commission (if applicable) on the Assigned Share of
the Total Revolving Loan Commitment and/or Total Term Loan Commitment (if not
theretofore terminated) at the rate specified in Item 7 of Annex I hereto; and
(z) all Letter of Credit Fees (if applicable) on the Assignee's participation in
all Letters of Credit at the rate specified in Item 8 of Annex I hereto, which,
in each case, accrue on and after the Settlement Date, such interest and, if
applicable, Commitment Commission and Letter of Credit Fees, to be paid by the
Administrative Agent directly to the Assignee. It is further agreed that all
payments of principal made on the Assigned Share of the Loans which occur on and
after the Settlement Date will be paid directly by the Administrative Agent to
the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor
an amount specified by the Assignor in writing which represents the Assigned
Share of the principal amount of the respective Loans made by the Assignor
pursuant to the Credit Agreement which are outstanding on the Settlement Date,
and which are being assigned hereunder. The Assignor and the Assignee shall make
all appropriate adjustments in payments under the Credit Agreement for periods
prior to the Settlement Date directly between themselves.
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 300
EXHIBIT K
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Assignment and Assumption
Agreement, as of the date first above written, such execution also being made on
Annex I hereto.
Accepted this ____ day [NAME OF ASSIGNOR]
of _______, 19__ as Assignor
By _______________________
Title:
[NAME OF ASSIGNEE]
as Assignee
Acknowledged: By _______________________
Title:
BANKERS TRUST COMPANY
as Administrative Agent
By: ___________________________
Title:
[EYE CARE CENTERS OF AMERICA,
INC,
By: ___________________________
Title:](6)
- --------
(6) Consent of the Borrower required in certain circumstances.
<PAGE> 301
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
Borrower: Eye Care Centers of America, Inc.
Name and Date of Credit Agreement:
Credit Agreement, dated as of April 23, 1998 among Eye Care Centers of
America, Inc., various lending institutions from time to time party thereto,
Bankers Trust Company, as Administrative Agent for such Lender, and Merrill
Lynch Capital Corporation, as Syndication Agent.
Date of Assignment Agreement:
Amounts (as of date of item #3 above):
<TABLE>
<CAPTION>
[Total Term [Total Outstanding Outstanding Revolving
Loan Acquisition Principal of Principal of Loan
Commitment Loan Term Loans Acquisition Commitment
---------- Commitment ---- ----- Loans ----------
---------- -----
<S> <C> <C> <C> <C> <C>
a. Aggregate Amount for all $__________ $__________ $__________ $__________ $_________
Lenders
b. Assigned Share __________% __________% __________% __________% _________%
c. Amount of Assigned Share $________](7) $________](8) $__________ $_________ $_________
</TABLE>
Settlement Date:
- --------
(7) This column should be deleted in the case of Assignment and Assumption
Agreements executed after the termination of the Total Term Loan Commitment.
(8) This column should be deleted in the case of Assignment and Assumption
Agreements executed after the termination of the Total Acquisition Loan
Commitment.
<PAGE> 302
Annex I
Page 2
1. Rate of Interest As set forth in Section 1.08 of the
to the Assignee: Credit Agreement (unless otherwise agreed
to by the Assignor and the Assignee)(9)
2. Commitment As set forth in Section 3.01(a) of
Commission to the the Credit Agreement (unless otherwise agreed
Assignee: to by the Assignor and the Assignee)(10)
3. Letter of Credit As set forth in Section 3.01(b) of
Fees to the the Credit Agreement (unless otherwise agreed
Assignee: to by the Assignor and the Assignee)(11)
4. Notice:
- --------
(9) The Borrower and the Administrative Agent shall direct the entire amount of
the interest to the Assignee at the rate set forth in Section 1.08 of the Credit
Agreement, with the Assignor and Assignee effecting the agreed upon sharing of
the interest through payments by the Assignee to the Assignor.
(10) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. The Borrower and the Administrative
Agent shall direct the entire amount of the Commitment Commission to the
Assignee at the rate set forth in Section 3.01(a) of the Credit Agreement, with
the Assignor and the Assignee effecting the agreed upon sharing of Commitment
Commission through payment by the Assignee to the Assignor.
(11) Insert "Not Applicable" in lieu of text if no portion of the Total
Revolving Loan Commitment is being assigned. Otherwise, the Borrower and the
Administrative Agent shall direct the entire amount of the Letter of Credit Fees
to the Assignee at the rate set forth in Section 3.10(b) of the Credit
Agreement, with the Assignor and the Assignee effecting the agreed upon sharing
of Letter of Credit Fees through payment by the Assignee to the Assignor.
<PAGE> 303
Annex I
Page 3
ASSIGNOR:
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
ASSIGNEE:
---------------------
---------------------
---------------------
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
---------------------
---------------------
---------------------
Attention:
Reference:
ASSIGNEE:
---------------------
---------------------
---------------------
Attention:
<PAGE> 304
Annex I
Page 4
Reference:
<PAGE> 305
Annex I
Page 5
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
----------------------- ----------------------
----------------------- ----------------------
(Print Name and Title) (Print Name and Title)
<PAGE> 1
EYE CARE CENTERS OF AMERICA, INC.
$150,000,000
$100,000,000 9 1/8% Senior Subordinated Notes due 2008
$50,000,000 Floating Interest Rate
Subordinated Term Securities due 2008 (FIRSTS)
<PAGE> 2
PURCHASE AGREEMENT
April 17, 1998
BT ALEX. BROWN INCORPORATED
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
c/o BT Alex. Brown Incorporated
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Eye Care Centers of America, Inc., a Texas corporation (the "Company"),
and each Guarantor (as defined) hereby confirm their agreement with each of you
(collectively, the "Initial Purchasers"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$100,000,000 aggregate principal amount of its 9 1/8% Senior Subordinated Notes
due 2008 (the "Fixed Rate Notes") and $50,000,000 aggregate principal amount of
its Floating Interest Rate Subordinated Term Securities due 2008 (the "Floating
Rate Notes" and, together with the Fixed Rate Notes, the "Notes"). The Notes are
to be issued under an indenture (the "Indenture") to be dated as of April 24,
1998 by and between the Company, the Guarantors and United States Trust Company
of New York, as Trustee (the "Trustee"). The Notes will be guaranteed
(collectively, the "Guarantees") on an unsecured senior subordinated basis by
each of the Company's domestic subsidiaries listed on the signature pages hereof
(collectively, and together with any subsidiary that in the future executes a
supplemental indenture pursuant to which such subsidiary agrees to guarantee the
Notes, the "Guarantors"). The Notes and the Guarantees are collectively referred
to herein as the "Securities." The Company and the Guarantors are collectively
referred to herein as the "Issuers".
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Act"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has prepared
a preliminary offering memorandum dated March 31, 1998 (the "Preliminary
Memorandum"), and a final offering memorandum dated April 17, 1998 (the "Final
Memorandum"; the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "Memorandum") setting forth or including a description of
the terms of the Securities, the terms of the offering of the Securities, a
description of the Company, a description of the Recapitalization (as defined
below) and any material developments relating to the Company occurring after the
date
- 2 -
<PAGE> 3
of the most recent historical financial statements included therein.
The Initial Purchasers and their direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Issuers have agreed,
among other things, to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the Securities or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act.
As described in the Preliminary Memorandum and the Final Memorandum,
the offering of the Notes is part of an over-all recapitalization of the Company
(the "Recapitalization"), pursuant to which the Company has entered into a
recapitalization agreement (the "Recapitalization Agreement"), dated as of March
6 1998, whereby a Delaware corporation formed by the Thomas H. Lee Company ("THL
Co.") will merge with and into the Company (the "Merger"). Upon consummation of
the Merger, THL Fund IV, L.P. and other affiliates of THL Co. (together, "THL")
will own approximately 90.1% of the issued and outstanding shares of Common
Stock of the Company (the "Common Stock"), existing shareholders (including
management) of the Company will retain approximately 7.3% of the issued and
outstanding Common Stock and management will purchase additional shares
representing approximately 2.6% of the issued and outstanding Common Stock. In
connection with the Recapitalization, (i) the Company and the Guarantors will
enter into a new credit facility (the "New Credit Facility") with Bankers Trust
New York Corporation, as administrative agent, and Merrill Lynch Capital
Corporation, as syndication agent, providing for a $55.0 million term loan
facility, a $35.0 million revolving credit facility, and a $100.0 million
acquisition facility and (ii) the Company will receive up to $99.1 million (the
"Equity Contribution") from the sale of capital stock to THL, Bernard W. Andrews
and other members of management consisting of (i) approximately $71.4 million
from the sale of Common Stock and (ii) approximately $27.8 million from the sale
of New Preferred Stock of the Company (the "New Preferred Stock").
2. Representations and Warranties. The Company represents and warrants
to and agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof
nor the Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as defined
in Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to any of the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
- 3 -
<PAGE> 4
(b) As of the Closing Date (after giving effect to the
Recapitalization), the Company will have the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the domestic
subsidiaries of the Company are listed in Schedule 2 attached hereto (each, a
"Subsidiary" and collectively, the "Subsidiaries"); all of the outstanding
shares of capital stock of the Company and the Subsidiaries have been, and as of
the Closing Date will be, duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights; all of the outstanding shares of capital stock of the Company and of
each of the Subsidiaries will be free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability or voting (other than
liens, restrictions and encumbrances imposed in favor of the lenders under the
New Credit Facility and restrictions and encumbrances in the Shareholders
Agreement to be entered into in connection with the Recapitalization and other
than those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions); except as set forth in the Final Memorandum, after giving effect
to the Recapitalization, there are no (i) options, warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests in the Company or any of the Subsidiaries
outstanding. Except for the Subsidiaries or as disclosed in the Final
Memorandum, the Company does not own, directly or indirectly, any shares of
capital stock or any other equity or long-term debt securities or have any
equity interest in any firm, partnership, joint venture or other entity.
(c) Each of the Company and the Subsidiaries is duly
incorporated, validly existing and in good corporate standing under the laws of
its respective jurisdiction of incorporation and has all requisite corporate
power and authority to own its properties and conduct its business as now
conducted and as described in the Final Memorandum; each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business affairs, management,
business, condition (financial or otherwise) or results of operations of the
Company and the Subsidiaries, taken as a whole (any such event, a "Material
Adverse Effect").
(d) The Company has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under the
Notes, the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Notes, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance with
the provisions of the Indenture and, in the case of the Notes, when delivered to
and paid for by the Initial Purchasers in accordance with the terms of this
Agreement, will constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the Company
in accordance with their terms, except that the enforcement
- 4 -
<PAGE> 5
thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(e) Each Guarantor has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under its
Guarantee, its guarantee of the Exchange Notes (each, an "Exchange Notes
Guarantee") and its guarantee of the Private Exchange Notes (each, a "Private
Exchange Notes Guarantee"). The Guarantees, when issued, will be in the form
contemplated by the Indenture. The Guarantees, the Exchange Notes Guarantees and
the Private Exchange Notes Guarantees have each been duly and validly authorized
by the Guarantors and, in the case of the Guarantees, when delivered to and paid
for by the Initial Purchasers in accordance with the terms of this Agreement,
will constitute valid and legally binding obligations of the Guarantors,
entitled to the benefits of the Indenture, and enforceable against the
Guarantors in accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(f) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by each of the Issuers and, when executed and delivered by each of
the Issuers (assuming the due authorization, execution and delivery by the
Trustee), will constitute a valid and legally binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(g) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and, when executed and delivered by each of
the Issuers, will constitute a valid and legally binding agreement of the
Issuers enforceable against the Issuers in accordance with its terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
- 5 -
<PAGE> 6
(h) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
consummation by each of the Issuers of the transactions contemplated hereby have
been duly and validly authorized by the Issuers. This Agreement has been duly
executed and delivered by each of the Issuers.
(i) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the New Credit
Facility. The New Credit Facility has been duly and validly authorized by each
of the Issuers and, when executed and delivered by each of the Issuers, will
constitute a valid and legally binding agreement of the Issuers enforceable
against the Issuers in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(j) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Recapitalization Agreement. The Recapitalization Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes a
valid and legally binding agreement of the Company enforceable against the
Company in accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought. The Company has furnished the
Initial Purchasers with a true and correct conformed copy of the
Recapitalization Agreement, as in effect on the date hereof.
(k) No consent, approval, authorization or order of any court
or governmental agency or body, or third party is required for the issuance and
sale by the Issuers of the Securities to the Initial Purchasers or the
consummation by the Issuers of the Recapitalization or the other transactions
contemplated hereby, except such as have been obtained and such as may be
required under state securities or "Blue Sky" laws in connection with the
purchase and resale of the Securities by the Initial Purchasers. None of the
Company or the Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws (or similar organizational document), (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to any of them or any of their respective properties or assets, except for any
such breach or violation which would not, individually or in the aggregate, have
a Material Adverse Effect, or (iii) in breach of or default under (nor has any
event occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
- 6 -
<PAGE> 7
respective properties or assets is subject (collectively, "Contracts"), except
for any such breach, default, violation or event which would not, individually
or in the aggregate, have a Material Adverse Effect.
(l) The execution, delivery and performance by each of the
Issuers of this Agreement, the Indenture, the Registration Rights Agreement and
the New Credit Facility and the consummation by the Issuers of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
sale of the Securities to the Initial Purchasers) will not conflict with or
constitute or result in a breach of or a default under (or an event which with
notice or passage of time or both would constitute a default under) or violation
of any of (i) the terms or provisions of any Contract, except for any such
conflict, breach, violation, default or event which would not, individually or
in the aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the Company or
any of the Subsidiaries, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the representations
and warranties of the Initial Purchasers in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to the Company or any of
the Subsidiaries or any of their respective properties or assets, except for any
such conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(m) The audited consolidated financial statements (including
the notes thereto) of the Company and the Subsidiaries included in the Final
Memorandum present fairly in all material respects the financial position,
results of operations and cash flows of the Company and the Subsidiaries at the
dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except as otherwise stated therein. The summary and selected financial
and statistical data (including the notes thereto) in the Final Memorandum
present fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein. To the
Company's knowledge, Ernst & Young LLP (the "Independent Accountants") is an
independent public accounting firm within the meaning of the Act and the rules
and regulations promulgated thereunder.
(n) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the bases described
therein; the assumptions used in the preparation of the pro forma financial data
and other pro forma financial information included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
- 7 -
<PAGE> 8
(o) The audited consolidated financial statements (including
the notes thereto) of each of The Samit Organization ("TSO") and Visionworks
Holdings, Inc. ("Visionworks") included in the Final Memorandum present fairly
in all material respects the financial position, results of operations and cash
flows of TSO and Visionworks, as applicable, at the dates and for the periods to
which they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as otherwise stated
therein. To the Company's knowledge, Beers & Cutler PLLC and KPMG Peat Marwick
LLP are independent public accountants within the meaning of the Act and the
rules and regulations promulgated thereunder with respect to TSO and
Visionworks, respectively.
(p) Except as disclosed in the Final Memorandum, there is not
pending or, to the knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation to which the Company or any of the
Subsidiaries is a party, or to which the property or assets of the Company or
any of the Subsidiaries are subject, before or brought by any court, arbitrator
or governmental agency or body which, if determined adversely to the Company or
any of the Subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the consummation of the Recapitalization or the other
transactions described in the Final Memorandum.
(q) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently required or
necessary to own or lease, as the case may be, and to operate its respective
properties and to carry on its respective businesses as now or proposed to be
conducted as set forth in the Final Memorandum ("Permits"), except where the
failure to obtain such Permits would not, individually or in the aggregate, have
a Material Adverse Effect; each of the Company and the Subsidiaries has
fulfilled and performed in all material respects all of its obligations with
respect to such Permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such Permit;
and none of the Company or the Subsidiaries has received any notice of any
proceeding relating to revocation or modification of any such Permit, except as
described in the Final Memorandum or except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect.
(r) Since the date of the most recent financial statements
appearing in the Final Memorandum, except as described therein, (i) none of the
Company or the Subsidiaries has incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the business affairs, management, business,
condition (financial or otherwise) or
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<PAGE> 9
results of operations of the Companies and its Subsidiaries, taken as a whole,
(ii) the Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on its
capital stock and (iii) there shall not have been any material change in the
capital stock or increase in long-term indebtedness of the Company or the
Subsidiaries.
(s) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries that would have, individually or
in the aggregate, a Material Adverse Effect.
(t) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate.
(u) None of the Company, the Subsidiaries or any agent acting
on their behalf has taken or will take any action that might cause this
Agreement or the sale of the Securities to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in effect,
or as the same may hereafter be in effect, on the Closing Date.
(v) Each of the Company and the Subsidiaries has good and
marketable title to all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good and marketable
title to any leasehold estate in the real and personal property described in the
Final Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect. All leases, contracts and agreements
to which the Company or any of the Subsidiaries is a party or by which any of
them is bound are valid and enforceable against the Company or such Subsidiary,
and, to the Company's or such Subsidiary's knowledge, are valid and enforceable
against the other party or parties thereto and are in full force and effect with
only such exceptions as would not, individually or in the aggregate, have a
Material Adverse Effect. The Company and the Subsidiaries own or possess
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by them as described in the Final Memorandum, and none
of the Company or the Subsidiaries has received any notice of infringement of or
conflict with (or knows of any such infringement of or conflict with) asserted
rights of others with respect to any patents, trademarks, service marks, trade
names,
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<PAGE> 10
copyrights or know-how which, if such assertion of infringement or conflict were
sustained, would have a Material Adverse Effect.
(w) There are no legal or governmental proceedings involving
or affecting the Company or any Subsidiary or any of their respective properties
or assets which would be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum, nor are there any
material contracts or other documents which would be required to be described in
a prospectus pursuant to the Act that are not described in the Final Memorandum.
(x) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, to the Company's knowledge, (A) each of the
Company and the Subsidiaries is in compliance with and not subject to liability
under applicable Environmental Laws (as defined below), (B) each of the Company
and the Subsidiaries has made all filings and provided all notices required
under any applicable Environmental Law, and has and is in compliance with all
Permits required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company or any of the Subsidiaries, threatened against the Company or any
of the Subsidiaries under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any Environmental Law with
respect to any assets, facility or property owned, operated, leased or
controlled by the Company or any of the Subsidiaries, (E) none of the Company or
the Subsidiaries has received notice that it has been identified as a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA") or any comparable
state law, (F) no property or facility of the Company or any of the Subsidiaries
is (i) listed or proposed for listing on the National Priorities List under
CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials, and (iii) underground
and above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(y) There is no strike, labor dispute, slowdown or work
stoppage with the
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<PAGE> 11
employees of the Company or any of the Subsidiaries which is pending or, to the
knowledge of the Company or any of the Subsidiaries, threatened.
(z) Each of the Company and the Subsidiaries carries insurance
in such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties.
(aa) None of the Company or the Subsidiaries has any material
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any of the Subsidiaries
makes or ever has made a contribution and in which any employee of the Company
or of any Subsidiary is or has ever been a participant. With respect to such
plans, the Company and each Subsidiary is in compliance in all material respects
with all applicable provisions of ERISA.
(bb) Each of the Company and the Subsidiaries (i) makes and
keeps in all material respects accurate books and records and (ii) maintains
internal accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing assets at
reasonable intervals.
(cc) None of the Company or the Subsidiaries will be an
"investment company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(dd) The Securities, the Indenture, the Registration Rights
Agreement, the New Preferred Stock and the New Credit Facility will conform in
all material respects to the descriptions thereof in the Final Memorandum. The
Recapitalization Agreement conforms in all material respects to the description
thereof in the Final Memorandum.
(ee) No holder of securities of the Company or any Subsidiary
will be entitled to have such securities registered under the registration
statements required to be filed by the Company pursuant to the Registration
Rights Agreement other than as expressly permitted thereby.
(ff) Immediately after the consummation of the transactions
contemplated by this Agreement, the New Credit Facility and the Recapitalization
Agreement, the fair value and present fair saleable value of the assets of each
of the Issuers will exceed the sum of its stated liabilities and identified
contingent liabilities; none of the Issuers is, nor will any of the
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<PAGE> 12
Issuers be, after giving effect to the execution, delivery and performance of
this Agreement, the New Credit Facility and the Recapitalization Agreement, and
the consummation of the transactions contemplated hereby and thereby, (a) left
with unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (b) unable to pay its debts (contingent or otherwise)
as they mature or (c) otherwise insolvent.
(gg) None of the Company, the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act)
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any "security" (as defined in the
Act) which is or could be integrated with the sale of the Securities in a manner
that would require the registration under the Act of the Securities or (ii)
engaged in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) in connection with the offering of
the Securities or in any manner involving a public offering within the meaning
of Section 4(2) of the Act. Assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement to register any of the
Securities under the Act or to qualify the Indenture under the TIA.
(hh) No securities of the Company or any Subsidiary are of the
same class (within the meaning of Rule 144A under the Act) as the Notes are
listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system.
(ii) None of the Company or the Subsidiaries has taken, nor
will any of them take, directly or indirectly, any action designed to, or that
might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Notes.
(jj) None of the Company, the Subsidiaries, any of their
respective Affiliates or any person acting on its or their behalf (other than
the Initial Purchasers) has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Act ("Regulation S")) with respect to
the Securities; the Company, the Subsidiaries and their respective Affiliates
and any person acting on its or their behalf (other than the Initial Purchasers)
have complied with the offering restrictions requirement of Regulation S.
(kk) The Company has delivered to the Initial Purchasers a
complete copy of the Recapitalization Agreement.
Any certificate signed by any officer of the Company or any
Subsidiary and delivered to any Initial Purchaser or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company or such
Subsidiary, as the case may be, to each Initial Purchaser as to the matters
covered thereby.
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<PAGE> 13
3. Purchase, Sale and Delivery of the Securities. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers, acting
severally and not jointly, agree to purchase the Notes in the respective amounts
set forth on Schedule 1 hereto from the Company at 96.511% of the principal
amount thereof, in the case of the Fixed Rate Notes, and 97.000% of the
principal amount thereof, in the case of the Floating Rate Notes, and the
Guarantors agree to issue the Guarantees. One or more certificates in definitive
form for the Securities that the Initial Purchasers have agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Initial Purchasers request upon notice to the Company at least
36 hours prior to the Closing Date, shall be delivered by or on behalf of the
Issuers to the Initial Purchasers, against payment by or on behalf of the
Initial Purchasers of the purchase price therefor by wire transfer (same day
funds) to such account or accounts as the Company shall specify prior to the
Closing Date, or by such means as the parties hereto shall agree prior to the
Closing Date. Such delivery of and payment for the Notes shall be made at the
offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00
A.M., New York time, on April 24, 1998, or at such other place, time or date as
the Initial Purchasers, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." The Issuers will make such certificate or certificates
for the Securities available for checking and packaging by the Initial
Purchasers at the offices of BT Alex. Brown Incorporated in New York, New York,
or at such other place as BT Alex. Brown Incorporated may designate, at least 24
hours prior to the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers propose
to make an offering of the Securities at the price and upon the terms set forth
in the Final Memorandum, as soon as practicable after this Agreement is entered
into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Company. The Issuers covenant and agree with each
of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement and as
to which the Initial Purchasers shall not have given their consent. The Company
will promptly, upon the reasonable request of the Initial Purchasers or counsel
for the Initial Purchasers, make any amendments or supplements to the
Preliminary Memorandum or the Final Memorandum that may be necessary or
advisable in connection with the resale of the Securities by the Initial
Purchasers.
(b) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws
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<PAGE> 14
of such jurisdictions as the Initial Purchasers may designate and will continue
such qualifications in effect for as long as may be necessary to complete the
resale of the Securities; provided, however, that in connection therewith, the
Company shall not be required to qualify as a foreign corporation or to execute
a general consent to service of process in any jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Securities or the Private Exchange
Notes, any event occurs or information becomes known as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchasers thereof and will prepare, at
the expense of the Company, an amendment or supplement to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For a period of two years from the Closing Date the
Issuers will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Securities and, as soon as available, copies of any
reports or financial statements furnished to or filed by the Company with the
Commission or any national securities exchange on which any class of securities
of the Company may be listed.
(g) Prior to the Closing Date, the Issuers will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the Final
Memorandum.
(h) None of the Issuers or any of their Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Securities in a manner which would require the registration under the Act of
the Securities.
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<PAGE> 15
(i) The Issuers will not, and will not permit any of the
Subsidiaries to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Securities or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding,
the Issuers will make available at their expense, upon request, to any holder of
such Securities and any prospective purchasers thereof the information specified
in Rule 144A(d)(4) under the Act, unless the Company is then subject to Section
13 or 15(d) of the Exchange Act.
(k) The Issuers will use their best efforts to (i) permit the
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "Portal Market") and
(ii) permit the Securities to be eligible for clearance and settlement through
The Depository Trust Company.
(l) In connection with Securities offered and sold in an
offshore transaction (as defined in Regulation S) the Issuers will not register
any transfer of such Securities not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Securities in the form of definitive
securities.
(m) The Company will provide the Initial Purchasers with a
complete set of documents and opinions, to the extent permitted, executed in
connection with the Recapitalization and will provide the Initial Purchasers
with drafts of such documents in substantially final form prior to the Closing
Date.
6. Expenses. The Issuers agree to pay all costs and expenses incident
to the performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the
delivery to the Initial Purchasers of copies of the foregoing documents, (iii)
the fees and disbursements of the counsel, the accountants and any other experts
or advisors retained by the Company, (iv) preparation (including printing),
issuance and delivery to the Initial Purchasers of the Securities, (v) the
qualification of the Securities under state securities and "Blue Sky" laws,
including filing fees and reasonable fees and disbursements of counsel for the
Initial Purchasers relating thereto, (vi) 50% of expenses in connection with any
meetings with prospective investors in the Securities, (vii) fees and expenses
of the Trustee including fees and expenses of counsel, (viii) all expenses and
listing fees incurred in connection with the application for quotation of the
Securities on the PORTAL Market and (ix)
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<PAGE> 16
any fees charged by investment rating agencies for the rating of the Securities.
If the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth in Section 7
hereof is not satisfied, because this Agreement is terminated (other than
pursuant to Sections 11(a)(ii), (iii) or (iv)) or because of any failure,
refusal or inability on the part of the Issuers to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Initial Purchasers of their
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Issuers agree to promptly reimburse the Initial
Purchasers upon demand for all out-of-pocket expenses (including reasonable
fees, disbursements and charges of Cahill Gordon & Reindel, counsel for the
Initial Purchasers) that shall have been incurred by the Initial Purchasers in
connection with the proposed purchase and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The obligation of
the Initial Purchasers to purchase and pay for the Securities shall be subject
to the satisfaction or waiver of the following conditions on or prior to the
Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and after giving effect to
the Recapitalization and addressed to the Initial Purchasers, of Hutchins,
Wheeler & Dittmar, a Professional Corporation, and Cox & Smith Incorporated,
counsel for the Issuers, in form and substance satisfactory to counsel for the
Initial Purchasers, to the effect that (subject to customary assumptions,
qualifications and exceptions):
(i) Each of the Company and the Subsidiaries is
validly existing and in good corporate standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate power and
authority to own its properties and to conduct its business as described in the
Final Memorandum. Each of the Company and the Subsidiaries is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
where the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.
(ii) The Company has the authorized, issued and
outstanding capitalization set forth in the Final Memorandum; all of the
outstanding shares of capital stock of the Company and the Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the Subsidiaries are owned, directly or
indirectly, by the Company, and, to the knowledge of such counsel, free and
clear of all other liens, encumbrances, equities and claims or restrictions on
transferability (other than liens, restrictions and encumbrances in favor of the
lenders under the New Credit Facility and other than those imposed by the Act
and the securities or "Blue Sky" laws of certain jurisdictions) or voting.
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<PAGE> 17
(iii) Except as set forth in the Final
Memorandum (A) no options, warrants or other rights to purchase from the Company
shares of capital stock or ownership interests in the Company are outstanding,
(B) no agreements or other obligations to issue, or other rights to convert, any
obligation into, or exchange any securities for, shares of capital stock or
ownership interests in the Company are outstanding and (C) no holder of
securities of the Company is entitled to have such securities registered under a
registration statement filed by the Company pursuant to the Registration Rights
Agreement.
(iv) Each of the Issuers has all requisite
corporate power and authority to execute, deliver and perform each of its
respective obligations under the Indenture, the Securities, the Exchange Notes
and the Private Exchange Notes; the Indenture meets the requirements for
qualification under the TIA; the Indenture has been duly and validly authorized
by each of the Issuers and, when duly executed and delivered by each of the
Issuers (assuming the due authorization, execution and delivery thereof by the
Trustee), will constitute the valid and legally binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(v) Each Guarantor has all requisite corporate
power and authority to execute, deliver and perform each of its obligations
under its Guarantee, the Exchange Notes Guarantee and the Private Exchange Notes
Guarantee. The Guarantees, when issued, will be in the form contemplated by the
Indenture. The Guarantees, the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees have each been duly and validly authorized by the
Guarantors and, in the case of the Guarantees, when delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Guarantors, entitled to
the benefits of the Indenture, and enforceable against the Guarantors in
accordance with their terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(vi) The Notes are in the form contemplated by
the Indenture. The Notes have each been duly and validly authorized by the
Company and, when duly executed and delivered by the Company and paid for by the
Initial Purchasers in accordance with the terms of this Agreement (assuming the
due authorization, execution and delivery of the Indenture by the Trustee and
due authentication and delivery of the Notes by the Trustee in accordance with
the Indenture), will constitute the valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture, and enforceable against the
Company in accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the
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<PAGE> 18
discretion of the court before which any proceeding therefor may be brought.
(vii) (A) The Exchange Notes and the
Private Exchange Notes have been duly and validly authorized by the Company and
(B) the Exchange Notes Guarantees and the Private Exchange Notes Guarantees have
been duly and validly authorized by each of the Guarantors, and when the
Exchange Notes, the Private Exchange Notes, the Exchange Notes Guarantees and
the Private Exchange Notes Guarantees have been duly executed and delivered by
the Issuers in accordance with the terms of the Registration Rights Agreement
and the Indenture (assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the Exchange
Notes, the Private Exchange Notes, the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees by the Trustee in accordance with the Indenture), will
constitute the valid and legally binding obligations of the Issuers, entitled to
the benefits of the Indenture, and enforceable against the Issuers in accordance
with their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(viii) Each of the Issuers has all
requisite corporate power and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly authorized by each of the Issuers and, when
duly executed and delivered by each of the Issuers (assuming due authorization,
execution and delivery thereof by the Initial Purchasers), will constitute the
valid and legally binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(ix) Each of the Issuers has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby;
this Agreement and the consummation by the Issuers of the transactions
contemplated hereby have been duly and validly authorized by the Issuers. This
Agreement has been duly executed and delivered by each of the Issuers.
(x) The Indenture, the Securities, the
Registration Rights Agreement and the New Credit Facility conform in all
material respects to the descriptions thereof contained in the Final Memorandum.
(xi) Except as described in the Final Memorandum
no actions, suits, proceedings, inquiries or investigations are pending or, to
the knowledge of such counsel,
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<PAGE> 19
threatened to which any of the Company or the Subsidiaries is a party or to
which the property or assets of the Company or any Subsidiary are subject,
before or brought by any court, arbitrator or governmental agency or body which,
if determined adversely to the Company or the Subsidiaries, would result,
individually or in the aggregate, in a Material Adverse Effect, or which seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Securities to be sold hereunder or the consummation of
the Recapitalization or the other transactions described in the Final
Memorandum.
(xii) None of the Company or the
Subsidiaries is (i) in violation of its certificate of incorporation or bylaws
(or similar organizational document), or (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to any of them
or any of their respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xiii) The execution, delivery and
performance of this Agreement, the Indenture, the Registration Rights Agreement
and the New Credit Facility and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
sale by the Issuers of the Securities to the Initial Purchasers) will not
conflict with or constitute or result in a breach or a default under (or an
event which with notice or passage of time or both would constitute a default
under) or violation of any of (i) the terms or provisions of any Contract known
to such counsel, except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws (or similar
organizational document) of the Company or any of the Subsidiaries, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation known to such counsel to be applicable to the Company or any of the
Subsidiaries or any of their respective properties or assets, except for any
such conflict, breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xiv) No consent, approval, authorization
or order of any court or governmental agency or body, or, to such counsel's
knowledge, third party is required for the issuance and sale by the Issuers of
the Securities to the Initial Purchasers or the consummation by the Issuers of
the Recapitalization or the other transactions contemplated hereby or thereby,
except such as have been obtained and such as may be required under Blue Sky
laws, as to which such counsel need express no opinion, and those which have
previously been obtained.
(xv) There are no legal or governmental
proceedings involving or affecting the Company or the Subsidiaries or any of
their respective properties or assets which would be required to be described in
a prospectus pursuant to the Act that are not described in the Final Memorandum,
nor are there any material contracts or other documents which would be required
to be described in a prospectus pursuant to the Act that are not described in
the
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<PAGE> 20
Final Memorandum.
(xvi) None of the Company or the
Subsidiaries is, or immediately after the sale of the Securities to be sold
hereunder and the application of the proceeds from such sale (as described in
the Final Memorandum under the caption "Use of Proceeds") will be, an
"investment company" or "promoter" or "principal underwriter" for an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended and the rules and regulations thereunder.
(xvii) No registration under the Act of the
Securities is required in connection with the sale of the Securities to the
Initial Purchasers as contemplated by this Agreement and the Final Memorandum or
in connection with the initial resale of the Securities by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior to the
commencement of the Exchange Offer (as defined in the Registration Rights
Agreement) or the effectiveness of the Shelf Registration Statement (as defined
in the Registration Rights Agreement), the Indenture is not required to be
qualified under the TIA, in each case assuming (i) (A) that the purchasers who
buy such Securities in the initial resale thereof are qualified institutional
buyers as defined in Rule 144A promulgated under the Act ("QIBs") or (B) that
the offer or sale of the Securities is made in an offshore transaction as
defined in Regulation S, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Issuers contained in this
Agreement regarding the absence of a general solicitation in connection with the
sale of such Securities to the Initial Purchasers and the initial resale thereof
and (iii) the due performance by the Initial Purchasers of the agreements set
forth in Section 8 hereof.
(xviii) Neither the consummation of the
transactions contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
At the time the foregoing opinion is delivered, Hutchins, Wheeler &
Dittmar shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the Initial
Purchasers and counsel for the Initial Purchasers, at which conferences the
contents of the Final Memorandum and related matters were discussed, and,
although it has not independently verified and is not passing upon and assumes
no responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent specified in subsection
7(a)(x)), no facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the financial
statements and related notes thereto and the other financial, statistical and
accounting data included in the Final Memorandum). The opinion of Hutchins,
Wheeler & Dittmar described in this Section shall
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<PAGE> 21
be rendered to the Initial Purchasers at the request of the Company and shall so
state therein.
References to the Final Memorandum in this subsection (a) shall include
any amendment or supplement thereto prepared in accordance with the provisions
of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have
received the opinion, in form and substance satisfactory to the Initial
Purchasers, dated as of the Closing Date and addressed to the Initial
Purchasers, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with
respect to certain legal matters relating to this Agreement and such other
related matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received and may rely upon such
certificates and other documents and information as it may reasonably request to
pass upon such matters.
(c) The Initial Purchasers shall have received from (i) the
Independent Accountants a comfort letter or letters dated the date hereof and
the Closing Date, in form and substance satisfactory to counsel for the Initial
Purchasers and (ii) from Beers & Cutler PLLC and KPMG Peat Marwick LLP a comfort
letter dated the date hereof with respect to the financial statements of TSO and
Visionworks included in the Final Memorandum, in form and substance satisfactory
to counsel for the Initial Purchasers.
(d) The representations and warranties of the Issuers
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date; the statements of the Company's officers made pursuant to any certificate
delivered in accordance with the provisions hereof shall be true and correct on
and as of the date made and on and as of the Closing Date; the Issuers shall
have performed all covenants and agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to the Closing
Date; and, except as described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), subsequent to the date
of the most recent financial statements in such Final Memorandum, there shall
have been no event or development, and no information shall have become known,
that, individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(e) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), none of the Company or any of the Subsidiaries
shall have sustained any loss or interference with respect to its business or
properties from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute, slow down or work
stoppage or from any legal or governmental proceeding, order or decree, which
loss
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<PAGE> 22
or interference, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(g) The Initial Purchasers shall have received a certificate
of the Company, dated the Closing Date, signed on behalf of the Company by its
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) The representations and warranties of the
Issuers contained in this Agreement are true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date, and the
Issuers have performed all covenants and agreements and satisfied all conditions
on their part to be performed or satisfied hereunder at or prior to the Closing
Date;
(ii) At the Closing Date, since the date hereof or
since the date of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date hereof), no
event or development has occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect; and
(iii) The sale of the Securities hereunder
has not been enjoined (temporarily or permanently).
(h) On the Closing Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by each of the Issuers and
such agreement shall be in full force and effect at all times from and after the
Closing Date.
(i) On or before the Closing Date, (i) the New Credit Facility
(as defined in the Final Memorandum) shall have been consummated,(ii) the
Initial Purchasers and counsel for the Initial Purchasers shall have received
executed copies of the New Credit Facility, dated the Closing Date, and such
other documents, opinions and reliance letters as they shall have reasonably
requested, (iii) all conditions necessary for the effectiveness of the New
Credit Facility shall have been satisfied without waiver or amendment, (iv)
after giving effect to the transactions contemplated by this Agreement and the
application of the proceeds received by the Company from the sale of the
Securities, no condition that would constitute a default or event of default
under the New Credit Facility shall exist and (v) not more than $56.0 million
shall be outstanding under the New Credit Facility on the Closing Date (after
giving effect to all borrowings on the Closing Date).
(j) The Company shall contemporaneously consummate the
Recapitalization on the terms described in the Final Memorandum, including the
Merger, the New Credit Facility and the Equity Contribution, as described in the
Final Memorandum, and there shall have been no material amendments, alterations,
modifications or waivers of any material provisions of the Recapitalization
Agreement since the Issue Date.
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<PAGE> 23
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. (a) Each of the
Initial Purchasers represents and warrants (as to itself only) that it is a QIB.
Each of the Initial Purchasers agrees with the Company (as to itself only) that
(i) it has not and will not solicit offers for, or offer or sell, the Securities
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit
offers for the Securities only from, and will offer the Securities only to (A)
in the case of offers inside the United States, persons whom the Initial
Purchasers reasonably believe to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as fiduciary
or agent, only when such person has represented to the Initial Purchasers that
each such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A and (B) in the case of offers outside the United
States, to persons other than U.S. persons ("foreign purchasers," which term
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than an
estate or trust)); provided, however, that, in the case of this clause (B), in
purchasing such Securities such persons are deemed to have represented and
agreed as provided under the caption "Transfer Restrictions" contained in the
Final Memorandum (or, if the Final Memorandum is not in existence, in the most
recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as
to itself only) with respect to offers and sales outside the United States that
(i) it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Securities or has
in its possession or distributes any Memorandum or any such other material, in
all cases at its own expense; (ii) the Securities have not been and will not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S under the Act or
pursuant to an exemption from the registration requirements of the Act; (iii) it
has offered the Securities and will offer and sell the Securities (A) as part of
its distribution at any time and (B) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance with
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<PAGE> 24
Rule 903 of Regulation S and, accordingly, neither it nor any persons acting on
its behalf have engaged or will engage in any directed selling efforts (within
the meaning of Regulation S) with respect to the Securities, and any such
persons have complied and will comply with the offering restrictions requirement
of Regulation S; and (iv) it agrees that, at or prior to confirmation of sales
of the Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the distribution of the
Securities at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above have
the meaning given to them in Regulation S."
Terms used in this Section 8 and not defined in this Agreement have the
meanings given to them in Regulation S.
9. Indemnification and Contribution. (a) Each of the Issuers agrees,
jointly and severably, to indemnify and hold harmless each of the Initial
Purchasers, and each person, if any, who controls each Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against
any losses, claims, damages or liabilities to which each of Initial Purchaser or
such controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendment or
supplement thereto or any application or other document, or any amendment or
supplement thereto, executed by any of the Issuers or based upon written
information furnished by or on behalf of any of the Issuers filed in any
jurisdiction in order to qualify the Securities under the securities or "Blue
Sky" laws thereof or filed with any securities association or securities
exchange (each an "Application"); or
(ii) the omission or alleged omission to state,
in any Memorandum or any amendment or supplement thereto or any Application, a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse, as incurred, each of the Initial
Purchasers and each such controlling person for any legal or other expenses
incurred by such Initial Purchaser or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
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<PAGE> 25
however, the Issuers will not be liable in any such case to the extent that any
such loss, claim, damage, or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information concerning the Initial
Purchasers furnished to the Company by the Initial Purchasers specifically for
use therein; provided, further, that the foregoing indemnity with respect to the
Preliminary Memorandum shall not insure to the benefit of any Initial Purchaser
(or to the benefit of any person controlling such Initial Purchaser) from whom
the person asserting any such losses, claims, damages or liabilities purchased
Securities if (i) such untrue statement or omission or alleged untrue statement
or omission made in the Preliminary Memorandum was eliminated or remedied in the
Final Memorandum (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto to such Initial Purchaser prior to
confirmation of the sale of such Securities to such person by such Initial
Purchaser) and (ii) a copy of the Final Memorandum (as so amended and
supplemented) was not furnished to such person at or prior to the written
confirmation of the sale of such Securities to such person, unless such failure
to deliver was a result of non-compliance by the Company with Section 5(a), 5(c)
or 5(d) and the claims asserted by such person do not include allegations of
other untrue statements or omissions of material facts made in the Final
Memorandum which allegations are upheld in a final judgment. This indemnity
agreement will be in addition to any liability that the Issuers may otherwise
have to the indemnified parties. The Issuers shall not be liable under this
Section 9 for any settlement of any claim or action effected without its prior
written consent, which shall not be unreasonably withheld. The Initial
Purchasers shall not, without the prior written consent of the Company, effect
any settlement or compromise of any pending or threatened proceeding in respect
of which any Issuer is or could have been a party, or indemnity could have been
sought hereunder by any Issuer, unless such settlement (A) includes an
unconditional written release of the Issuers, in form and substance reasonably
satisfactory to the Company, from all liability on claims that are the subject
matter of such proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any Issuer.
(b) The Initial Purchasers agree, jointly and severably, to
indemnify and hold harmless the Issuers, their directors, their officers and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act against any losses, claims, damages
or liabilities to which the Issuers or any such director, officer or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendment or
supplement thereto or any Application, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written
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<PAGE> 26
information concerning such Initial Purchaser, furnished to the Company by the
Initial Purchasers specifically for use therein; and subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses incurred by the Issuers or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchasers may otherwise have to
the indemnified parties. The Initial Purchasers shall not be liable under this
Section 9 for any settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld. The Issuers shall not,
without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which any Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, unless such settlement (A)
includes an unconditional written release of the Initial Purchasers, in form and
substance reasonably satisfactory to the Initial Purchasers, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties.
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<PAGE> 27
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Initial Purchasers in the case of paragraph (a) of this
Section 9 or the Company in the case of paragraph (b) of this Section 9,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions) or (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld), unless
such indemnified party waived in writing its rights under this Section 9, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Issuers on
the one hand and any Initial Purchaser on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by such Initial Purchaser. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand,
or such Initial Purchaser on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission or alleged statement or omission, and any other
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<PAGE> 28
equitable considerations appropriate in the circumstances. The Issuers and the
Initial Purchasers agree that it would not be equitable if the amount of such
contribution were detemined by pro rata or per capita allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial Purchaser
shall be obligated to make contributions hereunder that in the aggregate exceed
the total discounts, commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchasers, and each director of the Issuers, each officer of the
Issuers and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as the Issuers.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Issuers, their
officers and the Initial Purchasers set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Issuers, any of
their officers or directors, the Initial Purchasers or any controlling person
referred to in Section 9 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6, 9 and 15 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that the Issuers shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) any of the Company or the Subsidiaries shall
have sustained any loss or interference with respect to its businesses or
properties from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute, slow down or work
stoppage or any legal or governmental proceeding, which loss or interference, in
the sole judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the aggregate, has
or could be reasonably likely to have a Material Adverse Effect (including
without limitation a change in control of the Company or
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<PAGE> 29
the Subsidiaries), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New
York Stock Exchange, American Stock Exchange or the NASDAQ National Market shall
have been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii) a banking moratorium shall have been declared
by New York or United States authorities;
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any foreign power, (B)
an outbreak or escalation of any other insurrection or armed conflict involving
the United States or any other national or international calamity or emergency
or (c) any material change in the financial markets of the United States which,
in the case of Section 11(a)(iv)(A) or (B) or (c) which in the sole judgment of
the Initial Purchasers, makes it impracticable or inadvisable to proceed with
the offering or the delivery of the Securities as contemplated by the Final
Memorandum; or
(v) any securities of the Company shall have
been downgraded or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The statements set
forth in the last paragraph on the front cover page, in the first paragraph on
page (i) and in the second and third sentences of the third paragraph and in the
sixth, seventh and eighth paragraphs under the heading "Private Placement" in
the Final Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and, if
sent to the Initial Purchasers, shall be mailed or delivered to BT Alex. Brown
Incorporated, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department; and if sent to the Company, shall be mailed or delivered to
the Company at 11103 West Avenue, San Antonio, Texas 78213, Attention: Chief
Financial Officer; with a copy to Hutchins, Wheeler & Dittmar, 101 Federal
Street, Boston, Massachusetts 02110, Attention: James Westra, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; and one business day
after being timely delivered to a next-day air courier.
- 29 -
<PAGE> 30
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Issuers and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Issuers contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchasers within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Issuers, their officers
and any person or persons who control the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act. No purchaser of Securities from
the Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Issuers
and the Initial Purchasers.
Very truly yours,
EYE CARE CENTERS OF AMERICA, INC.
By:
Name:
Title:
- 30 -
<PAGE> 31
ENCLAVE ADVANCEMENT GROUP, INC.
ECCA MANAGED VISION CARE, INC.
VISIONWORKS HOLDINGS, INC.
VISIONWORKS, INC.
VISIONWORKS PROPERTIES, INC.
EYECARE HOLDINGS, INC.
VISIONARY RETAIL MANAGEMENT, INC.
VISIONARY PROPERTIES, INC.
VISIONARY MSO, INC.
THE SAMIT GROUP, INC.
HOUR EYES, INC.
SYKLAB OPTICAL, INC.
METROPOLITAN VISION SERVICES, INC.
By:
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED
By:
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
Name:
Title:
- 31 -
<PAGE> 32
SCHEDULE 1
<TABLE>
<CAPTION>
PrincipalAmount of Principal Amount of
Initial Purchaser Fixed Rate Notes Floating Rate Notes
<S> <C> <C>
BT Alex. Brown Incorporated................................. $50,000,000 $25,000,000
Merrill Lynch, Pierce, Fenner $50,000,000 $25,000,000
& Smith Incorporated......................................
------------ -----------
Total............................................. $100,000,000 $50,000,000
</TABLE>
<PAGE> 33
SCHEDULE 2
Subsidiaries of the Company
Jurisdiction of
Name Incorporation
- ---- -------------
Enclave Advancement Group, Inc. Texas
ECCA Managed Vision Care, Inc. Texas
Visionworks Holdings, Inc. Florida
Visionworks, Inc. Florida
Visionworks Properties, Inc. Florida
Eyecare Holdings, Inc. Delaware
Visionary Retail Management, Inc. Delaware
Visionary Properties, Inc. Delaware
Visionary MSD, Inc. Delaware
The Samit Group, Inc. Delaware
Hour Eyes, Inc. Maryland
Skylab Optical, Inc. Virginia
Metropolitan Vision Services, Inc. Virginia
- 2 -
<PAGE> 1
EXHIBIT 10.22
EXHIBIT B
SECURED PROMISSORY NOTE
$999,904.55 April 24, 1998
FOR VALUE RECEIVED, Bernard W. Andrews (the "Maker") hereby promises to
pay to the order of Eye Care Centers of America, Inc., a Texas corporation with
an address at 11103 West Avenue, San Antonio, Texas 78213 (the "Holder"), the
principal sum of Nine Hundred Ninety-nine Thousand Nine Hundred Four and 55/100
Dollars ($999,904.55). Outstanding principal and accrued interest shall be paid
only from proceeds generated from the sale of any of the Shares (as defined
below). Any and all proceeds generated from the sale of any Shares shall be
applied to the repayment of all amounts due hereunder, until all principal,
interest and any other amounts due hereunder is paid in full. All such proceeds
shall be applied, first, to repayment of all Collection Expenses (as defined
below), if any, second, to repayment of accrued interest, third, to principal,
and, fourth, to repayment of any other amounts due hereunder. Only after all of
the foregoing amounts shall have been paid in full, may proceeds from the sale
of the Shares be paid to Maker. Principal or interest shall be due or payable
only to the extent that Shares are sold or transferred for value.
The unpaid principal amount of this Note shall bear interest at a fixed
rate equal to 9.75% .
All payments under this Note shall be payable in lawful money of the
United States of America in immediately available funds.
This Note is being given in payment for 8,005 shares of Common Stock, par
value $0.01 per share, as adjusted for stock dividends, stock splits or the like
("Shares"), of the Holder issued to the Maker pursuant to an Executive
Subscription and Stock Purchase Agreement of even date.
The Maker shall have the right to prepay this Note, in whole or in part,
at any time without charge, premium or penalty.
The failure of the Maker to (i) perform its obligations and covenants
hereunder, or (ii) make any payment hereunder when due and payable, shall
constitute an event of default ("Event of Default") which shall entitle the
Holder to declare the entire unpaid principal balance hereunder immediately due
and payable without notice, demand or presentment.
In the event the Holder shall exercise or endeavor to exercise any of its
remedies hereunder, the Maker shall pay all costs and expenses incurred in
connection therewith, including without limitation, reasonable attorneys' fees
("Collection Expenses"), and the Holder may take judgment for all Collection
Expenses in addition to all other sums due hereunder.
The Maker hereby waives presentment for payment, protest and demand,
notice of protest, demand and/or dishonor, and any other notice otherwise
required to be given under the law, which may be lawfully waived, in connection
with the delivery, acceptance, performance, default, enforcement or collection
of this Note. THE MAKER AND THE HOLDER EACH HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. The Maker expressly agrees that
this Note may be extended or subordinated, by forbearance or otherwise, from
time to time, without in any way affecting the liability of the Maker. No
consent or waiver by the Holder with respect to any action or failure to act
which without such consent or waiver would constitute a breach of any provision
of this Note shall be valid and binding unless in writing signed by the Holder.
All agreements between the Maker and the Holder are hereby expressly
limited so that in no contingency or event whatsoever whether by reason of
acceleration of maturity of the indebtedness
<PAGE> 2
evidenced hereby or otherwise shall the amount paid or agreed to be paid to the
Holder for the use, forbearance or detention of the indebtedness evidenced
hereby exceed the maximum permissible under applicable law. As used herein, the
term "applicable law" shall mean the law in effect as of the date hereof. If,
from any circumstance whatsoever, fulfillment of any provision hereof at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then IPSO, FACTO, the obligation to be
fulfilled shall be reduced to the limit of such validity.
As collateral security for the payment of the indebtedness and the
performance of all obligations hereunder and all amendments and replacements
hereof, the Maker hereby pledges, assigns, delivers and grants a security
interest in the Shares, together with any fractional shares of stock split up on
or with respect to the Shares, and all dividends, distributions, and other
proceeds of all of the forgoing, in each case whether now existing or hereafter
arising (all of the foregoing is referred to herein as the "Collateral"). Maker
hereby represents and warrants that the Maker is the sole legal and beneficial
owner of the Collateral free from any adverse lien or security interest. Subject
to certain restriction set forth in the Employment Agreement dated April 24,
1998 by and between Maker and Holder, and the Stockholders' Agreement dated
April 24, 1998 by and among the Maker, the Holder and the parties listed on
Exhibit A thereto, the Maker may sell all or any portion of the Shares. In such
an event, the Maker shall deliver to the Holder a notice of sale ("Sale Notice")
specifying the number of Shares to be sold, and upon payment of the proceeds of
such Shares by the Maker to the Holder, the Holder shall promptly deliver to the
Maker the number of Shares specified in the Sale Notice. The security interest
in the Shares not delivered to the Maker in the manner set forth above shall
continue until this Note has been paid in full. Upon full payment of this Note,
the Holder shall promptly return to the Maker all previously undelivered Shares.
Prior to an Event of Default hereunder, the Maker shall have all rights and
powers pertaining to the Collateral, including any voting rights or rights to
receive dividends. Upon an Event of Default, the Holder shall have all rights
and remedies of a secured party afforded by the Uniform Commercial Code as from
time to time in effect in the State of Texas or afforded by other applicable
law.
No recourse shall be made of repayment of the principal owing under this
Note or any amount of the unpaid interest on such amount, or for any claim
against the Maker relating to or in connection with this Note. The Holder shall
only have full recourse against the Shares as provided herein and the proceeds
of any Shares sold.
This Note shall be construed in accordance with and governed by the
internal and substantive laws of the Holder's jurisdiction of incorporation,
from time to time.
IN WITNESS WHEREOF, the undersigned has executed this Note on the day and
year first above written.
WITNESS
- ---------------------- --------------------------
Bernard W. Andrews
- 2 -
<PAGE> 1
EXHIBIT 12.1
EYE CARE CENTER OF AMERICA, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Thirteen Thirteen
Weeks Weeks
YEAR ENDED Ended Ended
----------------------------------------------------------------------------------------
December 31, December 31, December 30, December 28, January 3, March 29, April 4,
1993 1994 1995 1996 1998 1997 1998
----------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Neat earning (loss) ($2,111) ($15,615) ($9,119) $ 1,418 $ 5,215 $2,889 $3,882
Add: Income tax provision 2,291 -- -- 188 335 100 67
----------------------------------------------------------------------------------------
180 (15,615) (9,119) 1,606 5,550 2,989 3,949
----------------------------------------------------------------------------------------
Fixed Charges
Interest expense, net 3,106 9,271 9,046 10,341 14,380 3,508 3,558
Interest factor portion of rent expense 4,296 3,738 4,011 4,368 6,254 1,524 1,601
----------------------------------------------------------------------------------------
Total fixed charges 7,402 13,009 13,057 14,709 20,634 5,032 5,159
----------------------------------------------------------------------------------------
Earnings (loss) before income taxes
and fixed charges ($7,582) ($ 2,606) $ 3,938 $16,315 $26,184 $8,021 $9,108
----------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 1.0 (a) 0.3 1.1 1.3 1.6 1.8
(a) Earnings were insufficient to cover fixed charges by $15,615 for the fiscal ended December 31, 1994.
</TABLE>
<PAGE> 1
Exhibit 21.1
EYE CARE CENTERS OF AMERICA
SUBSIDIARIES
NAME OF COMPANY PLACE OF INCORPORATION
Enclave Advancement Group, Inc. Texas
ECCA Managed Vision Care, Inc. Texas
Visionworks Holdings, Inc. Florida
Visionworks, Inc. Florida
Visionworks Properties, Inc. Florida
Eye Care Holdings, Inc. Delaware
Visionary Retail Management, Inc. Delaware
Visionary Properties, Inc. Delaware
Visionary MSO, Inc. Delaware
The Samit Group, Inc. Delaware
Hour Eyes, Inc. Maryland
Skylab Optical, Inc. Virginia
Metropolitan Vision Services, Inc. Virginia
Eye Care Centers de Mexico, S.A. de C.V. Mexico
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 2, 1998 (except for Note 15 as to which the date
is March 6, 1998) in the Registration Statement (Form S-4) and the related
Prospectus of Eye Care Centers of America, Inc. dated June 10, 1998.
/s/ Ernst & Young LLP
San Antonio, Texas
June 8, 1998
<PAGE> 1
Exhibit 23.2
As independent auditors, we hereby consent to the use of our report dated
November 20, 1997, on our audits of the consolidated and combined financial
statements of The Samit Organization as of September 30, 1997 and December 31,
1996, and for the period January 1, 1997 through September 30, 1997, and the
year ended December 31, 1996 (and to all references to our Firm) included in or
made a part of this registration statement.
/s/ Beers & Cutler PLLC
Beers & Cutler PLLC
Washington, DC
June 10, 1998
<PAGE> 1
Exhibit 23.3
The Board of Directors
Eye Care Centers of America, Inc.
We consent to the use of our report dated October 15, 1996 on Visionworks
Holdings, Inc. included herein and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Tampa, Florida
June 9, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---------
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation or (I. R. S. Employer
organization if not a U.S. national bank) Identification Number)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
EYE CARE CENTERS OF AMERICA, INC.
(Exact name of OBLIGOR as specified in its charter)
Texas 74-2337775
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
11103 West Avenue 78213
San Antonio, TX (Zip code)
(Address of principal executive offices)
<PAGE> 2
-2-
--------------------------
ECCA MANAGED VISION CARE, INC.
(Exact name of REGISTRANT as specified in its charter)
Texas 74-2759084
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
ENCLAVE ADVANCEMENT GROUP, INC.
(Exact name of REGISTRANT as specified in its charter)
Texas 74-2510780
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
VISIONSWORKS, INC.
(Exact name of REGISTRANT as specified in its charter)
Florida 59-3226331
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
VISIONSWORKS HOLDINGS, INC.
(Exact name of REGISTRANT as specified in its charter)
Florida 59-3226333
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
EYE CARE HOLDINGS INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 74-2849556
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
VISIONWORKS PROPERTIES, INC.
(Exact name of REGISTRANT as specified in its charter)
Florida 59-3226335
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 3
- 3-
--------------------------
VISIONARY RETAIL MANAGEMENT, INC.
(Exact name of REGISTRANT as specified in its charter)
Delarware 74-2849552
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
VISIONARY PROPERTIES, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 74-2849554
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
VISIONARY MSO, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 74-2849555
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
THE SAMIT GROUP, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 54-1702412
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
SKYLAB OPTICAL INC.
(Exact name of REGISTRANT as specified in its charter)
Virginia 54-1450693
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 4
-4-
--------------------------
METROPOLITAN VISION SERVICES, INC.
(Exact name of REGISTRANT as specified in its charter)
Virginia 54-1579086
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
HOUR EYES, INC.
(Exact name of REGISTRANT as specified in its charter)
Maryland 54-1517741
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
--------------------------
9-1/8% Senior Subordinated Notes due 2008
Floating Interest Rate Subordinated Notes due 2008
(Title of the indenture securities)
<PAGE> 5
- 5 -
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System). Federal Deposit
Insurance Corporation, Washington, D. C. New York State Banking
Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is
Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 6
- 6 -
16. LIST OF EXHIBITS (continued)
T-1.4 -- The By-laws of the United States Trust Company of
New York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended
by the Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of June 1, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U. S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of New
York, and State of New York, on the 1st day of June, 1998.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Patricia Stermer
---------------------------------
Patricia Stermer
Assistant Vice President
<PAGE> 7
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By:/s/
--------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 8
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 650,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
----------
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
TOTAL ASSETS $3,159,978
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
----------
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and Accrued Liabilities 136,396
----------
TOTAL LIABILITIES $2,987,921
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,307
----------
TOTAL STOCKHOLDER'S EQUITY 172,057
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,159,978
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
May 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<CASH> 4,152
<SECURITIES> 0
<RECEIVABLES> 6,574
<ALLOWANCES> 319
<INVENTORY> 26,243
<CURRENT-ASSETS> 4,205
<PP&E> 103,283
<DEPRECIATION> 44,576
<TOTAL-ASSETS> 177,771
<CURRENT-LIABILITIES> 42,958
<BONDS> 105,276
12,337
0
<COMMON> 10
<OTHER-SE> 11,780
<TOTAL-LIABILITY-AND-EQUITY> 177,771
<SALES> 61,358
<TOTAL-REVENUES> 62,019
<CGS> 20,499
<TOTAL-COSTS> 54,676
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,394
<INCOME-PRETAX> 3,949
<INCOME-TAX> 67
<INCOME-CONTINUING> 3,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,882
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME., ON
_______________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
EYE CARE CENTERS OF AMERICA, INC.
1103 West Avenue
San Antonio, Texas 78213
LETTER OF TRANSMITTAL
9 1/8% Senior Subordinated Notes due 2008
Floating Interest Rate Subordinated Term Securities due 2008
Exchange Agent:
United States Trust Company of New York
By Facsimile:
(212) 780-0592
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
<PAGE> 2
Delivery of this instrument to an address other than as set forth above does not
constitute a valid deliver.
The undersigned acknowledges receipt of the Prospectus dated
__________, 1998 (the "Prospectus") of Eye Care Centers of America, Inc., a
Texas corporation (the "Company"), and the domestic subsidiaries of the Company
(together with the Company, the "Issuers") and this Letter of Transmittal for
9 1/8% Senior Subordinated Notes due 2008, and Floating Interest Rate
Subordinated Term Securities due 2008, which may be amended from time to time
(this "Letter"), which together constitute the Issuers' offer (the "Exchange
Offer") to exchange up to $100,000,000 in principal amount of its 9 1/8 % Senior
Subordinated Notes due 2008 and $50,000,000 in principal amount of its Floating
Interest Rate Subordinated Term Securities due 2008 (the "Exchange Notes"), for
$100,000,000 in principal amount of its outstanding 9 1/8 % Senior Subordinated
Notes due 2008, and $50,000,000 in principal amount of its outstanding Floating
Interest Rate Subordinated Term Securities due 2008, issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Original Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Original Notes who wish to tender their Original Notes
must, prior to the Expiration Date: (1) complete, sign, date and mail or
otherwise deliver this Letter to the Exchange Agent, in person or to the address
set forth above; and (2) tender his or her Original Notes or, if a tender of
Original Notes is to be made by book-entry transfer to the account maintained by
the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in
each case in accordance with the procedures for tendering described in the
Instructions to this Letter. Holders of Original Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
Book-Entry Confirmation and all other documents required by this Letter to be
delivered to the Exchange Agent on or prior to the Expiration Date, must tender
their Original Notes according to the guaranteed delivery procedures set forth
under the caption "The Exchange Offer - How to Tender" in the Prospectus. (See
Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Douglas C. Shepard, Vice President, Controller of the Company,
at (210) 340-3531, 1103 West Avenue, San Antonio, Texas, 78213.
- 2 -
<PAGE> 3
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have
the respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If
the space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Original Notes on a separate signed schedule and affix that
schedule to this Letter.
BOX I
TO BE COMPLETED BY ALL TENDERING HOLDERS
- --------------------------------------------------------------------------------
Principal
Name(s) and Address(es) of Amount of
Registered Holder(s) Certificate Principal Amount Original Notes
(Please fill in if blank) Number(s)(1) of Original Notes Tendered (2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Totals:
- --------------------------------------------------------------------------------
(1) Need not be completed if Original Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Original Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
- 3 -
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuers the principal amount of Original Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Original Notes tendered with this Letter, the undersigned exchanges, assigns
and transfers to, or upon the order of, the Issuers all right, title and
interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or
her agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuers) with respect to the tendered Original Notes,
with full power of substitution, to: (a) deliver certificates for such Original
Notes; (b) deliver Original Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuers upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuers of the Original Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Original Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and that the Issuers will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Issuers to be necessary or
desirable to complete the assignment and transfer of the Original Notes
tendered.
The undersigned agrees that acceptance of any tendered Original Notes
by the Issuers and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Issuers of their obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon the
issuance of the Exchange Notes, the Issuers will have no further obligations or
liabilities thereunder (except in certain limited circumstances). By tendering
Original Notes, the undersigned certifies (a) that it is not an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, that it is
not a broker-dealer that owns Original Notes acquired directly from the Issuers
or an affiliate of the Issuers, that it is acquiring the Exchange Notes in the
ordinary course of the undersigned's business and that the undersigned has no
arrangement with any person to participate in the distribution of the Exchange
Notes or (b) that it is an "affiliate" (as so defined) of the Issuers or of the
initial purchasers in the original offering of the Original Notes, and that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
- 4 -
<PAGE> 5
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuers may accept the
undersigned's tender by delivering written notice of acceptance to the Exchange
Agent, at which time the undersigned's right to withdraw such tender will
terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below,
the Exchange Agent will deliver Exchange Notes (and, if applicable, a
certificate for any Original Notes not tendered but represented by a certificate
also encompassing Original Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter, the Prospectus shall
prevail.
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): _______________________________________
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if available):
Name of Institution which Guaranteed Delivery:
- 5 -
<PAGE> 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X ______________________________ __________
X ______________________________ __________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:______________________________
This box must be signed by registered holder(s) of Original Notes as their
name(s) appear(s) on certificate(s) for Original Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
(See Instruction 3)
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed ________________________________________________________
by an Eligible Institution: (Authorized Signature)
(If required by ________________________________________________________
Instruction 3) (Title)
________________________________________________________
(Name of Firm)
- --------------------------------------------------------------------------------
- 6 -
<PAGE> 7
BOX 3
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------------------------
| TO BE COMPLETED BY ALL TENDERING HOLDERS |
-----------------------------------------------------------------------------------------
| PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK |
-----------------------------------------------------------------------------------------
| | | -------------------------|
| | Part 1 - PLEASE PROVIDE YOUR TIN IN | Social Security Number or|
| | THE BOX AT RIGHT AND CERTIFY BY | Employer Identification |
| | SIGNING AND DATING BELOW. | Number |
-----------------------------------------------------------------------------------------
| | |
| SUBSTITUTE | |
| Form W-9 | Part 2 - Check the box if you are NOT subject to back-up |
| Department of the | withholding under the provisions of Section 2406(a)(1)(C) of |
| Treasury Internal | the Internal Revenue Code because (1) you have not been |
| Revenue Service | notified that you are subject to back-up withholding as a |
| | result of failure to report all interest or dividends or (2) |
| | the Internal Revenue Service has notified you that you are no |
| Payor's Request for | longer subject to back-up withholding. [ ] |
|Taxpayer Identification | |
| Number (TIN) | |
-----------------------------------------------------------------------------------------
| CERTIFICATION - UNDER THE PENALTIES | Part 3 |
| OF PERJURY, I CERTIFY THAT THE | Check if |
| INFORMATION PROVIDED ON THIS FORM | Awaiting TIN |
| IS TRUE, CORRECT AND COMPLETE. | [ ] |
| | |
| SIGNATURE_______________ DATE____ | |
-----------------------------------------------------------------------------------------
------------------------------------------ ------------------------------------------
| BOX 4 | | BOX 5 |
| | | |
| SPECIAL ISSUANCE INSTRUCTIONS | | SPECIAL DELIVERY INSTRUCTIONS |
| (See Instructions 3 and 4) | | (See Instructions 3 and 4) |
| | | |
| To be completed ONLY if certificates for | | |
| Original Notes in a principal amount not | | To be completed ONLY if certificates for |
| exchange, or Exchange Notes, are to be | | Original Notes in a principal amount not |
| issued in the name of someone other than | | exchanged, or Exchange Notes, are to be |
| the person whose signature appears in | | sent to someone other than the person |
| Box , or if Original Notes delivered by | | whose signature appears in Box 2 or to |
| book-entry transfer which are not | | an address other than that shown in |
| accepted for exchange are to be returned | | box 1. |
| by credit to an account maintained at | | |
| the Book-Entry Transfer Facility other | | |
| than the account indicated above. | | |
| | | |
| Issue and deliver: | | Deliver: |
| | | |
| (check appropriate boxes) | | (check appropriate boxes) |
| | | |
| [ ] Original Notes not tendered | | [ ] Original Notes not tendered |
| | | |
| [ ] Exchange Notes, to: | | [ ] Exchange Notes, to: |
| | | |
| Name_________________________________ | | Name_________________________________ |
| Please Print | | Please Print |
| | | |
| Address______________________________ | | Address______________________________ |
| | | _____________________________________ |
| Please complete the Substitute Form W-9 | | |
| at Box 3 | | |
| | | |
| Tax I.D. or Social Security | | |
| Number:_______________ | | |
------------------------------------------ -------------------------------------------
</TABLE>
-7-
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for
Original Notes or a Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Original Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the Exchange
Agent. If delivery is by mail, the use of registered mail with return receipt
requested, properly insured, is suggested.
Holders whose Original Notes are not immediately, available or who
cannot deliver their Original Notes or a Book-Entry Confirmation, as the case
may be, and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Original Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i)
tender must be made by or through an Eligible Institution (as defined in the
Prospectus under the caption "The Exchange Offer"); (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by telegram,
telex, facsimile transmission, mail or hand delivery) (x) setting forth the name
and address of the holder, the description of the Original Notes and the
principal amount of Original Notes tendered, (y) stating that the tender is
being made thereby and (z) guaranteeing that, within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, this Letter together with the certificates representing the Original
Notes or a Book-Entry Confirmation, as the case may be, and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) the certificates for all tendered Original Notes or a
Book-Entry Confirmation, as the case may be, as well as all other documents
required by this Letter, must be received by the Exchange Agent within five New
York Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in the Prospectus under the caption "The
Exchange Offer - How to Tender."
All questions as to the validity, form, eligibility, (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Issuers' counsel,
would be unlawful. The Issuers also reserve the right to waive any
irregularities or conditions of tender as to particular Original Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Original Notes.
- 8 -
<PAGE> 9
Neither the Issuers, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal
amount of any Senior Note evidenced by a submitted certificate or by a
Book-Entry Confirmation is tendered, the tendering holder must fill in the
principal amount tendered in the fourth column of Box 1 above. All of the
Original Notes represented by a certificate or by a Book-Entry Confirmation
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. A certificate for Original Notes not tendered will be sent
to the holder, unless otherwise provided in Box 5, as soon as practicable after
the Expiration Date, in the event that less than the entire principal amount of
Original Notes represented by a submitted certificate is tendered (or, in the
case of Original Notes tendered by book-entry transfer, such non-exchanged
Original Notes will be credited to an account maintained by the holder with the
Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to 5:00 p.m., Eastern Standard time, on the Expiration Date. To
be effective with respect to the tender of Original Notes, a notice of
withdrawal must: (i) be received by the Exchange Agent before the Company
notifies the Exchange Agent that it has accepted the tender of Original Notes
pursuant to the Exchange Offer; (ii) specify the name of the person who tendered
the Original Notes; (iii) contain a description of the Original Notes to be
withdrawn, the certificate numbers shown on the particular certificates
evidencing such Original Notes and the principal amount of Original Notes
represented by such certificates; and (iv) be signed by the holder in the same
manner as the original signature on this Letter (including any required
signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES.
If this Letter is signed by the holder(s) of Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Original Notes, without alteration, enlargement or any
change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more
joint owners, all owners must sign this Letter. If any tendered Original Notes
are held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Original Notes are tendered; and/or (ii)
untendered Original Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Original Notes, nor provide a separate bond power. If any other case, the holder
of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians. attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuers.
- 9 -
<PAGE> 10
Signatures on this Letter must be guaranteed by an Eligible
Institution, unless Original Notes are tendered: (i) by a holder who has not
completed the Box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter; or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The Securities
Transfer Agents Medallion Program (STAMP), The New York Stock Exchanges
Medallion Signature Program (MSP) or The Stock Exchanges Medallion Program
(SEMP) (collectively, "Eligible Institutions"). If Original Notes are registered
in the name of a person other than the signer of this Letter, the Original Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Issuers in their sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Original Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Original
Notes by book-entry transfer may request that Original Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as such
holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered original Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to the holder of the Exchange Notes pursuant to
the Exchange Offer may be subject to back-up withholding. (If withholding
results in overpayment of taxes, a refund may be obtained.) Exempt holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these back-up withholding and reporting requirements. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuers
on account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; or (ii) the Internal Revenue Service has notified the holder that he
or she is no longer subject to back-up withholding; or (iii) certify in
accordance with the Guidelines that such holder is exempt from back-up
withholding. If the Original Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for information on
which TIN to report.
- 10 -
<PAGE> 11
6. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the transfer of Original Notes to it or its order pursuant to the
Exchange Offer.' If. however, the Exchange Notes or certificates for Original
Notes not exchanged are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter, or
if a transfer tax is imposed by any reason other than the transfer of Original
Notes to the Company or its order pursuant to the Exchange Offer, then the
amount of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to
amend or waive any of the specified conditions in the Exchange Offer in the case
of any Original Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder
whose certificates for Original Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above, for
further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating
to the procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Original Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
- 11 -
<PAGE> 1
EXHIBIT 99.2
EYE CARE CENTERS OF AMERICA, INC.
EXCHANGE OFFER
TO HOLDERS OF ITS
9 1/8% SENIOR SUBORDINATED NOTES DUE 2008
FLOATING INTEREST RATE SUBORDINATED TERM SECURITIES DUE 2008
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated ___________, 1998 (the
"Prospectus") of Eye Care Centers of America, Inc. (the "Company") and all of
the domestic subsidiaries of the Company (together with the Company, the
"Issuers") under "The Exchange Offer -- How to Tender" and in the Letter of
Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange
Offer") by the Issuers to exchange up to $100,000,000 in principal amount of its
9 1/8% Senior Subordinated Notes due 2008 and $50,000,000 in principal amount
of its Floating Interest Rate Subordinated Term Securities due 2008 (the
"Exchange Notes"), for $100,000,000 in principal amount of its outstanding
9 1/8% Senior Subordinated Notes due 2008, and $50,000,000 in principal amount
of its outstanding Floating Interest Rate Subordinated Term Securities due
2008, issued and sold in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Original Notes"), respectively, this
form or one substantially equivalent hereto must be used to accept the Exchange
Offer of the Issuers if: (i) certificates for the Original Notes are not
immediately available; or (ii) time will not permit all required documents to
reach the Exchange Agent (as defined below) on or prior to the Expiration Date
(as defined in the Prospectus) of the Exchange Offer. Such form may be
delivered by hand or transmitted by telegram, telex, facsimile transmission or
letter to the Exchange Agent.
TO: UNITED STATES TRUST COMPANY OF NEW YORK (the "Exchange Agent")
By Facsimile:
(212) 780-0592
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
<PAGE> 2
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO
A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
-2-
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the principal amount of Original Notes set forth below pursuant to
the guaranteed delivery procedure described in the Prospectus and the Letter of
Transmittal.
- --------------------------------------------------------------------------------
Sign Here
Principal Amount of Original Notes Signature(s) __________________________
Tendered __________________________ _______________________________________
Certificate Nos. Please Print the Following Information
(if available) ____________________
Name(s) _______________________________
_______________________________________
Total Principal Amount
Represented by Original Notes Address _______________________________
Certificate(s) ___________________ _______________________________________
Area Code and Tel. No(s). _____________
_______________________________________
Account Number ____________________
Dated: _____________, 1998
- --------------------------------------------------------------------------------
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
GUARANTEE
The undersigned, an Eligible Institution within the meaning of Rule 17A(d)-15
under the Securities Exchange Act of 1934, as amended, hereby guarantees that
delivery to the Exchange Agent of certificates tendered hereby, in proper form
for transfer, or delivery of such certificates pursuant to the procedure for
book-entry transfer, in either case with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
required documents, is being made within five trading days after the date of
execution of a Notice of Guaranteed Delivery of the above named person.
Name of Firm: ___________________
____________________
Authorized Signature
Title: _________________
Name: __________________
_____________________________
Number and Street or P.O. Box
_____________________
City, State, Zip Code
_______________________
Area Code and Tel. No.
Dated: ___________, 1998 NOTE: DO NOT SEND INITIAL NOTES WITH THIS
NOTICE OF GUARANTEED DELIVERY. INITIAL
NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
- --------------------------------------------------------------------------------
-4-
<PAGE> 1
EXHIBIT 99.3
EXCHANGE AGENT AGREEMENT
DATED AS OF _______ , 1998
United States Trust Company of
New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Division
Ladies and Gentlemen:
Eye Care Centers of America, Inc., a Texas corporation (the "Company"),
together with its subsidiary guarantors set forth on Schedule I hereto, is
offering to exchange up to $100,000,000 in principal amount of 91/8% Senior
Subordinated Notes due 2008 and up to $50,000,000 in principal amount of
Floating Interest Rate Subordinated Term Securities due 2008 (FIRST(sm))
(collectively, the Exchange Notes") for $100,000,000 in principal amount of its
91/8% Senior Subordinated Notes due 2008 and up to $50,000,000 in principal
amount of its outstanding Floating Interest Rate Subordinated Term Securities
due 2008 (FIRST(sm)), respectively (collectively, the "Initial Notes" and
together with the Exchange Notes the "Notes"), upon the terms and conditions set
forth in the Prospectus dated __________, ___ 1998 and in the related Letter of
Transmittal (together, the "Offer") annexed hereto as Exhibits A and B,
respectively. Capitalized terms not defined herein shall have the meanings set
forth in the Offer.
The Company hereby appoints you to act as Exchange Agent in connection
with the Offer and by your acknowledgment and acceptance of this Letter
Agreement you hereby accept such appointment.
<PAGE> 2
The Letter of Transmittal that accompanies the Prospectus sent to the
holders of Initial Notes (the "Initial Noteholders") shall be used by the
Initial Noteholders to accept the Offer, and contains instructions with respect
to the delivery of the Initial Notes for the Exchange Notes.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions and shall take such additional
reasonable action as from time to time may be reasonably requested and directed
in writing by the Company:
1. You are to mail the Prospectus and the Letters of Transmittal to all
of the Initial Noteholders on the day that you are notified in writing by the
Company that the Registration Statement has become effective under the
Securities Act of 1933, as amended, and to make subsequent mailings thereof to
persons who become Holders prior to the Expiration Date as may from time to time
be requested by the Company.
2. The Offer shall expire at 5:00 p.m. New York City Time, on
__________, 1998 (the "Expiration Date"), or at any subsequent time to which the
Company, in its sole discretion, may extend the Offer by giving written notice
to you and a timely public announcement no later than 5:00 p.m. on the next
business day following the Expiration Date.
3. You are hereby directed to establish an account with respect to the
Exchange Notes (the "Book Entry Transfer Facility") at The Depository Trust
Company ("DTC") within two days after the date of the execution of this Letter
Agreement. Any financial institution that is a participant in the Book-Entry
Transfer Facility system may, until the Expiration Date, make book-entry
delivery of the Initial Notes by causing the Book-Entry Facility to transfer
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<PAGE> 3
such Initial Notes into your account in accordance with the procedure for such
transfer established by the Book-Entry Transfer Facility.
4. You are to examine the Letters of Transmittal, the Initial Notes and
other documents, if any, as required by the Letter of Transmittal, delivered or
mailed to you or transmitted by facsimile transmission, as such form of delivery
is provided for in the Offer to ascertain whether (i) the Letters of Transmittal
are duly executed and completed in accordance with the instructions set forth in
the Offer, (ii) the other documents, if any, are properly executed and completed
and (iii) the Initial Notes have been tendered in accordance with the
instructions in the Letter of Transmittal and the Prospectus, provided, however,
that you shall be entitled to rely on the DTC electronic messages sent regarding
ATOP delivery of the Initial Notes to the Exchange Agent's account at DTC from
the DTC participants listed on the DTC position listing provided to you. In each
case where a Letter of Transmittal has been improperly executed or completed or,
for any reason, is not in proper form, or some other irregularity in connection
with the acceptance of the Offer exists, and if, in your opinion, the time
available to you so permits, you will endeavor to contact the tendering Initial
Noteholder, in the manner directed by the Company and agreed to by you, to give
such Initial Noteholder an opportunity to correct the irregularity in the manner
directed by the Company in a timely manner and agreed to by you. Determination
of all questions as to the proper completion or execution of a Letter of
Transmittal or as to the proper form for transfer of the Initial Notes or as to
any other irregularity in connection with the acceptance of this offer shall be
made by the Company, in its sole discretion, which determination shall be final
and binding on all tendering Initial Noteholders.
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<PAGE> 4
5. Tenders of Initial Notes may be made only as set forth in the Letter
of Transmittal. Any additional handling, copying or retention requests from the
Company shall be at the Company's expense. The issuance of the Exchange Notes
shall only be done upon: (a) receipt of all tendered Initial Notes, fully
executed and properly completed Letters of Transmittal and accompanying
documentation required by the Offer, by the Exchange Agent; (b) delivery by the
Exchange Agent of the tendered Initial Notes to the Trustee for cancellation in
accordance with the Indenture; and (c) receipt of the duly authenticated
Exchange Notes from the Trustee. The Exchange Agent shall then deliver the
authenticated Exchange Notes to the tendering Initial Noteholders in accordance
with the instructions of each tendering Initial Noteholder in the Letters of
Transmittal. Any exceptions, alternatives or deviations from the delivery
instructions described in the Letter of Transmittal and the Prospectus shall
only be upon the written instructions of the Company, together with indemnity
satisfactory to you, in your reasonable discretion, for any Losses (as
hereinafter defined) that you may suffer in connection with the making of such
payment. You shall have no duty to enforce any guarantees given pursuant to the
section entitled "The Exchange Offer - How to Tender" in the Prospectus.
6. On each business day up to and including the Expiration Date, you
are to notify by facsimile, to (i) Douglas C. Shepard, Vice President/Controller
(telephone: (210) 524-6538) and facsimile: (210) 524-6996)) and (ii) Francis J.
Feeney, Jr., Esq. (telephone: (617) 951-6906) and facsimile: (617) 951-1295))
and such other persons as the Company may reasonably request, of the aggregate
principal amount of Initial Notes that have been properly tendered pursuant to
the offer and the number properly tendered that day.
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<PAGE> 5
7. The tendered Initial Notes are to be dealt with as follows:
(i) As soon as practicable after the Company notifies you that
the Expiration Date of the Offer has occurred and will not be extended
pursuant to this paragraph 6 and upon receipt by you of the Initial
Notes and authorization to deliver such Initial Notes as directed by
the tendering Initial Noteholders, you shall (a) deliver the tendered
Initial Notes to such person or entity as the Company shall designate,
and (b) deliver over your window or send by first-class mail postage
prepaid to, or at the direction of, each Initial Noteholder, whose
Initial Notes were tendered, Exchange Notes in like aggregate principal
amount in the manner described in the Offer or as otherwise directed by
the Company in writing pursuant to an officers' certificate;
(ii) Tenders pursuant to the Offer are irrevocable, except as
set forth in the Letter of Transmittal;
(iii) If, pursuant to the terms of the Offer, the Company does
not accept for tender all or any part of the Initial Notes tendered, or
Initial Notes tendered are withdrawn in the manner provided in "The
Exchange Offer - Withdrawal Rights" in the Prospectus, or partial
tenders are made, you shall promptly return to, or, upon the order of,
the tendering Initial Noteholder, Initial Notes not accepted, and to
the extent required, submit to the Trustee for reissuance to, or upon
the order of, the tendering Initial Noteholder, Initial Notes not
tendered or purchased, which Initial Notes shall be returned to you for
distribution to the holders of such Initial Notes;
(iv) Initial Notes not accepted for tender shall be forwarded
by first-class mail under an existing insurance policy protecting you
and the Company from loss or
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<PAGE> 6
liability arising out of the non-receipt or non-delivery of such
Initial Notes or by registered mail insured separately for the
replacement value of such Initial Notes.
8. For your services as Exchange Agent hereunder, the Company shall pay
you such fees as are set forth in Exhibit C hereto. The Company shall also
reimburse you for your reasonable out-of-pocket expenses (including, but not
limited to, counsel's reasonable fees and expenses) in connection with entering
into this Letter Agreement and your services hereunder promptly after submission
to the Company of an itemized statement in reasonable detail within thirty (30)
days following receipt of same. This paragraph shall survive any termination of
this Letter Agreement.
9. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or in the Exhibits attached hereto which
form part of this Letter Agreement;
(b) will be regarded as making no representations and having
no responsibilities regarding the validity, sufficiency, value or
genuineness of any Initial Notes deposited with you hereunder, and will
not be required to and will not make any representation as to the
validity, value or genuineness of the Offer;
(c) will be regarded as making no representations and having
no responsibilities regarding the validity, sufficiency, adequacy or
accuracy of the Prospectus or the Letter of Transmittal or any other
disclosure materials delivered in connection therewith;
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<PAGE> 7
(d) shall not be obligated to take any legal action hereunder
which might in your judgment involve any expense or liability, unless
you shall have been furnished with an indemnity from the Company
satisfactory to you;
(e) may rely on and shall be protected in acting in reliance
upon any instruction, direction, Officers, Certificate, certificate,
instrument, opinion, notice, letter, telegram or other document
delivered to you and believed by you to be genuine and to have been
signed by the proper party or parties;
(f) may rely on and shall be protected and fully indemnified,
pursuant to paragraph 9 hereof, in acting upon the written or oral
instructions confirmed in writing by facsimile transmission, with an
original delivered by guaranteed overnight courier, with respect to any
matter relating to your acting as Exchange Agent;
(g) may consult with counsel satisfactory to you (including
counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by you in reliance upon such opinion,
provided, that you shall promptly notify the Company in writing of any
action taken or omitted by you in reliance upon such opinion; and
(h) shall not at any time advise any Initial Noteholder
tendering pursuant to the Offer as to the wisdom of making such tender
or as to the market value of the Exchange Notes.
10. The Company covenants and agrees to indemnify and hold harmless
United Trust Company of New York and its officers, directors, employees, agents
and affiliates (collectively, the "Indemnified Parties" and each an "Indemnified
Party") and hold each Indemnified Party
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<PAGE> 8
harmless against any loss, liability or reasonable expense of any nature
(including reasonable legal and other fees and expenses) incurred in connection
with the administration of the duties of the Indemnified Parties hereunder;
provided, however, that no Indemnified Party shall be indemnified against any
such loss, liability or expense arising out of such party's gross negligence or
bad faith. In no event shall you be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if you have been advised of the likelihood of such loss
or damage and regardless of the form of action. To the extent stated below, the
Company shall not be liable under this indemnity with respect to any claim
against any Indemnified Party unless the Company shall be notified by such
Indemnified Party by letter, or by cable, telex or telecopier, confirmed by
letter, of the written assertion of a claim against such Indemnified Party, or
of any action commenced against such Indemnified Party, promptly after but in
any event within 10 days of the date such Indemnified Party shall have received
any such written assertion of a claim or shall have been served with a summonses
and complaints, or other legal process, giving information as to the nature and
basis of the claim, but failure so to notify the Company shall not relieve the
Company of any liability which it may have otherwise than on account of this
Agreement or hereunder except such liability which is a direct result of such
Indemnified Party's failure to notify promptly. The Company shall be entitled to
participate at its own expense in the defense against any such claim or legal
action. If such Indemnified Party in such notice so directs, the Company shall
assume the defense of any suit brought to enforce any such claim. If such
Indemnified Party does not so direct the Company but elects not to defend any
such claim or legal action or if such Indemnified Party has elected to defend
any such claim or legal action but is not, in the reasonable judgment of the
Company,
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<PAGE> 9
diligently pursuing such defense, then the Company may elect to assume the
defense of any suit brought to enforce any such claim. In the event the Company
assumes the defense, the Company shall not be liable for any fees and expenses
thereafter incurred by such Indemnified Party's counsel, except for any
reasonable fees and expenses of such Indemnified Party's counsel incurred in
representing such Indemnified Party that are necessary and appropriate as a
result of the need to have separate representation because of a conflict of
interest between such Indemnified Party and the Company. You shall not enter
into a settlement or other compromise with respect to any indemnified loss,
liability or expense without the prior written consent of the Company, which
shall not be unreasonably withheld or delayed.
11. All notices and communications hereunder shall be in writing and
shall be deemed to be duly given if delivered or mailed first-class certified or
registered mail, postage prepaid, or telecopied as follows:
If to the Company
address to the
Company at: Eye Care Centers of America, Inc.
1163 West Avenue
San Antonio, Texas 78213
Telephone: (210) 340-3531
Fax: (210) 524-6996
Attn: President
and a copy to: Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Telephone: (617) 951-6600
Fax: (617) 951-1295
Attn: Francis J. Feeney, Jr., Esq.
If to you: United States Trust Company of New York
114 West 47th Street
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<PAGE> 10
New York, New York 10036
Telephone: (212) 852-1664
Fax: (212) 852-1626
Attn: Ms. Patricia Stermer
or such other address or telecopy number as any of the above may have furnished
to the other parties in writing for such purpose.
12. The Letter Agreement shall be construed and governed by the laws of
the State of New York.
13. The parties hereto hereby irrevocably submit to the venue and
jurisdiction of any New York state or federal court sitting in the Borough of
Manhattan in New York City in any action or proceeding arising out of or
relating to this Agreement, and the parties hereby irrevocably agree that all
claims in respect of such action or proceeding arising out of or relating to
this Letter Agreement, shall be heard and determined in such a New York state or
federal court. The parties hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the subject matter of any
such dispute and agree that delivery or mailing of any process or other papers
in the manner provided herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
14. This Letter Agreement may only be modified in writing. Any
inconsistency between this Letter Agreement and the Prospectus and related
Letter of Transmittal, as they may from time to time be amended, shall be
resolved in favor of the Prospectus and the related Letter of Transmittal,
except wit h respect to duties, liabilities and indemnification of you as
Exchange Agent which shall be governed exclusively by this Letter Agreement.
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<PAGE> 11
15. This Letter Agreement and all of the obligations hereunder shall be
assumed by any and all successors and assigns of the Company.
16. This Letter Agreement may be executed in counterparts, each of
which so executed shall be deemed to be an original but all such counterparts
shall together constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 12
Please acknowledge receipt of this Letter Agreement and confirm your
agreement to the arrangements herein provided by signing and returning the
enclosed copy.
Very truly yours,
EYE CARE CENTERS OF AMERICA, INC.
By:______________________________
Name:
Title:
ACKNOWLEDGED, ACCEPTED AND AGREED TO
THIS ____ DAY OF___________, 1998:
UNITED STATES TRUST COMPANY OF
NEW YORK
By:______________________________
Name:
Title:
S-1
<PAGE> 13
SCHEDULE I
List of Subsidiary Guarantors
Enclave Advancement Group, Inc.
ECCA Managed Vision Care, Inc.
Visionworks Holdings, Inc.
Visionworks, Inc.
Visionworks Properties, Inc.
Eye Care Holdings, Inc.
Visionary Retail Management, Inc.
Visionary Properties, Inc.
Visionary MSO, Inc.
The Samit Group, Inc.
Hour Eyes, Inc.
Skylab Optical, Inc.
Metropolitan Vision Services, Inc.
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<PAGE> 14
EXHIBIT C
SCHEDULE OF FEES
United States Trust Company of New York
to act as
Exchange Agent
Exchange Agent Fee: $7,500
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