<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED NOVEMBER 1, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM _______________ TO ________________
Commission File Number: 0-8550
PCA INTERNATIONAL, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0888429
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
815 MATTHEWS-MINT HILL ROAD
MATTHEWS, NORTH CAROLINA 28105
--------------------------------------
(Address of principal executive offices)
(Zip Code)
(704) 847-8011
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK, $0.20 PAR VALUE 2,357,052
- ------------------------------------ --------------------------------
CLASS OUTSTANDING AT DECEMBER 1, 1998
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - November 1, 1998 and
February 1, 1998................................................. 1
Consolidated Statements of Income - Three Months and Nine Months
Ended November 1, 1998 and November 2, 1997...................... 2
Consolidated Statement of Changes in Shareholders' Equity - Nine
Months Ended November 1, 1998.................................... 3
Consolidated Statements of Cash Flows - Nine Months Ended
November 1, 1998 and November 2, 1997............................ 4
Condensed Notes to Consolidated Financial Statements................. 5-6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 10
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings.................................................... 11
ITEM 5. Other Information.................................................... 11
ITEM 6. Exhibits and Reports on Form 8-K..................................... 12
SIGNATURES ..................................................................... 12
</TABLE>
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
- ---------------------------------------------------------------------------------------------
NOVEMBER 1, February 1,
ASSETS 1998 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 3,425,033 $ 12,289,761
Accounts receivable (net of allowance for
doubtful accounts of $1,792,865 and $1,315,666)
Due from licensor stores and customers ..... 8,874,555 6,740,560
Other, including employee advances ......... 2,158,254 763,925
Inventories ....................................... 5,519,430 10,078,719
Deferred income taxes ............................. 7,205,396 5,827,324
Prepaid expenses .................................. 1,597,562 1,043,708
------------ ------------
TOTAL CURRENT ASSETS ....................... 28,780,230 36,743,997
------------ ------------
PROPERTY:
Land and improvement............................... 2,305,293 2,305,293
Building and improvements ......................... 12,175,220 12,148,732
Photographic and sales equipment .................. 60,091,276 57,713,911
Photographic finishing equipment .................. 15,647,619 15,599,525
Furniture and equipment ........................... 14,884,572 13,872,058
Transportation equipment .......................... 294,920 292,593
Leasehold improvements ............................ 16,417,684 16,050,719
Construction in progress .......................... 2,648,446 1,429,621
------------ ------------
Total Property ............................. 124,465,030 119,412,452
Less: Accumulated depreciation and
amortization .................................. 71,836,695 64,488,965
------------ ------------
PROPERTY, NET .............................. 52,628,335 54,923,487
------------ ------------
INTANGIBLE ASSETS .................................... 58,161,810 59,733,731
OTHER ASSETS ......................................... 13,105,989 1,899,611
------------ ------------
TOTAL ASSETS ......................................... $152,676,364 $153,300,826
============ ============
<CAPTION>
UNAUDITED
- ----------------------------------------------------------------------------------------------
NOVEMBER 1, February 1,
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 1998 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings .............................. $ 6,800,000 $ --
Current portion of long-term debt .................. 5,000,000 8,750,000
Accounts payable-trade ............................. 17,163,487 25,915,285
Accrued insurance .................................. 4,650,234 4,085,191
Accrued income taxes ............................... 158,823 1,188,859
Accrued compensation ............................... 4,159,986 6,474,414
Other accrued liabilities .......................... 11,563,532 10,664,577
------------- -------------
TOTAL CURRENT LIABILITIES ................... 49,496,062 57,078,326
------------- -------------
LONG-TERM DEBT ...................................... 220,158,293 42,063,857
------------- -------------
DEFERRED INCOME TAXES ............................... -- 1,738,255
------------- -------------
OTHER LIABILITIES ................................... 6,823,466 7,730,964
------------- -------------
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $10.00 par value (authorized--
2,000,000 shares; outstanding--none) .......... -- --
Common Stock, $0.20 par value (authorized--
20,000,000 shares; issued--2,357,052 shares and
7,901,579 shares) ............................. 471,410 1,580,316
Additional paid-in capital ........................ -- 9,995,238
Retained earnings (deficit) ....................... (123,865,042) 33,423,465
Cumulative foreign currency translation
adjustments .................................. (407,825) (309,595)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY .................. (123,801,457) 44,689,424
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 152,676,364 $ 153,300,826
============= =============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
NOVEMBER 1, November 2, NOVEMBER 1, November 2,
1998 1997 1998 1997
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
SALES ...................................... $ 56,401,636 $61,235,465 $156,031,866 $167,064,104
------------ ----------- ------------ ------------
COSTS AND EXPENSES:
Advertising and promotional costs .... 4,689,111 5,218,214 10,992,832 13,194,294
Costs of photographic sales .......... 20,925,585 21,411,971 58,478,546 61,907,588
Store commissions and selling costs... 18,999,557 20,309,908 54,783,581 56,599,036
General and administrative expenses... 7,488,198 8,409,817 24,834,963 27,177,110
Merger related costs and expenses .... 24,877,533 -- 25,889,431 --
Amortization of intangibles .......... 505,665 482,477 1,519,885 1,447,052
------------ ----------- ------------ ------------
Total costs and expenses ......... 77,485,649 55,832,387 176,499,238 160,325,080
------------ ----------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS .............. (21,084,013) 5,403,078 (20,467,372) 6,739,024
Interest expense, net ................ 5,974,759 1,719,380 8,339,106 4,989,876
------------ ----------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES .......... (27,058,772) 3,683,698 (28,806,478) 1,749,148
INCOME TAX (BENEFIT) PROVISION ............. (6,839,804) 1,763,854 (7,403,265) 825,598
------------ ----------- ------------ ------------
NET (LOSS) INCOME .......................... $(20,218,968) $ 1,919,844 $(21,403,213) $ 923,550
============ =========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic ................................ 3,770,118 8,659,875 6,549,917 8,413,323
============ =========== ============ ============
Diluted .............................. 3,827,290 8,702,670 6,889,667 8,641,240
============ =========== ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE:
Net Income (Loss) .................... $ (5.36) $ 0.22 $ (3.27) $ 0.11
============ =========== ============ ============
CASH DIVIDENDS PER COMMON SHARE ............ $ -- $ 0.07 $ 0.07 $ 0.14
============ =========== ============ ============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
2
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS; EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 1, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY
------------------------- PAID-IN COMPREHENSIVE EARNINGS/ TRANSLATION
SHARES AMOUNT CAPITAL INCOME (DEFICITS) ADJUSTMENT
----------- ----------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 1, 1998: 7,901,579 $ 1,580,316 $ 9,995,238 $ 33,423,465 $ (309,595)
Comprehensive Income
Net loss $(21,403,213) (21,403,213)
Foreign currency translation
adjustment (58,165) (98,230)
------------
Total comprehensive loss $(21,461,378)
Exercise of stock options 46,300 9,260 712,377
Shares issued 1,957,812 391,562 51,490,456
Shares acquired (7,548,639) (1,509,728) (63,198,716) (135,330,489)
Cancellation of warrents (1,537,500)
Compensatory stock options 2,538,145
Dividends (554,805)
--------------------------------------------- --------------------------
BALANCE, NOVEMBER 1, 1998: 2,357,052 $ 471,410 $ -- $ (123,865,042) $ (407,825)
============================================= ===========================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
3
<PAGE> 6
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------------
NOVEMBER 1, November 2,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income ............................................................... $ (21,403,213) $ 923,550
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization .............................................. 11,277,686 11,256,532
Increase in allowance for doubtful accounts ................................ 479,601 745,067
Deferred income taxes ...................................................... (7,612,308) (922,359)
Loss on disposal of property ............................................... 324,822 1,636,368
Compensatory stock option expense .......................................... 2,538,145 --
Decrease in other liabilities............................................... (917,087) (656,767)
(Increase) decrease in other noncurrent assets ............................. 2,051,120 (1,195,669)
Changes in operating assets and liabilities:
Increase in accounts receivable ........................................ (4,017,824) (5,215,226)
Decrease in inventories................................................. 4,555,111 2,965,303
(Increase) decrease in prepaid expenses................................. (544,135) 239,855
Increase (decrease) in accounts payable ................................ (8,743,696) 1,707,858
Decrease in accrued expenses............................................ (1,846,410) (2,866,905)
------------- ------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ............................. (23,858,188) 8,617,607
------------- ------------
INVESTING ACTIVITIES:
Purchase of property ............................................................ (8,564,955) (11,074,008)
Proceeds from sale of fixed assets............................................... 609,994 1,200
Purchase of American Studios..................................................... -- (2,526,814)
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NET CASH USED IN INVESTING ACTIVITIES............................................ (7,954,961) (13,599,622)
------------- ------------
FINANCING ACTIVITIES:
Increase in borrowings, net of financing costs................................... 172,386,690 4,897,155
Exercise of stock options ....................................................... 721,637 3,610,507
Shares acquired ................................................................. (200,038,933) --
Shares issued ................................................................... 51,882,018 --
Cancellation of warrants ........................................................ (1,537,500) --
Cash dividends .................................................................. (554,805) (1,095,043)
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NET CASH PROVIDED BY FINANCING ACTIVITIES ....................................... 22,859,107 7,412,619
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Effect of exchange rate changes on cash ......................................... 89,314 (30,065)
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................ (8,864,728) 2,400,539
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................................... 12,289,761 1,536,234
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................ $ 3,425,033 $ 3,936,773
============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .............................................................. $ 8,710,221 $ 6,678,863
============= ============
Income taxes paid .......................................................... $ 1,997,615 $ 2,378,313
============= ============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
4
<PAGE> 7
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
With respect to the significant accounting policies of PCA
International, Inc. and its subsidiaries (the "Company" or "PCA"), which are
wholly-owned, reference is made to note 1 of the financial statements in the
Company's Form 10-K filed for the fiscal year ended February 1, 1998. The
interim financial statements reflect all adjustments (consisting of normal
recurring accruals) that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented.
NOTE 2. DEBT
The Company signed a credit agreement with NationsBank, N.A., as Agent,
on August 25, 1998 for $150 million in senior secured debt financing ("Credit
Facility"). The Credit Facility includes a $35 million five-year term loan
("Tranche A"), a $90 million seven-year term loan ("Tranche B") and a $25
million five-year revolving line of credit ("Revolving Credit Facility"). The
term loans shall be repaid in quarterly installments which increase on an annual
basis from an aggregate of $5.0 million in the first year to an aggregate of
$31.9 million in the seventh year. Interest rates under the Credit Facility are
based on LIBOR (or a bank base rate, as selected by the Company) with an
applicable margin that may adjust after the first year based upon the Company's
ratio of debt to EBITDA. The Revolving Credit Facility and the Tranche A term
loan bear interest at a rate equal to LIBOR plus 2.25% and the Tranche B term
loan bears interest at a rate equal to LIBOR plus 2.75%. The Credit Facility is
secured by substantially all of the assets of the Company, including 100% of the
outstanding capital stock of all domestic subsidiaries. The terms of the Credit
Facility prohibit the payment of dividends by the Company.
The Company received initial financing on August 25, 1998 under a $100
million senior subordinated credit facility arranged by NationsBanc Montgomery
Securities LLC ("Initial Loans"). The Initial Loans mature on August 25, 1999.
If, at such maturity date, any Initial Loan has not been repaid in full, subject
to certain conditions, such loan will be automatically converted into a term
loan maturing seven years after the date of such conversion. The interest rate
accruing on the Initial Loans is based on LIBOR plus 4.25% increasing in
increments up to a specified maximum rate.
DEBT SUMMARY
Short-term: At November 1, 1998 the Company had $6.8 million in
short-term borrowings, $5.0 million of L.O.C.'s, and approximately $13.2 million
available under its revolving credit facility.
5
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Long-term: The Company's long-term debt at November 1, 1998 is
summarized as follows ($000):
<TABLE>
<CAPTION>
NOVEMBER 1
1998
-----------
<S> <C>
Senior Term Loan
Tranche A due 2003............................... $ 35,000
Senior Term Loan
Tranche B due 2005............................... $ 90,000
Senior Subordinated Debt.................................. $ 100,000
Capital Leases............................................ $ 158
----------
Total Debt....................................... $ 225,158
Less current portion of long-term debt.................... $ 5,000
----------
Net Debt......................................... $ 220,158
</TABLE>
Aggregate debt maturities for the next five years are as follows
($000):
<TABLE>
<S> <C>
1999............................................... $ 5,000
2000............................................... $ 6,431
2001............................................... $ 8,435
2002............................................... $ 11,292
2003............................................... $ 19,625
Thereafter......................................... $ 174,375
-----------
Total....................................... $ 225,158
</TABLE>
NOTE 3. EQUITY
The merger with and between PCA International and a subsidiary of
Jupiter Partners II L.P. closed on August 25, 1998. Following the merger, the
Company was recapitalized with $62.5 million in equity. Jupiter contributed
$51.9 million, or 83.1% of the outstanding equity of the Company, and the
management team rolled over equity of $2.5 million or 3.9% of the outstanding
equity of the Company. Public shareholders rolled over equity of $8.1 million
or 13.0% of the outstanding equity of the Company. Subsequently, the Company
issued management new options to purchase common stock representing up to an
additional 11% of equity on a fully-diluted basis. The new options will vest
over time or upon the achievement of certain performance targets.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is a holding company engaged through its subsidiaries in
the sale and processing of professional color portraits of children, adults,
and families. As of November 1, 1998, the Company operated 2,026 portrait
studios within Kmart and Wal-Mart discount stores
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PCA INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
and supercenters. The Company's studios are located in the United States,
Canada, Mexico, Puerto Rico, and South America. The Company also operates an
extensive traveling studio business providing portrait photography services in
approximately 1,400 additional domestic retail locations as well as to church
congregations and other institutions.
The Company's merger with a subsidiary of Jupiter Partners II L.P.
("Jupiter") was approved by shareholders on August 17, 1998 and became effective
on August 25, 1998. Financing sources for the merger (collectively, "Merger
Financing") were (a) an equity contribution of $51.9 million from Jupiter, (b)
$150 million in senior secured debt pursuant to a bank credit facility led by
NationsBank, N.A., and (c) $100 million in senior subordinated debt initially
through the issuance of bridge loans from NationsBridge, L.L.C. and The Chase
Manhattan Bank. The Merger Financing was used to (i) pay the cash merger
consideration and to purchase other outstanding equity interests, (ii) refinance
indebtedness of approximately $45.8 million, and (iii) pay fees and expenses
incurred in connection with the merger.
The Company reported merger-related charges totaling $26.3 million in
its fiscal 1998 third quarter. These merger-related charges comprise
nonrecurring charges of $24.9 million and a noncash write-off of unamortized
financing expenses related to the Company's previous credit facilities of $1.4
million. The principal components of the nonrecurring charges were a cash
payment upon the cancellation of stock options of approximately $18.9 million,
cash payments for fees and expenses incurred in connection with the merger, and
a noncash charge for the rollover of options.
On August 25, 1998, the effective date of the merger, the Company's
common stock was delisted from the Nasdaq National Market. The Company's shares
were listed for trading on the over-the-counter market (the OTC Bulletin Board)
under the symbol "PCAI."
For the quarter ended November 1, 1998, the Company closed 84 portrait
studios located within Kmart stores, 75 of which were closed in compliance with
a termination agreement previously reported. The Company was notified by Kmart
in November 1998 that it would close an additional 135 studios in which PCA is
currently operating. Under the terms of the licensing agreement between Kmart
and PCA, PCA is required to exit these 135 studios within six months of
notification or around May 1999.
SEASONALITY
Because of the retail nature of its services and its locations in
discount stores, the Company's portrait photography business is seasonal. The
Christmas season accounts for a high percentage of the Company's annual sales
and net income, and the Company's fourth fiscal quarter (late October through
late January) typically produces the largest percentage of annual sales and net
income. The fourth fiscal quarters of 1997, 1996, and 1995, accounted for
approximately 31.2%, 33.2%, and 32.2% of sales, respectively; and 89.4%, 32.8%,
and 64.2% of net income, respectively, for those years. Fiscal 1997 fourth
quarter net income as a percent of annual net income was higher than comparable
historical quarters due to significant costs incurred for restructuring the
Company's digital studio operations which led to operating losses in the first
half of the year. The 1996 fourth quarter net income would have accounted for
69.5% of annual net income before giving effect to a $3.6 million after-tax
charge for studio closure costs.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
Consolidated sales for the three months ended November 1, 1998 were
$56.4 million, a decrease of 7.9% compared with $61.2 million reported in the
three months ended November 2, 1997. The $4.8 million sales decline was due to
weaker than expected same studio sales caused by a decline in customer traffic,
partially offset by higher average sales. Consolidated sales for the nine months
ended November 1, 1998 were $156.0 million, a decrease of 6.6% compared with
$167.1 million for the nine months ended November 2, 1997. The fiscal 1997
period includes approximately $14.7 million sales in aggregate from closed or
discontinued operations and reorganization activities related to the integration
of American Studios. Excluding these non-core sales, PCA's core sales for the
1998 nine months increased approximately 2.4% over the 1997 nine months.
At November 1, 1998 , the Company operated 2,026 portrait studios. This
compares to 2,069 studio locations at November 2, 1997. During the fiscal 1998
third quarter, the Company opened 57 portrait studios and closed 85 portrait
studios.
The following table presents the percentage of sales represented by the
following line items from the Company's statements of income for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ---------------------------------
NOVEMBER 1, November 2, NOVEMBER 1, November 2,
1998 1997 1998 1997
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sales............................. 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses...... 92.4 90.4 95.5 95.1
Merger costs...................... 44.1 0.0 16.6 0.0
Amortization of intangible assets. 0.9 0.8 1.0 0.8
-------- -------- -------- --------
Income (loss) from operations..... (37.4) 8.8 (13.1) 4.1
Interest expense.................. 10.6 2.8 5.3 3.0
-------- -------- -------- --------
Income (loss) before income
taxes........................... (48.0) 6.0 (18.4) 1.1
Income tax (benefit) provision.... (12.2) 2.9 (4.7) 0.5
======== ======== ======== ========
Net (loss) income................. (35.8%) 3.1% (13.7%) 0.6%
======== ======== ======== ========
</TABLE>
For the quarter ended November 1, 1998, operating costs and expenses as
a percentage of sales increased to 92.4% compared with 90.4% reported in the
year-ago quarter. The increase was due principally to lower sales per studio and
rising labor costs. Merger costs related to the execution of the
recapitalization merger with Jupiter were $24.9 million representing 44.1% of
sales. Amortization of intangible assets related to the acquisition of American
Studios in February 1997 was $0.5 million or 0.9% of sales. Excluding $24.9
million of merger-related costs, the Company generated $3.8 million in income
from operations or 6.7% of sales. Inclusive of the $24.9 million merger-related
costs, the Company reported a loss from operations before interest expense and
income tax of $21.1 million for the 1998 third quarter compared with income of
$5.4 million in the 1997 third quarter. Net interest expense for the quarter
ended November 1, 1998 was $6.0 million versus $1.7 million reported in the
year-ago quarter. The increase in net interest expense was attributable to an
increase in the level of borrowings during the 1998 period and a $1.4 million
noncash write-off of unamortized financing expenses related to the Company's
previous credit facility. The income tax benefit for the third quarter of 1998
was $6.8 million compared with a tax provision of $1.8 million for the fiscal
1997 third quarter. The Company reported a
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
net loss of $20.2 million for the fiscal 1998 third quarter compared with net
income of $1.9 million for the comparable quarter one year ago.
For the nine months ended November 1, 1998, operating costs and
expenses as a percentage of sales were 95.5% compared with 95.1% of sales
reported in the year-ago period. The increase was due principally to lower sales
per studio and rising labor costs. Merger-related costs for the nine-month
period were $25.9 million representing 16.6% of sales. Amortization of
intangible assets related to the acquisition of American Studios in February
1997 was $1.5 million or 1.0% of sales for the nine-month period of 1998.
Excluding $25.9 million of merger-related costs, the Company generated $5.4
million in income from operations or 3.5% of sales for the nine months ended
November 1, 1998. Inclusive of merger-related costs, the Company reported a loss
from operations before interest expense and income tax of $20.5 million for the
nine months ended November 1, 1998 compared with income of $6.7 million for the
nine months ended November 2, 1997. Net interest expense for the 1998 nine
months was $8.3 million versus $5.0 million reported in the 1997 nine-month
period. The increase in net interest expense was attributable to $1.4 million in
interest charges related to the recapitalization merger and an increase in the
level of borrowings during the 1998 period. The income tax benefit for the 1998
nine months was $7.4 million compared with a tax provision of $0.8 million for
the fiscal 1997 nine months. The Company reported a net loss of $21.4 million
for the nine months ended November 1, 1998 compared with net income of $0.9
million for the nine months ended November 2, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net loss for the nine months ended November 1, 1998 was $21.4 million,
which includes deferred income taxes of $7.6 million and compensatory stock
option expense of $2.5 million. The Company experienced negative cash flows from
operating activities of $23.9 million for the period ended November 1998, due
principally to the Company's recapitalization merger with Jupiter described in
the Overview. With the consummation of the merger, operating cash flows were
negatively affected by a reduction in net income principally due to
merger-related expenses totaling $27.4 million for the nine months. Excluding
the merger and financing related items, operating activities provided cash of
$2.5 million for the period. Additionally, cash flows were impacted by a
reduction in accounts payable partially offset by a slight decrease in
inventories.
The Company had capital expenditures of $3.4 million in the 1998 third
quarter, principally for new studios and materials used to improve the physical
layout of portrait studios.
During the fiscal 1998 third quarter, the Company's principal sources
of working capital were cash on hand and borrowings under its revolving credit
facility. Sources of merger financing included: (a) an equity contribution of
$51.9 million from Jupiter, (b) $150 million in senior secured debt pursuant to
a bank credit facility led by NationsBank, N.A., and (c) $100 million in senior
subordinated debt initially through the issuance of bridge loans from
NationsBridge, L.L.C. and The Chase Manhattan Bank. These debt facilities are
secured by substantially all of the assets of the Company and its direct and
indirect domestic subsidiaries, subject to certain limitations with respect to
foreign subsidiaries, and contain customary covenants and events of default,
including substantial restrictions on the Company's ability to declare dividends
or distributions. The Merger Financing was used to (i) pay the cash merger
consideration and to purchase other outstanding equity interests, (ii) refinance
indebtedness of approximately $45.8 million, and (iii) pay fees and expenses
incurred in connection with the merger. At November 1, 1998, the Company had
$3.4 million in cash and cash equivalents, $5.0 million of L.O.C.'s, and $6.8
million in short-term borrowings with $13.2 million available under
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
its revolving credit facility. Based upon the current level of operations,
management believes that cash flow from operations and available cash, together
with available borrowings under its credit facilities, will be adequate to meet
the Company's liquidity needs in the near term.
YEAR 2000
The Company has been evaluating and adjusting all date-sensitive
systems and equipment for compliance with the Year 2000. The Company upgraded
its mainframe computer hardware in November 1997 to a version that will be
vendor supported into the new millennium. During the first quarter of fiscal
1998, the Company completed the assessment phase of the Year 2000 project
including information technology, such as point-of-sale computer systems, as
well as non-information technology equipment such as film processing, printers
and portrait processing equipment. The Company initiated plans to correct
programming code in existing computer software applications. Over 65% of the
required coding conversions on information technology has occurred to date. The
Company anticipates completing all known remaining coding conversions by the
first quarter of 1999. Testing of individual program modifications began in
March 1998 with the integrated systems testing scheduled to begin in February
1999. Testing will continue for all existing systems and enhancements to ensure
readiness. In addition, communications are ongoing with other companies with
which our systems interface or our business relies on to determine the extent to
which those companies are addressing their Year 2000 compliance.
The Company is using both internal and external resources to reprogram
and/or modify Company-developed applications, install up-to-date releases of
purchased systems, and test all systems for the Year 2000 compliance. The
Company has not deferred any information technology projects to address the Year
2000 issue.
The total estimated cost of the conversion is between $1.0 million and
$1.2 million, which is being expensed as incurred, or capitalized if
appropriate. The vast majority of the cost is related to reprogramming or
replacement software, the remainder is related to acquisition of hardware.
Through the end of the third quarter, the Company has expensed $0.5 million. All
of these costs are being funded through operating cash flows.
Although the Company anticipates minimal business disruption will occur
as a result of Year 2000 issues, possible consequences include, but are not
limited to, loss of communications links with certain studio locations,
inability to process transactions, inability to process portraits, or engage in
similar normal business activities. To date, the Company has not established a
contingency plan for possible Year 2000 issues. The Company will establish
contingency plans where needed based on the results of actual testing. We
anticipate contingency plans to be in place by March 30, 1999.
The cost of the conversions and the completion dates are based on
management's best estimates and may be updated as additional information becomes
available.
10
<PAGE> 13
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 22, 1998, the Company and the members of its Board of
Directors were sued by Harbor Finance Partners, a shareholder of the Company, to
enjoin the merger between the Company and Jupiter, or in the alternative, for
damages. The lawsuit was filed in the Superior Court of Mecklenburg County,
North Carolina. Harbor Finance Partners has alleged that the Company and its
Directors breached their fiduciary duty to the shareholders in connection with
the merger. On May 26, 1998, the Company and the Directors moved to dismiss the
lawsuit on the basis that Harbor Finance Partners had failed to state a claim
for which relief can be granted. On August 18, 1998, Harbor Finance Partners
filed an Amended Complaint that added a claim that the Proxy Statement provided
to shareholders contained misleading information on their rights to dissent and
appraisal under North Carolina corporation law. The defendant's motion to
dismiss the Amended Complaint was denied. The Company and the Directors intend
to defend the lawsuit vigorously and believe it to be without merit.
ITEM 5. OTHER INFORMATION
The Private Securities Litigation Act of 1995 ("the Act") provides a
safe harbor for forward-looking statements made by or on behalf of the Company.
Certain statements contained in Management's Discussion and Analysis and in
other Company filings are "forward-looking statements" that involve a number of
risks and uncertainties. A number of factors could cause actual results,
performance, achievements of the Company, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, the competitive environment in the portrait photography industry in
general and in the Company's specific market areas; changes in prevailing
interest rates and the availability of and terms of financing to fund the
anticipated growth of the Company's business; inflation; changes in costs of
goods and services; economic conditions in general and in the Company's specific
market areas; demographic changes; changes in or failure to comply with federal,
state and/or local governmental regulations; liability and other claims asserted
against the Company; changes in operating strategy or development plans; the
ability to attract and retain qualified personnel; the significant indebtedness
of the Company after the merger Recapitalization and the impact of increases in
interest rates on such indebtedness; labor disturbances; changes in the
Company's capital expenditure and studio expansion plans; termination of the
Company's right to do business in Kmart or Wal-Mart stores on a permanent or
traveling studio basis; decreases in the number of customers or lower average
sales amounts; and other factors referenced in the Company's filings with the
Securities and Exchange Commission. Actual results may materially differ from
anticipated results described in such statements.
11
<PAGE> 14
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(f) Credit Agreement dated as of August 25, 1998 by and among
PCA International, Inc., PCA Photo Corporation of Canada,
Inc., PCA Specialty Retail Photo Corporation, Inc., Photo
Corporation of America, PCA National, Inc., American
Studios, Inc., the Borrowers, and NationsBank, as Agent.
10(g) Senior Subordinated Credit Facility dated as of August
25, 1998 among PCA International, Inc., PCA Photo
Corporation of Canada, Inc., PCA Specialty Retail Photo
Corporation, Inc., Photo Corporation of America, PCA
National, Inc., American Studios, Inc., as Borrowers, and
NationsBanc Montgomery Securities LLC, as Arranger and
NationsBridge, LLC, as Administrative Agent.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
A Form 8-K was filed on September 9, 1998, to report changes in
control pursuant to the completion on August 25, 1998 of the
merger between PCA International, Inc. and Jupiter Acquisition
Corp. ("Mergerco"), a wholly-owned subsidiary of Jupiter
Partners II L.P. whereby Mergerco merged with and into the
Company, with the Company as the surviving corporation.
A Form 8-K was filed on July 30, 1998, to file selected portions
of the disclosure materials prepared in connection with the
recapitalization merger between PCA International, Inc. and
Jupiter Acquisition Corp., a wholly-owned subsidiary of Jupiter
Partners II L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCA INTERNATIONAL, INC.
------------------------------------------
(Registrant)
Date: December 15, 1998 /s/ John Grosso
------------------------------------------
John Grosso
President
(Principal Executive Officer)
Date: December 15, 1998 /s/ Bruce A. Fisher
------------------------------------------
Bruce A. Fisher
Executive Vice President
(Principal Accounting Officer)
12
<PAGE> 1
CREDIT AGREEMENT
Dated as of August 25, 1998
among
PCA INTERNATIONAL, INC.,
as Borrower,
CERTAIN SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTY HERETO
as Guarantors,
THE SEVERAL LENDERS FROM TIME
TO TIME PARTY HERETO
AND
NATIONSBANK, N.A.,
as Agent
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 DEFINITIONS....................................................1
1.1 Definitions.................................................1
1.2 Computation of Time Periods................................25
1.3 Accounting Terms...........................................25
SECTION 2 CREDIT FACILITIES.............................................26
2.1 Revolving Loans............................................26
2.2 Letter of Credit Subfacility...............................27
2.3 Tranche A Term Loans.......................................32
2.4 Tranche B Term Loans.......................................34
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES................36
3.1 Default Rate...............................................36
3.2 Extension and Conversion...................................36
3.3 Prepayments................................................37
3.4 Termination and Reduction of Commitments...................40
3.5 Fees.......................................................40
3.6 Capital Adequacy...........................................41
3.7 Inability To Determine Interest Rate.......................41
3.8 Illegality.................................................41
3.9 Requirements of Law........................................42
3.10 Taxes.....................................................43
3.11 Indemnity.................................................45
3.12 Pro Rata Treatment........................................45
3.13 Sharing of Payments.......................................46
3.14 Payments, Computations, Etc...............................47
3.15 Evidence of Debt..........................................48
3.16 Replacement of Lenders....................................49
SECTION 4 GUARANTY......................................................50
4.1 The Guarantee..............................................50
4.2 Obligations Unconditional..................................50
4.3 Reinstatement..............................................51
4.4 Certain Additional Waivers.................................52
4.5 Remedies...................................................52
4.6 Rights of Contribution.....................................52
4.7 Continuing Guarantee.......................................53
SECTION 5 CONDITIONS....................................................53
5.1 Conditions to Closing......................................53
5.2 Conditions to All Extensions of Credit.....................58
SECTION 6 REPRESENTATIONS AND WARRANTIES................................59
6.1 Financial Condition........................................59
6.2 No Changes or Restricted Payments..........................59
6.3 Organization; Existence; Compliance with Law...............60
6.4 Power; Authorization; Enforceable Obligations..............60
<PAGE> 3
6.5 No Legal Bar...............................................60
6.6 No Material Litigation.....................................61
6.7 No Default.................................................61
6.8 Ownership of Property; Liens...............................61
6.9 Intellectual Property......................................61
6.10 Disclosure................................................62
6.11 No Burdensome Restrictions................................62
6.12 Taxes.....................................................62
6.13 ERISA.....................................................62
6.14 Governmental Regulations, Etc.............................63
6.15 Subsidiaries..............................................64
6.16 Purpose of Extensions of Credit...........................64
6.17 Environmental Matters.....................................65
6.18 Solvency..................................................66
6.19 Labor Matters.............................................66
6.20 Year 2000 Compliance......................................66
6.21 Location of Collateral....................................66
SECTION 7 AFFIRMATIVE COVENANTS.........................................66
7.1 Financial Statements.......................................67
7.2 Certificates; Other Information............................68
7.3 Notices....................................................69
7.4 Compliance with Law........................................70
7.5 Payment of Obligations.....................................70
7.6 Conduct of Business and Maintenance of Existence...........70
7.7 Maintenance of Property; Insurance.........................70
7.8 Inspection of Property; Books and Records; Discussions.....71
7.9 Environmental Laws.........................................71
7.10 Financial Covenants.......................................72
7.11 Agency Fees...............................................73
7.12 Additional Guaranties and Stock Pledges...................73
7.13 Ownership of Subsidiaries.................................74
7.14 Use of Proceeds...........................................74
7.15 Year 2000 Compliance......................................74
7.16 Collateral................................................74
SECTION 8 NEGATIVE COVENANTS............................................75
8.1 Indebtedness...............................................75
8.2 Liens......................................................76
8.3 Nature of Business.........................................76
8.4 Consolidation, Merger, Sale or Purchase of Assets,
Capital Expenditures, etc..................................76
8.5 Advances, Investments and Loans............................77
8.6 Transactions with Affiliates...............................77
8.7 Ownership of Equity Interests..............................77
8.8 Fiscal Year................................................77
8.9 Prepayments of Indebtedness, etc...........................77
<PAGE> 4
8.10 Restricted Payments.......................................78
8.11 Sale Leasebacks...........................................78
8.12 No Further Negative Pledges...............................78
8.13 License Agreements........................................78
8.14 Payment Blockage Notice...................................78
SECTION 9 EVENTS OF DEFAULT.............................................79
9.1 Events of Default..........................................79
9.2 Acceleration; Remedies.....................................81
SECTION 10 AGENCY PROVISIONS............................................82
10.1 Appointment...............................................82
10.2 Delegation of Duties......................................83
10.3 Exculpatory Provisions....................................83
10.4 Reliance on Communications................................83
10.5 Notice of Default.........................................84
10.6 Non-Reliance on Agent and Other Lenders...................84
10.7 Indemnification...........................................85
10.8 Agent in its Individual Capacity..........................85
10.9 Successor Agent...........................................85
SECTION 11 MISCELLANEOUS................................................86
11.1 Notices...................................................86
11.2 Right of Set-Off..........................................87
11.3 Benefit of Agreement......................................87
11.4 No Waiver; Remedies Cumulative............................89
11.5 Payment of Expenses, etc..................................90
11.6 Amendments, Waivers and Consents..........................91
11.7 Counterparts..............................................91
11.8 Headings..................................................92
11.9 Survival..................................................92
11.10 Governing Law; Submission to Jurisdiction; Venue.........92
11.11 Severability.............................................93
11.12 Entirety.................................................93
11.13 Binding Effect; Termination..............................93
11.14 Confidentiality..........................................93
11.15 Source of Funds..........................................94
11.16 Conflict.................................................94
SCHEDULES
Schedule 1.1(a) Non-Recurring Expenses
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i)Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b)-1 Closing Date Letters of Credit
<PAGE> 5
Schedule 2.2(b)-2 Form of Notice of Request for Letter of Credit
Schedule 2.3(e) Form of Tranche A Term Note
Schedule 2.4(e) Form of Tranche B Term Note
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(l) List of Real Property Collateral
Schedule 5.1(o) Corporate Structure
Schedule 6.2 Restricted Payments
Schedule 6.6 Litigation
Schedule 6.8 Existing Liens
Schedule 6.9 Intellectual Property
Schedule 6.15 Subsidiaries
Schedule 6.21(a) Collateral Locations
Schedule 6.21(b) Chief Executive Office/Principal Place of Business
Schedule 7.2(b) Form of Officer's Compliance Certificate
Schedule 7.7 Insurance
Schedule 7.12 Form of Joinder Agreement
Schedule 7.11-3 Foreign Subsidiaries
Schedule 8.1 Existing Indebtedness
Schedule 8.5 Existing Investments
Schedule 11.3(b) Form of Assignment and Acceptance
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of August 25, 1998 (the "Credit
Agreement"), is by and among PCA INTERNATIONAL, INC., a North Carolina
corporation (the "Borrower"), and the subsidiaries of the Borrower identified on
the signature pages hereto and such other subsidiaries as may from time to time
become Guarantors hereunder in accordance with the provisions hereof
(collectively, the "Guarantors"), the lenders named herein and such other
lenders as may become a party hereto (the "Lenders"), and NATIONSBANK, N.A., as
Agent (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a
$150,000,000 credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall
have the meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date by execution of a Joinder Agreement.
"Affiliate" means, with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5%) or more of the equity
interest in such Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
<PAGE> 7
"Agent" has the meaning given to such term in the heading
hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement,
dated April 20, 1998, between the Agent and the Borrower, as amended,
modified, supplemented or replaced from time to time.
"Agent's Fees" shall have the meaning assigned to such term in
Section 3.5(c).
"Agency Services Address" means NationsBank, N.A.,
NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255,
Attn: Agency Services, or such other address as may be identified by
written notice from the Agent to the Borrower.
"Aggregate Revolving Committed Amount" means the aggregate
amount of Revolving Commitments in effect from time to time, being
initially Twenty Five Million Dollars ($25,000,000).
"Aggregate Tranche A Term Loan Committed Amount" means the
aggregate amount of Tranche A Term Loan Commitments in effect from time
to time, being initially Thirty Five Million Dollars ($35,000,000).
"Aggregate Tranche B Term Loan Committed Amount" means the
aggregate amount of Tranche B Term Loan Commitments in effect from time
to time, being initially Ninety Million Dollars ($90,000,000).
"Applicable Percentage" means for purposes of calculating the
applicable interest rate for any day for any Base Rate Loan or any
Eurodollar Loan, or the applicable rate of the Letter of Credit Fee for
any day, the appropriate applicable percentage in the following table
corresponding to the Consolidated Leverage Ratio then in effect as of
the most recent Rate Determination Date:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Applicable Applicable
Percentage for Percentage for Applicable Applicable
Eurodollar Base Rate Loans Percentage for Percentage for
Loans which are Applicable which are Eurodollar Base Rate Loans
Revolving Loans Percentage for Revolving Loans Loans which which are
Pricing Consolidated and Tranche A Letter of and Tranche A are Tranche B Tranche B Term
Level Leverage Ratio Term Loans Credit Fee Term Loans Term Loans Loans
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I > 5.0 to 1.0 2.25% 2.25% 1.25% 2.75% 1.75%
-
- ---------------------------------------------------------------------------------------------------------------------
II > 4.5 to 1.0 but 2.0% 2.0% 1.0% 2.50% 1.50%
-
< 5.0 to 1.0
- ---------------------------------------------------------------------------------------------------------------------
III > 4.0 to 1.0 but 1.75% 1.75% 0.75% 2.50% 1.50%
-
< 4.5 to 1.0
- ---------------------------------------------------------------------------------------------------------------------
IV > 3.5 to 1.0 but 1.50% 1.50% 0.50% 2.25% 1.25%
-
< 4.0 to 1.0
- ---------------------------------------------------------------------------------------------------------------------
V < 3.5 to 1.0 1.25% 1.25% 0.25% 2.25% 1.25%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 8
The Applicable Percentage shall be determined and adjusted quarterly on
the date (each a "Rate Determination Date") three (3) Business Days
after the date by which the annual and quarterly compliance
certificates and related financial statements and information are
required in accordance with the provisions of Sections 7.1(a) and (b)
and Section 7.2(b), as appropriate; provided that:
(i) the initial Applicable Percentages shall be based
on Pricing Level I and shall remain in effect at such Pricing
Level until the first Rate Determination Date to occur after
July 31, 1999, and
(ii) in the event an annual or quarterly compliance
certificate and related financial statements and information
are not delivered timely to the Agency Services Address by the
date required by Sections 7.1(a) and (b) and Section 7.2(b),
as appropriate, the Applicable Percentages shall be based on
Pricing Level I until such time as an appropriate compliance
certificate and related financial statements and information
are delivered, whereupon the Applicable Percentage shall be
adjusted based on the information contained in such compliance
certificate and related financial statements and information.
Each Applicable Percentage shall be effective from a Rate Determination
Date until the next such Rate Determination Date. The Agent shall
determine the appropriate Applicable Percentages in the pricing matrix
promptly upon receipt of the quarterly or annual compliance certificate
and related financial information and shall promptly notify the
Borrower and the Lenders of any change thereof. Adjustments in the
Applicable Percentages shall be effective as to existing Extensions of
Credit as well as new Extensions of Credit made thereafter.
"Asset Disposition" means, (i) the sale, lease or other
disposition of any property or asset by the Borrower or any Subsidiary
of the Borrower, other than (A) any such sale permitted by Sections
8.4(c)(i) and 8.4(c)(ii) and (B) any such sale permitted by Section
8.4(c)(iii) to the extent the aggregate proceeds received from such
sales in any fiscal year are less than $5,000,000, and (ii) receipt by
the Borrower or any Subsidiary of the Borrower of any cash insurance
proceeds or condemnation award payable by reason of theft, loss,
physical destruction or damage, taking or similar event with respect to
any of their property or assets in an amount in excess of $1,000,000.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee,
3
<PAGE> 9
sequestrator (or similar official) of such Person or for any
substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against
such Person an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
for the winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Bridge Loan Agreement" means that certain Bridge Loan
Agreement dated as of August 25, 1998 among the Borrower, the
guarantors listed on the signature pages thereto, the lenders named
therein, NationsBanc Montgomery Securities LLC, as arranger and
NationsBridge, L.L.C., as administrative agent.
"Bridge Loans" means those certain bridge loans made to the
Borrower pursuant to the terms of Section 2.1 of the Bridge Loan
Agreement.
"Borrower" means the Person identified as such in the heading
hereof, together with any successors and permitted assigns.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Charlotte, North Carolina are
authorized or required by law to close, and when used in connection
with a Eurodollar Loan, such day shall also be a day on which
4
<PAGE> 10
dealings between banks are carried on in U.S. dollar deposits in
London, England, Charlotte, North Carolina and New York, New York.
"Capital Lease" means, as applied to any Person, any lease of
any Property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Capital Lease Obligation" means the capital lease obligations
(including without limitation the payment of rent or other amounts)
relating to a Capital Lease determined in accordance with GAAP.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, or (ii) any domestic commercial bank of
recognized standing (y) having capital and surplus in excess of
$500,000,000 and (z) whose short-term commercial paper rating from S&P
is at least A-2 or the equivalent thereof or from Moody's is at least
P-2 or the equivalent thereof (any such bank being an "Approved Bank"),
in each case with maturities of not more than 270 days from the date of
acquisition, (c) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) and
maturing within six months of the date of acquisition, (d) repurchase
agreements entered into by a Person with a bank or trust company
(including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which
such Person shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) obligations of any State of the United
States or any political subdivision thereof, the interest with respect
to which is exempt from federal income taxation under Section 103 of
the Code, having a long term rating of at least AA- or Aa-3 by S&P or
Moody's, respectively, and maturing within three years from the date of
acquisition thereof, (f) Investments in municipal auction preferred
stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa
(or the equivalent thereof) or better by Moody's and (ii) with
dividends that reset at least once every 365 days and (g) Investments,
classified in accordance with GAAP as current assets, in money market
investment programs registered under the Investment Company Act of
1940, as amended, which are administered by reputable financial
institutions having capital of at least $100,000,000 and the portfolios
of which are limited to Investments of the character described in the
foregoing subdivisions (a), (b), (c), (e) and (f).
"Change of Control" means any of the following events: (a)
prior to a Qualifying IPO, (1) Jupiter shall fail to own beneficially,
directly or indirectly, at least 51% of the outstanding capital stock
of the Borrower or (2) a person or any group, and any affiliate of any
such person other than Jupiter shall beneficially own, directly or
indirectly, an amount of the outstanding capital stock of the Borrower
entitled to 25% or more of the voting
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<PAGE> 11
power of all the outstanding capital stock of the Borrower, (b) after a
Qualifying IPO, (1) Jupiter shall own beneficially, directly or
indirectly, less than 30% of the outstanding capital stock of the
Borrower or (2) a person or any group, and any affiliate of any such
person other than Jupiter shall beneficially own, directly or
indirectly, an amount of the outstanding capital stock of the Borrower
entitled to 25% or more of the voting power of all the outstanding
capital stock of the Borrower, (c) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 24 month period were directors of the Borrower
(together with any new director whose election by the Borrower's Board
of Directors or whose nomination for election by the Borrower's
shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the directors of the Borrower then in office or (d) the
occurrence of a "Change of Control" under and as defined in the
Indenture. As used herein, "beneficial ownership", shall have the
meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"Closing Date" means the date hereof.
"Closing Date Letters of Credit" means those letters of credit
identified on Schedule 2.2(b)-1.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Documents" means the Security Agreement, the
Pledge Agreement, the Mortgages and such other documents executed and
delivered in connection with the attachment and perfection of the
Agent's security interests in the assets of the Credit Parties,
including without limitation, the Mortgage Policies, UCC financing
statements and patent and trademark filings.
"Commitment" means the Revolving Commitment, the LOC
Commitment, the Tranche A Term Loan Commitment and the Tranche B Term
Loan Commitment.
"Commitment Fee" shall have the meaning given such term in
Section 3.5(a).
"Commitment Period" means the period from and including the
Closing Date to but not including the earlier of (i) the Termination
Date, or (ii) the date on which the Revolving Commitments terminate in
accordance with the provisions of this Credit Agreement.
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<PAGE> 12
"Consolidated Capital Expenditures" means for any period for
the Borrower and its Subsidiaries on a consolidated basis, all capital
expenditures for such period, as determined in accordance with GAAP.
"Consolidated Cash Taxes" means for any period, the aggregate
of all federal, state or other domestic or foreign taxes upon the
income and profits of the Borrower and its Subsidiaries on a
consolidated basis, for such period, as determined in accordance with
GAAP, to the extent the same are paid in cash during such period.
"Consolidated EBITDA" means for any period for the Borrower
and its Subsidiaries on a consolidated basis, the sum of (i)
Consolidated Net Income for such period plus (ii), without duplication,
an amount which, in the determination of Consolidated Net Income for
such period has been deducted for (A) Consolidated Interest Expense,
(B) total Federal, state or other domestic and foreign income taxes,
(C) depreciation and amortization, (D) non-recurring expenses set forth
on Schedule 1.1(a) hereto to the extent accrued during the period in
question, and (E) Consolidated Non-Cash Charges plus (iii) the amount
of cash reimbursement payments received from either Wal*Mart Stores,
Inc. or Kmart Corporation during such period to offset photography
studio closure costs during such period, plus (iv) any extraordinary
gains for such period minus (v) any extraordinary losses for such
period, in each case on a consolidated basis determined in accordance
with GAAP applied on a consistent basis. Except as expressly provided
otherwise, the applicable period shall be for the four consecutive
quarters ending as of the date of determination.
"Consolidated Excess Cash Flow" means for any period for the
Borrower and its Subsidiaries on a consolidated basis, the sum of
Consolidated Net Income for such period plus the non-cash portion of
Consolidated Interest Expense for such period plus depreciation,
amortization and other non-cash charges minus Consolidated Capital
Expenditures (to the extent not funded by Capital Leases or purchase
money Indebtedness) for such period minus the aggregate amount of all
regularly scheduled payments of principal on Funded Debt minus the cash
portion of Federal, state, local and foreign income, value added and
similar taxes paid (to the extent not deducted in determining
Consolidated Net Income), in each case on a consolidated basis
determined in accordance with GAAP applied on a consistent basis.
"Consolidated Fixed Charge Coverage Ratio" means for any
period, the ratio of (i) Consolidated EBITDA for such period minus
Consolidated Maintenance Capital Expenditures for such period minus
Consolidated Cash Taxes for such period to (ii) Consolidated Fixed
Charges for such period.
"Consolidated Fixed Charges" means for any period for the
Borrower and its Subsidiaries on a consolidated basis, the sum of the
cash portion of Consolidated Interest Expense plus scheduled maturities
of Funded Debt paid during such period, in each case on a consolidated
basis determined in accordance with GAAP applied on a consistent
7
<PAGE> 13
basis. Except as expressly provided otherwise, the applicable period
shall be for the four consecutive quarters ending as of the date of
determination.
"Consolidated Funded Debt" means Funded Debt of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP applied on a consistent basis.
"Consolidated Group" means the Borrower and its Subsidiaries.
"Consolidated Interest Coverage Ratio" means for any period,
the ratio of Consolidated EBITDA for such period to the cash portion of
Consolidated Interest Expense for such period.
"Consolidated Interest Expense" means for any period for the
Borrower and its Subsidiaries on a consolidated basis, all interest
expense, including the amortization of debt discount and premium and
the interest component under Capital Leases and the implied interest
component under Synthetic Leases, in each case on a consolidated basis
determined in accordance with GAAP applied on a consolidated basis.
Except as expressly provided otherwise, the applicable period shall be
for the four consecutive quarters ending as of the date of
determination.
"Consolidated Leverage Ratio" means, as of the last day of any
fiscal quarter, the ratio of Consolidated Funded Debt on such date to
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending as of such day.
"Consolidated Maintenance Capital Expenditures" means, for
purposes of calculating the Consolidated Fixed Charge Coverage Ratio,
the greater of (i) $4,000,000 or (ii) the sum of $2,000 multiplied by
the number of photography studios under operation by the Borrower and
its Subsidiaries as of the last day of the period for which the
Consolidated Fixed Charge Coverage Ratio is being calculated.
"Consolidated Net Income" means for any period, the net income
of the Borrower and its Subsidiaries on a consolidated basis determined
in accordance with GAAP applied on a consistent basis, but excluding
any extraordinary gains or losses and any taxes on such excluded gains
and any tax deductions or credits on account of any such excluded gains
and any tax deductions or credits on account of any such excluded
losses.
"Consolidated Non-Cash Charges" means for any period for the
Borrower and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP, all non-cash charges for such period (excluding
any non-cash charges that require an accrual or reserve for cash
charges for any future period).
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any material
agreement, instrument or undertaking to which such Person is a party or
by which it or any of its property is bound.
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<PAGE> 14
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, the Collateral Documents, each
Joinder Agreement, the Agent's Fee Letter, and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto.
"Credit Parties" means a collective reference to the Borrower
and the Guarantors, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (i) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other
Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a Bankruptcy Event with respect to any Credit
Party, regardless of whether such interest is an allowed claim under
the Bankruptcy Code) and (ii) all liabilities and obligations, whenever
arising, owing from any Credit Party to any Lender, or any Affiliate of
a Lender, arising under any Hedging Agreement.
"Debt Issuance" means the issuance of any Indebtedness for
borrowed money by a Credit Party or any of its Subsidiaries, other than
Indebtedness permitted by Section 8.1.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time, (i) has failed to make an Extension of Credit required
pursuant to the terms of this Credit Agreement, (ii) has failed to pay
to the Agent or any Lender an amount owed by such Lender pursuant to
the terms of the Credit Agreement or any other of the Credit Documents,
or (iii) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or
similar proceeding.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Subsidiary" means any Subsidiary which is
incorporated or organized under the laws of any State or territory of
the United States or the District of Columbia.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) in the case of any Lender which is an investment fund,
any investment fund which is managed by the same investment advisor of
such Lender; and (iv) any other Person approved by the Agent and,
unless an Event of Default has occurred and is continuing at the time
any assignment is effected in accordance with Section 11.3, the
Borrower (such approval not to be unreasonably withheld or delayed by
the Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Lender and the Agent from the
Borrower within five Business Days after notice of such proposed
assignment has been provided by the assigning Lender to the Borrower);
provided, however, that
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<PAGE> 15
neither the Borrower nor an Affiliate of the Borrower shall qualify as
an Eligible Assignee.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Transaction" means, with respect to the Borrower and
its Subsidiaries, any issuance of shares of its capital stock or other
equity interest; provided that any Equity Transaction shall not include
any such issuance (A) by a Subsidiary of the Borrower to the Borrower,
(B) to an employee, officer or director or former employee, officer or
director pursuant to a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement except to the extent that
the aggregate annual amount of such issuances under this subsection (B)
exceeds $1,000,000, (C) by the Borrower to Jupiter, (D) by the Borrower
to existing shareholders of the Borrower pursuant to a shareholder's
rights offering so long as Jupiter purchases 50% of the capital stock
or other equity interest issued pursuant to such shareholder's rights
offering, or (E) by the Borrower of equity securities so long as the
proceeds of such equity securities are applied to the Bridge Loans or
NationsBridge Term Loans.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14)
of ERISA, or is a member of a group which includes the Borrower and
which is treated as a single employer under Sections 414(b) or (c) of
the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which could
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<PAGE> 16
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (vi) the complete or partial withdrawal of the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a
Multiemployer Plan; (vii) the conditions for imposition of a lien under
Section 302(f) of ERISA exist with respect to any Plan; or (vii) the
adoption of an amendment to any Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
"Eurocurrency liabilities" as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
"Extension of Credit" means, as to any Lender, the making of,
extension or conversion of, or participation in, a Loan by such Lender
or the issuance or extension of, or participation in, a Letter of
Credit.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal
11
<PAGE> 17
Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (A) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day and (B) if no such
rate is so published on such next preceding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent
on such day on such transactions as determined by the Agent.
"Foreign Subsidiary" means a Subsidiary which is not a
Domestic Subsidiary.
"Funded Debt" means, with respect to any Person, without
duplication, (i) all Indebtedness of such Person for borrowed money,
(ii) all purchase money Indebtedness of such Person, including without
limitation the principal portion of all obligations of such Person
under Capital Leases, (iii) all Guaranty Obligations of such Person
with respect to Funded Debt of another Person, (iv) all Funded Debt of
another Person secured by a Lien on any Property of such Person,
whether or not such Funded Debt has been assumed, provided that for
purposes hereof the amount of such Funded Debt shall be limited to the
greater of (A) the amount of such Funded Debt as to which there is
recourse to such Person and (B) the fair market value of the property
which is subject to the Lien, (v) all obligations of such Person issued
or assumed as the deferred purchase price of Property or services
purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within twelve months of the
incurrence thereof) and (vi) the principal balance outstanding under
any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which such
Person is a party, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP. The Funded Debt of any Person shall include
the Funded Debt of any partnership or joint venture in which such
Person is a general partner or joint venturer, but only to the extent
to which there is recourse to such Person for the payment of such
Funded Debt.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of
Section 1.3 hereof.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Guarantor" means each of those Persons identified as a
"Guarantor" on the signature pages hereto and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such
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<PAGE> 18
Indebtedness or any Property constituting security therefor, (ii) to
advance or provide funds or other support for the payment or purchase
of any such Indebtedness or to maintain working capital, solvency or
other balance sheet condition of such other Person (including without
limitation keep well agreements, maintenance agreements, comfort
letters or similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease or purchase
Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold
harmless the holder of such Indebtedness against loss in respect
thereof. The amount of any Guaranty Obligation hereunder shall (subject
to any limitations set forth therein) be deemed to be an amount equal
to the outstanding principal amount (or maximum principal amount, if
larger) of the Indebtedness in respect of which such Guaranty
Obligation is made.
"Hedging Agreements" means any interest rate protection
agreement or foreign currency exchange agreement between the Borrower
and any Lender, or any Affiliate of a Lender.
"Indebtedness" of any Person means (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (iv) all obligations
of such Person issued or assumed as the deferred purchase price of
Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within twelve
months of the incurrence thereof) which would appear as liabilities on
a balance sheet of such Person, (v) all obligations of such Person
under take-or-pay or similar arrangements or under commodities
agreements, (vi) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed,
provided that for purposes hereof the amount of such Indebtedness shall
be limited to the greater of (A) the amount of such Indebtedness as to
which there is recourse to such Person and (B) the fair market value of
the property which is subject to the Lien, (vii) all Guaranty
Obligations of such Person, (viii) the principal portion of all
obligations of such Person under Capital Leases, (ix) all obligations
of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements, commodity purchase or option
agreements or other interest or exchange rate or commodity price
hedging agreements (including, but not limited to, the Hedging
Agreements), (x) the maximum amount of all standby letters of credit
issued or bankers' acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (xi) all preferred stock issued by such
Person and required by the terms thereof to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date and (xii) the
principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such
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<PAGE> 19
transaction is considered borrowed money indebtedness for tax purposes
but is classified as an operating lease in accordance with GAAP. The
Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner
or a joint venturer, but only to the extent to which there is recourse
to such Person for payment of such Indebtedness.
"Indenture" means (a) so long as either the Bridge Loans or
the NationsBridge Term Loans are outstanding, the Bridge Loan
Agreement, and/or (b) at such time as the Bridge Loans and/or
NationsBridge Term Loans have been repaid in full or in part with
proceeds from the Permanent Securities, any Indenture to be entered
into by the Borrower, as issuer in connection with such Permanent
Securities, as the same may be amended, modified, or supplemented from
time to time (such Indenture to contain terms and conditions
(including, without limitation, subordination provisions) satisfactory
to the Agent).
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to the rate of interest, determined by the Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day
of such Interest Period), appearing on Telerate Page 3750 (or, if, for
any reason, Telerate Page 3750 is not available, the Reuters Screen
LIBO Page) as of approximately 11:00 A.M. (London time) two (2)
Business Days before the first day of such Interest Period. As used
herein, "Telerate Page 3750" means the display designated as page 3750
by Dow Jones Telerate, Inc. (or such other page as may replace such
page on that service for the purpose of displaying the British Bankers
Association London interbank offered rates) and "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 for the purpose of displaying London interbank
offered rates of major banks).
"Interest Payment Date" means (i) as to any Base Rate Loan,
the last day of each calendar quarter, the date of repayment of
principal of such Loan and the Termination Date and (ii) as to any
Eurodollar Loan, the last day of each Interest Period for such Loan,
any date of repayment of principal of such Loan and the Termination
Date, and in addition where the applicable Interest Period is more than
3 months, then also on the date 3 months from the beginning of the
Interest Period, and each 3 months thereafter. If an Interest Payment
Date falls on a date which is not a Business Day, such Interest Payment
Date shall be deemed to be the next succeeding Business Day, except
that in the case of Eurodollar Loans where the next succeeding Business
Day falls in the next succeeding calendar month, then on the next
preceding Business Day.
"Interest Period" means as to any Eurodollar Loan, a period of
one, two, three or six month's duration, as the Borrower may elect,
commencing in each case, on the date of the borrowing (including
conversions, extensions and renewals); provided, however, (A) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall
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<PAGE> 20
be extended to the next succeeding Business Day (except that in the
case of Eurodollar Loans where the next succeeding Business Day falls
in the next succeeding calendar month, then on the next preceding
Business Day), (B) no Interest Period shall extend beyond the
Termination Date, and (C) in the case of Eurodollar Loans, where an
Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the Interest Period is
to end, such Interest Period shall end on the last day of such calendar
month.
"Investment" means (i) any loan or advance to any Person, (ii)
any purchase or other acquisition of any capital stock, warrants,
rights, options, obligations or other securities of, or equity interest
in, any Person, (iii) any capital contribution to any Person or any
other investment in such Person, including, without limitation, any
Guaranty Obligation incurred for the benefit of such Person.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" has the meaning assigned to such term in
Section 3.5(b)(ii).
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Schedule 7.12 hereto, executed and delivered by an
Additional Credit Party in accordance with the provisions of Section
7.12.
"Jupiter" means Jupiter Partners II L.P., a Delaware limited
partnership.
"Kmart License Agreement" means the Agreement, dated May 10,
1996, between Kmart Corporation and the Borrower, as amended, modified
or supplemented from time to time.
"Lenders" means each of the Persons identified as a "Lender"
on the signature pages hereto, and their successors and assigns.
"Letter of Credit" means any Closing Date Letter of Credit and
any other letter of credit issued by the Issuing Lender for the account
of the Borrower in accordance with the terms of Section 2.2.
"Letter of Credit Fee" has the meaning given such term in
Section 3.5(b)(i).
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and the Term
Loans.
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<PAGE> 21
"LOC Commitment" means the commitment of the Issuing Lender to
issue, and to honor payment obligations under, Letters of Credit
hereunder and with respect to each Lender, the commitment of each
Lender to purchase participation interests in the Letters of Credit up
to such Lender's LOC Committed Amount as specified in Schedule 2.1(a),
as such amount may be reduced from time to time in accordance with the
provisions hereof.
"LOC Committed Amount" means, collectively, the aggregate
amount of all of the LOC Commitments of the Lenders to issue and
participate in Letters of Credit as referenced in Section 2.2(a), being
initially FIVE MILLION DOLLARS ($5,000,000) and, individually, the
amount of each Lender's LOC Commitment as specified in Schedule 2.1(a).
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
"Margin Stock" has the meaning given such term in 12 CFR Part
221.2.
"Material Adverse Effect" means a material adverse effect on
(i) the condition (financial or otherwise), operations, business,
assets, liabilities or prospects of the Borrower and its Subsidiaries
taken as a whole, (ii) the ability of the Credit Parties taken as a
whole to perform any material obligation under the Credit Documents to
which it is a party or (iii) the rights and remedies of the Lenders
under the Credit Documents.
"Material Guarantors" means any Subsidiary of the Borrower
having total assets of $1,000,000 or more.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws,
including, without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
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"Merger" means that certain merger of Jupiter Acquisition
Corp., a North Carolina corporation with and into the Borrower pursuant
to the terms and conditions of the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of
Merger by and between the Borrower and Jupiter Acquisition Corp., a
North Carolina corporation dated as of April 20, 1998, as amended or
modified from time to time.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Mortgages" has the meaning given to such term in Section
5.1(l).
"Mortgage Policies" has the meaning given to such term in
Section 5.1(l).
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate and at least one
employer other than the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"NationsBridge Term Loans" shall mean the Term Loans (as
defined in the Bridge Loan Agreement).
"Net Proceeds" means 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 in
connection with an Asset Disposition, Debt Issuance or Equity
Transaction, net of (i) reasonable transaction costs, including in the
case of an Equity Transaction, underwriting discounts and commissions
and in the case of an Asset Disposition occurring in connection with a
claim under an insurance policy, costs incurred in connection with
adjustment and settlement of the claim, (ii) estimated taxes payable in
connection therewith, and (iii) in the case of an Asset Disposition,
any amounts payable in respect of Indebtedness (other than the Loans),
including without limitation principal, interest, premiums and
penalties, which is secured by, or otherwise related to, any property
or asset which is the subject thereof to the extent that such
Indebtedness and any payments in respect thereof are paid with a
portion of the proceeds therefrom.
"Non-Excluded Taxes" means such term as is defined in Section
3.10.
"Note" or "Notes" means any Revolving Notes and/or any Term
Notes, individually or collectively, as appropriate.
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"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Schedule 2.1(b)(i), as required by Section
2.1(b)(i).
"Notice of Extension/Conversion" means a written notice of
extension or conversion in substantially the form of Schedule 3.2, as
required by Section 3.2.
"Obligations" means, collectively, the Term Loans, the
Revolving Loans and the LOC Obligations.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Participation Interest" means the purchase by a Lender of a
participation in Letters of Credit and LOC Obligations as provided in
Section 2.2(c), and in Loans as provided in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.
"Permanent Securities" shall have the meaning provided such
term in the Bridge Loan Agreement.
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; (iii) Investments consisting
of stock, obligations, securities or other property received in
settlement of accounts receivable (created in the ordinary course of
business) from bankrupt or insolvent obligors; (iv) Investments
existing as of the Closing Date and set forth in Schedule 8.5; (v)
Guaranty Obligations permitted by Section 8.1; (vi) loans to employees,
directors or officers in connection with the award of convertible bonds
or stock under a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement in the aggregate not to
exceed $500,000 (calculated on the exercise price for any such shares)
in the aggregate at any time outstanding; (vii) other advances or loans
to employees, directors, officers or agents not to exceed $750,000 in
the aggregate at any time outstanding; (viii) advances or loans to
customers or suppliers that do not exceed $1,000,000 in the aggregate
at any one time outstanding; (ix) Investments by one Credit Party in
and to another Credit Party; (x) loans, advances and investments in
Foreign Subsidiaries in an amount not to exceed $15,000,000 in the
aggregate at any time outstanding and (xi) other loans, advances and
investments of a nature not contemplated in the foregoing subsections
in an amount not to exceed $1,000,000 in the aggregate at any time
outstanding.
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"Permitted Liens" means:
(i) Liens in favor of the Agent on behalf of
the Lenders;
(ii) Liens (other than Liens created or
imposed under ERISA) for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on
account thereof);
(iii) statutory Liens of landlords and Liens
of carriers, warehousemen, mechanics, materialmen and
suppliers and other Liens imposed by law or pursuant to
customary reservations or retentions of title arising in the
ordinary course of business, provided that such Liens secure
only amounts not yet due and payable or, if due and payable,
are unfiled and no other action has been taken to enforce the
same or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in
accordance with GAAP have been established (and as to which
the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or
imposed under ERISA) incurred or deposits made by the Borrower
and its Subsidiaries in the ordinary course of business in
connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for
the payment of borrowed money);
(v) Liens in connection with attachments or
judgments (including judgment or appeal bonds) provided that
the judgments secured shall, within 30 days after the entry
thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 30 days
after the expiration of any such stay;
(vi) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or
irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use
of the encumbered Property for its intended purposes;
(vii) Liens securing purchase money
Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(d), provided that any such Lien
attaches only to the Property financed and such Lien attaches
thereto concurrently with or within 90 days after the
acquisition thereof;
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(viii) leases or subleases granted to others
not interfering in any material respect with the business of
any member of the Consolidated Group;
(ix) any interest of title of a lessor
under, and Liens arising from UCC financing statements (or
equivalent filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Credit
Agreement;
(x) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
(xi) Liens deemed to exist in connection
with Investments in repurchase agreements permitted under
Section 8.5;
(xii) normal and customary rights of setoff
upon deposits of cash in favor of banks or other depository
institutions; and
(xiii) Liens existing as of the Closing Date
and set forth on Schedule 6.8; provided that (a) no such Lien
shall at any time be extended to or cover any Property other
than the Property subject thereto on the Closing Date and (b)
the principal amount of the Indebtedness secured by such Liens
shall not be extended, renewed, refunded or refinanced.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Pledge Agreement" means the Pledge Agreement dated as of the
date hereof entered into by the Credit Parties in favor of the Agent
for the benefit of the Lenders (and Affiliates of Lenders as to certain
obligations under the Hedging Agreements), as amended, modified,
restated or supplemented from time to time.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by NationsBank as its prime rate in effect
at its principal office in Charlotte, North Carolina, with each change
in the Prime Rate being effective on the date such change is publicly
announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by NationsBank in determining interest
rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by NationsBank to any
debtor).
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"Prior Credit Agreement" means that certain Credit Agreement
among the Borrower, certain subsidiaries of the Borrower, the lenders
party thereto and NationsBank, N.A., as Agent dated as of February 28,
1997, as amended or modified from timed to time.
"Pro Forma" means, with respect to any event, that such event
shall be deemed to have occurred as of the first day of the
twelve-month period ending as of the last day of the most recent fiscal
quarter for which the Lenders have received the financial information
required by Section 7.1(a) or 7.1(b)(ii), as applicable.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Qualifying IPO" means an underwritten primary public offering
(other than a public offering pursuant to a registration statement on
Form S-8) of the common capital stock of the Borrower (i) pursuant to
an effective registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act (whether
alone or in connection with a secondary public offering) and (ii)
resulting in proceeds to the Borrower of at least $25 million.
"Register" has the meaning given such term in Section 11.3(c).
"Regulation T, U, or X" means Regulation T, U or X,
respectively, 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
or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles
containing any Materials of Environmental Concern).
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
notice requirement has been waived by regulation.
"Required Lenders" means, at any time, Lenders having more
than fifty percent (50%) of the Commitments, or if the Commitments have
been terminated, Lenders having more than fifty percent (50%) of the
aggregate principal amount of the Obligations outstanding (taking into
account in each case Participation Interests or obligation to
participate therein); provided that the Commitments of, and outstanding
principal amount of Obligations (taking into account Participation
Interests therein) owing to, a Defaulting Lender shall be excluded for
purposes hereof in making a determination of Required Lenders.
"Requirement of Law" means, as to any Person, the certificate
of incorporation and by-laws or other organizational or governing
documents of such Person, and any law,
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treaty, rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property.
"Responsible Officer" means the President, the Chief Financial
Officer, the Controller and any Vice President.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of any member of the Consolidated Group now or hereafter
outstanding, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock of any member of the Consolidated
Group now or hereafter outstanding, and (iii) any payment made to
retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of any
member of the Consolidated Group now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans in an aggregate
principal amount at any time outstanding of up to such Lender's
Revolving Commitment Percentage of the Aggregate Revolving Committed
Amount as specified in Schedule 2.1(a), as such amount may be reduced
from time to time in accordance with the provisions hereof.
"Revolving Commitment Percentage" means, for each Lender, a
fraction (expressed as a decimal) the numerator of which is the
Revolving Commitment of such Lender at such time and the denominator of
which is the Aggregate Revolving Committed Amount at such time. The
initial Revolving Commitment Percentages are set out on Schedule
2.1(a).
"Revolving Committed Amount" means, collectively, the
aggregate amount of all of the Revolving Commitments as referenced in
Section 2.1(a) and, individually, the amount of each Lender's Revolving
Commitment as specified in Schedule 2.1(a).
"Revolving Loans" has the meaning assigned to such term in
Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Revolving Loans in substantially the form attached as Schedule 2.1(e),
individually or collectively, as appropriate, as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
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"Security Agreement" means the Security Agreement dated as of
the date hereof entered into by the Credit Parties in favor of the
Agent for the benefit of the Lenders (and Affiliates of Lenders as to
certain obligations under the Hedging Agreements), as amended,
modified, restated or supplemented from time to time.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" or "Solvency" means, with respect to any Person as
of a particular date, that on such date (i) such Person is able to
realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's Property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged or is to engage, (iv) the
fair value of the Property of such Person is greater than the total
amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (v) the present fair saleable value of
the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Debt" means the Indebtedness evidenced by the
Indenture in an aggregate principal amount not to exceed $100,000,000.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, 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 directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% of
the voting interests at any time. Unless otherwise identified,
"Subsidiary" or "Subsidiaries" shall mean Subsidiaries of the Borrower.
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an Operating Lease.
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"Termination Date" means (i) with respect to the Revolving
Loans, Letters of Credit (and the related LOC Obligations) and the
Tranche A Term Loans, August 25, 2003 and (ii) with respect to the
Tranche B Term Loans, August 25, 2005.
"Term Loans" means the Tranche A Term Loans and the Tranche B
Term Loans.
"Term Notes" means the Tranche A Term Notes and/or Tranche B
Term Notes, individually or collectively, as appropriate.
"Tranche A Term Loans" has the meaning assigned to such term
in Section 2.3(a).
"Tranche A Term Loan Commitment" means, with respect to each
Lender, the commitment of such Lender to make Tranche A Term Loans in
an aggregate principal amount at any time outstanding of up to such
Lender's Tranche A Term Loan Commitment Percentage of the Aggregate
Tranche A Term Loan Committed Amount.
"Tranche A Term Loan Commitment Percentage" means, for any
Lender, the percentage identified as its Tranche A Term Loan Commitment
Percentage on Schedule 2.1(a), as such amount may be reduced from time
to time in accordance with the provisions hereof.
"Tranche A Term Loan Committed Amount" means, collectively,
the aggregate amount of all of the Tranche A Term Loan Commitments as
referenced in Section 2.3(a) and, individually, the amount of each
Lender's Tranche A Term Loan Commitment as specified in Schedule
2.1(a).
"Tranche A Term Note" or "Tranche A Term Notes" means the
promissory notes of the Borrower in favor of each of the Lenders
evidencing the Tranche A Term Loans in substantially the form attached
as Schedule 2.3(e), individually or collectively, as appropriate, as
such promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Tranche B Term Loan Commitment" means, with respect to each
Lender, the commitment of such Lender to make Tranche B Term Loans in
an aggregate principal amount at any time outstanding of up to such
Lender's Tranche B Term Loan Commitment Percentage of the Aggregate
Tranche B Term Loan Committed Amount.
"Tranche B Term Loan Commitment Percentage" means, for any
Lender, the percentage identified as its Tranche B Term Loan Commitment
Percentage on Schedule 2.1(a), as such amount may be reduced from time
to time in accordance with the provisions hereof.
"Tranche B Term Loan Committed Amount" means, collectively,
the aggregate amount of all of the Tranche B Term Loan Commitments as
referenced in Section 2.4(a)
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<PAGE> 30
and, individually, the amount of each Lender's Tranche B Term Loan
Commitment as specified in Schedule 2.1(a).
"Tranche B Term Loans" has the meaning assigned to such term
in Section 2.4(a).
"Tranche B Term Note" or "Tranche B Term Notes" means the
promissory notes of the Borrower in favor of each of the Lenders
evidencing the Tranche B Term Loans in substantially the form attached
as Schedule 2.4(e), individually or collectively, as appropriate, as
such promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time.
"Voting Stock" means, with respect to any Person, capital
stock issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of
such a contingency.
"Wal*Mart License Agreement" means the agreement, dated July
29, 1992, between Wal*Mart Stores, Inc. and American Studios, Inc., as
the same may be amended, modified or supplemented from time to time and
any other agreements entered into from time to time between the
Borrower (or its Subsidiaries) and Wal*Mart Stores, Inc. granting the
Borrower or its Subsidiaries the right to operate retail portrait
photography studios in Wal*Mart stores in the United States and Canada.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
100% of whose Voting Stock or other equity interests is at the time
owned by such Person directly or indirectly through other Wholly Owned
Subsidiaries.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding."
1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1
hereof (or, prior to the delivery of the first financial statements pursuant to
Section 7.1 hereof, consistent with the annual audited financial statements
referenced in Section 6.1); provided, however, if (a) the Borrower shall object
to determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Agent or the
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<PAGE> 31
Required Lenders shall so object in writing within 30 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.
SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (the "Revolving Loans") to the Borrower from time to time in the
amount of such Lender's Revolving Commitment Percentage of such Revolving Loans
for the purposes hereinafter set forth; provided that (i) with regard to the
Lenders collectively, the aggregate principal amount of the Revolving Loans and
the LOC Obligations outstanding at any time shall not exceed TWENTY FIVE MILLION
DOLLARS ($25,000,000) (as referenced on Schedule 2.1(a), the "Revolving
Committed Amount"), (ii) with regard to each Lender individually, such Lender's
Revolving Commitment Percentage of the Revolving Loans and the LOC Obligations
outstanding at any time shall not exceed such Lender's Revolving Committed
Amount and (iii) the Lenders shall have no obligation to advance Revolving Loans
during the period from and including December 15 through and including January
15 and, as more specifically provided in Section 3.3(b)(i) hereof, no Revolving
Loans shall be outstanding during such period. Revolving Loans may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the Borrower
may request, and may be repaid and reborrowed in accordance with the provisions
hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a
Revolving Loan borrowing by written notice (or telephone notice
promptly confirmed in writing) to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the date of the requested borrowing
(which shall be a Business Day) in the case of Base Rate Loans, and on
the third Business Day prior to the date of the requested borrowing in
the case of Eurodollar Loans. Each such request for borrowing shall be
irrevocable and shall specify (A) that a Revolving Loan is requested
(B) the date of the requested borrowing (which shall be a Business
Day), (C) the aggregate principal amount to be borrowed, and (D)
whether the borrowing shall be comprised of Base Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans are requested,
the Interest Period(s) therefor. If the Borrower shall fail to specify
in any such Notice of Borrowing (I) an applicable Interest Period in
the case of a Eurodollar Loan, then such notice shall be deemed to be a
request for an Interest Period of one month, or (II) the type of
Revolving Loan requested, then such notice shall be deemed to be a
request for a Base Rate Loan hereunder. The Agent shall give notice to
each Lender promptly upon receipt of each Notice of Borrowing pursuant
to
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<PAGE> 32
this Section 2.1(b)(i), of the contents thereof and each such Lender's
share of any borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan shall be in a
minimum aggregate principal amount of $1,000,000, in the case of
Eurodollar Loans, or $500,000 (or the remaining Revolving Committed
Amount, if less), in the case of Base Rate Loans, and integral
multiples of $100,000 in excess thereof.
(iii) Advances. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the Agent for
the account of the Borrower as specified in Section 3.14(a), or in such
other manner as the Agent may specify in writing, by 1:00 P.M.
(Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing (or the date on which a borrowing is
deemed requested pursuant to Section 2.2(e) hereof) in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrower by the Agent by crediting the account of
the Borrower on the books of the Agent with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds as
received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be due
and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the Base
Rate plus the Applicable Percentage; and
(ii) Eurodollar Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Revolving Notes. The Revolving Loans shall be evidenced by a duly
executed Revolving Note in favor of each Lender.
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. During the Commitment Period, subject to the terms and
conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Issuing Lender may reasonably require, the Issuing Lender
shall issue, and the Lenders shall participate in, such Letters of Credit as the
Borrower may request (or have requested in the case of Closing Date Letters of
Credit) for its own account or for the account of another Credit Party as
provided herein, in a form acceptable to the Issuing Lender, for the purposes
hereinafter set forth; provided
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that (i) the aggregate amount of LOC Obligations shall not exceed FIVE MILLION
DOLLARS ($5,000,000) at any time (the "LOC Committed Amount"), (ii) with regard
to the Lenders collectively, the aggregate principal amount of Obligations under
Revolving Loans and the LOC Obligations outstanding at any time shall not exceed
the Aggregate Revolving Committed Amount and (iii) with regard to each Lender
individually, such Lender's Revolving Commitment Percentage of Obligations under
Revolving Loans and the LOC Obligations outstanding at any time shall not exceed
such Lender's Revolving Committed Amount. Letters of Credit issued hereunder
shall not have an original expiry date more than one year from the date of
issuance or extension, nor an expiry date, whether as originally issued or by
extension, extending beyond the Termination Date. Each Letter of Credit shall
comply with the related LOC Documents. The issuance date of each Letter of
Credit shall be a Business Day.
(b) Notice and Reports. Except for Closing Date Letters of Credit
described on Schedule 2.2(b)-1, the request for the issuance of a Letter of
Credit shall be submitted by the Borrower to the Issuing Lender at least three
(3) Business Days prior to the requested date of issuance (or such shorter
period as may be agreed by the Issuing Lender). A form of Notice of Request for
Letter of Credit is attached as Schedule 2.2(b)-2. The Issuing Lender will
provide to the Agent at least monthly, and more frequently upon request, a
detailed summary report on its Letters of Credit and the activity thereon, in
form and substance acceptable to the Agent.
(c) Participation. Each Lender, upon issuance of a Letter of Credit
(or, as of the Closing Date, in the case of the Closing Date Letters of Credit),
shall be deemed to have purchased without recourse a participation from the
applicable Issuing Lender in such Letter of Credit and the obligations arising
thereunder, in each case in an amount equal to its pro rata share of the
obligations under such Letter of Credit (based on the respective Revolving
Commitment Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and be obligated to
pay to the Issuing Lender therefor and discharge when due, its pro rata share of
the obligations arising under such Letter of Credit. Without limiting the scope
and nature of each Lender's participation in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed as required hereunder or under
any such Letter of Credit, each such Lender shall pay to the Issuing Lender its
pro rata share of such unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to so
reimburse the Issuing Lender shall be absolute and unconditional and shall not
be affected by the occurrence of a Default, an Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of the Borrower to reimburse the Issuing Lender under any
Letter of Credit, together with interest as hereinafter provided. As of the
Closing Date, each Closing Date Letter of Credit shall be deemed for all
purposes of the Credit Agreement and the other Credit Documents to be a Letter
of Credit.
(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender that the Borrower intends
to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall
be deemed to have requested that the Lenders make a Revolving Loan in the amount
of the drawing as provided in subsection (e) hereof on the related Letter of
Credit, the
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<PAGE> 34
proceeds of which will be used to satisfy the related reimbursement
obligations. The Borrower promises to reimburse the Issuing Lender on the day of
drawing under any Letter of Credit (either with the proceeds of a Revolving Loan
obtained hereunder or otherwise) in same day funds. If the Borrower shall fail
to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount
of such drawing shall bear interest at a per annum rate equal to the Base Rate
plus the sum of (i) the Applicable Percentage and (ii) two percent (2%). The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment the Borrower may claim or have against the
Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit
drawn upon or any other Person, including without limitation any defense based
on any failure of the Borrower or any other Credit Party to receive
consideration or the legality, validity, regularity or unenforceability of the
Letter of Credit. The Issuing Lender will promptly notify the other Lenders of
the amount of any unreimbursed drawing and each Lender shall promptly pay to the
Agent for the account of the Issuing Lender in Dollars and in immediately
available funds, the amount of such Lender's pro rata share of such unreimbursed
drawing. Such payment shall be made on the day such notice is received by such
Lender from the Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time) otherwise such payment shall be made at or
before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next
succeeding the day such notice is received. If such Lender does not pay such
amount to the Issuing Lender in full upon such request, such Lender shall, on
demand, pay to the Agent for the account of the Issuing Lender interest on the
unpaid amount during the period from the date of such drawing until such Lender
pays such amount to the Issuing Lender in full at a rate per annum equal to, if
paid within three (3) Business Days of the date that such Lender is required to
make payments of such amount pursuant to the preceding sentence, the Federal
Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's
obligation to make such payment to the Issuing Lender, and the right of the
Issuing Lender to receive the same, shall be absolute and unconditional, shall
not be affected by any circumstance whatsoever and without regard to the
termination of this Credit Agreement or the Commitments hereunder, the existence
of a Default or Event of Default or the acceleration of the obligations of the
Borrower hereunder and shall be made without any offset, abatement, withholding
or reduction whatsoever. Simultaneously with the making of each such payment by
a Lender to the Issuing Lender, such Lender shall, automatically and without any
further action on the part of the Issuing Lender or such Lender, acquire a
participation in an amount equal to such payment (excluding the portion of such
payment constituting interest owing to the Issuing Lender) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest thereon
and in the related LOC Documents, and shall have a claim against the Borrower
with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan to
reimburse a drawing under a Letter of Credit, the Agent shall give notice to the
Lenders that a Revolving Loan has been requested or deemed requested by the
Borrower to be made in connection with a drawing under a Letter of Credit, in
which case a Revolving Loan comprised of Base Rate Loans (or Eurodollar Loans to
the extent the Borrower has complied with the procedures of Section 2.1(b)(i)
with respect thereto) shall be immediately made to the Borrower by all Lenders
(notwithstanding any termination of the Commitments pursuant to Section 9.2) pro
rata based on the respective Revolving Loan Commitment Percentages of the
Lenders (determined before giving effect to any
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<PAGE> 35
termination of the Commitments pursuant to Section 9.2) and the proceeds thereof
shall be paid directly to the Issuing Lender for application to the respective
LOC Obligations. Each such Lender hereby irrevocably agrees to make its pro rata
share of each such Revolving Loan immediately upon any such request or deemed
request in the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (i) the amount of such borrowing may not comply with
the minimum amount for advances of Revolving Loans otherwise required hereunder,
(ii) whether any conditions specified in Section 5.2 are then satisfied, (iii)
whether a Default or an Event of Default then exists, (iv) failure for any such
request or deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (vi) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
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 or any Credit Party), then each
such Lender hereby agrees that it shall forthwith purchase (as of the date such
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
Issuing Lender such participation in the outstanding LOC Obligations as shall be
necessary to cause each such Lender to share in such LOC Obligations ratably
(based upon the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments pursuant
to Section 9.2)), provided that in the event such payment is not made on the day
of drawing, such Lender shall pay in addition to the Issuing Lender interest on
the amount of its unfunded Participation Interest at a rate equal to, if paid
within three (3) Business Days of the date of drawing, the Federal Funds Rate,
and thereafter at the Base Rate.
(f) Designation of other Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including without limitation Section 2.2(a) hereof, a Letter of Credit hereunder
may contain a statement to the effect that such Letter of Credit is issued for
the account of a Credit Party other than the Borrower, provided that
notwithstanding such statement, the Borrower shall be the actual account party
for all purposes of this Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations hereunder
with respect to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. To the extent applicable, the
Letters of Credit shall be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the International
Chamber of Commerce (the "UCP"), and to the extent applicable, the UCP shall be
incorporated therein and deemed in all respects to be a part thereof.
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<PAGE> 36
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations under this Section
2.2, the Borrower hereby agrees to protect, indemnify, pay and save the
Issuing Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of
any Letter of Credit or (B) the failure of the Issuing Lender to honor
a drawing under a Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de
facto government or governmental authority (all such acts or omissions,
herein called "Government Acts").
(ii) As between the Borrower and the Issuing Lender, the
Borrower shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. The Issuing Lender shall
not be responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, fraudulent or forged; (B) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (D)
for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from causes
beyond the control of the Issuing Lender, including, without
limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of the Issuing Lender's rights or powers
hereunder.
(iii) In furtherance and extension of, and not in limitation
of, the specific provisions hereinabove set forth, any action taken or
omitted by the Issuing Lender, under or in connection with any Letter
of Credit or the related certificates, if taken or omitted in good
faith and without gross negligence or willful misconduct, shall not put
such Issuing Lender under any resulting liability to the Borrower or
any other Credit Party. It is the intention of the parties that this
Credit Agreement shall be construed and applied to protect and
indemnify the Issuing Lender against any and all risks involved in the
issuance of the Letters of Credit, all of which risks are hereby
assumed by the Borrower (on behalf of itself and each of the other
Credit Parties), including, without limitation, any and all Government
Acts. The Issuing Lender shall not, in any way, be liable for any
failure by the Issuing Lender or anyone else to pay any drawing under
any Letter of Credit as a result of any Government Acts or any other
cause beyond the control of the Issuing Lender.
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(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the Borrower under this subsection (i) shall
survive the termination of this Credit Agreement. No act or omissions
of any current or prior beneficiary of a Letter of Credit shall in any
way affect or impair the rights of the Issuing Lender to enforce any
right, power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing
Lender (A) arising solely out of the gross negligence or willful
misconduct of the Issuing Lender, as determined by a court of competent
jurisdiction, or (B) caused by the Issuing Lender's failure to pay
under any Letter of Credit after presentation to it of a request
strictly complying with the terms and conditions of such Letter of
Credit, as determined by a court of competent jurisdiction, unless such
payment is prohibited by any law, regulation, court order or decree.
(j) Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender hereunder to the Lenders are
only those expressly set forth in this Credit Agreement and that the Issuing
Lender shall be entitled to assume that the conditions precedent set forth in
Section 5.2 have been satisfied unless it shall have acquired actual knowledge
that any such condition precedent has not been satisfied; provided, however,
that nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section 2.2 in
the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit constituted gross negligence or
willful misconduct on the part of the Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict between
this Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 TRANCHE A TERM LOANS.
(a) Tranche A Term Loans. Subject to the terms and conditions set forth
herein (including specifically without limitation the satisfaction of each of
the conditions contained in Section 5 hereof), each Lender severally agrees, on
the Closing Date, to make a term loan (collectively, the "Tranche A Term Loans")
to the Borrower, in Dollars, in an amount equal to such Lender's Tranche A Term
Loan Commitment Percentage, if any, of the Tranche A Term Loan Committed Amount;
provided that the aggregate amount of such Tranche A Term Loans made on the
Closing Date shall not exceed the Aggregate Tranche A Term Loan Committed
Amount. No Tranche A Term Loans shall be made after the Closing Date. Once
repaid, Tranche A Term Loans cannot be reborrowed.
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(b) Funding of Tranche A Term Loans. On the Closing Date, each
applicable Lender will make its Tranche A Term Loan Committed Amount available
to the Agent by deposit, in Dollars and in immediately available funds, at the
offices of the Agent at its principal office in Charlotte, North Carolina or at
such other address as the Agent may designate in writing. The amount of the
Tranche A Term Loans will then be made available to the Borrower by the Agent by
crediting the account of the Borrower on the books of such office of the Agent,
to the extent the amount of such Tranche A Term Loans is made available to the
Agent. The Tranche A Term Loans shall initially bear interest at the Base Rate
plus the Applicable Percentage.
No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make a Tranche A Term Loan hereunder; provided,
however, that the failure of any Lender to fulfill its obligations hereunder
shall not relieve any other Lender of its obligations hereunder. If the Agent
shall have received an executed signature page to this Credit Agreement (whether
an original or via telecopy) from a Lender, the Agent may assume that such
Lender has or will make its Tranche A Term Loan Committed Amount available to
the Agent on the Closing Date, and the Agent in reliance upon such assumption,
may (in its sole discretion but without any obligation to do so) make available
to the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Agent, the Agent shall be able to recover such
corresponding amount from such Lender. If such Lender shall fail to pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent will
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from the 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 Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate equal to (i)
from the Borrower at the applicable rate for such Tranche A Term Loan and (ii)
from a Lender at the Federal Funds Rate.
(c) Amortization. The principal amount of the Tranche A Term Loans
shall be repaid in quarterly installments on the dates set forth below:
Tranche A
Principal Amortization Term Loan Principal
Payment Dates Amortization Payment
------------- --------------------
January 30, 1999 $ 800,000
May 1, 1999 $ 800,000
July 31, 1999 $ 900,000
October 30, 1999 $ 1,250,000
January 29, 2000 $ 1,250,000
April 29, 2000 $ 1,250,000
July 29, 2000 $ 1,250,000
October 28, 2000 $ 1,625,000
January 27, 2001 $ 1,625,000
April 28, 2001 $ 1,625,000
July 28, 2001 $ 1,625,000
October 27, 2001 $ 2,500,000
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February 2, 2002 $ 2,500,000
May 4, 2002 $ 2,500,000
August 3, 2002 $ 2,500,000
November 2, 2002 $ 2,750,000
February 1, 2003 $ 2,750,000
May 3, 2003 $ 2,750,000
August 2, 2003 $ 2,750,000
TOTAL $35,000,000
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Tranche A Term
Loans shall be comprised in whole or in part of Base Rate Loans, such
Base Rate Loans shall bear interest at a per annum rate equal to the
Base Rate plus the Applicable Percentage; and
(ii) Eurodollar Loans. During such periods as Tranche A Term
Loans shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus the Applicable Percentage.
Interest on Tranche A Term Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Tranche A Term Notes. The Tranche A Term Loans shall be evidenced
by a duly executed Tranche A Term Note in favor of each Lender.
2.4 TRANCHE B TERM LOANS.
(a) Tranche B Term Loans. Subject to the terms and conditions set forth
herein (including specifically without limitation the satisfaction of each of
the conditions contained in Section 5 hereof), each Lender severally agrees, on
the Closing Date, to make a term loan (collectively, the "Tranche B Term Loans")
to the Borrower, in Dollars, in an amount equal to such Lender's Tranche B Term
Loan Commitment Percentage, if any, of the Tranche B Term Loan Committed Amount;
provided that the aggregate amount of such Tranche B Term Loans made on the
Closing Date shall not exceed the Aggregate Tranche B Term Loan Committed
Amount. No Tranche B Term Loans shall be made after the Closing Date. Once
repaid, Tranche B Term Loans cannot be reborrowed.
(b) Funding of Tranche B Term Loans. On the Closing Date, each
applicable Lender will make its Tranche B Term Loan Committed Amount available
to the Agent by deposit, in Dollars and in immediately available funds, at the
offices of the Agent at its principal office in Charlotte, North Carolina or at
such other address as the Agent may designate in writing. The amount of the
Tranche B Term Loans will then be made available to the Borrower by the Agent by
crediting the account of the Borrower on the books of such office of the Agent,
to the extent the
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<PAGE> 40
amount of such Tranche B Term Loans is made available to the Agent. The Tranche
B Term Loans shall initially bear interest at the Base Rate plus the Applicable
Percentage.
No Lender shall be responsible for the failure or delay by any other
Lender in its obligation to make a Tranche B Term Loan hereunder; provided,
however, that the failure of any Lender to fulfill its obligations hereunder
shall not relieve any other Lender of its obligations hereunder. If the Agent
shall have received an executed signature page to this Credit Agreement (whether
an original or via telecopy) from a Lender, the Agent may assume that such
Lender has or will make its Tranche B Term Loan Committed Amount available to
the Agent on the Closing Date, and the Agent in reliance upon such assumption,
may (in its sole discretion but without any obligation to do so) make available
to the Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Agent, the Agent shall be able to recover such
corresponding amount from such Lender. If such Lender shall fail to pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent will
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from the 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 Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate equal to (i)
from the Borrower at the applicable rate for such Tranche B Term Loan and (ii)
from a Lender at the Federal Funds Rate.
(c) Amortization. The principal amount of the Tranche B Term Loans
shall be repaid in quarterly installments on the dates set forth below:
Tranche B
Principal Amortization Term Loan Principal
Payment Dates Amortization Payment
------------- --------------------
January 30, 1999 $333,333.33
May 1, 1999 $333,333.33
July 31, 1999 $333,333.34
October 30, 1999 $250,000.00
January 29, 2000 $250,000.00
April 29, 2000 $250,000.00
July 29, 2000 $250,000.00
October 28, 2000 $250,000.00
January 27, 2001 $250,000.00
April 28, 2001 $250,000.00
July 28, 2001 $250,000.00
October 27, 2001 $250,000.00
February 2, 2002 $250,000.00
May 4, 2002 $250,000.00
August 3, 2002 $250,000.00
November 2, 2002 $250,000.00
February 1, 2003 $250,000.00
May 3, 2003 $250,000.00
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<PAGE> 41
August 2, 2003 $ 250,000.00
November 1, 2003 $10,625,000.00
January 31, 2004 $10,625,000.00
May 1, 2004 $10,625,000.00
July 31, 2004 $10,625,000.00
October 30, 2004 $10,625,000.00
January 29, 2005 $10,625,000.00
April 30, 2005 $10,625,000.00
July 30, 2005 $10,625,000.00
TOTAL $90,000,000.00
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Tranche B Term
Loans shall be comprised in whole or in part of Base Rate Loans, such
Base Rate Loans shall bear interest at a per annum rate equal to the
Base Rate plus the Applicable Percentage; and
(ii) Eurodollar Loans. During such periods as Tranche B Term
Loans shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate plus the Applicable Percentage.
Interest on Tranche B Term Loans shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(e) Tranche B Term Notes. The Tranche B Term Loans shall be evidenced
by a duly executed Tranche B Term Note in favor of each Lender.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts due and owing hereunder or under the other Credit
Documents shall bear interest, payable on demand, at a per annum rate 2% greater
than the rate which would otherwise be applicable (or if no rate is applicable,
whether in respect of interest, fees or other amounts, then 2% greater than the
Base Rate plus the Applicable Percentage).
3.2 EXTENSION AND CONVERSION.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to extend existing Loans into a subsequent
permissible Interest Period or to convert Loans into Loans of another interest
rate type; provided, however, that (i) except as provided in Section 3.8,
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<PAGE> 42
Eurodollar Loans may be extended, and Eurodollar Loans may be converted into
Base Rate Loans only on the last day of the Interest Period applicable thereto,
(ii) Eurodollar Loans may be extended, and Base Rate Loans may be converted into
Eurodollar Loans, only if the conditions precedent set forth in Section 5.2 are
satisfied on the date of extension or conversion, (iii) Loans extended as, or
converted into, Eurodollar Loans shall be subject to the terms of the definition
of "Interest Period" set forth in Section 1.1 and with respect to Revolving
Loans, shall be in a minimum aggregate principal amount of $1,000,000 and
integral multiples of $100,000 in excess thereof, and (iv) any request for
extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Each such extension or conversion shall be effected by the Borrower by
giving a Notice of Extension/Conversion (or telephone notice promptly confirmed
in writing) to the Agent prior to 11:00 A.M. (Charlotte, North Carolina time) on
the Business Day of, in the case of the conversion of a Eurodollar Loan into a
Base Rate Loan, and on the third Business Day prior to, in the case of the
extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a
Eurodollar Loan, the date of the proposed extension or conversion, specifying
the date of the proposed extension or conversion, the Loans to be so extended or
converted, the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall be irrevocable and shall constitute a
representation and warranty by the Borrower of the matters specified in
subsections (a) through (d) of Section 5.2. In the event the Borrower fails to
request extension or conversion of any Eurodollar Loan in accordance with this
Section, or any such conversion or extension is not permitted or required by
this Section, then such Eurodollar Loan shall be automatically converted into a
Base Rate Loan at the end of the Interest Period applicable thereto. The Agent
shall give each Lender notice as promptly as practicable of any such proposed
extension or conversion affecting any Loan. The Borrower will be limited to a
maximum number of eight (8) Eurodollar Loans outstanding at any time. For
purposes hereof, Eurodollar Loans with separate or different Interest Periods
will be considered as separate Eurodollar Loans even if their Interest Periods
expire on the same date.
3.3 PREPAYMENTS.
(a) Voluntary Prepayments. The Loans may be repaid in whole or in part
without premium or penalty; provided that (i) Eurodollar Loans may be prepaid
only upon three (3) Business Days' prior written notice to the Agent and must be
accompanied by payment of any amounts owing under Section 3.11, (ii) partial
prepayments shall be minimum principal amounts of $1,000,000, in the case of
Eurodollar Loans, $1,000,000, in the case of Base Rate Loans and in integral
multiples of $500,000 in excess thereof. Subject to the foregoing terms,
prepayments with respect to the Tranche A Term Loans and the Tranche B Term
Loans pursuant to this Section 3.3(a) shall be applied as follows: (I) the first
$15 million of proceeds prepaid during the term of this Credit Agreement
pursuant to the terms of this Section 3.3(a) and Section 3.3(c) shall be applied
among the outstanding Tranche A Term Loans and the Tranche B Term Loans (and
among the remaining principal installments due thereunder) as the Borrower may
elect; provided that if the Borrower fails to specify the manner of prepayment
of any portion of the first $15 million of proceeds such prepayment shall be
applied pro rata among the outstanding Tranche A Term Loans and Tranche B Term
Loans (which amount shall then be applied pro rata with respect to each
remaining installment of principal), (II) following the
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<PAGE> 43
prepayment of the first $15 million of Term Loans, prepayments with respect to
the Term Loans pursuant to this Section 3.3(a) shall be applied pro rata among
the outstanding Tranche A Term Loans and Tranche B Term Loans (which amounts
shall then be applied pro rata to the principal payments on the Tranche A Term
Loans and Tranche B Term Loans due within the first twelve months following
repayment of $15 million of Term Loans pursuant to clause (I) above), and (III)
following the prepayments required pursuant to clause (II) above, prepayments
with respect to the Term Loans pursuant to this Section 3.3(a) shall be applied
pro rata among the outstanding Tranche A Term Loans and Tranche B Term Loans
(which amounts shall be applied pro rata with respect to each remaining
installment of principal). One or more holders of the Tranche B Term Loans may
decline to accept a voluntary prepayment under this Section 3.3(a) (to the
extent there is sufficient Tranche A Term Loans outstanding to be paid with such
prepayment in which case any voluntary prepayments declined by the holders of
the Tranche B Term Loans shall be allocated pro rata among the Tranche A Term
Loans and the Tranche B Term Loans held by Lenders accepting such prepayment).
Within the parameters of the applications set forth above, prepayments shall be
applied first to Base Rate Loans and then Eurodollar Loans in direct order of
Interest Period maturities. All prepayments under this Section 3.3(a) shall be
subject to Section 3.11, but otherwise without premium or penalty, and be
accompanied by interest on the principal amount prepaid through the date of
prepayment.
(b) Mandatory Prepayments. The Borrower will make the following
prepayments (in accordance with and to be applied as set forth in paragraph (c)
below).
(i) Commitment Limitations. If at any time, (A) the sum of the
aggregate principal amount of outstanding Revolving Loans plus LOC
Obligations outstanding shall exceed the Aggregate Revolving Committed
Amount or (B) the aggregate amount of LOC Obligations outstanding shall
exceed the LOC Committed Amount, the Borrower shall immediately make
payment on the Revolving Loans and (after all Revolving Loans have been
repaid) to a cash collateral account in respect of the LOC Obligations,
in an amount sufficient to eliminate the deficiency. In addition, the
Borrower agrees to prepay any Revolving Loans outstanding on December
15 of any year and no Revolving Loans shall be outstanding during the
period from December 15 through January 15.
(ii) Asset Dispositions. The Borrower will make prepayment on
the Loans in an amount equal to one hundred percent (100%) of the Net
Proceeds received from any Asset Disposition.
(iii) Equity Transactions. The Borrower will make prepayment
on the Loans in an amount equal to fifty percent (50%) of the Net
Proceeds received from any Equity Transaction (it being agreed that any
such payments required in connection with the issuance of stock under
stock incentive, stock option or other similar plans shall be made
quarterly within sixty days following the end of each quarter).
(iv) Debt Issuances. The Borrower shall make a prepayment on
the Loans in an aggregate amount equal to one hundred percent (100%) of
the Net Proceeds of any Debt Issuance to the Lenders.
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(v) Excess Cash Flow. Within 10 days after the date the
audited financial statements are required to be delivered pursuant to
Section 7.1(a), the Borrower shall make a prepayment on the Loans in an
amount equal to (A) (I) 75% of Consolidated Excess Cash Flow for the
fiscal year most recently ended if as of such fiscal year end the
current Consolidated Leverage Ratio is greater than or equal to 4.0 to
1.0 or (II) 50% of Consolidated Excess Cash Flow for the fiscal year
most recently ended if as of such fiscal year end the current
Consolidated Leverage Ratio is less than 4.0 to 1.0 less (B) any
voluntary prepayments (other than voluntary prepayments of loans
outstanding under revolving lines of credit, including Revolving Loans
hereunder, unless there is a corresponding permanent reduction in the
commitments relating thereto) on Funded Debt made during such fiscal
year.
(c) Application of Prepayments. All amounts required to be paid
pursuant to Section 3.3(b)(i) shall be applied first to Revolving Loans and
second to a cash collateral account in respect of LOC Obligations. All amounts
required to be prepaid pursuant to Section 3.3(b)(ii), (iii) and (iv) above
shall be paid promptly upon receipt of the amounts to be prepaid. All amounts
required to be prepaid pursuant to Section 3.3(b)(ii), (iii), (iv) and (v) above
shall be applied as follows: (I) the first $15 million of proceeds prepaid
during the term of this Credit Agreement pursuant to the terms of Section 3.3(a)
and this Section 3.3(c) shall be applied among the outstanding Tranche A Term
Loans and Tranche B Term Loans (and among the remaining principal installments
due thereunder) as the Borrower may elect; provided that if the Borrower fails
to specify the manner of prepayment of any portion of the first $15 million of
proceeds such prepayment shall be applied pro rata among the outstanding Tranche
A Term Loans and Tranche B Term Loans (which amounts shall then be applied pro
rata with respect to each remaining installment of principal), (II) following
the prepayment of the first $15 million of Term Loans, prepayments with respect
to the Term Loans pursuant to this Section 3.3(c) and Section 3.3(a) shall be
applied pro rata among the outstanding Tranche A Term Loans and Tranche B Term
Loans (which amounts shall then be applied pro rata to the principal payments on
the Tranche A Term Loans and Tranche B Term Loans due within the first twelve
months following repayment of $15 million of Term Loans pursuant to clause (I)
above, and (III) following the prepayments required pursuant to clause (II)
above, prepayments with respect to the Term Loans shall be applied among the
outstanding Tranche A Term Loans and Tranche B Term Loans (which amounts shall
be applied pro rata with respect to each remaining installment of principal).
One or more holders of the Tranche B Term Loans may decline to accept a
mandatory prepayment under Sections 3.3(b)(ii), (iii), (iv), or (v) with respect
to the Tranche B Term Loans (to the extent there is sufficient Tranche A Term
Loans outstanding to be paid with such prepayment in which case such declined
prepayments shall be allocated pro rata among the Tranche A Term Loans and among
the Tranche B Term Loans held by Lenders accepting such prepayments). In the
event the Tranche A Term Loans and Tranche B Term Loans have been repaid in
full, no further amounts shall be required to be prepaid pursuant to Section
3.3(b)(ii), (iii), (iv) or (v) hereof. Within the parameters of the application
set forth above, prepayments shall be applied first to Base Rate Loans and then
to Eurodollar Loans in direct order of Interest Period maturities. All
prepayments hereunder shall be subject to Section 3.11.
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3.4 TERMINATION AND REDUCTION OF COMMITMENTS
(a) Voluntary Reductions. The Revolving Commitments may be terminated
or permanently reduced in whole or in part upon three (3) Business Days' prior
written notice to the Agent, provided that (i) after giving effect to any
voluntary reduction the aggregate amount of Revolving Loans and the LOC
Obligations outstanding shall not exceed the Aggregate Revolving Committed
Amount, as reduced, and (ii) partial reductions shall be in a minimum principal
amount of $1,000,000, and in integral multiples of $500,000 in excess thereof.
(b) Mandatory Reduction. The Revolving Commitments hereunder shall
terminate on the Termination Date.
3.5 FEES.
(a) Commitment Fee. In consideration of the Revolving Commitments
hereunder, the Borrower agrees to pay to the Agent for the ratable benefit of
the Lenders a commitment fee (the "Commitment Fee") equal to 0.50% per annum on
the average daily unused amount of the Revolving Committed Amount for the
applicable period. The Commitment Fee shall be payable quarterly in arrears on
the 15th day following the last day of each calendar quarter for the immediately
preceding quarter (or portion thereof) beginning with the first such date to
occur after the Closing Date and on the Termination Date.
(b) Letter of Credit Fees.
(i) Letter of Credit Fee. In consideration of the LOC
Commitment hereunder, the Borrower agrees to pay to the Agent for the
ratable benefit of the Lenders a fee (the "Letter of Credit Fee") on
the average daily maximum amount available to be drawn under Letters of
Credit computed at a per annum rate from the date of issuance to the
date of expiration equal to the Applicable Percentage then in effect.
The Letter of Credit Fee shall be payable quarterly in arrears on the
15th day following the last day of each calendar quarter for the
immediately preceding quarter (or portion thereof) beginning with the
first such date to occur after the Closing Date and on the applicable
date of expiration of each Letter of Credit.
(ii) Issuing Lender Fee. In addition to the Letter of Credit
Fee, the Borrower agrees to pay to the Issuing Lender for its own
account without sharing by the other Lenders upon the issuance of any
Letter of Credit hereunder a fee equal to one-quarter of one percent
(.25%) of the face amount of such Letter of Credit and customary
charges of the Issuing Lender with respect to the issuance, amendment,
transfer, administration, cancellation and conversion of, and drawings
under, such Letters of Credit (collectively, the "Issuing Lender
Fees").
(c) Administrative Fees. The Borrower agrees to pay to the Agent, for
its own account, an annual administrative fee and such other fees, if any,
referred to in the Agent's Fee Letter (collectively, the "Agent Fees").
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3.6 CAPITAL ADEQUACY.
If any Lender has determined, after the date hereof, that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then,
upon notice from such Lender to the Borrower, the Borrower shall be obligated to
pay within thirty days of demand therefor to such Lender such additional amount
or amounts as will compensate such Lender for such reduction. The Lender shall
provide the Borrower notice of any such claim within ninety days of the
occurrence of any event constituting the basis for such claim. Each
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 INABILITY TO DETERMINE INTEREST RATE.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable thereafter. If
such notice is given (a) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as Base Rate Loans and (b) any Loans
that were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans shall be converted to or continued as Base Rate
Loans. Until such notice has been withdrawn by the Agent (which notice shall be
withdrawn whenever such circumstances no longer exist), no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Base Rate Loans to Eurodollar Loans.
3.8 ILLEGALITY.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (b) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Lender to make or maintain
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Eurodollar Loans, such Lender shall then have a commitment only to make a Base
Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days of the then current Interest Periods
with respect to such Loans or within such earlier period as required by law. If
any such conversion of a Eurodollar Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the Borrower shall
pay to such Lender such amounts, if any, as may be required pursuant to Section
3.11.
3.9 REQUIREMENTS OF LAW.
If, after the date hereof, the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Lender, or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority, in each case made subsequent to the Closing Date (or, if later, the
date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for (i) Non-Excluded Taxes covered by Section 3.10 (including
Non-Excluded Taxes imposed solely by reason of any failure of such
Lender to comply with its obligations under Section 3.10(b)) and (ii)
changes in taxes measured by or imposed upon the overall net income, or
franchise tax (imposed in lieu of such net income tax), of such Lender
or its applicable lending office, branch, or any affiliate thereof));
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
pay within 30 days of demand therefor to such Lender, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to convert
the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving
the Agent at least one Business Day's notice of such election, in which case the
Borrower shall promptly pay to such Lender, upon demand, without duplication,
such amounts, if any, as may be required pursuant to Section 3.11. The Lender
shall provide the Borrower notice of any such
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claim within ninety days of the occurrence of any event constituting the basis
for such claim. If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall provide prompt notice thereof to the
Borrower, through the Agent, certifying (x) that one of the events described in
this paragraph has occurred and describing in reasonable detail the nature of
such event, (y) as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by such Lender and a
reasonably detailed explanation of the calculation thereof. Such a certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Agent, to the Borrower shall be conclusive and binding
on the parties hereto in the absence of manifest error. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.10 TAXES.
(a) Except as provided below in this subsection, all payments made by
the Borrower under this Credit Agreement and any Notes shall be made free and
clear of, and without deduction or withholding for or on account of, any present
or future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any court, or governmental body, agency or other
official, excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate thereof,
and all franchise taxes, branch taxes, taxes on doing business or taxes on the
overall capital or net worth of any Lender or its applicable lending office, or
any branch or affiliate thereof imposed: (i) by the jurisdiction under the laws
of which such Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending office,
branch or affiliate other than a connection arising solely from such Lender
having executed, delivered or performed its obligations, or received payment
under or enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
the Agent or any Lender hereunder or under any Notes, (A) the amounts so payable
to the Agent or such Lender shall be increased to the extent necessary to yield
to the Agent or such Lender (after payment of all Non-Excluded Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of this
subsection whenever any Non-Excluded Taxes are payable by the Borrower, and (B)
as promptly as possible thereafter the Borrower shall send to the Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or
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any Lender as a result of any such failure. The agreements in this subsection
shall survive the termination of this Credit Agreement and the payment of the
Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the Borrower
under this Credit Agreement or Notes to such Lender, deliver to the
Borrower and the Agent (A) two (2) duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, certifying that it is entitled to
receive payments under this Credit Agreement and any Notes without
deduction or withholding of any United States federal income taxes and
(B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is entitled to
an exemption from United States backup withholding tax;
(ii) deliver to the Borrower and the Agent two (2) further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Agent; or
(Y) in the case of any such Lender that is not a "bank" within
the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i)
represent to the Borrower (for the benefit of the Borrower and the
Agent) that it is not a bank within the meaning of Section 881(c)(3)(A)
of the Internal Revenue Code, (ii) agree to furnish to the Borrower on
or before the date of any payment by the Borrower, with a copy to the
Agent two (2) accurate and complete original signed copies of Internal
Revenue Service Form W-8, or successor applicable form certifying to
such Lender's legal entitlement at the date of such certificate to an
exemption from U.S. withholding tax under the provisions of Section
881(c) of the Internal Revenue Code with respect to payments to be made
under this Credit Agreement and any Notes (and to deliver to the
Borrower and the Agent two (2) further copies of such form on or before
the date it expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably requested by the
Borrower or the Agent for filing and completing such forms), and (iii)
agree, to the extent legally entitled to do so, upon reasonable request
by the Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably required
in order to establish the legal entitlement of such Lender to an
exemption from withholding with respect to payments under this Credit
Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would
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prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advises the Borrower and the Agent. Each Person
that shall become a Lender or a participant of a Lender pursuant to subsection
11.3 shall, upon the effectiveness of the related transfer, be required to
provide all of the forms, certifications and statements required pursuant to
this subsection, provided that in the case of a participant of a Lender the
obligations of such participant of a Lender pursuant to this subsection (b)
shall be determined as if the participant of a Lender were a Lender except that
such participant of a Lender shall furnish all such required forms,
certifications and statements to the Lender from which the related participation
shall have been purchased.
3.11 INDEMNITY.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto. With
respect to Eurodollar Loans, such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Eurodollar Loans provided for herein (excluding, however, the
Applicable Percentage included therein, if any) over (ii) the amount of interest
(as reasonably determined by such Lender) which would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank Eurodollar market. The covenants of the
Borrower set forth in this Section 3.11 shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts payable
hereunder.
3.12 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or prepayment of principal of any
Loan or reimbursement obligations arising from drawings under Letters of Credit,
each payment of interest on the Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Commitment Fees, each payment
of the Letter of Credit Fee, each reduction of the Revolving Committed Amount
and each conversion or extension of any Loan, shall be allocated pro rata among
the Lenders in accordance with the respective principal amounts of their
outstanding Loans and Participation Interests.
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(b) Advances. No Lender shall be responsible for the failure or delay
by any other Lender in its obligation to make its ratable share of a borrowing
hereunder; provided, however, that the failure of any Lender to fulfill its
obligations hereunder shall not relieve any other Lender of its obligations
hereunder. Unless the Agent shall have been notified by any Lender prior to the
date of any requested borrowing that such Lender does not intend to make
available to the Agent its ratable share of such borrowing to be made on such
date, the Agent may assume that such Lender has made such amount available to
the Agent on the date of such borrowing, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent, the Agent shall be able to
recover such corresponding amount from such Lender. If such Lender does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the Agent
will promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from the 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 Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate equal to (i)
from the Borrower at the applicable rate for the applicable borrowing pursuant
to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate.
3.13 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans, LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrower agrees that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such
payments shall be made together with interest thereon for each date from the
date such
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amount is due until the date such amount is paid to the Agent or such other
Lender at a rate per annum equal to the Federal Funds Rate. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.13 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.13 to share in the benefits of any recovery on such secured claim.
3.14 PAYMENTS, COMPUTATIONS, ETC.
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in dollars in immediately available funds,
without offset, deduction, counterclaim or withholding of any kind, at the
Agent's office specified in Section 11.1 not later than 2:00 P.M. (Charlotte,
North Carolina time) on the date when due. Payments received after such time
shall be deemed to have been received on the next succeeding Business Day. The
Agent may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
maintained with the Agent (with notice to the Borrower). The Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to the Agent
the Loans, LOC Obligations, Fees, interest or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may determine to be appropriate in respect of obligations
owing by the Borrower hereunder, subject to the terms of Section 3.12(a)). The
Agent will distribute such payments to such Lenders, if any such payment is
received prior to 2:00 P.M. (Charlotte, North Carolina time) on a Business Day
in like funds as received prior to the end of such Business Day and otherwise
the Agent will distribute such payment to such Lenders on the next succeeding
Business Day. Whenever any payment hereunder 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 (subject to accrual of interest and Fees for the period
of such extension), except that (i) in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day and (ii) with respect to any payment of principal of either the Tranche A
Term Loans or the Tranche B Term Loans, such payment shall be made on the next
preceding Business Day. Except as expressly provided otherwise herein, all
computations of interest and fees shall be made on the basis of actual number of
days elapsed over a year of 360 days, except with respect to computation of
interest on Base Rate Loans which (unless the Base Rate is determined by
reference to the Federal Funds Rate) shall be calculated based on a year of 365
or 366 days, as appropriate. Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.
(b) Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Credit Agreement or any other Credit Document to the
contrary, after (i) the occurrence and during the continuance of an Event of
Default and (ii) the Agent has exercised any of the actions identified in
Section 9.2, all amounts collected or received by the Agent or any Lender on
account of the Credit Party Obligations or any other amounts outstanding under
any of the Credit Documents or in respect of the Collateral shall be paid over
or delivered as follows:
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FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation, reasonable attorneys' fees)
of each of the Lenders in connection with enforcing its rights under
the Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender;
FOURTH, to the payment of all accrued interest and fees on or
in respect of the Credit Party Obligations;
FIFTH, to the payment of the outstanding principal amount of
the Credit Party Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations owed to such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (A) first,
to reimburse the Issuing Lender for any drawings under such Letters of Credit
and (B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses "FIFTH" and "SIXTH" above in the
manner provided in this Section 3.14(b).
3.15 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts evidencing each
Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will
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make reasonable efforts to maintain the accuracy of its account or accounts and
to promptly update its account or accounts from time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section 11.3(c)
hereof, and a subaccount for each Lender, in which Register and subaccounts
(taken together) shall be recorded (i) the amount, type and Interest Period of
each such Loan hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable to each Lender hereunder and (iii) the
amount of any sum received by the Agent hereunder from or for the account of the
Borrower and each Lender's share thereof. The Agent will make reasonable efforts
to maintain the accuracy of the Register and subaccounts referred to in the
preceding sentence and to promptly update such Register and subaccounts from
time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent
with the entries of the Agent, subsection (a)) shall 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 Agent to maintain any
such account, such Register or such subaccount, as applicable, or any error
therein, shall not in any manner affect the obligation of the Borrower to repay
the Loans made by such Lender in accordance with the terms hereof.
3.16 REPLACEMENT OF LENDERS.
In the event any Lender delivers to the Borrower any notice in
accordance with Section 3.6, 3.8, 3.9 or 3.10 or the Agent notifies the Borrower
that a Lender has not made its ratable share of a Loan borrowing available in
accordance with Section 3.12(b), then the Borrower shall have the right, if no
Default or Event of Default then exists, to replace such Lender (the "Replaced
Lender") with one or more additional banks or financial institutions
(collectively, the "Replacement Lender"), provided, that (a) at the time of any
replacement pursuant to this Section 3.16, the Replacement Lender shall enter
into one or more Assignment and Acceptance agreements pursuant to, and in
accordance with the terms of, Section 11.3(b) (and with all processing and
recordation fees payable pursuant to said Section 11.3(b) to be paid by the
Replacement Lender or, at its option, the Borrower) pursuant to which the
Replacement Lender shall acquire all of the rights and obligations of the
Replaced Lender hereunder and, in connection therewith, shall pay to the
Replaced Lender in respect thereof an amount equal to the sum of (i) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, and (ii) all accrued, but theretofore unpaid, fees owing to the Replaced
Lender pursuant to Section 3.5, and (b) all other obligations of the Borrower
owing to the Replaced Lender (including all other obligations, if any, owing
pursuant to Sections 3.6, 3.8, 3.9 and 3.10 and 3.11) shall be paid in full to
such Replaced Lender concurrently with such replacement.
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SECTION 4
GUARANTY
4.1 THE GUARANTEE.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, to each Affiliate of a Lender that enters into a Hedging Agreement and
to the Agent as hereinafter provided, the prompt payment of the Credit Party
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, a mandatory cash collateralization or otherwise)
strictly in accordance with the terms thereof. The Guarantors hereby further
agree that if any of the Credit Party Obligations are not paid in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration, as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally, promptly pay the same, without any demand or notice whatsoever, and
that in the case of any extension of time of payment or renewal of any of the
Credit Party Obligations, the same will be promptly paid in full when due
(whether at extended maturity, as a mandatory prepayment, by acceleration or
otherwise) in accordance with the terms of such extension or renewal. Each
Guarantor agrees that this is a continuing guarantee of payment and not of
collection.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 hereof are joint
and several, absolute, irrevocable and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents or Hedging Agreements, or any other agreement or instrument referred
to therein, or any substitution, release or exchange of any other guarantee of
or security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute, irrevocable and
unconditional under any and all circumstances. Each Guarantor agrees that such
Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor of the Credit Party
Obligations for amounts paid under this Guaranty until such time as the Lenders
(and any Affiliates of Lenders entering into Hedging Agreements) have been paid
in full and all Commitments under the Credit Agreement have been terminated.
Without limiting the generality of the foregoing, it is agreed that, to the
fullest extent permitted by law, the occurrence of any one or more of the
following shall not alter or impair the liability of any Guarantor hereunder
which shall remain absolute, irrevocable and unconditional as described above:
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(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of any
of the Credit Documents, any Hedging Agreement or any other agreement
or instrument referred to in the Credit Documents or Hedging Agreements
shall be done or omitted;
(iii) the maturity of any of the Credit Party Obligations
shall be accelerated, or any of the Credit Party Obligations shall be
modified, supplemented or amended in any respect, or any right under
any of the Credit Documents, any Hedging Agreement or any other
agreement or instrument referred to in the Credit Documents or Hedging
Agreements shall be waived or any other guarantee of any of the Credit
Party Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Agent or any
Lender or Lenders as security for any of the Credit Party Obligations
shall fail to attach or be perfected; or
(v) any of the Credit Party Obligations shall be determined to
be void or voidable (including, without limitation, for the benefit of
any creditor of any Guarantor) or shall be subordinated to the claims
of any Person (including, without limitation, any creditor of any
Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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4.4 CERTAIN ADDITIONAL WAIVERS.
Each Guarantor further agrees that such Guarantor shall have no right
of recourse to security for the Credit Party Obligations, except through the
exercise of the rights of subrogation pursuant to Section 4.2.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 hereof (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 hereof notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
4.6 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations (as defined below), and none of the
Guarantors shall exercise any right or remedy under this Section 4.6 against any
other Guarantor until payment and satisfaction in full of all of such Guaranteed
Obligations. For purposes of this Section 4.6, (a) "Guaranteed Obligations"
shall mean any obligations arising under the other provisions of this Section 4;
(b) "Excess Payment" shall mean the amount paid by any Guarantor in excess of
its Pro Rata Share of any Guaranteed Obligations; (c) "Pro Rata Share" shall
mean, for any Guarantor in respect of any payment of Guaranteed Obligations, the
ratio (expressed as a percentage) as of the date of such payment of Guaranteed
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors; provided, however, that, for purposes of calculating the
Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed
Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall be deemed to have been a Guarantor on the date of such
payment and the financial information for such Guarantor as of the date such
Guarantor became a Guarantor shall be utilized
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for such Guarantor in connection with such payment; and (d) "Contribution Share"
shall mean, for any Guarantor in respect of any Excess Payment made by any other
Guarantor, the ratio (expressed as a percentage) as of the date of such Excess
Payment of (i) the amount by which the aggregate present fair salable value of
all of its assets and properties exceeds the amount of all debts and liabilities
of such Guarantor (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
other than the maker of such Excess Payment exceeds the amount of all of the
debts and liabilities (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Borrower and the
Guarantors hereunder) of the Borrower and all of the Guarantors other than the
maker of such Excess Payment; provided, however, that, for purposes of
calculating the Contribution Shares of the Guarantors in respect of any Excess
Payment, any Guarantor that became a Guarantor subsequent to the date of any
such Excess Payment shall be deemed to have been a Guarantor on the date of such
Excess Payment and the financial information for such Guarantor as of the date
such Guarantor became a Guarantor shall be utilized for such Guarantor in
connection with such Excess Payment. This Section 4.6 shall not be deemed to
affect any right of subrogation, indemnity, reimbursement or contribution that
any Guarantor may have under applicable law against the Borrower in respect of
any payment of Guaranteed Obligations. Notwithstanding the foregoing, all rights
of contribution against any Guarantor shall terminate from and after such time,
if ever, that such Guarantor shall be relieved of its obligations pursuant to
Section 8.4.
4.7 CONTINUING GUARANTEE.
The guarantee in this Section 4 is a continuing guarantee, and shall
apply to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CONDITIONS TO CLOSING.
This Credit Agreement shall become effective, and the initial
Extensions of Credit shall be made, upon the satisfaction of the following
conditions precedent (in form and substance acceptable to the Lenders):
(a) Execution of Credit Agreement and Credit Documents.
Receipt by the Agent of (i) multiple counterparts of this Credit Agreement, (ii)
the Notes and (iii) the Collateral Documents, in each case executed by a duly
authorized officer of each party thereto and in each case conforming to the
requirements of this Credit Agreement.
(b) Financial Information. Receipt by the Agent of (i) a
satisfactory pro forma consolidated balance sheet of the Borrower as of the
Closing Date giving effect to the Merger and the transactions contemplated by
the Merger Agreement, prepared by independent public
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accountants of recognized national standing, (ii) interim monthly financial
statements and monthly working capital detail for the trailing twelve months and
the first projected year and (iii) such other information relating to the
Borrower as the Agent may reasonably require in connection with the structuring
and syndication of credit facilities of the type described herein.
(c) Material Adverse Effect. No material adverse change shall
have occurred since January 31, 1998 in the business, assets, operations,
condition (financial or otherwise), management or prospects of the Borrower and
its Subsidiaries taken as a whole other than any material adverse change to the
financial condition of the Borrower resulting from the Merger.
(d) Repayment of Indebtedness. Receipt by the Agent of
evidence that simultaneously with the making of the initial Loans, all
obligations of the Borrower under the Prior Credit Agreement have been paid in
full.
(e) Absence of Legal Proceedings. The absence of any action,
suit, investigation or proceeding pending or threatened in any court or before
any arbitrator or governmental instrumentality which could reasonably be
expected to have a Material Adverse Effect on the Borrower or any of its
Subsidiaries.
(f) Host Agreements. Each of the Wal*Mart License Agreement
and the Kmart License Agreement shall be in full force and effect.
(g) Legal Opinions. Receipt of multiple counterparts of
opinions of counsel for the Credit Parties relating to the Credit Documents and
the transactions contemplated herein, in form and substance satisfactory to the
Agent.
(h) Corporate Documents. Receipt of the following (or their
equivalent) for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the articles
of incorporation or charter documents certified to be true and complete
as of a recent date by the appropriate governmental authority of the
state of its incorporation.
(ii) Resolutions. Copies of resolutions of the Board
of Directors approving and adopting the respective Credit Documents,
the transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant secretary as of
the Closing Date to be true and correct and in force and effect as of
such date.
(iii) Bylaws. Copies of the bylaws certified by a
secretary or assistant secretary as of the Closing Date to be true and
correct and in full force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of (A)
certificates of good standing, existence or its equivalent certified as
of a recent date by the appropriate
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governmental authorities of the state of incorporation and each other
state in which the failure to so qualify and be in good standing would
have a material adverse effect on the business or operations in such
state and (B) a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) Incumbency. An incumbency certificate for each of
the Credit Parties certified by a secretary or assistant secretary to
be true and correct as of the Closing Date.
(i) Merger. There shall not have been any material
modification, amendment, supplement or waiver to the Merger Agreement without
the prior written consent of the Lenders, and the Merger shall be in full force
and effect and the Merger shall have been consummated in accordance with the
terms of the Merger Agreement and applicable law and regulatory approvals, and
the aggregate purchase price for the shares of the Borrower shall not exceed
$234 million (based on a per share price of not more than $26.50).
(j) KeyMan Life Insurance. Evidence of key man life insurance
for John Grosso, Eric Jeltrup and Bruce Fisher in an aggregate amount of at
least $5,000,000 naming the Borrower as beneficiary, which key man life
insurance shall be pledged to secure the Obligations.
(k) Personal Property Collateral. The Agent shall have
received:
(i) searches of Uniform Commercial Code ("UCC")
filings or its equivalent in the office of the Secretary of
State or its equivalent in the jurisdiction of the chief
executive office of each Credit Party and each jurisdiction
where any Collateral is located in the United States of
America, copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements in
the office of the Secretary of State or its equivalent in the
jurisdiction of the chief executive office of each Credit
Party and each jurisdiction where any Collateral is located in
the United States of America;
(iii) searches of ownership of intellectual
property in the appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral; and
(iv) all stock certificates evidencing the stock
pledged to the Agent pursuant to the Pledge Agreement,
together with duly executed in blank undated stock powers
attached thereto.
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(l) Real Property Collateral. The Agent shall have received:
(i) fully executed and notarized mortgages,
deeds of trust or deeds to secure debt (each a "Mortgage" and
collectively the "Mortgages") encumbering the fee interest of
the Credit Parties in each real property asset owned by a
Credit Party set forth on Schedule 5.1(l) (each a "Mortgaged
Property" and collectively the "Mortgaged Properties"),
together with such UCC-1 financing statements as the Agent
shall deem appropriate with respect to each such Mortgaged
Property;
(ii) ALTA or other appropriate form mortgagee
title insurance policies (the "Mortgage Policies") issued by
title insurers reasonably satisfactory to the Agent (the
"Title Insurance Company"), in an amount satisfactory to the
Agent with respect to each Mortgaged Property and otherwise in
form and substance satisfactory to the Agent;
(iii) to the extent not previously delivered to
the Agent, maps or plats of an as-built survey of the sites of
the Mortgaged Properties certified to the Agent and the Title
Insurance Company in a manner satisfactory to them, dated a
date satisfactory to the Agent and the Title Insurance Company
by an independent professional licensed land surveyor
satisfactory to the Agent and the Title Insurance Company,
which maps or plats and the surveys on which they are based
shall be sufficient to delete any standard printed survey
exception contained in the applicable title policy and be made
in accordance with the Minimum Standard Detail Requirements
for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on
Surveying and Mapping in 1992; and
(iv) to the extent not previously delivered to
the Agent, certification from a registered engineer or land
surveyor in a form satisfactory to the Agent or other evidence
acceptable to the Agent that none of the improvements on the
real property encumbered by the Mortgages are located within
any area designated by the Director of the Federal Emergency
Management Agency as a "special flood hazard" area or if any
improvements on such properties are located within a "special
flood hazard" area, evidence of a flood insurance policy from
a company and in an amount satisfactory to the Agent for the
applicable portion of the premises, naming the Agent, for the
benefit of the Lenders, as mortgagee.
(m) Priority of Liens. The Agent shall have received
satisfactory evidence that (i) the Agent, on behalf of the Lenders, holds a
perfected, first priority Lien on all Collateral and (ii) none of the Collateral
is subject to any other Liens other than Permitted Liens.
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(n) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Credit Parties evidencing
liability and casualty insurance meeting the requirements set forth in the
Credit Documents, including, but not limited to, naming the Agent as sole loss
payee on behalf of the Lenders.
(o) Corporate Structure. The corporate capital and ownership
structure of the Borrower and its Subsidiaries (after giving effect to the
Merger) shall be as described in Schedule 5.1(o).
(p) Equity Investment. Receipt by the Agent of evidence that
an equity investment of at least $65 million (of which a minimum of $50.5
million shall be in the form of cash equity contributed by Jupiter) shall have
been made in the Borrower on terms that are satisfactory to the Agent.
(q) Subordinated Debt. (i) The Borrower shall have entered
into the Indenture, which such Indenture shall contain subordination provisions
acceptable to the Lenders and otherwise be in form and substance satisfactory to
the Lenders, (ii) the Agent shall have received a copy, certified by an officer
of the Borrower as true and complete, of the Indenture and (iii) the Borrower
shall have received net proceeds pursuant to the terms of the Indenture in an
aggregate principal amount of $100 million.
(r) Government Consent. All governmental, shareholder and
material third party consents (including Hart-Scott-Rodino clearance) and
approvals necessary or desirable in connection with the Merger and the related
financings and other transactions contemplated hereby shall have been obtained,
and all applicable waiting periods shall have expired without any action being
taken by any authority that could reasonably be likely to restrain, prevent or
impose any material adverse conditions on the Merger or such other transactions.
(s) Solvency Opinion. Receipt by the Agent of an opinion from
Valuation Research Corporation or another independent auditor or appraiser
acceptable to the Agent in usual and customary form as to the financial
condition, solvency and related matters of the Credit Parties (after giving
effect to the Merger and the incurrence of indebtedness related thereto).
(t) Officer's Certificates. The Agent shall have received a
certificate or certificates executed by an officer of the Borrower as of the
Closing Date stating that (A) each member of the Consolidated Group is in
compliance with all existing financial obligations, (B) all governmental,
shareholder and third party consents and approvals, if any, with respect to the
Credit Documents and the transactions contemplated thereby have been obtained,
(C) no action, suit, investigation or proceeding is pending or threatened in any
court or before any arbitrator or governmental instrumentality which could
reasonably be expected to have a Material Adverse Effect on the Borrower or any
of its Subsidiaries, (D) the transactions contemplated by the Merger Agreement
have been consummated in accordance with the terms thereof and (E) immediately
after giving effect to this Credit Agreement, the other Credit Documents and all
the transactions contemplated therein to occur on such date, (1) each of the
Credit Parties is Solvent, (2) no Default or Event of Default exists, (3) all
representations and warranties contained herein and in the other
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Credit Documents are true and correct in all material respects, and (4) the
Credit Parties are in compliance with each of the financial covenants set forth
in Section 7.10.
(u) Material Contracts. No material agreements or any
organizational documents of the Borrower or any of its Subsidiaries shall have
been amended, modified, or supplemented, replaced or revoked, or terminated, nor
shall any waivers or consents in connection therewith have been given without
the prior written consent of the Agent if any such amendment, modification,
supplement, repeal, revocation, termination, waiver, or consent would have an
adverse effect on the interests of the Lenders under this Credit Agreement.
(v) Fees. Receipt of all fees, if any, owing pursuant to the
Agent's Fee Letter and Section 3.5 or otherwise.
(w) Availability. After giving effect to the Merger and the
initial Loans and the outstanding LOC Obligations as of the Closing Date, there
shall be no less than $12 million of availability under the Revolving
Commitments.
(x) Interest Rate Protection. The Borrower shall have in place
one or more Hedging Agreements satisfactory in form and substance to the Agent,
protecting against, for a period expiring no earlier than three years from the
Closing Date, fluctuations in interest rates and in a notional amount of at
least $65 million.
(y) Year 2000. Receipt by the Agent and the Lenders of
evidence that (a) each member of the Consolidated Group is taking all necessary
and appropriate steps to ascertain the extent of, and to quantify and
successfully address, business and financial risks facing the Consolidated Group
as a result of what is commonly referred to as the `Year 2000 problem' (i.e.,
the inability of certain computer applications to recognize correctly and
perform date-sensitive functions involving certain dates prior to and after
December 31, 1999), including risks resulting from the failure of key vendors
and customers of the Consolidated Group to successfully address the Year 2000
problem, and (b) each member of the Consolidated Group's material computer
applications and those of its key vendors and customers will, on a timely basis,
adequately address the Year 2000 problem in all material respects.
(z) Subsection 5.2 Conditions. The conditions specified in
Section 5.2 shall be satisfied.
(aa) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Credit Agreement shall
be reasonably satisfactory in form and substance to the Agent.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
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(a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein or in any other Credit Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on and as
of the date of such Extension of Credit as if made on and as of such date
(except for those which expressly relate to an earlier date).
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Credit
Agreement.
(c) Additional Conditions to Revolving Loans. If a Revolving
Loan is made pursuant to Section 2.1, all conditions set forth therein shall
have been satisfied.
(d) Additional Conditions to Letters of Credit. If such
Extension of Credit is made pursuant to Section 2.2, all conditions set forth
therein shall have been satisfied.
Each request for Extension of Credit (including extensions and
conversions) and each acceptance by the Borrower of an Extension of Credit
(including extensions and conversions) shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in paragraphs (a), (b), (c) and (d) of
this subsection have been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each Credit Party hereby represents
and warrants to the Agent and to each Lender that:
6.1 FINANCIAL CONDITION.
The financial statements delivered to the Lenders pursuant to Section
5.1(b) and Section 7.1(a) and (b), have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby, are complete and
correct in all material respects and present fairly the financial condition and
results from operations of the entities and for the periods specified, subject
in the case of interim company-prepared statements to normal year-end
adjustments and the absence of notes required by GAAP.
6.2 NO CHANGES OR RESTRICTED PAYMENTS.
Since January 31, 1998, (a) there has been no circumstance, development
or event relating to or affecting the members of the Consolidated Group which
has had or would be
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reasonably expected to have a Material Adverse Effect, and (b) except as set
forth on Schedule 6.2 or as permitted herein or pursuant to the Merger in
accordance with the terms of the Merger Agreement, no Restricted Payments have
been made or declared or are contemplated by any members of the Consolidated
Group.
6.3 ORGANIZATION; EXISTENCE; COMPLIANCE WITH LAW.
Each of the members of the Consolidated Group (a) is a corporation duly
organized, validly existing in good standing under the laws of the jurisdiction
of its organization, (b) has the corporate or other necessary power and
authority, and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate or other necessary power
and authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance by it of the Credit Documents
to which it is a party. No consent or authorization of, filing with, notice to
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery or performance of any Credit Documents by the Credit Parties (other
than those which have been obtained, such filings as are required by the
Securities and Exchange Commission and to fulfill other reporting requirements
with Governmental Authorities) or with the validity or enforceability of any
Credit Document against the Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which the Credit Parties are a party
constitutes a legal, valid and binding obligation of such Credit Parties
enforceable against such Credit Parties in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 NO LEGAL BAR.
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law, which violation has or would reasonably be expected to
have a Material Adverse Effect, or any Contractual Obligation of any member of
the Consolidated Group (except those as to which waivers or consents have been
obtained ), and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
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Requirement of Law or Contractual Obligation other than the Liens arising under
or contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which has or would reasonably be expected to have a
Material Adverse Effect.
6.6 NO MATERIAL LITIGATION.
No claim, litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the
Credit Parties, threatened by or against, any members of the Consolidated Group
or against any of their respective properties or revenues which (a) relate to
the Credit Documents or any of the transactions contemplated hereby or thereby
(including specifically without limitation the Merger) or (b) could reasonably
be expected to have a Material Adverse Effect. Set forth on Schedule 6.6 is a
summary of all claims, litigation, investigations and proceedings pending or, to
the best knowledge of the Credit Parties, threatened by or against the members
of the Consolidated Group or against any of their respective properties or
revenues, and none of such actions, individually or in the aggregate, is
reasonably expected to have a Material Adverse Effect.
6.7 NO DEFAULT.
No member of the Consolidated Group is in default in any respect under
any contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound which default could have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS.
Each of the members of the Consolidated Group has good record and
marketable title in fee simple to, or a valid leasehold interest in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material property, and none of such property is subject to any Lien,
except for Permitted Liens.
6.9 INTELLECTUAL PROPERTY.
Each of the members of the Consolidated Group owns, or has the legal
right to use, all United States trademarks, tradenames, copyrights, technology,
know-how and processes, if any, necessary for each of them to conduct its
business as currently conducted (the "Intellectual Property") except for those
the failure to own or have such legal right to use would not be reasonably
expected to have a Material Adverse Effect. Set forth on Schedule 6.9 is a list
of all Intellectual Property owned by each member of the Consolidated Group or
that any member of the Consolidated Group has the right to use. No claim has
been asserted and is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and the
use of such Intellectual Property by the members of the Consolidated Group does
not infringe on the
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rights of any Person, except for such claims and infringements that in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
6.10 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any member of the Consolidated Group in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein not misleading.
6.11 NO BURDENSOME RESTRICTIONS.
No Requirement of Law applicable to, or Contractual Obligation of, the
members of the Consolidated Group has or would be reasonably expected to have a
Material Adverse Effect.
6.12 TAXES.
Each of the members of the Consolidated Group has filed or caused to be
filed all United States federal income tax returns and all other material tax
returns which, to the best knowledge of the Credit Parties, are required to be
filed and has paid (a) all taxes shown to be due and payable on said returns or
(b) all taxes shown to be due and payable on any assessments of which it has
received notice made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate, would not have a Material Adverse Effect
or (ii) taxes, fees or other charges the amount or validity of which are
currently being contested and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person), and no tax Lien has been
filed, and, to the best knowledge of the Credit Parties, no claim is being
asserted, with respect to any such tax, fee or other charge.
6.13 ERISA
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred, and, to
the best knowledge of the Credit Parties, no event or condition has occurred or
exists as a result of which any ERISA Event could reasonably be expected to
occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Code, and any other
applicable federal or state laws; and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.
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(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
Single Employer Plan, as of the last annual valuation date prior to the date on
which this representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial assumptions used in such Plan's most recent actuarial valuation
report), did not exceed as of such valuation date the fair market value of the
assets of such Plan.
(c) No member of the Consolidated Group nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be reasonably
expected to incur, any withdrawal liability under ERISA to any Multiemployer
Plan or Multiple Employer Plan. No member of the Consolidated Group nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
any member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject any member of
the Consolidated Group or any ERISA Affiliate to any liability under Sections
406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) No member of the Consolidated Group nor any ERISA Affiliates has
any material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects of such sections.
6.14 GOVERNMENTAL REGULATIONS, ETC.
(a) No part of the proceeds of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U, or for the purpose of purchasing or carrying or
trading in any securities. If requested by any Lender or the Agent, the Borrower
will furnish to the Agent and each Lender additional statements to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No indebtedness being reduced or retired out of the proceeds of
the Loans was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U or any "margin security" within
the meaning of Regulation T. Margin Stock does not constitute more than 25% of
the value of the consolidated assets of the Borrower and its Subsidiaries. None
of the transactions contemplated by this Credit Agreement (including, without
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limitation, the direct or indirect use of the proceeds of the Loans) will
violate or result in a violation of the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, or regulations issued pursuant
thereto, or Regulation T, U or X.
(b) None of the members of the Consolidated Group is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940, each as amended. In addition,
none of the members of the Consolidated Group is (i) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(c) Each of the members of the Consolidated Group has obtained all
material licenses, permits, franchises, other governmental authorizations and
third party approvals necessary to the ownership of its respective Property and
to the conduct of its business.
(d) None of the members of the Consolidated Group is in violation of
any applicable statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or any other jurisdiction, or
of any agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a Material
Adverse Effect.
(e) Each of the members of the Consolidated Group is current with all
reports and documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance with all
applicable rules and regulations of such commissions except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.15 SUBSIDIARIES.
Set forth on Schedule 6.15 are all the Subsidiaries of the Borrower,
the jurisdiction of their incorporation, the number of shares of each class of
capital stock outstanding, the number and percentage of outstanding shares of
each class owned (directly or indirectly) by a member of the Consolidated Group;
and the number and effect, if exercised of all outstanding options, warrants,
rights of conversion or purchase and all other similar rights with respect
thereto. Schedule 6.15 may be updated from time to time by the Borrower by
giving written notice thereof to the Agent.
6.16 PURPOSE OF EXTENSIONS OF CREDIT.
The Loans will be used (a) to refinance the existing Indebtedness of
the Borrower under the Prior Credit Agreement, (b) to pay the cash portion of
the purchase price for the shares of the Borrower pursuant to the Merger
Agreement, (c) to pay related fees and expenses in connection with the
foregoing, (d) to provide working capital and (e) for general corporate
purposes. The Letters of Credit shall be used only for or in connection with
appeal bonds, reimbursement
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obligations arising in connection with surety and reclamation bonds,
reinsurance, worker's compensation, domestic or international trade transactions
and obligations not otherwise aforementioned relating to transactions entered
into by the applicable account party in the ordinary course of business.
6.17 ENVIRONMENTAL MATTERS.
Except as would not reasonably be expected to have a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or operated by
the members of the Consolidated Group (the "Properties") and all operations at
the Properties are in compliance with all applicable Environmental Laws, and
there is no violation of any Environmental Law with respect to the Properties or
the businesses operated by the members of the Consolidated Group (the
"Businesses"), and there are no conditions relating to the Businesses or
Properties that could reasonably be expected to result in any liability under
any applicable Environmental Laws.
(b) None of the Properties contains, or has previously contained, any
Materials of Environmental Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, Environmental Laws.
(c) None of the members of the Consolidated Group has received any
written or verbal notice of, or inquiry from any Governmental Authority
regarding, any violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Businesses, nor
does any member of the Consolidated Group have knowledge or reason to believe
that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed of
at, on or under any of the Properties or any other location, in each case by or
on behalf of any members of the Consolidated Group in violation of, or in a
manner that would be reasonably likely to give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
any member of the Consolidated Group, the Properties or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations (including, without limitation, disposal) of any member of the
Consolidated Group in connection with the Properties or otherwise in connection
with the Businesses, in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.
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6.18 SOLVENCY.
Each member of the Consolidated Group is and, after consummation of the
transactions contemplated by this Credit Agreement will be Solvent.
6.19 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the
Closing Date and none of the Consolidated Group has suffered any strikes,
walkouts, work stoppages or other material labor difficulty within the last five
years.
6.20 YEAR 2000 COMPLIANCE.
Each Credit Party has (i) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that could
reasonably be expected to be adversely affected by the "Year 2000 Problem" (that
is, the risk that computer applications used by such Credit Party or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with the timetable. Based on the foregoing,
each Credit Party believes that all computer applications (including those of
its suppliers, vendors and customers) that are material to its and any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so could not reasonably be expected to have Material
Adverse Effect.
6.21 LOCATION OF COLLATERAL.
Set forth on Schedule 6.21(a) is a list of all locations where any
tangible personal property of a member of the Consolidated Group is located,
including county and state where located. Set forth on Schedule 6.21(b) is the
chief executive office and principal place of business of each member of the
Consolidated Group.
SECTION 7
AFFIRMATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith have
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been paid in full, each of the members of the Consolidated Group party hereto
shall, and shall cause each of its Subsidiaries to:
7.1 FINANCIAL STATEMENTS.
Furnish, or cause to be furnished, to the Agent and to each of the
Lenders:
(a) Audited Financial Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year, an audited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the fiscal
year and the related consolidated statements of income, retained earnings,
shareholders' equity and cash flows for the year, audited by KPMG Peat Marwick,
or other firm of independent certified public accountants of nationally
recognized standing reasonably acceptable to the Agent, setting forth in each
case in comparative form the figures for the previous year, reported without a
"going concern" or like qualification or exception, or qualification indicating
that the scope of the audit was inadequate to permit such independent certified
public accountants to certify such financial statements without such
qualification or any other material qualification or exception.
(b) Company-Prepared Financial Statements. As soon as available, but in
any event
(i) within 30 days after the end of each month, a
company-prepared unaudited consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries as of the
end of such month and related company-prepared consolidated
and consolidating statements of income for such monthly period
and for the fiscal year to date;
(ii) within 45 days after the end of each of the
first three fiscal quarters, the company-prepared unaudited
consolidated and consolidating balance sheet of the Borrower
and its Subsidiaries as of the end of such quarter and related
company-prepared consolidated and consolidating statements of
income, retained earnings, shareholders' equity and cash flows
for such quarterly period and for the fiscal year to date or,
in lieu thereof, the Borrower's report on Form 10Q filed with
the Securities and Exchange Commission for such period;
(iii) within 45 days following the end of each fiscal
year, an annual business plan and budget for the members of
the Consolidated Group, containing, among other things, pro
forma financial statements for the then current fiscal year,
in each case setting forth in comparative form the consolidated and
consolidating figures for the corresponding period or periods of the
preceding fiscal year or the portion of the fiscal year ending with
such period, as applicable, in each case subject to normal recurring
year-end audit adjustments and the absence of notes required by GAAP.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and shall be prepared
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in reasonable detail and, in the case of the annual and quarterly financial
statements provided in accordance with subsections (a) and (b) above, in
accordance with GAAP applied consistently throughout the periods reflected
therein) and further accompanied by a description of, and an estimation of the
effect on the financial statements on account of, any change in the application
of accounting principles as provided in Section 1.3.
7.2 CERTIFICATES; OTHER INFORMATION.
Furnish, or cause to be furnished, to the Agent and to each of the
Lenders:
(a) Accountant's Certificate and Reports. Concurrently with the
delivery of the financial statements referred to in subsection 7.1(a) above, a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except as
specified in such certificate.
(b) Officer's Certificate. Concurrently with the delivery of the
financial statements referred to in Sections 7.1(a) and 7.1(b)(ii) above, a
certificate of a Responsible Officer (i) demonstrating compliance with the
financial covenants in Section 7.10 by calculation thereof as of the end of each
such fiscal period and (ii) stating that, to the best of such Responsible
Officer's knowledge and belief, (A) the financial statements fairly present in
all material respects the financial condition of the parties covered by such
financial statements, (B) during such period the members of the Consolidated
Group have observed or performed in all material respects the covenants and
other agreements hereunder and under the other Credit Documents relating to
them, and satisfied in all material respects the conditions, contained in this
Credit Agreement to be observed, performed or satisfied by them and (C) in each
case such Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate. A form of Officer's
Certificate is attached as Schedule 7.2(b).
(c) Accountants' Reports. Promptly upon receipt, a copy of any final
(as distinguished from a preliminary or discussion draft) "management letter" or
other similar report submitted by independent accountants or financial
consultants to any member of the Consolidated Group in connection with any
annual, interim or special audit.
(d) Public Information. Within ten days after the same are sent, copies
of all reports (other than those otherwise provided pursuant to subsection 7.1)
and other financial information which any member of the Consolidated Group sends
to its public stockholders, and within ten days after the same are filed, copies
of all financial statements and non-confidential reports which any member of the
Consolidated Group may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority.
(e) Studio Closings. Concurrently with the delivery of the financial
statements referred to in Sections 7.1(a) and 7.1(b)(ii), a report containing
information as to the number of photography studios closed by the Borrower or
any of its Subsidiaries during the applicable fiscal quarter period and the
number of studios remaining open at the end of such fiscal quarter.
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(f) Other Information. Promptly, such additional financial and other
information as the Agent, at the request of any Lender, may from time to time
reasonably request.
7.3 NOTICES.
Give notice to the Agent (which shall promptly transmit such notice to
each Lender) of:
(a) Defaults. Immediately (and in any event within five (5) Business
Days) after a Responsible Officer of any Credit Party knows of, the occurrence
of any Default or Event of Default.
(b) Contractual Obligations. Promptly, the occurrence of any default or
event of default under any Contractual Obligation of any member of the
Consolidated Group which would reasonably be expected to have a Material Adverse
Effect.
(c) Legal Proceedings. Promptly, the initiation of any litigation, or
any investigation or proceeding (including without limitation, any environmental
proceeding) known to any Responsible Officer of a member of the Consolidated
Group, or any material development in respect thereof, against any member of the
Consolidated Group which, if adversely determined, would in the opinion of
management of the Borrower reasonably be expected to have a Material Adverse
Effect (and in any event, where compensation, reimbursement, damages or relief
is sought in excess of $1,000,000 in any instance and such liability is not
covered by insurance).
(d) ERISA. Promptly, after any Responsible Officer of the Borrower
knows of (i) any event or condition, including, but not limited to, any
Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event;
(ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against any of their
ERISA Affiliates, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of ERISA);
(iii) the failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the members of the Consolidated Group
or any ERISA Affiliate are required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect; or (iv) any change in the funding status of any Plan
that reasonably could be expected to have a Material Adverse Effect; together
with a description of any such event or condition or a copy of any such notice
and a statement by the chief financial officer of the Borrower briefly setting
forth the details regarding such event, condition, or notice, and the action, if
any, which has been or is being taken or is proposed to be taken by the Credit
Parties with respect thereto. Promptly upon request, the members of the
Consolidated Group shall furnish the Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested, including, but
not limited to, copies of each annual report/return (Form 5500 series), as well
as all schedules and attachments thereto required to be filed with the
Department of Labor and/or the Internal Revenue Service pursuant to ERISA and
the Code, respectively, for each "plan year" (within the meaning of Section
3(39) of ERISA).
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(e) Other. Promptly, any other development or event which a Responsible
Officer determines could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Credit Parties propose to take with respect
thereto.
7.4 COMPLIANCE WITH LAW.
Comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could have a Material Adverse Effect.
7.5 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with prudent business
practice (subject, where applicable, to specified grace periods) all material
obligations of each member of the Consolidated Group of whatever nature
(including without limitation all taxes, assessments and governmental charges or
levies imposed on it, or upon its income or profits and all lawful claims which,
if unpaid, might give rise to a Lien upon any of its properties) and any
additional costs that are imposed as a result of any failure to so pay,
discharge or otherwise satisfy such obligations; provided, however, that no
member of the Consolidated Group shall be required to pay any such tax or other
obligation which is being contested in good faith by appropriate proceedings and
as to which adequate reserves therefor have been established in accordance with
GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could have
a Material Adverse Effect.
7.6 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Continue to engage in business of the same general type as now
conducted by it on the date hereof, and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges, licenses and franchises necessary or desirable in the
normal conduct of its business; and comply with all Contractual Obligations and
Requirements of Law applicable to it except to the extent that failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.
7.7 MAINTENANCE OF PROPERTY; INSURANCE.
Keep all material property useful and necessary in its business in
reasonably good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies casualty,
liability and such other insurance (which may include plans of self-insurance)
with such coverage and deductibles, and in such amounts as may be consistent
with prudent business practice and in any event consistent with normal industry
practice; maintain at all times an aggregate of at least $5,000,000 in the key
man life insurance
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insuring John Grosso, Eric Jeltrup and Bruce Fisher; and furnish to the Agent,
upon written request, full information as to the insurance carried. The Agent
shall be named as loss payee or mortgagee, as its interest may appear, and/or as
additional insured with respect to any such insurance providing coverage in
respect of any Collateral, and each provider of any such insurance shall agree,
by endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Agent, that it will give the Agent thirty (30) days
prior written notice before any such policy or policies shall be altered or
canceled, and that no act or default of the Borrower or any of its Subsidiaries
or any other Person shall affect the rights of the Agent or the Lenders under
such policy or policies. The present insurance coverage of the Borrower and its
Subsidiaries is outlined as to carrier, policy number, expiration date, type and
amount on Schedule 7.7, as Schedule 7.7 may be amended from time to time by
written notice to the Agent.
7.8 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
(a) Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable notice
by the Agent or any Lender, the Agent or such Lender to visit and inspect any of
its properties and examine and make abstracts (including photocopies) from any
of its books and records (other than materials protected by the attorney-client
privilege and materials which the Credit Parties may not disclose without
violation of a confidentiality obligation binding upon them) at any reasonable
time, and to discuss the business, operations, properties and financial and
other condition of the members of the Consolidated Group with officers and
employees of the members of the Consolidated Group and with their independent
certified public accountants. The cost of the inspection by the Agent referred
to in the preceding sentence shall be for the account of the Lenders unless an
Event of Default has occurred and is continuing, in which case the cost of such
inspection shall be for the account of the Credit Parties, and the cost of the
inspection by any Lender referred to in the preceding sentence shall be for the
account of such Lender.
(b) In addition to the foregoing subsection (a), permit the Agent to
have agents or representatives to conduct a "field audit" of its inventory and
accounts, including inspection of the inventory and account records and a right
to examine and make abstracts (including photocopies) from its books and records
relating to its inventory and accounts once in each fiscal year, and more
frequently after the occurrence of an Event of Default.
7.9 ENVIRONMENTAL LAWS.
(a) Comply in all material respects with, and take reasonable actions
to ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply in all
material respects with and maintain, and take reasonable actions to ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect;
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(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the failure to do so or the pendency of such
proceedings would not reasonably be expected to have a Material Adverse Effect;
and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the members of the Consolidated Group or the Properties, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Loans and all
other amounts payable hereunder, and termination of the Commitments.
7.10 FINANCIAL COVENANTS.
(a) Consolidated Leverage Ratio. There shall be maintained, as of the
end of each fiscal quarter to occur during the periods shown, a Consolidated
Leverage Ratio of not greater than:
October 31, 1998 through
January 29, 2000 6.25 to 1.0
January 30, 2000 through
January 27, 2001 6.0 to 1.0
January 28, 2001 through
February 2, 2002 5.50 to 1.0
February 3, 2002 through
February 1, 2003 5.0 to 1.0
February 2, 2003 through
January 31, 2004 4.50 to 1.0
February 1, 2004 and thereafter 4.0 to 1.0
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(b) Consolidated Fixed Charge Coverage Ratio. There shall be
maintained, as of the end of each fiscal quarter, a Consolidated Fixed Charge
Coverage Ratio of at least 1.0 to 1.0.
(c) Consolidated Interest Coverage Ratio. There shall be maintained, as
of the end of each fiscal quarter to occur during the periods shown, a
Consolidated Interest Coverage Ratio of at least:
October 31, 1998 through
January 29, 2000 1.65 to 1.0
January 30, 2000 through
January 27, 2001 1.75 to 1.0
January 28, 2001 through
February 2, 2002 1.85 to 1.0
February 3, 2002 through
February 1, 2003 2.0 to 1.0
February 2, 2003
through January 31, 2004 2.25 to 1.0
February 1, 2004 and thereafter 2.50 to 1.0
(d) Capital Expenditures. The aggregate amount of Consolidated Capital
Expenditures for the Consolidated Group will not exceed $12,500,000 during any
fiscal year. The unused portion of Consolidated Capital Expenditures permitted
but not used in any fiscal year may be carried over and used in the next fiscal
year (one year carry-over); provided, however, the Consolidated Group must use
the amount of Consolidated Capital Expenditures permitted in any given fiscal
year before utilizing the amount carried over from the preceding year.
7.11 AGENCY FEES.
Pay to the Agent the annual agency fee and comply with the other
agreements provided for in the Agent's Fee Letter.
7.12 ADDITIONAL GUARANTIES AND STOCK PLEDGES.
(a) Domestic Subsidiaries. At any time any Person becomes a Domestic
Subsidiary, the Borrower will promptly notify the Agent thereof and within 30
days of such event, cause such Domestic Subsidiary to become a Guarantor
hereunder by (i) execution of a Joinder Agreement, (ii) delivery of supporting
resolutions, incumbency certificates, corporation formation and organizational
documentation and opinions of counsel as the Agent may reasonably request, (iii)
delivery of security agreements, mortgages and other related documents
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(in a form acceptable to the Agent) necessary to perfect a lien on or security
interest in all material assets of such Domestic Subsidiary and (iv) delivery of
stock certificates and a related pledge agreement or pledge joinder agreement
evidencing the pledge of 100% of the Voting Stock of such Domestic Subsidiary
and of 100% of the Voting Stock of each of its Domestic Subsidiaries and 65% of
the Voting Stock of each of its Foreign Subsidiaries, together in each case with
undated stock transfer powers executed in blank.
(b) Foreign Subsidiaries. At any time that (i) either of the Foreign
Subsidiaries named on Schedule 7.11-3 has assets with a book value of $1,000,000
or more, or (ii) any other Person becomes a Foreign Subsidiary, then in each
such case the Borrower will promptly notify the Agent thereof and cause (A)
delivery of supporting resolutions, incumbency certificates, corporation
formation and organizational documentation and opinions of counsel as the Agent
may reasonably request, and (B) delivery of stock certificates (where required
for perfection under local law) and a related pledge agreement or pledge joinder
agreement evidencing the pledge of 65% of the Voting Stock of such Foreign
Subsidiary, together in each case with undated stock transfer powers executed in
blank.
7.13 OWNERSHIP OF SUBSIDIARIES.
Except to the extent otherwise permitted in Section 8.7 and except as
set forth on Schedule 6.15, the Borrower shall, directly or indirectly, own at
all times 100% of the Voting Stock of each of its Subsidiaries.
7.14 USE OF PROCEEDS.
Extensions of Credit will be used solely for the purposes provided in
Section 6.16.
7.15 YEAR 2000 COMPLIANCE.
Each Credit Party will promptly notify the Agent in the event such
Credit Party discovers or determines that any computer application (including
those of its suppliers, vendors and customers) that is material to its or any of
its Subsidiaries' business and operations will not be Year 2000 compliant,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
7.16 COLLATERAL.
If, subsequent to the Closing Date, a Credit Party shall (a) acquire or
lease any real property or (b) acquire any intellectual property, securities
instruments, chattel paper or other personal property required to be delivered
to the Agent as Collateral hereunder or under any of the Collateral Documents,
the Borrower shall immediately notify the Agent of same. Each Credit Party shall
take such action as requested by the Agent and at its own expense, to ensure
that the Agent has a first priority perfected Lien in all owned real property
(and in such leased real property as requested by the Agent or the Required
Lenders) and all personal property of the Credit Parties (whether now owned or
hereafter acquired), subject only to Permitted Liens. Each
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Credit Party shall adhere to the covenants regarding the location of personal
property as set forth in the Security Agreement.
SECTION 8
NEGATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing
Date, and so long as this Credit Agreement is in effect and until the
Commitments have been terminated, no Obligations remain outstanding and all
amounts owing hereunder or in connection herewith, have been paid in full, no
member of the Consolidated Group shall:
8.1 INDEBTEDNESS.
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit Agreement and
the other Credit Documents;
(b) the Subordinated Debt, provided that such Indebtedness is
subordinated on terms and conditions satisfactory to the Agent;
(c) Indebtedness set forth in Schedule 8.1, and renewals, refinancings
and extensions thereof on terms and conditions no less favorable than for such
existing Indebtedness;
(d) Capital Lease Obligations and Indebtedness incurred, in each case,
to provide all or a portion of the purchase price or costs of construction of an
asset, provided that (i) such Indebtedness when incurred shall not exceed the
purchase price or cost of construction of such asset, (ii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing, and (iii) the total amount
of all such Indebtedness shall not exceed $5,000,000 at any time outstanding;
(e) Indebtedness and obligations of the Borrower in respect of Hedging
Agreements entered into in the ordinary course of business to manage existing or
anticipated risks and not for speculative purposes;
(f) (i) unsecured intercompany Indebtedness owing by one Credit Party
to another Credit Party and (ii) unsecured intercompany Indebtedness owing by a
Credit Party to a Subsidiary of the Borrower which is not a Credit Party, in
each case to the extent permitted under Section 8.5 hereof;
(g) following the payment in full of the Bridge Loans or NationsBridge
Term Loans with proceeds from the Permanent Securities, other unsecured
Indebtedness of the Borrower of up to $3,000,000 in the aggregate at any time
outstanding; and
(h) Guaranty Obligations of Indebtedness permitted under this Section
8.1.
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8.2 LIENS.
Contract, create, incur, assume or permit to exist any Lien with
respect to any of their respective property or assets of any kind (whether real
or personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 NATURE OF BUSINESS.
Engage in any business other than the business conducted by such member
of the Consolidated Group on the Closing Date and any businesses reasonably
related thereto.
8.4 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, CAPITAL
EXPENDITURES, ETC.
(a) Dissolve, liquidate or wind up their affairs, except for the
dissolution and liquidation of a wholly-owned Subsidiary of a Credit Party where
the parent company Credit Party receives the assets of such Subsidiary;
(b) Enter into any transaction of merger or consolidation; provided,
however, that, so long as no Default or Event of Default would be directly or
indirectly caused as a result thereof, a member of the Consolidated Group may
merge or consolidate with another member of the Consolidated Group, provided
that (A) if the Borrower is a party thereto, the Borrower shall be the surviving
corporation and (B) if one of the parties thereto is a Credit Party, such Credit
Party shall be the surviving corporation;
(c) Sell, lease, transfer or otherwise dispose of any Property
(including without limitation pursuant to any sale/leaseback transaction or
securitization transaction ) other than (i) the sale of inventory in the
ordinary course of business for reasonable consideration, (ii) the sale or
disposition of machinery and equipment no longer used or useful in the conduct
of such Person's business, and (iii) other sales of assets (other than
inventory), provided that (A) after giving effect to such sale or other
disposition, the aggregate book value of assets sold or otherwise disposed of
pursuant to this clause (iii) in any given fiscal year does not exceed an amount
equal to $5,000,000 and (B) the proceeds from any such disposition are, within
360 days from the date of such disposition, reinvested in an asset similar to
the type transferred or disposed of pursuant to this Section 8.4(c)(iii); or
(d) Except as otherwise permitted by Section 8.4(b) and Section 8.5
hereof, (i) acquire all or any portion of the capital stock or securities of any
other Person or (ii) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any substantial part of
the Property of any other Person.
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8.5 ADVANCES, INVESTMENTS AND LOANS.
Lend money or extend 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, or otherwise make an Investment in, any Person
except for Permitted Investments.
8.6 TRANSACTIONS WITH AFFILIATES.
Enter into or permit to exist any transaction or series of transactions
with any officer, director, shareholder, Subsidiary or Affiliate other than (i)
transactions permitted by this Credit Agreement, (ii) customary fees and
expenses paid to directors and (iii) where such transactions are on terms and
conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder or Affiliate.
8.7 OWNERSHIP OF EQUITY INTERESTS.
Issue, sell, transfer, pledge or otherwise dispose of any partnership
interests, shares of capital stock or other equity or ownership interests
("Equity Interests") in any member of the Consolidated Group, except (i)
issuance, sale or transfer of Equity Interests to a Credit Party by a Subsidiary
of such Credit Party, (ii) in connection with a transaction permitted by Section
8.4, (iii) as needed to qualify directors under applicable law and (iv) subject
to the terms hereof, the sale of equity interests in the Borrower to any Person.
8.8 FISCAL YEAR.
(i) Change its fiscal year end from the Sunday falling closest to
January 31st of each year, or (ii) amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or similar document) in any manner that would reasonably be likely to
adversely affect the rights of the Lenders.
8.9 PREPAYMENTS OF INDEBTEDNESS, ETC.
(a) After the issuance thereof, amend or modify (or permit the
amendment or modification of), the terms of any other Indebtedness in a manner
adverse to the interests of the Lenders (including specifically shortening any
maturity or average life to maturity or requiring any payment sooner than
previously scheduled or increasing the interest rate or fees applicable thereto
or changing any subordination provisions thereof);
(b) Make any prepayment, redemption, defeasance or acquisition for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due), or refund, refinance or exchange of any Funded Debt, other than, so long
as no Default or Event of Default is in existence or would be caused as a result
thereof, (i) intercompany Indebtedness permitted hereunder and (ii) regularly
scheduled payments of principal and interest on such Funded Debt and (iii)
prepayment of the Bridge Loans or NationsBridge Term Loans with proceeds of the
Permanent Securities or
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conversion of the Bridge Loans to NationsBridge Term Loans pursuant to the terms
of the Bridge Loan Agreement.
8.10 RESTRICTED PAYMENTS.
Make or permit any Restricted Payments.
8.11 SALE LEASEBACKS.
Directly or indirectly become or remain liable as lessee or as
guarantor or other surety with respect to any lease, whether an Operating Lease
or a Capital Lease, of any Property (whether real or personal or mixed), whether
now owned or hereafter acquired, (i) which such Person has sold or transferred
or is to sell or transfer to any other Person other than a Credit Party or (ii)
which such Person intends to use for substantially the same purpose as any other
Property which has been sold or is to be sold or transferred by such Person to
any other Person in connection with such lease.
8.12 NO FURTHER NEGATIVE PLEDGES.
Except with respect to prohibitions against other encumbrances on
specific Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), no member of the
Consolidated Group will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any security for such obligation if security is given for some
other obligation except (a) pursuant to this Credit Agreement and the other
Credit Documents and (b) pursuant to the Indenture.
8.13 LICENSE AGREEMENTS.
(a) Terminate, cancel or permit to expire the Kmart License Agreement
or the Wal*Mart License Agreement; or
(b) permit the Consolidated Group to close a material number (as
determined by the Agent in its sole discretion or as determined by the Borrower)
of individual photography studios located in the United States in any single
fiscal year unless, after giving effect to such closings and any such prior
closings or other studio closings, determined as of the end of the next
succeeding fiscal quarter, the Borrower is able to establish to the satisfaction
of the Agent that the Borrower will be in compliance on a Pro Forma basis with
each of the financial covenants contained in Section 7.10 hereof.
8.14 PAYMENT BLOCKAGE NOTICE.
The Borrower (i) covenants and agrees that it will not give the Payment
Blockage Notice (as defined in the Indenture) without the consent of the
Required Lenders and (ii) hereby
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designates and appoints the Agent, as attorney-in-fact of the Borrower,
irrevocably and with full power of substitution, to deliver any Payment Blockage
Notice (as defined in the Indenture) that the Borrower has the right to deliver
pursuant to the terms of the Indenture; provided that the foregoing appointment
shall terminate at such time as the Loans, together with interest, fees and
other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence and during the
continuation of any of the following specified events (each an "Event of
Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligations arising from drawings
under Letters of Credit, or
(ii) default, and such defaults shall continue for three (3)
or more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations arising from drawings under
Letters of Credit, or of any Fees or other amounts owing hereunder,
under any of the other Credit Documents or in connection herewith or
therewith; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made herein, in any of the other Credit Documents, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or
(c) Covenants.
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 7.3(a), 7.10, 7.14 or 8.1
through 8.14, inclusive, or
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 9.1) contained in this
Credit Agreement and such default shall continue unremedied for a
period of at least 30 days after the earlier of a Responsible Officer
of a Credit Party having knowledge of such default or notice thereof by
the Agent; or
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(d) Other Credit Documents. (i) Any Credit Party shall default in the
due performance or observance of any material term, covenant or agreement in any
of the other Credit Documents (subject to applicable grace or cure periods, if
any), or (ii) any Credit Document shall fail to be in full force and effect or
to give the Agent and/or the Lenders any material part of the Liens, rights,
powers and privileges purported to be created thereby or any Credit Party shall
assert the same ; or
(e) Guaranties. Except as to the Credit Party which is dissolved,
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or consolidation permitted by Section 8.4(a) or Section
8.4(b), the guaranty given by any Guarantor hereunder or any material provision
thereof shall cease to be in full force and effect, or any Guarantor hereunder
or any Person acting by or on behalf of such Guarantor shall deny or disaffirm
such Guarantor's obligations under such guaranty, or any 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 beyond any applicable
grace period; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to
any member of the Consolidated Group; or
(g) Defaults under Other Agreements.
(i) There shall occur a default (beyond the applicable grace
period with respect thereto, if any) under either the Kmart License
Agreement or the Wal*Mart License Agreement, which default could
reasonably be expected to have a Material Adverse Effect; or
(ii) With respect to any Indebtedness (other than Indebtedness
outstanding under this Credit Agreement) in excess of $1,000,000 in the
aggregate for the Consolidated Group taken as a whole, (A) any member
of the Consolidated Group shall (1) default in any payment (beyond the
applicable grace period with respect thereto, if any) with respect to
any such Indebtedness, or (2) default in the observance or performance
relating to such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of which
default or other event or condition is (after the giving of notice or
lapse of time if required) to cause, or permit, the holder or holders
of such Indebtedness (or trustee or agent on behalf of such holders) to
cause any such Indebtedness to become due prior to its stated maturity;
or (B) any such Indebtedness shall be declared due and payable, or
required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall have been entered
against one or more of the members of the Consolidated Group involving a
liability of $500,000 or more in the aggregate (to the extent not paid or fully
covered by insurance provided by a carrier who has acknowledged coverage and has
the ability to perform) and any such judgments or decrees shall
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not have been vacated, discharged or stayed or bonded pending appeal within 30
days from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if such event or
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of a member of the
Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an
ERISA Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of such
Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in (i) the termination of such
Plan for purposes of Title IV of ERISA, or (ii) a member of the Consolidated
Group or any ERISA Affiliate incurring any liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency of (within the meaning of Section 4245 of ERISA) such
Plan; or (4) any prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall
occur which may subject a member of the Consolidated Group or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which a member of the Consolidated Group or any ERISA Affiliate has agreed or
is required to indemnify any person against any such liability; or
(j) Ownership. There shall occur, without the prior written consent of
the Lenders, which consent shall not be unreasonably withheld or delayed, a
Change of Control.
(k) Subordinated Debt. (i) Any holder of the Subordinated Debt alleges
in writing (or any Governmental Authority with applicable jurisdiction
determines) that the Lenders are not holders of Senior Debt (as defined in the
Indenture) or (ii) the subordination provisions in the Indenture shall, in whole
or in part, terminate, cease to be effective or cease to be legally valid,
binding and enforceable against any holder of the Subordinated Debt.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter,
the Agent shall, upon the request and direction of the Required Lenders, by
written notice to the Credit Parties take any of the following actions:
(i) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Agent and/or any of the
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Lenders hereunder to be due whereupon the same shall be immediately due
and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each of the Credit Parties.
(iii) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), it will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents and all
rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without
presentment, demand, protest or the giving of any notice or other action by the
Agent or the Lenders, all of which are hereby waived by the Credit Parties.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT.
Each Lender hereby designates and appoints NationsBank, N.A. as Agent
(in such capacity, the "Agent") of such Lender to act as specified herein and
the other Credit Documents, and each such Lender hereby authorizes the Agent as
the Agent for such Lender, to take such action on its behalf under the
provisions of this Credit Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated by the
terms hereof and of the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Each Lender further directs and authorizes
the Agent to execute releases (or similar agreements) to give effect to the
provisions of this Credit Agreement and the other Credit Documents.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and none of the Credit Parties shall have any rights
as a third party beneficiary of the provisions hereof. In performing its
functions and
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duties under this Credit Agreement and the other Credit Documents, the Agent
shall act solely as Agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for any Credit Party or any of their respective Affiliates.
10.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS.
The Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, document,
financial statement or other written or oral statement referred to or provided
for in, or received by the Agent under or in connection herewith or in
connection with the other Credit Documents, or enforceability or sufficiency
therefor of any of the other Credit Documents, or for any failure of any Credit
Party to perform its obligations hereunder or thereunder. The Agent shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Borrower or any Credit Party
in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Lenders or by or on behalf of
the Credit Parties to the Agent or any Lender or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or the use of the Letters of Credit or of the
existence or possible existence of any Default or Event of Default or, except as
otherwise provided herein, to inspect the properties, books or records of the
Credit Parties or any of their respective Affiliates.
10.4 RELIANCE ON COMMUNICATIONS.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of their respective interests hereunder for
all purposes unless a written notice of assignment, negotiation or transfer
thereof
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shall have been filed with the Agent in accordance with Section 11.3(b) hereof.
The Agent shall be fully justified in failing or refusing to take any action
under this Credit Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder or
under any of the other Credit Documents in accordance with a request of the
Required Lenders (or to the extent specifically provided in Section 11.6, all
the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that each of the Agent and its
officers, directors, employees, agents, attorneys-in-fact or affiliates has not
made any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Credit Party or any of their respective Affiliates, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower, the other Credit Parties or
their respective Affiliates and made its own decision to make its Loans
hereunder and enter into this Credit Agreement. Each Lender also represents that
it will, independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower, the other Credit Parties and their respective
Affiliates. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrower, the other
Credit Parties or any of their respective Affiliates which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
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10.7 INDEMNIFICATION.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably according to their respective Commitments (or if
the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interests of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the final payment of all of the obligations of the Borrower
hereunder and under the other Credit Documents) be imposed on, incurred by or
asserted against the Agent in its capacity as such in any way relating to or
arising out of this Credit Agreement or the other Credit Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower, its Subsidiaries
or their respective Affiliates as though the Agent were not the Agent hereunder.
With respect to the Loans made by and all obligations of the Borrower hereunder
and under the other Credit Documents, the Agent shall have the same rights and
powers under this Credit Agreement as any Lender and may exercise the same as
though it were not the Agent, and the terms "Lender" and "Lenders" shall include
the Agent in its individual capacity.
10.9 SUCCESSOR AGENT.
The Agent may, at any time, resign upon 20 days' written notice to the
Lenders. Upon any such resignation, the Required Lenders and, unless a Default
or Event of Default has occurred and is continuing, the Borrower (such approval
not to be unreasonably withheld or delayed) shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the notice of resignation, then the retiring Agent shall select a successor
Agent provided such successor is a Lender hereunder or a commercial bank
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $400,000,000 and is
reasonably acceptable to the Required Lenders. Upon the acceptance of any
appointment as Agent
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hereunder by a successor, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations as Agent, as appropriate, under this Credit Agreement and the other
Credit Documents and the provisions of this Section 10.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower, Guarantors and the Agent, set forth
below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such
other address as such party may specify by written notice to the other parties
hereto:
if to the Borrower or the Guarantors:
PCA INTERNATIONAL, INC.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attn: John Grosso, President
Telephone: (704) 847-8011
Telecopy: (704) 847-1548
with a copy to:
Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Richard Borisoff
Telephone: (212)373-3153
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Telecopy: (212)757-3990
if to the Agent:
NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 386-8388
Telecopy: (704) 386-9923
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28202-4003
Attn: Agency Services
Telephone: (704) 386-8388
Telecopy: (704) 386-9923
11.2 RIGHT OF SET-OFF.
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 continuation of an Event of Default, each Lender is authorized at
any time and from time to time, without presentment, demand, protest or other
notice of any kind (all of which rights being hereby expressly waived to the
extent permitted by law), 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 branches, agencies or
Affiliates of such Lender wherever located) to or for the credit or the account
of any Credit Party against obligations and liabilities of such Person to such
Lender hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether such Lender shall have made any demand hereunder and
although such obligations, liabilities or claims, or any of them, may be
contingent or unmatured, and any such set-off shall be deemed to have been made
immediately upon the occurrence of an Event of Default even though such charge
is made or entered on the books of such Lender subsequent thereto. Any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 3.13 or Section 11.3(d) may exercise all rights of set-off with respect
to its participation interest as fully as if such Person were a Lender
hereunder. Following the exercise of its rights under this Section 11.2, such
Lender shall make reasonable efforts to promptly notify the Borrower and/or the
relevant Credit Party.
11.3 BENEFIT OF AGREEMENT.
(a) This Credit 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 that none of the
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Credit Parties may assign or transfer any of its interests and obligations
without prior written consent of the Lenders; provided further that the rights
of each Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth in this Section 11.3.
(b) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Credit Agreement (including,
without limitation, all or a portion of its Loans, its Notes, and its
Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(v) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this
Credit Agreement, any such partial assignment shall be in an amount at
least equal to $5,000,000 (or, if less, the remaining amount of the
Commitment being assigned by such Lender) or an integral multiple of
$1,000,000 in excess thereof;
(vi) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under
this Credit Agreement and the Notes; and
(vii) the parties to such assignment shall execute and deliver
to the Agent for its acceptance an Assignment and Acceptance in the
form of Exhibit 11.3(b) hereto, together with any Note subject to such
assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Credit Agreement. Upon
the consummation of any assignment pursuant to this Section 11.3(b), the
assignor, the Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of Taxes in accordance with Section
3.11.
(c) The Agent shall maintain at its address referred to in Section 11.1
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agent and
the Lenders may treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Credit Agreement. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
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(d) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Schedule 11.3(b) hereto, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the parties
thereto.
(e) Each Lender may sell participations to one or more Persons in all
or a portion of its rights, obligations or rights and obligations under this
Credit Agreement (including all or a portion of its Commitment or its Loans);
provided, however, that (i) such Lender's obligations under this Credit
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participant shall be entitled to the benefit of the yield protection
provisions contained in Sections 3.7 through 3.12, inclusive, and the right of
set-off contained in Section 11.2, and (iv) the Borrower shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Credit Agreement, and such Lender shall retain the sole
right to enforce the obligations of the Borrower relating to its Loans and its
Notes and to approve any amendment, modification, or waiver of any provision of
this Credit Agreement (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is payable
on such Loans or Notes, extending any scheduled principal payment date or date
fixed for the payment of interest on such Loans or Notes, or extending its
Commitment).
(f) Notwithstanding any other provision set forth in this Credit
Agreement, any Lender may at any time assign and pledge all or any portion of
its Loans and its Notes to any secured party of a Lender including any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment or pledge shall
release the assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.14 hereof.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Agent or any Lender and any of the
Credit Parties 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 and
remedies provided herein are cumulative and not exclusive of any rights or
remedies which the Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle the Borrower or any other
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a
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waiver of the rights of the Agent or the Lenders to any other or further action
in any circumstances without notice or demand.
11.5 PAYMENT OF EXPENSES, ETC.
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Agent in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC, special counsel to the Agent) and any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (B) of the Agent and the Lenders in connection with enforcement of
the Credit Documents and the documents and instruments referred to therein as a
result of the occurrence of a Default or Event of Default (including, without
limitation, in connection with any such enforcement, the reasonable fees and
disbursements of counsel for the Agent and each of the Lenders); (ii) pay and
hold the Agent harmless from and against all reasonable fees, costs and expenses
(including reasonable fees of employees of the Agent or its Affiliates) of
"field audits" of inventory conducted as provided in Section 7.8(b) at any time
a Default or Event of Default then exists; (iii) pay and hold each of the
Lenders harmless from and against any and all present and future stamp 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 Lender, its officers,
directors, trustees, employees, representatives, advisors and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by 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 Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of proceeds
of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions (including without limitation the Merger)
contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding or (B) the presence or
Release of any Materials of Environmental Concern at, under or from any Property
owned, operated or leased by the Borrower or any of its Subsidiaries, or the
failure by the Borrower or any of its Subsidiaries to comply with any
Environmental Law (but excluding, in the case of either of clause (A) or (B)
above, any such losses, liabilities, claims, damages or expenses to the extent
incurred by reason of gross negligence or willful misconduct on the part of the
Person to be indemnified).
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11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(a) no such amendment, change, waiver, discharge or termination shall,
without the consent of each Lender directly affected thereby, (i) reduce the
rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates) on any
Loan or fees hereunder, (ii) extend (A) the termination date of the Commitments
of such Lender, (B) the maturity of any Loan, or any portion or installment
thereof, or (C) the time of payment of any reimbursement obligation, or any
portion thereof, arising from drawings under Letters of Credit, or (iii) reduce
the principal amount on any Loan;
(b) no such amendment, change, waiver, discharge or termination shall,
without the consent of each Lender affected thereby, (i) increase the Commitment
of such Lender over the amount thereof in effect (it being understood and agreed
that a waiver of any Default or Event of Default or of a mandatory reduction in
the total commitments shall not constitute a change in the terms of any
Commitment of any Lender), (ii) release all or any substantial portion of the
collateral pledged to secure the Obligations hereunder or release any Material
Guarantor from the guaranty obligations hereunder, (iii) amend, modify or waive
any provision of this Section 11.6 or Section 3.6, 3.10, 3.11, 3.12, 3.13,
9.1(a), 11.2, 11.3, 11.5 or 11.9, (iv) reduce any percentage specified in, or
otherwise modify, the definition of "Required Lenders," or (v) consent to the
assignment or transfer by the Borrower or any other Credit Party of any of its
rights and obligations under (or in respect of) the Credit Documents to which it
is a party;
(c) no provision of Section 2.2 may be amended without the consent of
the Issuing Lender and no provision of Section 10 may be amended without the
consent of the Agent; and
(d) without the consent of the Lenders holding in the aggregate more
than 50% of the outstanding Tranche A Term Loans and more than 50% of the
outstanding Tranche B Term Loans, extend the time for or the amount or the
manner of application of proceeds of any mandatory prepayment required by
Section 3.3(b)(ii), (iii), (iv) or (v) hereof.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
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11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.9, 10.7 or 11.5 shall survive the execution and delivery of
this Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Notes and the making of the Loans hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Any legal action or proceeding with respect to this Credit Agreement or any
other Credit Document may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the nonexclusive jurisdiction of
such courts. Each of the Credit Parties 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 it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such mailing.
Nothing herein shall affect the right of the Agent to serve process in any other
manner permitted by law or to commence legal proceedings or to otherwise proceed
against any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties 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
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof 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) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS, THE
BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS
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CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.13 BINDING EFFECT; TERMINATION.
(a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Agent, and the Agent shall have received copies hereof
(telefaxed or otherwise) which, when taken together, bear the signatures of each
Lender, and thereafter this Credit Agreement shall be binding upon and inure to
the benefit of the Borrower, the Guarantors, the Agent and each Lender and their
respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding and until all of the Commitments
hereunder shall have expired or been terminated.
11.14 CONFIDENTIALITY.
The Agent and each Lender (each, a "Lending Party") agrees to keep
confidential any information furnished or made available to it by the Borrower
pursuant to this Credit Agreement that is marked confidential; provided that
nothing herein shall prevent any Lending Party from disclosing such information
(a) to any other Lending Party or any Affiliate of any Lending Party, or any
officer, director, trustee, employee, agent, or advisor of any Lending Party or
Affiliate of any Lending Party, (b) to any other Person if reasonably incidental
to the administration of the credit facility provided herein, (c) as required by
any law, rule, or regulation, (d) upon the order of any court or administrative
agency, (e) upon the demand of any regulatory agency (including any
self-regulatory organization) or authority, (f) that is or becomes available to
the public or that is or becomes available to any Lending Party other than as a
result of a disclosure by any Lending Party prohibited by this Credit Agreement,
(g) in connection with any litigation to which such Lending Party or any of its
Affiliates may be a party to the extent actually required, (h) to the extent
necessary in connection with the exercise of any remedy under this Credit
93
<PAGE> 99
Agreement or any other Credit Document, and (i) subject to provisions
substantially similar to those contained in this Section 11.14, to any actual or
proposed participant or assignee.
11.15 SOURCE OF FUNDS.
Each of the Lenders hereby represents and warrants to the Borrower that
at least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any separate
account maintained by such Lender in which any employee benefit plan (or its
related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender has
disclosed to the Borrower the name of each employee benefit plan whose assets in
such account exceed 10% of the total assets of such account as of the date of
such purchase (and, for purposes of this subsection (b), all employee benefit
plans maintained by the same employer or employee organization are deemed to be
a single plan);
(c) to the extent that any part of such funds constitutes assets of an
insurance company's general account, such insurance company has complied with
all of the requirements of the regulations issued under Section 401(c)(1)(A) of
ERISA; or
(d) such funds constitute assets of one or more specific benefit plans
which such Lender has identified in writing to the Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.16 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
94
<PAGE> 100
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: PCA INTERNATIONAL, INC.,
a North Carolina corporation
By: /s/ John Grosso
Name: John Grosso
Title: President
GUARANTORS: PCA PHOTO CORPORATION OF
CANADA, INC., a North Carolina corporation
PCA SPECIALTY RETAIL PHOTO
CORPORATION, INC.,
a North Carolina corporation
PHOTO CORPORATION OF AMERICA,
a North Carolina corporation
PCA NATIONAL, INC.,
a North Carolina corporation
AMERICAN STUDIOS, INC.
a North Carolina corporation
By: /s/ John Grosso
Name: John Grosso
Title: President of each of the above-named
Guarantors
<PAGE> 101
LENDERS: NATIONSBANK, N. A.,
individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ John E. Ball
Name: John E. Ball
Title: SVP
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Elliot Jaffee
Name: Elliot Jaffee
Title: Vice President
MERCANTILE BANK NATIONAL ASSOCIATION
By: /s/ Juli K. Wisniewski
Name: Juli K. Wisniewski
Title: Assistant Vice President
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Carl G. Drake
Name: Carl G. Drake
Title: Vice President
By: /s/ Stephen W. Hipp
Name: Stephen W. Hipp
Title: Associate
LTCB TRUST COMPANY
By: /s/ Rebecca J. S. Silbert
Name: Rebecca J. S. Silbert
Title: SVP
CENTURA BANK
By: /s/ Gregory S. Greer
Name: Gregory S. Greer
Title: Corporate Banking Officer
THE ING CAPITAL SENIOR SECURED HIGH
INCOME FUND, L.P.
by: ING Capital Advisors, Inc., as
Investment Advisor
By: /s/ Jane Musser Nelson
Name: Jane M. Nelson
Title: Senior Vice President
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST
By: /s/ Peter Gewirtz
Name: Peter Gewirtz
Title: Authorized Signatory
PARIBAS CAPITAL FUNDING LLC
By: /s/ M. S. Alexander
Name: M. S. Alexander
Title: Director
<PAGE> 1
EXECUTION COPY
================================================================================
BRIDGE LOAN AGREEMENT
dated as of
August 25, 1998
among
PCA INTERNATIONAL, INC.,
as Borrower
the Guarantors listed on
the signature pages hereto,
as Guarantors
THE LENDERS named herein,
NationsBanc Montgomery Securities LLC, as Arranger
and
NationsBridge, L.L.C., as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS........................................................1
SECTION 1.1. DEFINED TERMS....................................................1
SECTION 1.2. INTERPRETATION..................................................19
ARTICLE II. THE CREDIT FACILITY..............................................20
SECTION 2.1. COMMITMENTS TO MAKE BRIDGE LOANS................................20
SECTION 2.2. CONVERSION TO TERM LOANS........................................20
SECTION 2.3. INTEREST; PAYMENT IN KIND OPTION; AND DEFAULT INTEREST..........20
SECTION 2.4. MANDATORY PREPAYMENT............................................21
SECTION 2.5. OPTIONAL PREPAYMENT.............................................22
SECTION 2.6. BREAKAGE COSTS; INDEMNITY.......................................22
SECTION 2.7. EFFECT OF NOTICE OF PREPAYMENT..................................22
SECTION 2.8. PAYMENTS........................................................22
SECTION 2.9. TAXES...........................................................24
SECTION 2.10. RIGHT OF SET OFF; SHARING OF PAYMENTS, ETC.....................26
SECTION 2.11. CERTAIN FEES...................................................27
ARTICLE III. REPRESENTATIONS AND WARRANTIES..................................27
SECTION 3.1. REPRESENTATIONS AND WARRANTIES IN THE CREDIT FACILITY AND
THE MERGER AGREEMENT............................................27
SECTION 3.2. ORGANIZATION; POWERS............................................27
SECTION 3.3. DUE AUTHORIZATION AND ENFORCEABILITY............................28
SECTION 3.4. NO CONFLICTS....................................................28
SECTION 3.5. NO VIOLATIONS; MATERIAL CONTRACTS...............................29
SECTION 3.6. CAPITAL STOCK; SUBSIDIARIES.....................................29
SECTION 3.7. LIENS...........................................................30
SECTION 3.8. NO VIOLATION OF REGULATIONS OF BOARD OF GOVERNORS OF
FEDERAL RESERVE SYSTEM..........................................30
SECTION 3.9. GOVERNMENTAL REGULATIONS........................................30
SECTION 3.10. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES...............30
SECTION 3.11. FULL DISCLOSURE................................................31
SECTION 3.12. PRIVATE OFFERING; RULE 144A MATTERS............................31
SECTION 3.13. ABSENCE OF PROCEEDINGS.........................................32
SECTION 3.14. TAXES..........................................................32
SECTION 3.15. FINANCIAL CONDITION; SOLVENCY..................................32
SECTION 3.16. NO MATERIAL ADVERSE CHANGE.....................................32
SECTION 3.17. YEAR 2000 COMPLIANCE...........................................32
ARTICLE IV. COVENANTS........................................................32
SECTION 4.1. FINANCIAL STATEMENTS............................................32
SECTION 4.2. CERTIFICATES; OTHER INFORMATION.................................33
SECTION 4.3. NOTICES.........................................................34
SECTION 4.4. COMPLIANCE WITH LAW.............................................35
SECTION 4.5. PAYMENT OF OBLIGATIONS..........................................35
SECTION 4.6. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE................35
SECTION 4.7. MAINTENANCE OF PROPERTY; INSURANCE..............................36
SECTION 4.8. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS..........36
SECTION 4.9. ENVIRONMENTAL LAWS..............................................36
SECTION 4.10. FINANCIAL COVENANTS............................................37
SECTION 4.11. FEE LETTER.....................................................38
SECTION 4.12. ADDITIONAL GUARANTIES AND STOCK PLEDGES........................38
SECTION 4.13. OWNERSHIP OF SUBSIDIARIES......................................38
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SECTION 4.14. USE OF PROCEEDS................................................38
SECTION 4.15. YEAR 2000 COMPLIANCE...........................................38
SECTION 4.16. INDEBTEDNESS...................................................38
SECTION 4.17. LIENS..........................................................39
SECTION 4.18. NATURE OF BUSINESS.............................................39
SECTION 4.19. CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS,
CAPITAL EXPENDITURES, ETC......................................39
SECTION 4.20. ADVANCES, INVESTMENTS AND LOANS................................40
SECTION 4.21. TRANSACTIONS WITH AFFILIATES...................................40
SECTION 4.22. OWNERSHIP OF EQUITY INTERESTS..................................40
SECTION 4.23. FISCAL YEAR....................................................40
SECTION 4.24. PREPAYMENTS OF INDEBTEDNESS, ETC...............................40
SECTION 4.25. RESTRICTED PAYMENTS............................................41
SECTION 4.26. SALE LEASEBACKS................................................41
SECTION 4.27. LICENSE AGREEMENTS.............................................41
SECTION 4.28. EXCHANGE OF TERM NOTES.........................................41
SECTION 4.29. CHANGE OF CONTROL..............................................42
ARTICLE V. CONDITIONS........................................................42
SECTION 5.1. CORPORATE AND OTHER PROCEEDINGS.................................42
SECTION 5.2. CONCURRENT TRANSACTIONS.........................................44
SECTION 5.3. NO MATERIAL ADVERSE CHANGE......................................44
SECTION 5.4. NO EVENT OF DEFAULT.............................................44
SECTION 5.5. LITIGATION; RESTRAINING ORDERS..................................44
SECTION 5.6. NO CHANGES IN FINANCIAL MARKETS.................................44
SECTION 5.7. CORPORATE STRUCTURE.............................................45
SECTION 5.8. NO CONFLICTS....................................................45
SECTION 5.9. DELIVERY OF OPINIONS............................................45
SECTION 5.10. SOLVENCY.......................................................45
SECTION 5.11. PAYMENT OF FEES................................................45
SECTION 5.12. NO BREACH UNDER ENGAGEMENT LETTER, COMMITMENT
LETTER OR FEE LETTER...........................................45
SECTION 5.13. CONSENTS AND APPROVALS.........................................45
SECTION 5.14. REPAYMENT OF INDEBTEDNESS......................................46
SECTION 5.15. CLOSING........................................................46
SECTION 5.16. DEBT REGISTRATION RIGHTS AGREEMENT.............................46
ARTICLE VI. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH
LOANS AND THE SECURITIES; REPRESENTATIONS OF LENDERS;
PARTICIPATIONS...................................................46
SECTION 6.1. TRANSFER OF LOANS, THE INSTRUMENTS EVIDENCING SUCH
LOANS AND THE SECURITIES........................................46
SECTION 6.2. PERMITTED ASSIGNMENTS...........................................47
SECTION 6.3. PERMITTED PARTICIPANTS; EFFECT..................................47
SECTION 6.4. DISSEMINATION OF INFORMATION....................................48
SECTION 6.5. TAX TREATMENT...................................................48
SECTION 6.6. REPLACEMENT SECURITIES UPON TRANSFER OR EXCHANGE................48
SECTION 6.7. LOAN REGISTER...................................................48
ARTICLE VII. EVENTS OF DEFAULT...............................................48
SECTION 7.1. EVENTS OF DEFAULT...............................................48
SECTION 7.2. ACCELERATION....................................................50
SECTION 7.3. RIGHTS AND REMEDIES CUMULATIVE..................................50
SECTION 7.4. DELAY OR OMISSION NOT WAIVER....................................51
SECTION 7.5. WAIVER OF PAST DEFAULTS.........................................51
SECTION 7.6. RIGHTS OF LENDERS TO RECEIVE PAYMENT............................51
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<PAGE> 4
ARTICLE VIII. PERMANENT SECURITIES...........................................51
SECTION 8.1. PERMANENT SECURITIES............................................51
ARTICLE IX. TERMINATION......................................................52
SECTION 9.1. TERMINATION.....................................................52
SECTION 9.2. SURVIVAL OF CERTAIN PROVISIONS..................................52
ARTICLE X. SUBORDINATION.....................................................52
SECTION 10.1. AGREEMENT TO SUBORDINATE.......................................52
SECTION 10.2. CERTAIN DEFINITIONS............................................52
SECTION 10.3. LIQUIDATION; DISSOLUTION; BANKRUPTCY...........................53
SECTION 10.4. DEFAULT ON DESIGNATED SENIOR DEBT..............................53
SECTION 10.5. ACCELERATION OF SECURITIES.....................................54
SECTION 10.6. WHEN DISTRIBUTION MUST BE PAID OVER............................54
SECTION 10.7. NOTICE BY THE BORROWER.........................................54
SECTION 10.8. SUBROGATION....................................................54
SECTION 10.9. RELATIVE RIGHTS................................................55
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY THE BORROWER AND
THE GUARANTORS................................................55
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE......................55
SECTION 10.12. RIGHTS OF ADMINISTRATIVE AGENT................................55
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.........................56
SECTION 10.14. AMENDMENTS....................................................56
ARTICLE XI. GUARANTEE........................................................56
SECTION 11.1. THE GUARANTEE..................................................56
SECTION 11.2. SUBORDINATION OF GUARANTEE.....................................57
SECTION 11.3. LIMITATION ON LIABILITY........................................57
SECTION 11.4. STAY OF ACCELERATION...........................................58
SECTION 11.5. RELEASE OF GUARANTORS..........................................58
ARTICLE XII. INDEMNITY.......................................................58
SECTION 12.1. INDEMNIFICATION................................................58
SECTION 12.2. INDEMNITY NOT AVAILABLE........................................59
SECTION 12.3. SETTLEMENT OF CLAIMS...........................................59
SECTION 12.4. APPEARANCE EXPENSES............................................60
SECTION 12.5. INDEMNITY FOR TAXES, RESERVES AND EXPENSES.....................60
SECTION 12.6. SURVIVAL OF INDEMNIFICATION....................................61
SECTION 12.7. LIABILITY NOT EXCLUSIVE; PAYMENTS..............................61
ARTICLE XIII. THE ADMINISTRATIVE AGENT; THE ARRANGERS........................61
SECTION 13.1. APPOINTMENT....................................................61
SECTION 13.2. DELEGATION OF DUTIES...........................................61
SECTION 13.3. EXCULPATORY PROVISIONS.........................................61
SECTION 13.4. RELIANCE BY THE ADMINISTRATIVE AGENT...........................61
SECTION 13.5. NOTICE OF DEFAULT..............................................62
SECTION 13.6. NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS.....62
SECTION 13.7. INDEMNIFICATION................................................63
SECTION 13.8. ADMINISTRATIVE AGENT, IN ITS INDIVIDUAL CAPACITIES.............63
SECTION 13.9. SUCCESSOR ADMINISTRATIVE AGENT.................................63
SECTION 13.10. ARRANGERS....................................................63
iii
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ARTICLE XIV. MISCELLANEOUS...................................................64
SECTION 14.1. EXPENSES; DOCUMENTARY TAXES....................................64
SECTION 14.2. NOTICES........................................................64
SECTION 14.3. CONSENT TO AMENDMENTS AND WAIVERS..............................65
SECTION 14.4. PARTIES........................................................65
SECTION 14.5. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.....................................................66
SECTION 14.6. REPLACEMENT NOTES..............................................66
SECTION 14.7. MARSHALLING; RECAPTURE.........................................66
SECTION 14.8. LIMITATION OF LIABILITY........................................66
SECTION 14.9. INDEPENDENCE OF COVENANTS......................................67
SECTION 14.10. CURRENCY INDEMNITY............................................67
SECTION 14.11. WAIVER OF IMMUNITY............................................67
SECTION 14.12. FREEDOM OF CHOICE............................................67
SECTION 14.13. SUCCESSORS AND ASSIGNS.......................................67
SECTION 14.14. MERGER.......................................................67
SECTION 14.15. SEVERABILITY CLAUSE..........................................68
SECTION 14.16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO
SURVIVE DELIVERY.............................................68
SCHEDULE 1.1(a) NON-RECURRING EXPENSES
SCHEDULE 3.5(a) MATERIAL ADVERSE EFFECT CONTRACTS
SCHEDULE 3.5(b) MATERIAL CONTRACTS
SCHEDULE 3.6(a) SUBSIDIARIES
SCHEDULE 3.6(b) OUTSTANDING COMMITMENTS
SCHEDULE 3.7 EXISTING LIENS
SCHEDULE 3.10 FINANCIAL STATEMENTS
SCHEDULE 3.13 LITIGATION
SCHEDULE 4.2(b) FORM OF OFFICER'S COMPLIANCE CERTIFICATE
SCHEDULE 4.7 INSURANCE
SCHEDULE 4.12 FORM OF JOINDER AGREEMENT
SCHEDULE 4.16 EXISTING INDEBTEDNESS
SCHEDULE 4.20 EXISTING INVESTMENTS
SCHEDULE 4.21 TRANSACTIONS WITH AFFILIATES
EXHIBIT A. FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT B. FORM OF BRIDGE NOTE
EXHIBIT C. FORM OF DEBT REGISTRATION RIGHTS AGREEMENT
EXHIBIT D. FORM OF EXCHANGE NOTE INDENTURE
EXHIBIT E-1. OPINION OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON
EXHIBIT E-2. OPINION OF ROBINSON, BRADSHAW & HINSON, P.A.
iv
<PAGE> 6
THIS BRIDGE LOAN AGREEMENT, dated as of August 25, 1998 (as amended,
restated and/or otherwise modified from time to time, this "Agreement"), is by
and among:
(a) PCA International, Inc., a North Carolina corporation (the
"Borrower"),
(b) the Guarantors listed on the signature pages hereto as
Guarantors,
(c) NationsBridge, L.L.C., as Administrative Agent,
(d) NationsBanc Montgomery Securities LLC, as Arranger, and
(e) the other financial institutions party hereto, as Lenders.
The parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"Additional Credit Party" means each Person that becomes a Guarantor
after the Closing Date by execution of a Joinder Agreement.
"Administrative Agent" means NationsBridge, L.L.C., acting as agent
pursuant to Article XIII or any successor or replacement Administrative Agent,
acting in such capacity.
"Affected Party" means any Lender, any Lender's Eurodollar Lending
Office, any beneficial owner of any Lender, and their respective successors and
assigns.
"Affiliate" means, with respect to any Person, any other Person (i)
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person or (ii) directly or indirectly owning or holding
five percent (5%) or more of the equity interest in such Person. For purposes of
this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" has the meaning specified in the preamble to this
Agreement.
"Applicable Margin " means:
(i) with respect to Bridge Loans that are Base Rate Loans, 325
basis points per annum at all times through and including the date that
is 180 days subsequent to the Closing Date, 425 basis points per annum
at all times after the date that is 180 days subsequent to the Closing
Date and prior to the date that is 270 days subsequent to the Closing
Date and increasing by 50 basis points per annum on the date that is
270 days subsequent to the Closing Date and by an additional 50 basis
points per annum on the last day of each 90-day period thereafter for
so long as any Bridge Loans are outstanding; and
<PAGE> 7
(ii) with respect to Bridge Loans that are Eurodollar Loans,
425 basis points per annum at all times through and including the date
that is 180 days subsequent to the Closing Date, 525 basis points per
annum at all times after the date that is 180 days subsequent to the
Closing Date and prior to the date that is 270 days subsequent to the
Closing Date and increasing by 50 basis points per annum on the date
that is 270 days subsequent to the Closing Date and by an additional 50
basis points per annum on the last day of each 90-day period thereafter
for so long as any Bridge Loans are outstanding.
"Arranger" has the meaning specified in the preamble to this Agreement.
"Asset Disposition" means (i) the sale, lease or other disposition of
any property or asset by the Borrower or any Subsidiary of the Borrower, other
than (A) any such sale permitted by Sections 4.19(c)(i) and 4.19(c)(ii) and (B)
any such sale permitted by Section 4.19(c)(iii) to the extent the aggregate
proceeds received from such sales in any fiscal year are less than $5,000,000,
and (ii) receipt by the Borrower or any Subsidiary of the Borrower of any cash
insurance proceeds or condemnation award payable by reason of theft, loss,
physical destruction or damage, taking or similar event with respect to any of
their property or assets in an amount in excess of $1,000,000.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit A or such other form as shall be approved by the
Administrative Agent and the Borrower.
"Bank Financing" means the financing provided by the Credit Facility.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence of
any of the following with respect to such Person: (i) a court or governmental
agency having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or ordering the winding up or liquidation of its affairs; or (ii) there shall be
commenced against such Person an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such Person
or for any substantial part of its Property or for the winding up or liquidation
of its affairs, and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded for a period of sixty
(60) consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its Property
or make any general assignment for the benefit of creditors; or (iv) such Person
shall be unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"Bankruptcy Law" means (i) Title 11 of the U.S. Code or (ii) any other
law of the United States, any political subdivision thereof or any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors.
2
<PAGE> 8
"Base Rate" means, for any day, the rate per annum (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater of
(a) the Federal Funds Rate in effect on such day plus 1/2 of 1% or (b) the Prime
Rate in effect on such day. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms hereof, the Base Rate shall
be determined without regard to clause (a) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change in
the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means a Bridge Loan or a Term Loan at any time that
the interest rate thereon is computed with reference to the Base Rate.
"beneficial owner" and "beneficial ownership" each has the meaning as
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act.
"Board" means the Board of Governors of the Federal Reserve System of
the United States or any successor.
"Borrower" has the meaning specified in the preamble to this Agreement.
"Bridge Loan" means a loan made by any Lender to the Borrower pursuant
to Section 2.1.
"Bridge Note" means a promissory note of the Borrower in the form
attached as Exhibit B hereto evidencing the Bridge Loan and Term Loan of any
Lender.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina are authorized or
required by law to close, and when used in connection with a Eurodollar Loan,
such day shall also be a day on which dealings between banks are carried on in
U.S. dollar deposits in London, England, Charlotte, North Carolina and New York,
New York.
"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Capital Lease Obligations" means the capital lease obligations
(including without limitation the payment of rent or other amounts) relating to
a Capital Lease determined in accordance with GAAP.
"Capital Markets Transaction" has the meaning specified in Section
2.4(a).
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (b) U.S. dollar denominated
time deposits and certificates of deposit of any domestic commercial bank of
recognized standing (y) having capital and surplus in excess of $500,000,000 and
(z) whose short-term commercial paper rating from S&P is at least A-2 or the
equivalent thereof or from Moody's is at least P-2 or the equivalent thereof
(any such bank being an "Approved
3
<PAGE> 9
Bank"), in each case with maturities of not more than 270 days from the date of
acquisition, (c) commercial paper and variable or fixed rate notes issued by any
Approved Bank (or by the parent company thereof) and maturing within six months
of the date of acquisition, (d) repurchase agreements entered into by a Person
with a bank or trust company or recognized securities dealer having capital and
surplus in excess of $500,000,000 for direct obligations issued by or fully
guaranteed by the United States of America in which such Person shall have a
perfected first priority security interest (subject to no other Liens) and
having, on the date of purchase thereof, a fair market value of at least 100% of
the amount of the repurchase obligations, (e) obligations of any State of the
United States or any political subdivision thereof, the interest with respect to
which is exempt from federal income taxation under Section 103 of the Code,
having a long term rating of at least AA- or Aa-3 by S&P or Moody's,
respectively, and maturing within three years from the date of acquisition
thereof, (f) Investments in municipal auction preferred stock (i) rated AAA (or
the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or
better by Moody's and (ii) with dividends that reset at least once every 365
days and (g) Investments, classified in accordance with GAAP as current assets,
in money market investment programs registered under the Investment Company Act
of 1940, as amended, which are administered by reputable financial institutions
having capital of at least $100,000,000 and the portfolios of which are limited
to Investments of the character described in the foregoing subdivisions (a),
(b), (c), (e) and (f).
"Change of Control" means any of the following events: (a) prior to a
Qualifying IPO, (1) Jupiter shall fail to own beneficially, directly or
indirectly, at least 51% of the outstanding capital stock of the Borrower or (2)
a person or any group, and any affiliate of any such person other than Jupiter
shall beneficially own, directly or indirectly, an amount of the outstanding
capital stock of the Borrower entitled to 25% or more of the voting power of all
the outstanding capital stock of the Borrower, (b) after a Qualifying IPO, (1)
Jupiter shall own beneficially, directly or indirectly, less than 30% of the
outstanding capital stock of the Borrower or (2) a person or any group, and any
affiliate of any such person other than Jupiter shall beneficially own, directly
or indirectly, an amount of the outstanding capital stock of the Borrower
entitled to 25% or more of the voting power of all the outstanding capital stock
of the Borrower, (c) during any period of up to 24 consecutive months,
commencing after the Closing Date, individuals who at the beginning of such 24
month period were directors of the Borrower (together with any new director
whose election by the Borrower's Board of Directors or whose nomination for
election by the Borrower's shareholders was approved by a vote of at least a
majority of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors of the Borrower then in office or (d) the occurrence of a "Change of
Control" under and as defined in the Exchange Note Indenture.
"Change of Control Fee" means a fee equal to 1% of the principal amount
of the Loans prepaid pursuant to the Change of Control Offer.
"Change of Control Offer" has the meaning specified in Section 4.29.
"Change of Control Payment" has the meaning specified in Section 4.29.
"Change of Control Payment Date" has the meaning specified in Section
4.29.
"Chase" means The Chase Manhattan Bank.
"Closing" has the meaning specified in Section 5.15.
"Closing Date" has the meaning specified in Section 5.15.
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<PAGE> 10
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, as interpreted by the rules and regulations issued
thereunder, in each case as in effect from time to time. References to sections
of the Code shall be construed also to refer to any successor sections.
"Commitment" means, with respect to any Lender, the amount set forth
opposite such Lender's signature on the signature pages of this Agreement.
"Commitment Letter" means the Bridge Commitment Letter (including the
Summaries of Indicative Terms and Conditions incorporated by reference therein),
dated April 20, 1998, by and among Jupiter, the Administrative Agent, Chase and
CSI.
"Consolidated Capital Expenditures" means for any period for the
Borrower and its Subsidiaries on a consolidated basis, all capital expenditures
for such period, as determined in accordance with GAAP.
"Consolidated Cash Taxes" means for any period, the aggregate of all
federal, state or other domestic or foreign taxes upon the income and profits of
the Borrower and its Subsidiaries on a consolidated basis, for such period, as
determined in accordance with GAAP, to the extent the same are paid in cash
during such period.
"Consolidated EBITDA" means for any period for the Borrower and its
Subsidiaries on a consolidated basis, the sum of (i) Consolidated Net Income for
such period plus (ii), without duplication, an amount which, in the
determination of Consolidated Net Income for such period has been deducted for
(A) Consolidated Interest Expense, (B) total federal, state or other domestic
and foreign income taxes, (C) depreciation and amortization, (D) non-recurring
expenses set forth on Schedule 1.1(a) hereto to the extent accrued during the
period in question, (E) Consolidated Non-Cash Charges and (F) all photography
studio closure costs offset by cash reimbursement payments received in
connection therewith, plus (iii) any extraordinary gains for such period minus
(iv) any extraordinary losses for such period, in each case on a consolidated
basis determined in accordance with GAAP applied on a consistent basis. Except
as expressly provided otherwise, the applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Excess Cash Flow" means for any period for the Borrower
and its Subsidiaries on a consolidated basis, the sum of Consolidated Net Income
for such period plus the non-cash portion of Consolidated Interest Expense for
such period plus depreciation, amortization and other non-cash charges minus
Consolidated Capital Expenditures for such period minus the aggregate amount of
all regularly scheduled payments of principal on Funded Debt minus the cash
portion of federal, state, local and foreign income, value added and similar
taxes paid (to the extent not deducted in determining Consolidated Net Income),
in each case on a consolidated basis determined in accordance with GAAP applied
on a consistent basis.
"Consolidated Fixed Charge Coverage Ratio" means for any period, the
ratio of (i) Consolidated EBITDA for such period minus Consolidated Maintenance
Capital Expenditures for such period minus Consolidated Cash Taxes for such
period to (ii) Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means for any period for the Borrower and
its Subsidiaries on a consolidated basis, the sum of the cash portion of
Consolidated Interest Expense plus scheduled maturities of Funded Debt paid
during such period, in each case on a consolidated basis
5
<PAGE> 11
determined in accordance with GAAP applied on a consistent basis. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP applied
on a consistent basis.
"Consolidated Group" means the Borrower and its Subsidiaries.
"Consolidated Interest Coverage Ratio" means for any period, the ratio
of Consolidated EBITDA for such period to the cash portion of Consolidated
Interest Expense for such period.
"Consolidated Interest Expense" means for any period for the Borrower
and its Subsidiaries on a consolidated basis, all interest expense, including
the amortization of debt discount and premium and the interest component under
Capital Leases and the implied interest component under Synthetic Leases, in
each case on a consolidated basis determined in accordance with GAAP applied on
a consolidated basis. Except as expressly provided otherwise, the applicable
period shall be for the four consecutive quarters ending as of the date of
determination.
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
quarter, the ratio of Consolidated Funded Debt on such date to Consolidated
EBITDA for the period of four consecutive fiscal quarters ending as of such day.
"Consolidated Maintenance Capital Expenditures" means, for purposes of
calculating the Consolidated Fixed Charge Coverage Ratio, the greater of (i)
$4,000,000 or (ii) the sum of $2,000 multiplied by the number of photography
studios under operation by the Borrower and its Subsidiaries as of the last day
of the period for which the Consolidated Fixed Charge Coverage Ratio is being
calculated.
"Consolidated Net Income" means for any period, the net income of the
Borrower and its Subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis, but excluding any extraordinary gains
or losses and any taxes on such excluded gains and any tax deductions or credits
on account of any such excluded gains and any tax deductions or credits on
account of any such excluded losses.
"Consolidated Non-Cash Charges" means for any period for the Borrower
and its Subsidiaries on a consolidated basis, determined in accordance with
GAAP, all non-cash charges for such period (excluding any non-cash charges that
require an accrual or reserve for cash charges for any future period).
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Conversion Date" means the Maturity Date.
"Conversion Default" means any one or more of the following: (i) the
occurrence of any Default or Event of Default, (ii) any fees due to the Lenders
and/or their Affiliates shall not have been paid in full, or (iii) any order,
decree, injunction or judgment enjoining the issuance of any Loans shall be in
effect.
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<PAGE> 12
"Conversion Rate" means, as of any date, the sum of (i) the then
applicable Conversion Spread, plus (ii) the greatest of the following (expressed
as a percentage per annum), calculated as of the Conversion Date:
(a) the sum of (1) the yield (expressed as a percentage per
annum) in effect on the Conversion Date for United States Treasury
Notes with a remaining maturity closest to seven years from the
Conversion Date (provided, however, that if the remaining term of the
Term Loans is not equal to the constant maturity of a United States
Treasury Note for which a weekly average yield is given, such yield on
United States Treasury Notes shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such
yields are given), plus (2) 650 basis points, and
(b) the Eurodollar Rate plus 625 basis points.
"Conversion Spread" means zero basis points during the 90-day period
commencing on the Conversion Date, increasing by 50 basis points at the
beginning of each subsequent 90-day period.
"Credit Facility" means that certain Credit Agreement, dated as of the
date hereof, by and among the Borrower, the Guarantors, the lenders party
thereto and NationsBank, N.A. as agent, and the other lenders party thereto,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Credit Parties" means a collective reference to the Borrower and the
Guarantors, and "Credit Party" means any one of them.
"Custodian" means any receiver, interim receiver, receiver and manager,
trustee, assignee, liquidator, sequestrator, custodian or similar official under
any Bankruptcy Law.
"Debt Registration Rights Agreement" means the registration rights
agreement, dated as of August 25, 1998, among the Borrower, the Guarantors and
the Administrative Agent pursuant to which the Exchange Notes are required to be
registered for public sale, in the form attached as Exhibit C.
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Designated Senior Debt" has the meaning specified in Section 10.2.
"dollars" or "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiary" means (i) any Subsidiary which is incorporated or
organized under the laws of any State or territory of the United States or the
District of Columbia or (ii) any Subsidiary which is not so incorporated or
organized but is treated as a partnership or a division (or a branch office) for
United States federal income tax purposes, as a result of an election under the
so-called "check the box" regulations.
"Engagement Letter" means the engagement letter, dated as of April 20,
1998, by and among Jupiter, the Administrative Agent, Chase, CSI and NMS.
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<PAGE> 13
"Environmental Laws" means any and all lawful and applicable Federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"Equity Financing" means the issuance and sale to Jupiter, certain of
its Affiliates, certain members of management of the Borrower and certain other
persons arranged by Jupiter of not less than $65.0 million of common stock of
the Borrower having terms and conditions acceptable to the Lenders (of which at
least $50.5 million shall be issued for cash and up to $14.5 million may consist
of the rollover of equity or of options).
"Equity Interests" has the meaning specified in Section 4.22.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity which is under common control with
any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is a
member of a group which includes the Borrower and which is treated as a single
employer under Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence of a
Reportable Event or the substantial cessation of operations (within the meaning
of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term is
defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
Employer Plan; (iii) the distribution of a notice of intent to terminate or the
actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual termination of a
Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which
could reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan;
(vi) the complete or partial withdrawal of the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions
for imposition of a lien under Section 302(f) of ERISA exist with respect to any
Plan; or (vii) the adoption of an amendment to any Plan requiring the provision
of security to such Plan pursuant to Section 307 of ERISA.
"Eurodollar Lending Office" means, with respect to any Lender, the
office, if any, of such Lender specified from time to time as its "Eurodollar
Lending Office" in a written notice to the Borrower.
"Eurodollar Loan" means any Loan bearing interest at a rate determined
by reference to the Eurodollar Rate.
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<PAGE> 14
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions, extensions
and renewals), a per annum interest rate determined pursuant to the following
formula:
Eurodollar Rate = Interbank Offered Rate
---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation
D, as such regulation may be amended from time to time or any successor
regulation, as the maximum reserve requirement (including, without limitation,
any basic, supplemental, emergency, special, or marginal reserves) applicable
with respect to "Eurocurrency liabilities" as that term is defined in Regulation
D (or against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is determined), whether
or not Lender has any Eurocurrency liabilities subject to such reserve
requirement at that time. Eurodollar Loans shall be deemed to constitute
Eurocurrency liabilities and as such shall be deemed subject to reserve
requirements without benefits of credits for proration, exceptions or offsets
that may be available from time to time to a Lender. The Eurodollar Rate shall
be adjusted automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means any event specified in Section 7.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Note Indenture" means, the indenture relating to the Exchange
Notes, among the Borrower, as issuer, the Guarantors, as guarantors and the
Exchange Note Trustee, in the form attached as Exhibit D.
"Exchange Note Trustee" means, on any date of determination, the
trustee under the Exchange Note Indenture.
"Exchange Notes" has the meaning specified in Section 4.28.
"Exchange Request" has the meaning specified in Section 4.28.
"Extension of Credit" means, as to any Lender, the making of, extension
or conversion of, or participation in, a Loan by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (A) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day and (B) if no such rate is
so published on such next preceding Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to the Administrative Agent on such
day on such transactions as determined by the Administrative Agent.
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<PAGE> 15
"Fee Letter" means that certain Amended and Restated Fee Letter
Agreement, dated as of August 24, 1998, among Jupiter, the Administrative Agent,
Chase, CSI and NMS.
"Foreign Subsidiary" means, with respect to any Person, a Subsidiary of
such Person which is not a Domestic Subsidiary.
"Funded Debt" means, with respect to any Person, without duplication,
(i) all Indebtedness of such Person for borrowed money, (ii) all purchase money
Indebtedness of such Person, including without limitation the principal portion
of all obligations of such Person under Capital Leases, (iii) all Guaranty
Obligations of such Person with respect to Funded Debt of another Person, (iv)
all Funded Debt of another Person secured by a Lien on any Property of such
Person, whether or not such Funded Debt has been assumed, provided that for
purposes hereof the amount of such Funded Debt shall be limited to the greater
of (A) the amount of such Funded Debt as to which there is recourse to such
Person and (B) the fair market value of the property which is subject to the
Lien, (v) all obligations of such Person issued or assumed as the deferred
purchase price of Property or services purchased by such Person (other than
trade debt incurred in the ordinary course of business and due within twelve
months of the incurrence thereof) and (vi) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP. The
Funded Debt of any Person shall include the Funded Debt of any partnership or
joint venture in which such Person is a general partner or joint venturer, but
only to the extent to which there is recourse to such Person for the payment of
such Funded Debt.
"GAAP" means with respect to the financial statements or other
financial information of any Person, generally accepted accounting principles in
the United States which are in effect from time to time.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" means the guarantee by each of the Guarantors pursuant to
Article XI hereof.
"Guaranteed Obligations" has the meaning specified in Section 11.1.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any Property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
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<PAGE> 16
"Guarantors" means the Guarantors listed on the signature pages hereto
as Guarantors and each Additional Credit Party, together with their successors
and assigns.
"Hedging Agreements" means, with respect to any Person, the agreements
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or foreign currency exchange rates.
"Indebtedness" of any Person means (i) all obligations of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments are
customarily made, (iii) all obligations of such Person under conditional sale or
other title retention agreements relating to Property purchased by such Person
(other than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all obligations
of such Person issued or assumed as the deferred purchase price of Property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within twelve months of the incurrence
thereof) which would appear as liabilities on a balance sheet of such Person,
(v) all obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (vi) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, provided that for purposes hereof
the amount of such Indebtedness shall be limited to the greater of (A) the
amount of such Indebtedness as to which there is recourse to such Person and (B)
the fair market value of the property which is subject to the Lien, (vii) all
Guaranty Obligations of such Person, (viii) the principal portion of all
obligations of such Person under Capital Leases, (ix) all obligations of such
Person in respect of interest rate protection agreements, foreign currency
exchange agreements, commodity purchase or option agreements or other interest
or exchange rate or commodity price hedging agreements (including, but not
limited to, the Hedging Agreements), (x) the maximum amount of all standby
letters of credit issued or bankers' acceptances facilities created for the
account of such Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (xi) all preferred stock issued by such Person and
required by the terms thereof to be redeemed, or for which mandatory sinking
fund payments are due, by a fixed date and (xii) the principal balance
outstanding under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product to which
such Person is a party, where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease in
accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, but only to the extent to which there is
recourse to such Person for payment of such Indebtedness.
"Indemnified Parties" has the meaning specified in Section 12.1.
"Indemnifying Parties" has the meaning specified in Section 12.1.
"Interbank Offered Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the rate of
interest, determined by the Administrative Agent on the basis of the offered
rates for deposits in dollars for a period of time corresponding to such
Interest Period (and commencing on the first day of such Interest Period),
appearing on Telerate Page 3750 (or, if, for any reason, Telerate Page 3750 is
not available, the Reuters Screen LIBO Page) as of approximately 11:00 A.M.
(London time) two (2) Business Days before
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<PAGE> 17
the first day of such Interest Period. As used herein, "Telerate Page 3750"
means the display designated as page 3750 by Dow Jones Telerate, Inc. (or such
other page as may replace such page on that service for the purpose of
displaying the British Bankers Association London interbank offered rates) and
"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 for the purpose of displaying London interbank offered
rates of major banks).
"Interest Payment Date" means (i) the last day of each November,
February, May and August after the Closing Date, (ii) the Maturity Date and
(iii) the date of any prepayment of all or any portion of the principal of the
Loans.
"Interest Period" means, in respect of any Eurodollar Loan, (i) in the
case of the first Interest Period (if any) applicable to the Bridge Loans, the
period commencing on and including the Closing Date and ending on the
numerically corresponding date in the month thereafter, and (ii) in the case of
each subsequent Interest Period, the period beginning on the last day of the
prior Interest Period and ending on the numerically corresponding date in the
month thereafter; provided, however, that if any Interest Period would end on a
day other than a Business Day, such Interest Period shall be extended until the
next succeeding Business Day unless the next Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Notwithstanding the foregoing, no Interest Period in
respect of the Bridge Loans may extend beyond the Maturity Date and each
Interest Period that would otherwise commence before and end after the Maturity
Date shall end on the Maturity Date.
"Investment Banks" means, collectively, NMS and CSI.
"Investments" means (i) any loan or advance to any Person, (ii) any
purchase or other acquisition of any capital stock, warrants, rights, options,
obligations or other securities of, or equity interest in, any Person, (iii) any
capital contribution to any Person or any other investment in such Person,
including, without limitation, any Guaranty Obligation incurred for the benefit
of such Person.
"Joinder Agreement" means a Joinder Agreement substantially in the form
of Schedule 4.12 hereto, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 4.12.
"Jupiter" means Jupiter Partners II L.P., a Delaware limited
partnership.
"Kmart License Agreement" means the Agreement, dated May 10, 1996,
between Kmart Corporation and the Borrower, as amended, modified or supplemented
from time to time.
"Lenders" shall mean (a) each financial institution that has executed a
counterpart to this Agreement (other than any such financial institution that
has ceased to be a party hereto pursuant to an Assignment and Acceptance) and
(b) any financial institution that has become a party hereto pursuant to an
Assignment and Acceptance.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code
as
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<PAGE> 18
adopted and in effect in the relevant jurisdiction or other similar recording or
notice statute, and any lease in the nature thereof).
"Liquidated Damages" means any and all liquidated damages then owing
pursuant to any of the Loan Documents.
"Loan" means a Bridge Loan or a Term Loan.
"Loan Documents" means this Agreement, the Bridge Notes and the Related
Documents.
"Loan Register" means the register maintained by the Administrative
Agent on behalf of the Borrower pursuant to Section 6.7.
"Material Contracts" has the meaning specified in Section 3.4(a).
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets, liabilities or
prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Credit Parties taken as a whole to perform any material
obligation under the Loan Documents to which it is a party or (iii) the rights
and remedies of the Lenders under the Loan Documents.
"Maturity Date" means August 25, 1999.
"Merger" means that certain merger of Jupiter Acquisition Corp., a
North Carolina corporation with and into the Borrower pursuant to the terms and
conditions of the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger by
and between the Borrower and Jupiter Acquisition Corp., a North Carolina
corporation dated as of April 20, 1998, as amended or modified from time to
time.
"Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate and at least one employer
other than the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
"NationsBridge" means NationsBridge, L.L.C.
"Net Proceeds" means 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 in connection with a Capital
Markets Transaction, net of (i) reasonable transaction costs, including in the
case of a transaction described in Section 2.4(a)(i), underwriting discounts and
commissions and in the case of an Asset Disposition occurring in connection with
a claim under an
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insurance policy, costs incurred in connection with adjustment and settlement of
the claim, (ii) estimated taxes payable in connection therewith, and (iii) in
the case of a Capital Markets Transaction described in clause (ii) or (iii) of
Section 2.4(a), any amounts payable in respect of Indebtedness (other than the
Loans) (x) under the Credit Facility or (y) which is secured by any property or
asset which is the subject thereof to the extent that such Indebtedness and any
payments in respect thereof are paid with a portion of the proceeds therefrom.
"NMS" means NationsBanc Montgomery Securities LLC.
"Obligations" means all now existing and hereafter arising obligations
and liabilities of any of the Borrower and the Guarantors to any and all of the
Lenders arising under or in connection with the Loan Documents, whether absolute
or contingent, and whether for principal, interest, penalties, premium, fees,
indemnifications, reimbursements, damages (including, if applicable, Liquidated
Damages), or otherwise and specifically including post-petition interest
(whether or not an allowable claim).
"Offering Documents" means an offering memorandum or prospectus
together with such other documents, instruments and agreements as the Investment
Banks may request in their sole discretion in connection with the issuance of
the Permanent Securities.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operation Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of either
the Borrower or any Guarantor by an Officer of the Borrower or any Guarantor, as
the case may be, who must be the principal executive officer, a vice chairman,
the principal financial officer, the treasurer or the principal accounting
officer of the Borrower or any Guarantor, as the case may be.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the lessee at
any time) of any Property (whether real, personal or mixed) which is not a
Capital Lease other than any such lease in which that Person is the lessor.
"Opinion of Counsel" means an opinion from legal counsel of the
Borrower or any Guarantor, which legal counsel is reasonably acceptable to the
Administrative Agent.
"Other Taxes" has the meaning specified in Section 2.9(b).
"Participations" has the meaning specified in Section 6.3.
"Payment Blockage Notice" has the meaning specified in Section 10.4.
"Payment Default" means any Default or Event of Default under Section
7.1(a) or any matured or unmatured default under the analogous provisions of the
documents governing the Credit Facility.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any of its functions under ERISA.
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"Permanent Securities" means any debt securities issued by the Borrower
which may be guaranteed by the Guarantors which have either been registered with
the SEC and sold pursuant to a registration statement in a public offering or
privately placed or otherwise sold in an offering exempt from registration with
the SEC to refinance the Loans.
"Permitted Investments" means Investments which are either (i) cash and
Cash Equivalents; (ii) accounts receivable created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (iii) Investments consisting of stock, obligations,
securities or other property received in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt or insolvent
obligors; (iv) Investments existing as of the Closing Date and set forth in
Schedule 4.20; (v) Guaranty Obligations permitted by Section 4.16; (vi) loans to
employees, directors or officers in connection with the award of convertible
bonds or stock under a stock incentive plan, stock option plan or other
equity-based compensation plan or arrangement in the aggregate not to exceed
$500,000 (calculated on the exercise price for any such shares) in the aggregate
at any time outstanding; (vii) other advances or loans to employees, directors,
officers or agents not to exceed $750,000 in the aggregate at any time
outstanding; (viii) advances or loans to customers or suppliers that do not
exceed $1,000,000 in the aggregate at any one time outstanding; (ix) Investments
by one Credit Party in and to another Credit Party; (x) loans, advances and
investments in Foreign Subsidiaries in an amount not to exceed $15,000,000 in
the aggregate at any time outstanding and (xi) other loans, advances and
investments of a nature not contemplated in the foregoing subsections in an
amount not to exceed $1,000,000 in the aggregate at any time outstanding.
"Permitted Junior Securities" has the meaning specified in Section
10.2.
"Permitted Liens" means:
(i) Liens in favor of the Administrative Agent on behalf of the
Lenders;
(ii) Liens (other than Liens created or imposed under ERISA) for taxes,
assessments or governmental charges or levies not yet due or Liens for taxes
being contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and as to
which the Property subject to any such Lien is not yet subject to foreclosure,
sale or loss on account thereof);
(iii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and suppliers and other Liens imposed by law or pursuant
to customary reservations or retentions of title arising in the ordinary course
of business, provided that such Liens secure only amounts not yet due and
payable or, if due and payable, are unfiled and no other action has been taken
to enforce the same or are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with GAAP have
been established (and as to which the Property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made by the Borrower and its Subsidiaries in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
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<PAGE> 21
(v) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall, within 30
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 30 days after the
expiration of any such stay;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of the
encumbered Property for its intended purposes;
(vii) Liens securing purchase money Indebtedness (including Capital
Leases) to the extent permitted under Section 4.16(d), provided that any such
Lien attaches only to the Property financed and such Lien attaches thereto
concurrently with or within 90 days after the acquisition thereof;
(viii) leases or subleases granted to others not interfering in any
material respect with the business of any member of the Consolidated Group;
(ix) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or agreements in
foreign jurisdictions) relating to, leases permitted by the Credit Facility;
(x) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xi) Liens deemed to exist in connection with Investments in repurchase
agreements permitted under Section 4.20;
(xii) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xiii) Liens on assets of any of the Credit Parties securing
Obligations under the Credit Facility whether now existing or hereafter arising;
and
(xiv) Liens existing as of the Closing Date and set forth on Schedule
3.7; provided that (a) no such Lien shall at any time be extended to or cover
any Property other than the Property subject thereto on the Closing Date and (b)
the principal amount of the Indebtedness secured by such Liens shall not be
extended, renewed, refunded or refinanced.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3) of
ERISA) which is covered by ERISA and with respect to which the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to be) an
"employer" within the meaning of Section 3(5) of ERISA.
"Prepayment Date" has the meaning specified in Section 2.7.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by NationsBank as its prime rate in effect at its principal
office in Charlotte, North Carolina, with
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each change in the Prime Rate being effective on the date such change is
publicly announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by NationsBank in determining interest rates on
certain loans and is not intended to be the lowest rate of interest charged on
any extension of credit by NationsBank to any debtor).
"Pro Forma" means, with respect to any event, that such event shall be
deemed to have occurred as of the first day of the twelve-month period ending as
of the last day of the most recent fiscal quarter for which the Lenders have
received the financial information required by Section 4.1(a) or 4.1(b)(ii), as
applicable.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Purchasers" has the meaning specified in Section 6.2.
"Qualifying IPO" means an underwritten primary public offering (other
than a public offering pursuant to a registration statement on Form S-8) of the
common capital stock of the Borrower (i) pursuant to an effective registration
statement filed with the SEC in accordance with the Securities Act (whether
alone or in connection with a secondary public offering) and (ii) resulting in
proceeds to the Borrower of at least $25 million.
"Rate Selection Notice" has the meaning specified in Section 2.3(a).
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time.
"Related Documents" means the Exchange Notes, the Exchange Note
Indenture, the Debt Registration Rights Agreements, the Engagement Letter and
the Fee Letter (including the exhibits thereto), each Joinder Agreement, and all
other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the notice requirement has been
waived by regulation.
"Representative" has the meaning specified in Section 10.2.
"Required Lenders" means, at any time, Lenders holding at least 66.67%
of the then aggregate unpaid principal balance of the Loans, or, if no such
principal amount is then outstanding, Lenders having at least a majority of the
total Commitments; provided that, for purposes hereof, neither the Borrower nor
any of its Affiliates shall be included in (i) the Lenders holding such amount
of the Loans or having such amount of the Commitments or (ii) determining the
aggregate unpaid principal amount of the Loans or the total Commitments.
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its material property.
"Responsible Officer" means the President, the Chief Financial Officer,
the Controller and any Vice President.
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"Restricted Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of any member
of the Consolidated Group now or hereafter outstanding, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of any member of
the Consolidated Group now or hereafter outstanding and (iii) any payment made
to retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock of any member of the
Consolidated Group now or hereafter outstanding.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor or assignee of the business of such division in the
business of rating securities.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Exchange Notes and all other "Securities" (as
defined in the Securities Act) issued, or required to be issued, under any Loan
Document.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" has the meaning specified in Section 10.2.
"Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"Solvent" or "Solvency" means, with respect to any Person as of a
particular date, that on such date (i) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (ii) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature in their ordinary course, (iii) such Person is not engaged in a business
or a transaction, and is not about to engage in a business or a transaction, for
which such Person's Property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged or is to engage, (iv) the fair value of the Property of
such Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (v) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Subsidiary" means, as to any Person, (a) any corporation more than 50%
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, 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 directly or indirectly
through Subsidiaries, and (b) any partnership, association, joint venture or
other entity in which such Person directly or indirectly through Subsidiaries
has more than 50% of the voting interests at any time. Unless otherwise
identified, "Subsidiary" or "Subsidiaries" shall mean Subsidiaries of the
Borrower.
"Taxes" has the meaning specified in Section 2.9(a).
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"Term Loan" means a loan made on the Conversion Date, if any, by a
Lender to the Borrower pursuant to Section 2.2 to refinance a Bridge Loan.
"Transactions" means, collectively, the Merger, the related financing
transactions and each of the other transactions contemplated by the Transaction
Documents.
"Transaction Documents" means the Loan Documents, the Credit Facility
and the Merger Agreement.
"Transferee" has the meaning specified in Section 6.4.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Voting Stock" means, with respect to any Person, capital stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Wal-Mart License Agreement" means the agreement, dated July 29, 1992,
between Wal-Mart Stores, Inc. and American Studios, Inc., as the same may be
amended, modified or supplemented from time to time and any other agreements
entered into from time to time between the Borrower (or its Subsidiaries) and
Wal-Mart Stores, Inc. granting the Borrower or its Subsidiaries the right to
operate retail portrait photography studios in Wal-Mart stores in the United
States and Canada.
"Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of
whose Voting Stock or other equity interests is at the time owned by such Person
directly or indirectly through other Wholly Owned Subsidiaries.
"Year 2000 Compliant" has the meaning specified in Section 3.17.
"Year 2000 Problem" has the meaning specified in Section 3.17.
Section 1.2. Interpretation. In this Agreement, the singular includes
the plural and the plural includes the singular; words implying any gender
include the other genders; references to any section, exhibit or schedule are to
sections, exhibits or schedules hereto unless otherwise indicated; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form; "including" following a word or phrase shall not be
construed to limit the generality of such word or phrase. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lenders hereunder shall be
prepared, in accordance with GAAP applied on a consistent basis. All
calculations made for the purposes of determining compliance with this Credit
Agreement shall (except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with the most recent annual or
quarterly financial statements delivered pursuant to Section 4.1 hereof (or,
prior to the delivery of the first financial statements pursuant to Section 4.1
hereof, consistent with the annual audited financial statements referenced in
Section 3.10); provided, however, if (a) the Borrower shall object to
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Administrative Agent or the Required Lenders shall so
object in writing within 30 days
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after delivery of such financial statements, then such calculations shall be
made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been
made.
ARTICLE II.
THE CREDIT FACILITY
Section 2.1. Commitments to Make Bridge Loans. In reliance upon the
representations and warranties of the Borrower set forth herein and subject to
the terms and conditions herein set forth, each of the Lenders severally agrees
to make a Bridge Loan to the Borrower on the Closing Date in the amount of such
Lender's Commitment. The proceeds of each Bridge Loan shall be disbursed by wire
transfer on the Closing Date as provided in written instructions delivered by
the Borrower to each of the Lenders on the Business Day prior to the Closing
Date. Each Bridge Loan will mature on the Maturity Date.
Section 2.2. Conversion to Term Loans. If, on the Maturity Date: (i)
all principal and interest in respect of the Bridge Loans has not been paid in
full, (ii) no Conversion Default exists and is continuing, (iii) no order,
decree, injunction or judgment enjoining the conversion of Bridge Loans to Term
Loans shall be in effect and (iv) the Administrative Agent receives an Officers'
Certificate from the Borrower certifying to the foregoing and requesting a
conversion of the Bridge Loans to Term Loans, each of the Lenders hereby commits
that, on the Maturity Date, such Lender will convert its Bridge Loan (including,
without limitation, any Bridge Loans resulting from the capitalization of
interest pursuant to Section 2.3(e) below), to a Term Loan maturing on the
seventh anniversary of the original Maturity Date (and the Maturity Date shall
be deemed to have been automatically extended to such seventh anniversary date).
Section 2.3. Interest; Payment in Kind Option; and Default Interest.
(a) Interest Rate Applicable to Bridge Loans. The Bridge Loans shall be
Base Rate Loans until the Borrower shall irrevocably specify in a written notice
(a "Rate Selection Notice") delivered to the Administrative Agent, or otherwise
agree with the Lenders, that the Bridge Loans shall be Eurodollar Loans. Subject
to Sections 2.3(d), (e) and (f) below:
(i) If the Bridge Loans are Base Rate Loans (prior to a Rate
Selection Notice or pursuant to Section 2.8(b) or (c)), the unpaid
principal balance thereof shall bear interest until paid at a rate per
annum equal to the sum of the Base Rate plus the Applicable Margin,
changing when and as the Base Rate and/or the Applicable Margin
changes, and
(ii) If the Bridge Loans are Eurodollar Loans, the unpaid
principal balance thereof shall bear interest until paid at a rate per
annum equal to the sum of the Eurodollar Rate plus the Applicable
Margin, changing when and as the Eurodollar Rate and/or the Applicable
Margin changes.
(b) Interest on Term Loans. Subject to Sections 2.3(d), (e) and (f)
below, interest on the unpaid principal balance of the Term Loans of each Lender
will accrue at a rate per annum equal to the Conversion Rate, changing when and
as the Conversion Spread changes.
(c) Basis of Computation of Interest; Payment of Interest. All interest
shall be calculated for actual days elapsed on the basis of a 360-day year (or a
365-day year in the case of Base
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Rate Loans) and shall be payable in arrears not later than 12:00 noon (New York
City time) on each Interest Payment Date, commencing on November 30, 1998, by
wire transfer of immediately available funds in accordance with Section 2.8.
(d) Maximum Interest Rate. Notwithstanding anything contained in
Section 2.3(a) or 2.3(b), but subject to Section 2.3(f), in no event shall the
interest rate on the Loans for any Interest Period exceed an annual rate equal
to the lesser of (i) 16% and (ii) the maximum interest rate permitted by law.
(e) Option to Capitalize Certain Interest. Subject to Section 2.3(f),
to the extent that the interest rate on the Bridge Loans or the Term Loans for
any Interest Period exceeds a rate equal to 14% per annum, the Borrower shall
have the option to pay to each Lender, pro rata, all or a portion of the
interest payable for such Interest Period in excess of the amount of interest
that would have been payable on such date at an interest rate of 14% per annum,
by capitalizing such excess interest and adding it to the aggregate principal
amount of outstanding Bridge Loans or Term Loans, as the case may be, held by
such Lender, effective as of the applicable Interest Payment Date. The Borrower
shall give the Administrative Agent an irrevocable notice that it will exercise
such right at least three Business Days prior to any Interest Payment Date as to
which such right is to be exercised.
(f) Default Interest. (i) If an Event of Default shall have occurred
and be continuing, the Borrower shall pay interest, to the extent permitted by
law, on such defaulted amount to but excluding the date of actual payment (after
as well as before judgment) to the extent lawful, at a rate per annum equal to
200 basis points in excess of the otherwise applicable interest rate on the
Loans. The Borrower shall pay such default interest and all interest accruing on
any overdue Obligation in cash on demand from time to time.
Section 2.4. Mandatory Prepayment.
(a) The Borrower shall prepay the Loans ratably in accordance with the
aggregate outstanding principal balances thereof, with the Net Proceeds of: (i)
any direct or indirect public offering or private placement of the Permanent
Securities, or any other debt or equity securities of the Borrower, any
Guarantor or any direct or indirect parent holding company of the Borrower
issued after the Closing Date other than (A) any issuance of directors'
qualifying shares, (B) any issuance or sale of common stock (or common stock
equivalents) or options to purchase common stock (or common stock equivalents)
of the Borrower to officers and employees under employee benefit or compensation
plans, (ii) the incurrence of any other Indebtedness by the Borrower, any of its
Subsidiaries or any direct or indirect parent holding company of the Borrower
(excluding Jupiter) after the Closing Date (other than (x) Indebtedness
permitted to be incurred under the Credit Facility pursuant to Section 4.16(a)
and (y) Indebtedness of the Borrower owed to and held by a Wholly Owned
Subsidiary of the Borrower and Indebtedness of a Wholly Owned Subsidiary of the
Borrower owed to and held by the Borrower or another Wholly Owned Subsidiary of
the Borrower) and (iii) any Asset Disposition by the Borrower or any of its
Subsidiaries after the Closing Date (other than an Asset Disposition permitted
under Section 4.19(c)) (each of the transactions in the foregoing clauses (i),
(ii) and (iii), a "Capital Markets Transaction"). The Borrower shall, not later
than the fourth Business Day following any Capital Markets Transaction, apply
such Net Proceeds to prepay the Loans pursuant to this Section 2.4, without
premium or penalty, by paying to each Lender an amount equal to 100% of such
Lender's pro rata share of the aggregate principal amount of the Loans to be
prepaid, plus accrued and unpaid interest thereon to the Prepayment Date.
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(b) Subject to and in accordance with Section 4.29, in the event of any
Change of Control, the Borrower shall offer to prepay the Loans pursuant to
Section 4.29.
Section 2.5. Optional Prepayment. The Borrower may, upon three Business
Days' prior written notice to each of the Lenders, prepay the Loans at any time,
in whole or in part, on a pro rata basis, by paying to each applicable Lender an
amount equal to 100% of such Lender's pro rata share of the aggregate principal
amount of Loans to be prepaid, plus accrued and unpaid interest thereon to the
Prepayment Date.
Section 2.6. Breakage Costs; Indemnity. The Borrower agrees to
indemnify and hold each Affected Party harmless from and against any loss or
expense which such Affected Party sustains or incurs as a consequence of:
(a) the failure by the Borrower to borrow Eurodollar Loans on
the Closing Date after the Borrower has given a notice with respect
thereof in accordance with Section 5.15, unless such failure by the
Borrower is due exclusively to a Lender's gross negligence or willful
action or omission,
(b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions
of Section 2.4 or 2.5, as applicable, or
(c) the mandatory or optional prepayment of Eurodollar Loans
on a day that is not the last day of an Interest Period.
Such indemnification may include an amount equal to the excess, if any of (i)
such Affected Party's actual loss and expenses incurred (excluding lost profits)
in connection with, or by reason of, any of the foregoing events and (ii) the
excess, if any of (A) the amount of interest that would have accrued on the
principal amount of Bridge Loans not so made or the principal amount of Loans so
prepaid from the date of such proposed issuance or prepayment in the case of a
failure to make Bridge Loans, to the last day of the Interest Period that would
have commenced on the proposed date of funding, or in the case of any such
prepayment, to the last day of the Interest Period in which such prepayment
occurred, in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included therein,
if any) over (B) the amount of interest (as reasonably determined by such
Affected Party) which would have accrued to such Affected Party on such amount
by placing such amount on deposit for a period comparable to such Interest
Period with leading banks in the interbank Eurodollar market. A certificate as
to any amounts payable pursuant to this Section 2.6 submitted to the Borrower by
any Affected Party shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment of the
Obligations.
Section 2.7. Effect of Notice of Prepayment. The Borrower shall notify
the Lenders in writing at their addresses shown in the Loan Register of any date
set for prepayment (each such day, a "Prepayment Date") of Loans. Once such
notice is received, the Loans to be prepaid shall become due and payable on the
Prepayment Date set forth in such notice. Such notice may not be conditional.
Section 2.8. Payments.
(a) Wire Transfer. Except as provided in Section 2.3(e) with respect to
the payment of certain interest by capitalizing it and adding it to the
principal of outstanding Loans, the principal of, fees, premium, if any, and
interest on each Loan and all other Obligations arising under the
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Loan Documents shall be payable by wire transfer in immediately available funds
(in United States dollars) to the respective accounts of the Lenders set forth
below their signatures on the signature pages of this Agreement or otherwise
designated in the Loan Register from time to time to the Borrower by any Lender
at least three Business Days prior to the due date therefor.
(b) Change in Costs. If prior to the first day of any Interest Period
with respect to a Eurodollar Loan, any Lender shall have determined (which
determination shall be conclusive and binding upon the Borrower and the
Guarantors absent manifest error) that: (i) by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period, or (ii) the Eurodollar Rate
determined or to be determined for such Interest Period will not adequately and
fairly reflect the cost to such Lender or its Eurodollar Lending Office of
maintaining its Eurodollar Loan during such Interest Period, then such Lender
shall give facsimile or telephone notice thereof to the Borrower as soon as
practicable thereafter. If such notice is given, the interest rate on each
Bridge Loan for such Interest Period and for each subsequent Interest Period
until such conditions or circumstances no longer exist shall equal the sum of
the Base Rate plus the Applicable Margin.
(c) Change in Law. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Borrower that subsequent to the date
hereof the introduction of, or any change in the interpretation of, any law or
regulation makes it unlawful, or any Governmental Authority asserts that it is
unlawful, for such Lender or its Eurodollar Lending Office to make or maintain
Eurodollar Loans hereunder, (i) the obligation of such Lender to make or
maintain Eurodollar Loans shall be suspended until such Lender shall notify the
Borrower that the circumstances causing such suspension no longer exist and (ii)
any Eurodollar Loan then outstanding from such Lender shall immediately be
converted into a Base Rate Loan Any such lender shall notify the Borrower
promptly after such time as the circumstances causing such suspension cease to
exist.
(d) Payments on Business Days. If any payment to be made hereunder or
under any Bridge Note shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day (and such extension of
time shall be included in computing interest in connection with such payment);
provided, however, that if such succeeding Business Day falls in the next
calendar month, such payment shall be made on the next preceding Business Day.
(e) Partial Prepayments and Redemptions. All partial prepayments and
redemptions of the outstanding principal balance of the Loans shall be made
ratably amongst the applicable Lenders in accordance with their respective
shares of the aggregate outstanding principal balance of the Loans eligible for
prepayment or redemption.
(f) No Defense. To the fullest extent permitted by law, the Borrower
and the Guarantors shall make all payments hereunder and under the Bridge Notes
regardless of any defense or counterclaim.
(g) Allocation. Any money paid to, received by, or collected by the
Administrative Agent or any Lender pursuant to this Agreement or any other Loan
Document, shall be applied in the following order, at the date or dates fixed by
the Administrative Agent:
First: to any unpaid fees and reimbursement or unpaid expenses
of the Administrative Agent hereunder and under the Fee Letter;
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Second: to the payment of all costs, expenses, other fees,
commissions and taxes owing to any Lender hereunder;
Third: to the indefeasible payment of all accrued interest to
the date of such payment or collection;
Fourth: to the indefeasible payment of the amounts then due
and unpaid under this Agreement, the Bridge Notes or any other Loan
Document for principal, in respect of which or for the benefit of which
such money has been paid or collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Bridge Notes for principal; and
Fifth: the balance, if any, to the Person lawfully entitled
thereto.
Section 2.9. Taxes. (a) Taxes. Any and all payments by the Borrower and
each Guarantor hereunder or under the Bridge Notes, the Exchange Notes or any
other Loan Document shall be made, in accordance with Section 2.8 or the other
applicable provision of the applicable Loan Document, free and clear of and
without deduction or withholding for or on account of any and all present or
future taxes, levies, imports, deductions, charges or withholdings, additions to
tax, interest, penalties and all other liabilities with respect thereto,
excluding net income or franchise taxes (imposed in lieu of net income tax)
imposed or levied on the Administrative Agent or the Lenders as a result of a
present or former connection between the Administrative Agent or the Lenders and
the jurisdiction of the governmental authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lenders
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement) (all such non-excluded taxes, levies,
imports, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"); provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States or a state thereof with respect to
any Taxes that are imposed on amounts payable to such Lender at the time such
Lender becomes a party to this Agreement (taking into account any reductions
under applicable treaties) or that are attributable to such Lender's failure to
comply with the requirements under Section 2.9(f) hereof. If the Borrower or any
Guarantor shall be required by law to deduct or withhold any Taxes from, or in
respect of, any sum payable hereunder or under the Bridge Notes, the Exchange
Notes or any other Loan Document to the Administrative Agent or the Lenders or
any of their respective Affiliates who may become a Lender: (i) the sum payable
thereunder shall be increased as may be necessary so that after making all
required deductions or withholdings (including deductions or withholdings
applicable to additional sums payable under this Section 2.9) the Administrative
Agent or the Lenders or any of their respective Affiliates receives an amount
equal to the sum it would have received had no such deductions or withholdings
been made; (ii) the Borrower or such Guarantor, as the case may be, shall make
such deductions or withholdings; and (iii) the Borrower or such Guarantor, as
the case may be, shall pay the full amount deducted to the relevant tax
authority or other authority in accordance with applicable laws.
(b) Other Taxes. In addition, the Borrower and each of the Guarantors
agrees to pay any present or future stamp, mortgage recording or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under a Bridge Note, Exchange Note or
other Loan Document or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or the other Loan Documents
(hereinafter referred to as "Other Taxes") and hold the Administrative Agent and
each Lender harmless from and against any and all liabilities with respect to or
resulting from any delay or omission to pay such Other Taxes.
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(c) Indemnity. The Borrower and the Guarantors will indemnify the
Administrative Agent and any Lender for the full amount of Taxes or Other Taxes
arising in connection with payments made under this Agreement or any other Loan
Document (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.9) paid by the
Administrative Agent or any Lender or any of their respective Affiliates and any
liability (including penalties, additions to tax interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes are
correctly or legally asserted. Payment under this indemnification shall be made
within fifteen days from the date the Administrative Agent or any Lender or any
of their respective Affiliates makes written demand therefor. Any such demand
submitted by the Administrative Agent or any Lender in good faith to the
Borrower shall, absent manifest error, be final, conclusive and binding on all
parties. After the Lender or the Administrative Agent (as the case may be)
receives written notice of the imposition of the Taxes or Other Taxes which are
subject to this Section 2.9(c), such Lender and Administrative Agent will act in
good faith to promptly notify the Borrower and the Guarantors of their
respective obligations hereunder; provided, however, that the failure to so act
shall not, standing alone, affect the rights of the Administrative Agent or the
Lenders under this Section 2.9(c).
(d) Furnish Evidence to Administrative Agent. The Borrower will use its
best efforts to obtain certified copies of tax receipts evidencing the payment
of any Taxes so deducted or withheld from each taxing authority imposing such
Taxes. The Borrower will furnish to the Lenders, within 60 days after the date
the payment of any Taxes so deducted or withheld is due pursuant to applicable
law, original or certified copies of tax receipts evidencing such payment by the
Borrower.
(e) Survival. Without prejudice to the survival of any other agreement
of the Borrower or any Guarantor hereunder, the agreements and obligations of
the Borrower and the Guarantors contained in this Section 2.9 shall survive the
payment in full of all amounts due hereunder and under the Bridge Notes.
(f) Certification of Exemption. Each Lender, Assignee and Participant
that is not a citizen or resident of the United States of America, a
corporation, partnership created or organized in or under the laws of the United
States, any estate that is subject to U.S. federal income taxation regardless of
the source of its income or any trust which is subject to the supervision of a
court within the United States and the control of a United States person as
described in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver
to the Borrower and the Administrative Agent, and if applicable, the assigning
Lender (or, in the case of a Participant, to the Lender from which the related
participation shall have been purchased) on or before the date on which it
becomes a party to this Agreement (or, in the case of a Participant, on or
before the date on which such Participant purchases the related participation)
either:
(A) two duly completed and signed copies of either Internal
Revenue Service Form 1001 relating to such Non-U.S. Lender or Form
4224, or successor and related applicable forms, as the case may be,
certifying that such Non-U.S. Lender is entitled to receive payments
under this Agreement or other Loan Documents without withholding or
deduction of United States federal income taxes or that such
withholding is imposed at a reduced rate; or
(B) in the case of a Non-U.S. Lender that is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code and that does
not comply with the requirements of clause (A) hereof, (x) a statement
to the effect that such Non-U.S. Lender is eligible for a complete
exemption from withholding of U.S. Taxes under Code Section 871(h) or
881(c), and (y) two
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duly completed and signed copies of Internal Revenue Service Form W-8
or successor and related applicable form.
Further, each Non-U.S. Lender agrees, upon request by the Borrower or
the Administrative Agent or the Lender, as the case may be, (i) to deliver to
the Borrower and the Administrative Agent, and if applicable, the assigning
Lender (or, in the case of a Participant, to the Lender from which the related
participation shall have been purchased) two further duly completed and signed
copies of such Forms 1001 or 4224, as the case may be, or successor and related
applicable forms, on or before the date that any such form expires or becomes
obsolete and promptly after the occurrence of any event requiring a change from
the most recent form(s) previously delivered by it to the Borrower (or, in the
case of a Participant, to the Lender from which the related participation shall
have been purchased) in accordance with applicable U.S. laws and regulations and
(ii) in the case of a Non-U.S. Lender that delivers a statement pursuant to this
Section 2.9(f)(B) above, to deliver to the Borrower and the Administrative
Agent, and if applicable, the assigning Lender, such renewed or additional
statements and forms before the statements or forms previously delivered expires
or becomes obsolete or as shall be reasonably requested by the Borrower from
time to time, unless, in any such case, any change in law or regulation has
occurred subsequent to the date such Lender became a party to this Agreement (or
in the case of a Participant, the date on which such Participant purchased the
related participation) which renders all such forms inapplicable or which would
prevent such Lender (or Participant) from properly completing and executing any
such form with respect to it and such Lender promptly notifies the Borrower and
the Administrative Agent (or, in the case of a Participant, the Lender from
which the related participation shall have been purchased) if it is no longer
able to deliver, or if it is required to withdraw or cancel, any form or
statement previously delivered by it pursuant to this Section 2.9(f)(B). A
Non-U.S. Lender shall not be required to deliver any form or statement pursuant
to the immediately preceding sentences in this Section 2.9(f) that such Non-U.S.
Lender is not legally able to deliver.
Section 2.10. Right of Set Off; Sharing of Payments, Etc.
(a) Right of Set-Off. 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 any Event of
Default or if the Borrower becomes insolvent, however evidenced, the Borrower
authorizes each Lender 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, time or demand,
provisional or final, whether or not collected or available) in any currency and
any other indebtedness at any time held or owing by such Lender or any of its
Affiliates (including, without limitation, by branches and agencies of such
Lender wherever located) to or for the credit or the account of the Borrower
against and on account of the Obligations of the Borrower to such Lender under
this Agreement or under any of the other Loan Documents, including, without
limitation, all interests in or participation in the Obligations purchased by
such Lender, and all other claims of any nature or description arising out of or
in connection with this Agreement or any other Loan Document, irrespective of
whether or not such Lender shall have made any demand hereunder and although the
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured. A Lender may exercise such rights notwithstanding that the amounts
concerned may be expressed in different currencies and each Lender is authorized
to effect any necessary conversions at a market rate of exchange selected by it.
A Lender exercising its rights under this Section 2.10(a) shall provide prompt
notice to the Borrower following such exercise.
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(b) Sharing. If any Lender shall obtain from the Borrower payment of
any principal of or interest on any Loan owing to it or payment of any other
amount under this Agreement, a Loan Document or any Bridge Note held by it
though the exercise of any right of set-off, banker's lien or counterclaim or
similar right or otherwise (other than from the Administrative Agent as provided
herein) and, as a result of such payment, such Lender shall have received a
greater percentage of the principal of or interest on the Loans or such other
amounts then due to such Lender by the Borrower than the percentage received by
any other Lenders, it shall promptly purchase from such other Lenders
participation in (or, if and to the extent specified by such Lender, direct
interests in) the Loans or such other amounts, respectively, owing to such other
Lenders (or any interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be equitable, to the end
that all the Lenders shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal of and/or
interest on the Loans or such other amounts, respectively, owing to each of the
Lenders. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) No Requirement. Nothing in this Agreement shall require any Lender
to exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 2.10 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in manner
consistent with the rights of the Lenders entitled under this Section 2.10 to
share in the benefits of any recovery on such secured claim.
Section 2.11. Certain Fees. The Borrower agrees to pay to the
Administrative Agent and Chase, each for its own account, with respect to the
Bridge Loans, Term Loans and Exchange Notes, amounts for their expenses incurred
hereunder and all other amounts owing under this Agreement and the other Loan
Documents.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
As of the date hereof and as of the Closing Date, the Borrower and each
of the Guarantors hereby jointly and severally agrees with, and represents and
warrants to, the Lenders that each of the following representations and
warranties is true and will be true after giving pro forma effect to the
Transactions:
Section 3.1. Representations and Warranties in the Credit Facility and
the Merger Agreement. The representations and warranties of the Borrower
contained in the Credit Facility and the Merger Agreement (without giving effect
to any waivers thereof or amendments thereto) are true and correct in all
material respects.
Section 3.2. Organization; Powers. The Borrower and each of its
Subsidiaries (a) is duly organized, validly existing and in good standing (to
the extent such concept exists) under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted, (c) is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where the failure so
to qualify would not reasonably be expected to result in a Material Adverse
Effect and (d) has the power and authority to execute, deliver and perform its
obligations under each of the
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Transaction Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party and, in the case of the Borrower, to borrow
hereunder.
Section 3.3. Due Authorization and Enforceability.
(a) Each of the Transaction Documents: (i) has been duly authorized,
executed and delivered by Borrower and each of its Subsidiaries (to the extent
each is a party thereto) and (ii) constitutes a valid and binding obligation of
Borrower and each of its Subsidiaries (to the extent each is a party thereto)
enforceable against each such Person in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer and other similar laws affecting
the enforceability of creditors' rights generally and by general principles of
equity (whether arising under a proceeding at law or in equity).
(b) The Loans, the Bridge Notes and the Exchange Notes have been duly
authorized by the Borrower and each of the Guarantees and the guarantees by the
Guarantors of the Borrower's obligations under the Exchange Notes have been duly
authorized by the Borrower and each Guarantor, as applicable. When the Bridge
Notes and the Exchange Notes have been executed and delivered pursuant to the
terms of this Agreement or the Exchange Note Indenture, as applicable, each of
the Loans, the Bridge Notes, the Exchange Notes, and the Guarantees and the
guarantees by the Guarantors of the Borrower's obligations under the Exchange
Notes will be valid and binding obligations of the Borrower and each Guarantor,
as applicable, enforceable against it in accordance with their terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer and other similar
laws affecting the enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law or in equity).
Section 3.4. No Conflicts.
(a) Neither the execution and delivery of any of the Transaction
Documents nor the consummation of any of the transactions contemplated hereby or
thereby nor compliance with the terms and provisions hereof or thereof (i)
violates or will violate any material law or regulation or any order or decree
of any court or Governmental Authority applicable to the Borrower or any of its
Subsidiaries or by which any of their respective properties or assets may be
bound, (ii) constitutes or will constitute a breach or a violation of, any of
the terms or provisions of, or a default under, the organizational documents
(including any certificate of incorporation or bylaws) or any other corporate
restriction of any of the Borrower or any of its Subsidiaries or (iii) conflicts
with or will result in the breach of, or constitutes a default under, any
material contract, lease, indenture, loan agreement (including, without
limitation, the Credit Facility), mortgage, deed of trust or other agreement or
instrument (each, a "Material Contract") to which the Borrower or any of its
Subsidiaries is a party or to which any of them may be subject or by which any
of them or any of their respective assets is or may be bound (except to the
extent that such violations, breaches, conflicts or defaults, singly or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect).
(b) No consent, approval, authorization or order of, or any
registration or filing with, any Governmental Authority is or will be required
in connection with the execution and delivery of any of the Transaction
Documents by the Borrower or any of its Subsidiaries (to the extent each is a
party thereto) or the consummation of the transactions contemplated hereby or
thereby other than those which have been obtained and filings with the SEC to
fulfill reporting requirements.
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Section 3.5. No Violations; Material Contracts.
(a) There does not exist (i) any violation of any law or regulation or
any order or decree of any court or Governmental Authority applicable to the
Borrower or any of its Subsidiaries, which violation would reasonably be
expected to have a Material Adverse Effect or (ii) any conflict or violation of
any terms or provisions of the organizational documents (including any articles
or certificate of incorporation or bylaws) of the Borrower or any of its
Subsidiaries.
(b) Except as set forth on Schedule 3.5(a), neither the Borrower nor
any of its Subsidiaries is a party to any agreement or instrument or subject to
any corporate or other restriction that, individually or in the aggregate, has
had or could have a Material Adverse Effect. Each Material Contract to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower or any
of its Subsidiaries or any of their respective properties or assets are or may
be bound as of the Closing Date is listed on Schedule 3.5(b), and true and
correct copies of all such Material Contracts have been delivered to the
Administrative Agent.
(c) As of the Closing Date, except as could not reasonably be expected
to have a Material Adverse Effect, (i) each Material Contract is in all material
respects valid, binding and in full force and effect and is enforceable by the
Borrower and each of its Subsidiaries (to the extent that each is a party
thereto) in accordance with its terms (except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or transfer and other similar laws affecting the
enforceability of creditors' rights generally and by general principles of
equity, whether arising under a proceeding at law or in equity), (ii) the
Borrower and each of its Subsidiaries (to the extent each is a party thereto)
has performed in all material respects all obligations required to be performed
by it to date under all of its Material Contracts and is not (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the knowledge of the Borrower and each of
its Subsidiaries, no other party to any of the Material Contracts is (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder, (iii) neither the Borrower or any of its
Subsidiaries, nor, to the knowledge of the Borrower and each of its
Subsidiaries, any other party to any Material Contract, has given notice of
termination of, or taken any action inconsistent with the continuation of, any
Material Contract, and (iv) none of such other parties has any presently
exercisable or future right to terminate any Material Contract except as
provided in any such Material Contract, including any right to terminate any
Material Contract on account of the execution, delivery or performance of any of
the Transaction Documents.
Section 3.6. Capital Stock; Subsidiaries.
(a) All shares of capital stock and other Equity Interests of the
Borrower are duly authorized, validly issued, fully paid and non-assessable. All
shares of capital stock and other Equity Interests of each Subsidiary of the
Borrower are duly authorized, validly issued, fully paid and non-assessable and
owned directly or indirectly by the Borrower beneficially and of record, free
and clear of any Lien other than the Liens to be created under the Credit
Facility (other than (x) directors' qualifying shares and (y) shares required by
applicable law to be held by another Person in an amount not to exceed one-tenth
of one percent of the outstanding shares). Schedule 3.6(a) sets forth, (i) as of
the date hereof (and without giving effect to the Transactions) a list of all
direct and indirect Subsidiaries of the Borrower and the percentage ownership
(direct and indirect) of the Borrower therein and (ii) as of the Closing Date
(after giving effect to the Transactions), a list of all direct Subsidiaries of
the Borrower and each Guarantor and the percentage Equity Interests of the
Borrower and each such Guarantor, as applicable, therein. All such shares of
capital stock or other ownership interest are duly authorized,
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validly issued, fully paid and non-assessable and owned by the Borrower or each
Guarantor, as the case may be, free and clear of all Liens other than Permitted
Liens.
(b) Except as set forth on Schedule 3.6(b), there are (i) no
outstanding subscriptions, warrants, options, calls or commitments of any
character related to or entitling any Person to purchase or otherwise acquire
any shares of the capital stock or other Equity Interests of the Borrower or any
of its Subsidiaries, (ii) no obligations or securities convertible into or
exchangeable for shares of any capital stock or other Equity Interests of the
Borrower or any of its Subsidiaries or any commitments of any character relating
to or entitling any Person to purchase or otherwise acquire any such obligations
or securities and (iii) no preemptive or similar rights to subscribe for or to
purchase any capital stock or other Equity Interests of the Borrower or any of
its Subsidiaries granted to any Person.
Section 3.7. Liens. There are no Liens on any assets of the Borrower or
any of its Subsidiaries except Permitted Liens.
Section 3.8. No Violation of Regulations of Board of Governors of
Federal Reserve System. None of the transactions contemplated by this Agreement
(including without limitation the use of the proceeds from the Loans and
Permanent Securities) will violate or result in a violation of Section 7 of the
Exchange Act, or any rule or regulation issued pursuant thereto, including,
without limitation, Regulations T, U and X of the Board.
Section 3.9. Governmental Regulations. None of the Borrower or any of
its Subsidiaries is required to register as an "investment company" under the
Investment Company Act of 1940, as amended, is a "public utility" or a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or is subject to any other statute, rule or regulation limiting its
ability to incur Indebtedness for borrowed money.
Section 3.10. Financial Statements; No Undisclosed Liabilities.
(a) The consolidated balance sheets of the Borrower and each of its
Subsidiaries that are attached hereto as Schedule 3.10 fairly present the
consolidated financial position of the Borrower and each of its Subsidiaries as
of the dates set forth therein, in each case in accordance with GAAP
consistently applied (except as otherwise specifically indicated therein),
subject to normal year-end adjustments. The consolidated statements of income
and cash flows of the Borrower and each of its Subsidiaries that are attached
hereto as Schedule 3.10 have been prepared in conformity with GAAP applied on a
consistent basis through all the periods involved (except as otherwise
specifically indicated therein) and fairly present the consolidated results of
operations of the Borrower and each of its Subsidiaries for the periods
indicated, subject to normal year-end adjustments. The pro forma consolidated
statements of income and cash flows included in Schedule 3.10 fairly present the
estimated consolidated income and cash flows of the Borrower and its
Subsidiaries assuming the consummation of the Merger as if it had occurred on
the date set forth therein, and the pro forma consolidated balance sheet of the
Borrower included in Schedule 3.10 fairly presents the consolidated financial
condition of the Borrower and its Subsidiaries on the Closing Date (after giving
effect to all simultaneous transactions to occur on such date). The historical
and pro forma financial statements attached hereto as Schedule 3.10 comply as to
form with the requirements applicable to such financial statements in, and
constitute all of the financial statements required by, Regulation S-X of the
Securities Act for a Form S-1 registration statement
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(b) Neither the Borrower nor any of its Subsidiaries (prior to giving
effect to the consummation of the Transactions) has any liability (absolute or
contingent) except (i) those shown on the most recent audited balance sheets
described in Section 3.10(a), (ii) those incurred under the Transaction
Documents and (iii) those that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 3.11. Full Disclosure. No information, report, financial
statement or certificate delivered or to be delivered to the Lenders in
connection with the Transactions contains or will contain any untrue statement
of material fact or omitted or omits or will omit to state a material fact
necessary to make such statements not misleading in light of the circumstances
in which such statements were made; provided that to the extent any such
information, report, financial statement, exhibit or schedule was based upon or
constitutes a forecast or projection, the Borrower represents only that it acted
in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
Section 3.12. Private Offering; Rule 144A Matters.
(a) Based in part on the accuracy of the representations and warranties
of, and compliance with the covenants and agreements by, the Lenders in Section
6.1, the making of the Loans hereunder and the issuance of the instruments
evidencing such Loans and the Securities are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act. Neither
the Borrower nor any Guarantor has issued or sold Loans, the instruments
evidencing such Loans or the Securities or equity securities to anyone other
than the Lenders. No securities of the same class as the Loans, the instruments
evidencing such Loans or the Securities have been issued or sold by the Borrower
or any Guarantor within the six-month period immediately prior to the date
hereof. The Borrower and each of the Guarantors agrees that neither it, nor
anyone acting on its behalf (other than the Lenders, as to whom the Borrower and
each of the Guarantors makes no representation), will (i) offer the Loans, the
instruments evidencing such Loans or the Securities so as to subject the making,
issuance and/or sale of the Loans, the instruments evidencing such Loans or the
Securities, to the registration or prospectus delivery requirements of the
Securities Act or (ii) offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect to the same with, anyone if the issuance or sale of the
Loans, the instruments evidencing such Loans, the Securities and any such
securities would be integrated as a single offering for the purposes of the
Securities Act, including without limitation, Regulation D thereunder, in such a
manner as would require registration under the Securities Act thereof. Each
Security shall have a legend setting forth the restrictions on the
transferability thereof imposed by the Securities Act for so long as such
restrictions apply.
(b) In the case of each offer, sale or issuance of the Loans, the
instruments evidencing such loans or the Securities, no form of general
solicitation or general advertising was or will be used by the Borrower or any
Guarantor or their representatives (other than the Lenders, as to whom the
Borrower and each of the Guarantors makes no representation), including, but not
limited to, advertisements, articles, notices or other communications published
in any newspaper, magazine or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(c) The Securities will be eligible for resale pursuant to Rule 144A
under the Securities Act. When the Securities are issued and delivered pursuant
to the Transaction Documents, they will not be of the same class (within the
meaning of Rule 144A(d) (3) under the Securities Act) as
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any other security of the Borrower or any Guarantor that is listed on a national
securities exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated interdealer quotation system. Neither the
issuance of the Exchange Notes nor the execution, delivery and performance of
the Transaction Documents (other than the Debt Registration Rights Agreement)
will require the qualification of an indenture under the Trust Indenture Act.
Section 3.13. Absence of Proceedings. Except with respect to the
matters disclosed in Schedule 3.13, there is not pending or threatened any
action, suit or proceeding to which the Borrower or any of its Subsidiaries is a
party, before or by any court or other Governmental Authority or body (domestic
or foreign), that would reasonably be expected to cause a Material Adverse
Effect.
Section 3.14. Taxes. The Borrower and its Subsidiaries have duly and
timely filed all required tax returns and reports and paid all taxes,
assessments, and governmental levies due prior to the date hereof except (i)
those being contested in good faith and by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower and its Subsidiaries and (ii) where the failure to file or
make payment would not reasonably be expected to have a Material Adverse Effect.
Section 3.15. Financial Condition; Solvency. The Borrower and each of
the Guarantors is, and immediately after giving effect to the consummation of
the Transactions will be, Solvent.
Section 3.16. No Material Adverse Change. There has been no material
adverse change (including any event which is likely to result in such a material
adverse change) in the business, assets, liabilities, revenues, operations,
condition (financial or otherwise), value, management or prospects of the
Borrower and its Subsidiaries, taken as a whole, since February 1, 1998.
Section 3.17. Year 2000 Compliance. The Borrower has (i) initiated a
review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Borrower or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the foregoing,
the Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent
that a failure to do so would not reasonably be expected to have Material
Adverse Effect.
ARTICLE IV.
COVENANTS
So long as any Commitment shall remain outstanding or any Obligation
shall remain unpaid, the Borrower and each of the Guarantors covenants and
agrees with the Lenders as follows:
Section 4.1. Financial Statements. To furnish, or cause to be
furnished, to the Administrative Agent and to each of the Lenders:
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(a) Audited Financial Statements. As soon as available, but in any
event within 90 days after the end of each fiscal year, an audited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the fiscal
year and the related consolidated statements of income, retained earnings,
shareholders' equity and cash flows for the year, audited by KPMG Peat Marwick
LLP, or other firm of independent certified public accountants of nationally
recognized standing reasonably acceptable to the Administrative Agent, setting
forth in each case in comparative form the figures for the previous year,
reported without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to permit
such independent certified public accountants to certify such financial
statements without such qualification.
(b) Company-Prepared Financial Statements. As soon as available, but in
any event
(i) within 30 days after the end of each month, a
company-prepared unaudited consolidated and consolidating balance sheet
of the Borrower and its Subsidiaries as of the end of such month and
related company-prepared consolidated and consolidating statements of
income for such monthly period and for the fiscal year to date;
(ii) within 45 days after the end of each of the first three
fiscal quarters, the company-prepared unaudited consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of
the end of such quarter and related company-prepared consolidated and
consolidating statements of income, retained earnings, shareholders'
equity and cash flows for such quarterly period and for the fiscal year
to date or, in lieu thereof, the Borrower's report on Form 10-Q filed
with the SEC for such period;
(iii) within 45 days following the end of each fiscal year, an
annual business plan and budget for the members of the Consolidated
Group, containing, among other things, pro forma financial statements
for the then current fiscal year,
in each case setting forth in comparative form the consolidated and
consolidating figures for the corresponding period or periods of the
preceding fiscal year or the portion of the fiscal year ending with
such period, as applicable, in each case subject to normal recurring
year-end audit adjustments and the absence of notes required by GAAP.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and shall be prepared in reasonable detail and, in
the case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein) and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, any change in the application of accounting principles.
Section 4.2. Certificates; Other Information. To furnish, or cause to
be furnished, to the Administrative Agent and to each of the Lenders:
(a) Accountant's Certificate and Reports. Concurrently with the
delivery of the financial statements referred to in subsection 4.1(a) above, a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except as
specified in such certificate.
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(b) Officer's Certificate. Concurrently with the delivery of the
financial statements referred to in Sections 4.1(a) and 4.1(b)(ii) above, a
certificate of a Responsible Officer (i) demonstrating compliance with the
financial covenants in Section 4.10 by calculation thereof as of the end of each
such fiscal period and (ii) stating that, to the best of such Responsible
Officer's knowledge and belief, (A) the financial statements fairly present in
all material respects the financial condition of the parties covered by such
financial statements, (B) during such period the members of the Consolidated
Group have observed or performed in all material respects the covenants and
other agreements hereunder and under the other Loan Documents relating to them,
and satisfied in all material respects the conditions, contained in this
Agreement to be observed, performed or satisfied by them and (C) in each case
such Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate. A form of Officer's Certificate
is attached as Schedule 4.2(b).
(c) Accountants' Reports. Promptly upon receipt, a copy of any final
(as distinguished from a preliminary or discussion draft) "management letter" or
other similar report submitted by independent accountants or financial
consultants to any member of the Consolidated Group in connection with any
annual, interim or special audit.
(d) Public Information. Within ten days after the same are sent, copies
of all reports (other than those otherwise provided pursuant to subsection 4.1)
and other financial information which any member of the Consolidated Group sends
to its public stockholders, and within ten days after the same are filed, copies
of all financial statements and non-confidential reports which any member of the
Consolidated Group may make to, or file with, the SEC or any successor or
analogous Governmental Authority.
(e) Studio Closings. Concurrently with the delivery of the financial
statements referred to in Sections 4.1(a) and 4.1(b)(ii), a report containing
information as to the number of photography studios closed by the Borrower or
any of its Subsidiaries during the applicable fiscal quarter period and the
number of studios remaining open at the end of such fiscal quarter.
(f) Other Information. Promptly, such additional financial and other
information as the Administrative Agent, at the request of any Lender, may from
time to time reasonably request.
Section 4.3. Notices. To give notice to the Administrative Agent (which
shall promptly transmit such notice to each Lender) of:
(a) Defaults. Immediately (and in any event within five Business Days)
after a Responsible Officer of any Credit Party knows of, the occurrence of any
Default or Event of Default.
(b) Contractual Obligations. Promptly, the occurrence of any default or
event of default under any Contractual Obligation of any member of the
Consolidated Group which would reasonably be expected to have a Material Adverse
Effect.
(c) Legal Proceedings. Promptly, the initiation of any litigation, or
any investigation or proceeding (including without limitation, any environmental
proceeding) known to any Responsible Officer of a member of the Consolidated
Group, or any material development in respect thereof, against any member of the
Consolidated Group which, if adversely determined, would in the opinion of
management of the Borrower reasonably be expected to have a Material Adverse
Effect (and in any event, where compensation, reimbursement, damages or relief
is sought in excess of $1,000,000 in any instance and such liability is not
covered by insurance).
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(d) ERISA. Promptly, after any Responsible Officer of the Borrower
knows of (i) any event or condition, including, but not limited to, any
Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event;
(ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed
in ERISA or otherwise of any withdrawal liability assessed against any of their
ERISA Affiliates, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of ERISA);
(iii) the failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the members of the Consolidated Group
or any ERISA Affiliate are required to contribute to each Plan pursuant to its
terms and as required to meet the minimum funding standard set forth in ERISA
and the Code with respect; or (iv) any change in the funding status of any Plan
that reasonably would be expected to have a Material Adverse Effect; together
with a description of any such event or condition or a copy of any such notice
and a statement by the chief financial officer of the Borrower briefly setting
forth the details regarding such event, condition, or notice, and the action, if
any, which has been or is being taken or is proposed to be taken by the Credit
Parties with respect thereto. Promptly upon request, the members of the
Consolidated Group shall furnish the Administrative Agent and the Lenders with
such additional information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return (Form 5500
series), as well as all schedules and attachments thereto required to be filed
with the Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each "plan year" (within the meaning of
Section 3(39) of ERISA).
(e) Other. Promptly, any other development or event which a Responsible
Officer determines would reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Credit Parties propose to take with respect
thereto.
Section 4.4. Compliance with Law. To comply with all laws, rules,
regulations and orders, and all applicable restrictions imposed by all
Governmental Authorities, applicable to it and its Property if noncompliance
with any such law, rule, regulation, order or restriction would reasonably be
expected to have a Material Adverse Effect.
Section 4.5. Payment of Obligations. To pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, in accordance with prudent business practice (subject, where applicable, to
specified grace periods) all material obligations of each member of the
Consolidated Group of whatever nature (including without limitation all taxes,
assessments and governmental charges or levies imposed on it, or upon its income
or profits and all lawful claims which, if unpaid, might give rise to a Lien
upon any of its properties) and any additional costs that are imposed as a
result of any failure to so pay, discharge or otherwise satisfy such
obligations; provided, however, that no member of the Consolidated Group shall
be required to pay any such tax or other obligation which is being contested in
good faith by appropriate proceedings and as to which adequate reserves therefor
have been established in accordance with GAAP, unless the failure to make any
such payment (i) could give rise to an immediate right to foreclose on a Lien
securing such amounts or (ii) would reasonably be expected to have a Material
Adverse Effect.
Section 4.6. Conduct of Business and Maintenance of Existence. To
continue to engage in business of the same general type as now conducted by it
on the date hereof, and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges, licenses and franchises necessary or desirable in the normal conduct
of its business;
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and comply with all Contractual Obligations and Requirements of Law applicable
to it except to the extent that failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.7. Maintenance of Property; Insurance. To keep all material
property useful and necessary in its business in reasonably good working order
and condition (ordinary wear and tear excepted); maintain with financially sound
and reputable insurance companies casualty, liability and such other insurance
(which may include plans of self-insurance) with such coverage and deductibles,
and in such amounts as may be consistent with prudent business practice and in
any event consistent with normal industry practice; maintain at all times an
aggregate of at least $5,000,000 in the key man life insurance insuring John
Grosso, Eric Jeltrup and Bruce Fisher; and furnish to the Administrative Agent,
upon written request, full information as to the insurance carried. The
Administrative Agent shall be named as loss payee or mortgagee, and/or as
additional insured with respect to any such insurance, and each provider of any
such insurance shall agree, by endorsement upon the policy or policies issued by
it or by independent instruments furnished to the Administrative Agent, that it
will give the Administrative Agent thirty days prior written notice before any
such policy or policies shall be altered or canceled, and that no act or default
of the Borrower or any of its Subsidiaries or any other Person shall affect the
rights of the Administrative Agent or the Lenders under such policy or policies.
The present insurance coverage of the Borrower and its Subsidiaries is outlined
as to carrier, policy number, expiration date, type and amount on Schedule 4.7,
as Schedule 4.7 may be amended from time to time by written notice to the
Administrative Agent.
Section 4.8. Inspection of Property; Books and Records; Discussions.
(a) To keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable notice
by any Lender, any such Lender to visit and inspect any of its properties and
examine and make abstracts (including photocopies) from any of its books and
records (other than materials protected by the attorney-client privilege and
materials which the Credit Parties may not disclose without violation of a
confidentiality obligation binding upon them) at any reasonable time, and to
discuss the business, operations, properties and financial and other condition
of the members of the Consolidated Group with officers and employees of the
members of the Consolidated Group and with their independent certified public
accountants. The cost of the inspection referred to in the preceding sentence
shall be for the account of the Lenders unless an Event of Default has occurred
and is continuing, in which case the cost of such inspection shall be for the
account of the Credit Parties.
(b) In addition to the foregoing subsection (a), to permit the
Administrative Agent to have agents or representatives to conduct a "field
audit" of its inventory and accounts, including inspection of the inventory and
account records and a right to examine and make abstracts (including
photocopies) from its books and records relating to its inventory and accounts
once in each fiscal year, and more frequently after the occurrence of an Event
of Default.
Section 4.9. Environmental Laws.
(a) To comply in all material respects with, and take reasonable
actions to ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply in all material respects with and maintain, and take reasonable actions
to ensure that all tenants and subtenants obtain and comply in all material
respects
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with and maintain, any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect;
(b) To conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the failure to do so or the pendency of such
proceedings would not reasonably be expected to have a Material Adverse Effect;
and
(c) To defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the members of the Consolidated Group or the
Properties, or any orders, requirements or demands of Governmental Authorities
related thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response costs, court
costs and litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this paragraph shall survive
repayment of the Loans and all other amounts payable hereunder and termination
of the Commitments.
Section 4.10. Financial Covenants.
(a) Consolidated Leverage Ratio. There shall be maintained, as of the
end of each fiscal quarter to occur during the periods shown, a Consolidated
Leverage Ratio of not greater than:
October 31, 1998 through
January 29, 2000 6.75 to 1.0
January 30, 2000 through
January 27, 2001 6.50 to 1.0
January 28, 2001 through
February 2, 2002 6.00 to 1.0
February 3, 2002 through
February 1, 2003 5.50 to 1.0
February 2, 2003 through
January 31, 2004 5.00 to 1.0
February 1, 2004 and
thereafter 4.50 to 1.0
(b) Consolidated Fixed Charge Coverage Ratio. There shall be
maintained, as of the end of each fiscal quarter, a Consolidated Fixed Charge
Coverage Ratio of at least .95 to 1.0.
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(c) Consolidated Interest Coverage Ratio. There shall be maintained, as
of the end of each fiscal quarter to occur during the periods shown, a
Consolidated Interest Coverage Ratio of at least:
October 31, 1998 through
January 29, 2000 1.35 to 1.0
January 30, 2000 through
February 2, 2002 1.50 to 1.0
February 3, 2002 through
January 31, 2004 1.75 to 1.0
February 1, 2004 and
thereafter 2.00 to 1.0
(d) Capital Expenditures. The aggregate amount of Consolidated Capital
Expenditures for the Consolidated Group will not exceed $12,500,000 during any
fiscal year. The unused portion of Consolidated Capital Expenditures permitted
but not used in any fiscal year may be carried over and used in the next fiscal
year (one year carry-over); provided, however, the Consolidated Group must use
the amount of Consolidated Capital Expenditures permitted in any given fiscal
year before utilizing the amount carried over from the preceding year.
Section 4.11. Fee Letter. To comply with the other agreements provided
for in the Fee Letter.
Section 4.12. Additional Guaranties and Stock Pledges. At any time any
Person becomes a Domestic Subsidiary, the Borrower will promptly notify the
Administrative Agent thereof and within 30 days of such event, cause such
Domestic Subsidiary to become a Guarantor hereunder by (i) execution of a
Joinder Agreement and (ii) delivery of supporting resolutions, incumbency
certificates, corporation formation and organizational documentation and
opinions of counsel as the Administrative Agent may reasonably request.
Section 4.13. Ownership of Subsidiaries. Except to the extent otherwise
permitted in Section 4.22 and except as set forth on Schedule 3.6, the Borrower
shall, directly or indirectly, own at all times 100% of the Voting Stock of each
of its Subsidiaries (other than (x) directors' qualifying shares and (y) shares
required by applicable law to be held by another Person in an amount not to
exceed one-tenth of one percent of the outstanding shares).
Section 4.14. Use of Proceeds. Extensions of Credit will be used solely
for the purpose of financing, in part, the Merger and the payment of related
fees and expenses.
Section 4.15. Year 2000 Compliance. Each Credit Party will promptly
notify the Administrative Agent in the event such Credit Party discovers or
determines that any computer application (including those of its suppliers,
vendors and customers) that is material to its or any of its Subsidiaries'
business and operations will not be Year 2000 Compliant, except to the extent
that such failure would not reasonably be expected to have a Material Adverse
Effect.
Section 4.16. Indebtedness. Not to contract, create, incur, assume or
permit to exist any Indebtedness, except:
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(a) Indebtedness of the Credit Parties arising or existing under the
Credit Facility in an aggregate principal amount not exceeding $150.0 million
less the aggregate amount of all principal repayments with respect to Term Loans
made under the Credit Facility since the Closing Date;
(b) Indebtedness under the Loan Documents;
(c) Indebtedness set forth in Schedule 4.16, and renewals, refinancings
and extensions thereof on terms and conditions no less favorable than for such
existing Indebtedness;
(d) Capital Lease Obligations and Indebtedness incurred, in each case,
to provide all or a portion of the purchase price or costs of construction of an
asset, provided that (i) such Indebtedness when incurred shall not exceed the
purchase price or cost of construction of such asset, (ii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing, and (iii) the total amount
of all such Indebtedness shall not exceed $5,000,000 at any time outstanding;
(e) Indebtedness and obligations of the Borrower in respect of Hedging
Agreements entered into in the ordinary course of business to manage existing or
anticipated risks and not for speculative purposes;
(f) (i) unsecured intercompany Indebtedness owing by one Credit Party
to another Credit Party and (ii) unsecured intercompany Indebtedness owing by a
Credit Party to a Subsidiary of the Borrower which is not a Credit Party, in
each case to the extent permitted under Section 4.20 hereof; and
(g) Guaranty Obligations of Indebtedness permitted under this Section
4.16.
Section 4.17. Liens. Not to contract, create, incur, assume or permit
to exist any Lien with respect to any of their respective property or assets of
any kind (whether real or personal, tangible or intangible), whether now owned
or hereafter acquired, except for Permitted Liens.
Section 4.18. Nature of Business. Not to engage in any business other
than the business conducted by such member of the Consolidated Group on the
Closing Date and any businesses reasonably related thereto.
Section 4.19. Consolidation, Merger, Sale or Purchase of Assets,
Capital Expenditures, etc.
(a) Not to dissolve, liquidate or wind up their affairs, except for the
dissolution and liquidation of a wholly-owned Subsidiary of a Credit Party where
the parent company Credit Party receives the assets of such Subsidiary;
(b) Not to enter into any transaction of merger or consolidation;
provided, however, that, so long as no Default or Event of Default would be
directly or indirectly caused as a result thereof, a member of the Consolidated
Group may merge or consolidate with another member of the Consolidated Group,
provided that (A) if the Borrower is a party thereto, the Borrower shall be the
surviving corporation and (B) if one of the parties thereto is a Credit Party,
such Credit Party shall be the surviving corporation;
(c) Not to sell, lease, transfer or otherwise dispose of any Property
(including without limitation pursuant to any sale/leaseback transaction or
securitization transaction ) other than (i)
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the sale of inventory in the ordinary course of business for reasonable
consideration, (ii) the sale or disposition of machinery and equipment no longer
used or useful in the conduct of such Person's business, and (iii) other sales
of assets (other than inventory), provided that (A) after giving effect to such
sale or other disposition, the aggregate book value of assets sold or otherwise
disposed of pursuant to this clause (iii) in any given fiscal year does not
exceed an amount equal to $5,000,000 and (B) the proceeds from any such
disposition are, within 360 days from the date of such disposition, reinvested
in an asset similar to the type transferred or disposed of pursuant to this
Section 4.19(c)(iii); or
(d) Except as otherwise permitted by Section 4.19(b) and Section 4.20
hereof, not to (i) acquire all or any portion of the capital stock or securities
of any other Person or (ii) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) all or any substantial part of
the Property of any other Person.
Section 4.20. Advances, Investments and Loans. Not to lend money or
extend 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, or otherwise make an Investment in, any Person except for
Permitted Investments.
Section 4.21. Transactions with Affiliates. Not to enter into or permit
to exist any transaction or series of transactions with any officer, director,
shareholder, Subsidiary or Affiliate other than (i) transactions permitted by
this Agreement, (ii) customary fees and expenses paid to directors and (iii)
where such transactions are on terms and conditions substantially as favorable
as would be obtainable in a comparable arm's-length transaction with a Person
other than an officer, director, shareholder or Affiliate.
Section 4.22. Ownership of Equity Interests. Not to Issue, sell,
transfer, pledge or otherwise dispose of any partnership interests, shares of
capital stock or other equity or ownership interests ("Equity Interests") in any
member of the Consolidated Group, except (i) issuance, sale or transfer of
Equity Interests to a Credit Party by a Subsidiary of such Credit Party, (ii) in
connection with a transaction permitted by Section 4.19, (iii) as needed to
qualify directors under applicable law and (iv) subject to the terms hereof, the
sale of Equity Interests in the Borrower to any Person.
Section 4.23. Fiscal Year. Not to (i) change its fiscal year end from
the Sunday falling closest to January 31st of each year, or (ii) amend, modify
or change its articles of incorporation (or corporate charter or other similar
organizational document) or bylaws (or similar document) in any manner that
would reasonably be likely to adversely affect the rights of the Lenders.
Section 4.24. Prepayments of Indebtedness, etc.
(a) After the issuance thereof, not to amend or modify (or permit the
amendment or modification of), the terms of any other Indebtedness in a manner
adverse to the interests of the Lenders (including specifically shortening any
maturity or average life to maturity or requiring any payment sooner than
previously scheduled or increasing the interest rate or fees applicable thereto
or changing any subordination provisions thereof);
(b) Not to make any prepayment, redemption, defeasance or acquisition
for value of (including without limitation, by way of depositing money or
securities with the trustee with respect thereto before due for the purpose of
paying when due), or refund, refinance or exchange of any Funded Debt other than
so long as no Default or Event of Default is in existence or would be caused as
a result
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thereof (i) intercompany Indebtedness permitted hereunder, (ii) regularly
scheduled payments of principal and interest on such Funded Debt and (iii)
prepayments of Indebtedness under the Credit Facility, as in effect on the date
hereof.
Section 4.25. Restricted Payments. Not to make or permit any Restricted
Payments.
Section 4.26. Sale Leasebacks. Not to directly or indirectly become or
remain liable as lessee or as guarantor or other surety with respect to any
lease, whether an Operating Lease or a Capital Lease, of any Property (whether
real or personal or mixed), whether now owned or hereafter acquired, (i) which
such Person has sold or transferred or is to sell or transfer to any other
Person other than a Credit Party or (ii) which such Person intends to use for
substantially the same purpose as any other Property which has been sold or is
to be sold or transferred by such Person to any other Person in connection with
such lease.
Section 4.27. License Agreements. Not to:
(a) terminate, cancel or permit to expire the Kmart License Agreement
or the Wal-Mart License Agreement; or
(b) permit the Consolidated Group to close a material number (as
determined by the Administrative Agent in its sole discretion or as determined
by the Borrower) of individual photography studios located in the United States
in any single fiscal year unless, after giving effect to such closings and any
such prior closings or other studio closings, determined as of the end of the
next succeeding fiscal quarter, the Borrower is able to establish to the
satisfaction of the Administrative Agent that the Borrower will be in compliance
on a Pro Forma basis with each of the financial covenants contained in Section
4.10 hereof.
Section 4.28. Exchange of Term Notes. The Borrower will, on the 5th
Business Day following the written request (the "Exchange Request") of the
holder of any Term Loan:
(a) Execute and deliver, cause each Guarantor to execute and deliver,
and cause the Exchange Note Trustee to execute and deliver, the Exchange Note
Indenture substantially in the form of Exhibit D attached hereto, if such
Exchange Note Indenture has not previously been executed and delivered; and
(b) Execute and deliver to such holder or beneficial owner in
accordance with the Exchange Note Indenture a note in the form attached to the
Exchange Note Indenture (the "Exchange Notes") bearing interest at a fixed rate
equal to the rate per annum borne by the Term Loan on the date of the Exchange
Request dated the date of the issuance of such Exchange Note, payable to the
order of such holder or owner, as the case may be, in the same principal amount
as such Term Loan (or portion thereof) being exchanged, and cause each Guarantor
to endorse its guarantee thereon.
The Exchange Request shall specify the principal amount of the Term
Loans to be exchanged pursuant to this Section 4.28 which shall be at least
$5,000,000 and integral multiples of $100,000 in excess thereof. Term Loans
delivered to the Borrower under this Section 4.28 in exchange for Exchange Notes
shall be canceled by the Borrower and the corresponding amount of the Term Loan
deemed repaid and the Exchange Notes shall be governed by and construed in
accordance with the terms of the Exchange Note Indenture.
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The Exchange Note Trustee shall at all times be a corporation organized
and doing business under the laws of the United States or the State of New York,
in good standing and having its principal offices in the Borough of Manhattan,
in The City of New York, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by Federal
or State authority and which has a combined capital and surplus of not less than
$50,000,000.
Section 4.29. Change of Control.
(a) Upon the occurrence of a Change of Control, each Lender will have
the right to require the Borrower to prepay all or any part the principal amount
of such Lender's Loans pursuant to the offer described below (the "Change of
Control Offer") at a prepayment price in cash equal to the aggregate principal
amount thereof plus (i) accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of prepayment and (ii) the Change of Control Fee
(collectively, the "Change of Control Payment"). Within 10 days following any
Change of Control, the Borrower will mail a notice to each Lender describing the
transaction or transactions that constituted the Change of Control and offer to
repay the Loans on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 45 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures set
forth below.
(b) Notice of a Change of Control Offer shall be mailed by the Borrower
to the Lenders at their addresses set forth in the Loan Register. The Change of
Control Offer shall remain open from the time of mailing until the Change of
Control Payment Date. The notice shall contain all instructions and materials
necessary to enable such Lenders to elect to be prepaid pursuant to the Change
of Control Offer.
(c) On the Change of Control Payment Date, the Borrower shall (i) repay
all Loans or portions thereof of each Lender that properly elected repayment
thereof pursuant to the Change of Control Offer, (ii) pay the Change of Control
Payment for each such Loan (or portion thereof) elected to be repaid and (iii)
deliver to each such Lender a new Bridge Note equal in principal amount
(excluding premiums, if any) to the unpurchased portion of the corresponding
Bridge Note surrendered, if any. The Borrower will notify the remaining Lenders
of the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
ARTICLE V.
CONDITIONS
The obligation of each of the Lenders to make Bridge Loans is subject
to (i) the representations and warranties in Article III and the representations
and warranties of the Borrower and each Guarantor, as the case may be, in the
Credit Facility and the Merger Agreement being true, correct and complete in all
material respects on and as of the Closing Date to the same extent as though
made on and as of that date, (ii) on or prior to the Closing Date, the Borrower
and each Guarantor, as the case may be, having performed and complied with all
covenants and conditions to be performed and observed by it on or prior to the
Closing Date and (iii) the prior or concurrent satisfaction of each of the
following conditions:
Section 5.1. Corporate and Other Proceedings. On or before the Closing
Date, all corporate and other proceedings taken or to be taken in connection
with the Transactions and all documents incidental thereto not previously found
acceptable by the Administrative Agent
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shall be reasonably satisfactory in form and substance to the Administrative
Agent, and the Administrative Agent shall have received on behalf of the Lenders
the following items, each of which shall be in form and substance reasonably
satisfactory to the Administrative Agent and, unless otherwise noted, dated the
Closing Date:
(a) a certified copy of the Borrower's and each of the Guarantor's
charter, in each case, together with a certificate of good standing or like
certificate with respect to the Borrower and each Guarantor issued by the
appropriate government officials of the jurisdiction of its respective formation
and of each jurisdiction in which the Borrower or such Guarantor owns any
material assets or carries on any material business, each to be dated a recent
date prior to the Closing Date;
(b) a copy of the Borrower's and each of the Guarantor's bylaws, in
each case, certified as of the Closing Date by its Secretary or one of its
Assistant Secretaries;
(c) resolutions of the Borrower's and each of the Guarantor's Board of
Directors, in each case, approving and authorizing the execution, delivery and
performance of this Agreement, each of the other Transaction Documents and any
other documents, instruments and certificates required to be executed by the
Borrower or such Guarantor in connection herewith or therewith and approving and
authorizing the execution, delivery and payment of the Bridge Notes, the
Exchange Notes and the consummation of the Transactions, each certified as of
the Closing Date by its respective Secretary or one of its Assistant Secretaries
as being in full force and effect without modification or amendment;
(d) signature and incumbency certificates of the Borrower's and each of
the Guarantor's Officers executing this Agreement and the Bridge Notes and any
other documents executed in connection therewith;
(e) executed copies of this Agreement and the Bridge Notes, drawn to
the order of the Lenders;
(f) a notation of Guarantee, executed and delivered by each Guarantor,
dated the date of this Agreement, substantially in the form of Exhibit B hereto,
as applicable;
(g) an Officers' Certificate from the Borrower and each of the
Guarantors in form and substance satisfactory to the Administrative Agent to the
effect that (i) the representations and warranties in Article III and the
representations and warranties of the Borrower and such Guarantor, as the case
may be, in the Credit Facility are true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date, (ii) on or prior to the Closing Date, the Borrower and such
Guarantor, as the case may be, has performed and complied in all material
respects with all covenants and conditions to be performed and observed by it on
or prior to the Closing Date and (iii) all conditions to the consummation of the
Transactions have been satisfied on the terms set forth in the documentation
relating thereto and have not been waived or amended without the Administrative
Agent's prior written consent;
(h) true and correct copies of the final form of each of: (i) the
Merger Agreement, which shall be satisfactory in form and substance to each of
the Lenders and which shall provide for an aggregate Merger consideration of
$233.5 million; (ii) the Credit Facility, which shall be satisfactory in form
and substance to each of the Lenders; and (iii) the agreements relating to the
Equity Financing, which shall be satisfactory in form and substance to each of
the Lenders;
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(i) true and correct copies of each of the other Transaction Documents,
each of which shall be satisfactory in form and substance to each of the Lenders
in their sole discretion;
(j) a copy of all closing documents relating to the Merger and all such
counterpart originals or certified copies of such documents, instruments,
certificates, opinions and reliance letters as the Administrative Agent may
reasonably request;
(k) a copy of all closing documents relating to the Credit Facility and
all such counterpart originals or certified copies of such documents,
instruments, certificates, reliance letters and opinions as the Administrative
Agent may reasonably request (including, without limitation, a reliance letter,
addressed to the Lenders, from counsel to the Borrower, entitling the Lenders to
rely on the opinions issued by such counsel in connection with the Credit
Facility);
(l) a copy of all closing documents relating to the other Transactions
and all such counterpart originals or certified copies of such documents,
instruments, certificates, reliance letters and opinions as the Administrative
Agent may reasonably request; and
(m) all authorizations, consents and approvals required by Section
5.13.
Section 5.2. Concurrent Transactions. Either prior to or concurrently
with the making of the Bridge Loans by the Lenders: (i) the Equity Financing and
the Bank Financing shall have been consummated on terms satisfactory to each of
the Lenders and all conditions precedent to the consummation of the Equity
Financing and the Bank Financing shall have been satisfied or, with the prior
approval of each of the Lenders, waived; and (ii) the Merger shall have been
consummated on terms satisfactory to each of the Lenders pursuant to the
provisions of the Merger Agreement delivered pursuant to 5.1(h) above in
compliance with applicable law and regulatory approvals and such Merger
Agreement shall not have been materially altered, amended or otherwise changed
or supplemented or any material condition therein waived, without the prior
written consent of the Lenders, and all conditions precedent to consummation of
the Merger shall have been satisfied or, with the prior approval of each of the
Lenders, waived.
Section 5.3. No Material Adverse Change. No material adverse change
(including any event which, in the reasonable opinion of any Lender, is likely
to result in such a material adverse change) in the business, assets,
liabilities, revenues, operations, condition (financial or otherwise), value,
management or prospects of the Borrower and its Subsidiaries, taken as a whole,
shall have occurred since February 1, 1998, and no material inaccuracy in such
financial statements shall exist.
Section 5.4. No Event of Default. No event shall have occurred and be
continuing or would result from the consummation of the Transactions that would
constitute an Event of Default.
Section 5.5. Litigation; Restraining Orders. There shall not exist (A)
any order, decree, judgment, ruling or injunction which restrains the
consummation of the Transactions in the manner contemplated by the Merger
Agreement and (B) any pending or threatened action, suit, investigation or
proceeding which, if adversely determined, could materially adversely affect the
ability of the Borrower or any Guarantor to perform any of their respective
obligations under the Loan Documents or the ability of the Lenders to exercise
their rights thereunder.
Section 5.6. No Changes in Financial Markets. No material adverse
change in the financial or capital markets shall have occurred which, in the
judgment of any Lender, would make it
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impractical or inadvisable to proceed with the funding of the Loans or the sale
of the Permanent Securities, and a banking moratorium shall not have been
declared by Federal or New York State banking officials.
Section 5.7. Corporate Structure. The corporate, capital and ownership
structure (including articles of incorporation and by-laws), shareholders'
agreements and management of the Borrower and its Subsidiaries (after giving
effect to the Transactions), including, without limitation, the execution of
employment contracts with and key-man life insurance with respect to, management
of the Borrower and each of the other key employees of the Borrower, shall be
satisfactory to each of the Lenders in all respects.
Section 5.8. No Conflicts. The execution, delivery and performance of
the documentation relating to the various aspects of the Transactions and the
consummation of all the transactions contemplated hereby and thereby will not
conflict with, constitute a default under or violate (A) any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of the
Borrower or any of its Subsidiaries, (B) any of the terms, conditions or
provisions of any material document, agreement or other instrument to which the
Borrower or any of its Subsidiaries is bound, (C) any foreign, federal, state or
local statute, rule or regulation, (D) any judgment, writ, injunction, decree,
order or ruling of any court or governmental authority binding on the Borrower
or any of its Subsidiaries, where such conflict, default or violation would have
a Material Adverse Effect on the Borrower and its Subsidiaries, taken as a
whole.
Section 5.9. Delivery of Opinions. The Administrative Agent shall have
received originally executed copies of one or more favorable written opinions of
(i) Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Borrower and the
Guarantors, in the form of Exhibit E-1 hereto and addressed to the Lenders, (ii)
Robinson, Bradshaw & Hinson, P.A., special North Carolina counsel for the
Borrower and the Guarantors, in the form of Exhibit E-2 hereto and addressed to
the Lenders and (iii) such other opinions of counsel and such certificates or
opinions of accountants, appraisers or other professionals as the Administrative
Agent shall have reasonably requested.
Section 5.10. Solvency. Each Lender shall have received a certificate
from Valuation Research, in form and substance satisfactory to each Lender,
certifying that, on the date of and immediately after giving effect to the
consummation of the Transactions, the Borrower and each of its Subsidiaries will
be Solvent.
Section 5.11. Payment of Fees. On or before the Closing Date, the
Borrower shall have paid to the Lenders and their Affiliates the fees payable on
the Closing Date pursuant to Section 2.11.
Section 5.12. No Breach Under Engagement Letter, Commitment Letter or
Fee Letter. Neither the Borrower nor any Guarantor shall be in breach or
violation of any of its obligations under the Engagement Letter, the Commitment
Letter or the Fee Letter and each of the Engagement Letter and the Fee Letter
shall be in full force and effect.
Section 5.13. Consents and Approvals. On or before the Closing Date,
all governmental, shareholder and third-party consents (including
Hart-Scott-Rodino clearance) and approvals necessary or desirable in connection
with the Transactions and the other transactions contemplated hereby shall have
been obtained; all such consents and approvals shall be in full force and
effect; and all applicable waiting periods shall have expired without any action
being taken by any
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authority that could restrain, prevent or impose any material adverse conditions
on the Transactions or such other transactions or that could seek or threaten
any of the foregoing. Copies of all such authorizations, consents and approvals
shall have been delivered to the Administrative Agent on the Closing Date.
Section 5.14. Repayment of Indebtedness. On or before the Closing Date,
all existing Indebtedness of the Borrower and its Subsidiaries shall be repaid
in full and all commitments thereunder shall be terminated.
Section 5.15. Closing. Upon satisfaction of the conditions set forth
herein, each of the Lenders shall disburse the proceeds of its Bridge Loan by
wire transfer of immediately available funds to the account designated by the
Borrower in New York, New York, against delivery to the Lenders in Bridge Notes
in the names and denominations specified by the Lenders (the "Closing"). The
Borrower shall give the Lenders at least three Business Days' notice of the
expected date of such Closing (the "Closing Date"). The Closing shall take place
at such place as shall be agreed upon by the Lenders and the Borrower.
Section 5.16. Debt Registration Rights Agreement. The Borrower, each of
the Guarantors and the Administrative Agent shall have entered into the Debt
Registration Rights Agreement and a fully executed copy of the Debt Registration
Rights Agreement shall have been delivered to each of the Lenders.
ARTICLE VI.
TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH LOANS AND
THE SECURITIES; REPRESENTATIONS OF LENDERS; PARTICIPATIONS
Section 6.1. Transfer of Loans, the instruments evidencing such Loans
and the Securities. Each Lender acknowledges that none of the Loans, the
instruments evidencing such Loans or any of the Securities have been registered
under the Securities Act and represents and agrees that it is acquiring the
Loans, the instruments evidencing such Loans and the Securities for its own
account and that it will not, directly or indirectly, transfer, sell, assign,
pledge or otherwise dispose of its Loans, the instruments evidencing such Loans
or the Securities (or any interest therein) unless such transfer, sale,
assignment, pledge or other disposition is made (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to an available
exemption from registration under, and otherwise in compliance with, the
Securities Act. Each Lender represents and warrants to and covenants and agrees
with the Borrower and each Guarantor that it is either (i) a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act
acting for its own account or the account of one or more other qualified
institutional buyers, and is aware that the Borrower and each Guarantor may rely
upon the exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A thereunder or (ii) an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Each of the Lenders acknowledges that the instruments evidencing the Loans and
the Securities will bear a legend restricting the transfer thereof in accordance
with the Securities Act.
Subject to the provisions of the previous paragraph, the Borrower and
each of the Guarantors agrees that, with the consent of the Administrative
Agent, each Lender will be free to sell or transfer all or any part of the
Loans, the instruments evidencing the Loans or the Securities (including,
without limitation, participation interest in the Loans) to any third party who
(1) acknowledges the matters set forth in the first sentence of the immediately
preceding paragraph and (2) represents and warrants to and covenants and agrees
with the Borrower and each Guarantor the matters set forth in
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clauses (i) and (ii) of the second sentence of the immediately preceding
paragraph and to pledge any or all of the Securities to any commercial bank or
other institutional lender; provided, however, that (i) NationsBridge agrees not
to sell the voting interest with respect to at least 30.1% of the Bridge Loans
issued on the Closing Date and (ii) Chase and CSI agree not to sell the voting
interest with respect to at least 20.0% of the Bridge Loans issued on the
Closing Date.
Section 6.2. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities who (1) acknowledge the matters set forth
in the first sentence of the first paragraph of Section 6.1 hereof and (2)
represent and warrant to and covenant and agree with the Borrower and each
Guarantor the matters set forth in clauses (i) and (ii) of the second sentence
of the first paragraph of Section 6.1 hereof ("Purchasers") all or any part of
its rights and obligations hereunder and under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit A or in such other form
as may be agreed to by the parties thereto. The consent of the Borrower and the
Administrative Agent shall be required prior to an assignment becoming effective
with respect to a Purchaser which is not a Lender or an Affiliate thereof;
provided, however, that if a Default has occurred and is continuing, the consent
of the Borrower shall not be required. Such consent shall not be unreasonably
withheld or delayed.
Section 6.3. Permitted Participants; Effect.
(a) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities who (1) acknowledge the matters set forth in the first sentence of the
first paragraph of Section 6.1 hereof and (2) represent and warrant to and
covenant and agree with the Borrower and each Guarantor the matters set forth in
clauses (i) and (ii) of the second sentence of the first paragraph of Section
6.1 hereof ("Participants") participating interests in any Loan owing to such
Lender, any Bridge Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the event of any
such sale by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the owner of its Loans and the holder
of any Note issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating interests, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
the Loan Documents.
(b) Each Lender shall retain the sole right to approve, without the
consent of any Participant, any amendment, modification or waiver of any
provision of the Loan Documents other than any amendment, modification or waiver
with respect to any Loan or Commitment in which such Participant has an interest
which forgives principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, extends the Maturity Date,
postpones any date fixed for any regularly scheduled payment of principal of, or
interest or fees on, any such Loan or Commitment or releases any guarantor of
any such Loan.
(c) The Borrower agrees that each Participant shall be deemed to have
the right of setoff provided in Section 2.10 in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
the Loan Documents, provided that each Lender shall retain the right of setoff
provided in Section 2.10 with respect to the amount of participating interests
sold to each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in
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Section 2.10, agrees to share with each Lender, any amount received pursuant to
the exercise of its right of setoff, such amounts to be shared in accordance
with Section 2.10 as if each Participant were a Lender.
Section 6.4. Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Reports.
Section 6.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.9.
Section 6.6. Replacement Securities Upon Transfer or Exchange. Upon
surrender of any Securities by any Lender in connection with any transfer or
exchange permitted by this Agreement, the Borrower will execute and deliver in
exchange therefor a new Security or Securities of the same aggregate tenor and
principal amount, payable to the order of such Persons and in such denominations
as such Lender may request. The Borrower may require payment by such Lender of a
sum sufficient to cover any stamp tax or governmental charge imposed in respect
of any such transfer.
Section 6.7. Loan Register. The Administrative Agent on behalf of the
Borrower shall maintain a register of the principal amount of the Loans held by
each Lender and any interest due and payable with respect thereto. The entries
in the Loan Register shall be conclusive, in the absence of manifest error, and
the Borrower, the Administrative Agent and the Lenders shall treat each Person
whose name is recorded in the Loan Register as the owner of a Loan or other
Securities hereunder as the owner thereof for all purposes of this Agreement and
the other Related Documents, notwithstanding any notice to the contrary. Any
assignment of any Loan or other Securities shall be effective only upon
appropriate entries with respect thereto being made in the Loan Register. The
Administrative Agent will allow any Lender to inspect and copy such register at
the Administrative Agent's principal place of business during normal business
hours.
ARTICLE VII.
EVENTS OF DEFAULT
Section 7.1. Events of Default. An Event of Default shall exist upon
the occurrence and during the continuation of any of the following specified
events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans, whether or not prohibited by the subordination provisions of
Article X hereof, or
(ii) default, and such defaults shall continue for three or
more Business Days, in the payment when due of any interest on the
Loans, or of any fees or other amounts owing
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hereunder, under any of the other Loan Documents or in connection
herewith or therewith, whether or not prohibited by the subordination
provisions of Article X hereof; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made herein, in any of the other Loan Documents, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or
(c) Covenants.
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 4.3(a), 4.10, 4.14 or 4.16
through 4.29, inclusive, or
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 7.1) contained in this
Agreement and such default shall continue unremedied for a period of at
least 30 days after the earlier of a Responsible Officer of a Credit
Party having knowledge of such default or notice thereof by the
Administrative Agent; or
(d) Other Loan Documents. (i) Any Credit Party shall default in the due
performance or observance of any material term, covenant or agreement in any of
the other Loan Documents (subject to applicable grace or cure periods, if any),
or (ii) any Loan Document shall fail to be in full force and effect or to give
the Administrative Agent and/or the Lenders any material part of the rights,
powers and privileges purported to be created thereby or any Credit Party shall
assert the same; or
(e) Guaranties. Except as to a Credit Party which is dissolved, merged
or consolidated out of existence as the result of or in connection with a
dissolution, merger or consolidation permitted by Section 4.19(a) or Section
4.19(b), the guaranty given by any Guarantor hereunder or any material provision
thereof shall cease to be in full force and effect, or any Guarantor hereunder
or any Person acting by or on behalf of such Guarantor shall deny or disaffirm
such Guarantor's obligations under such guaranty, or any 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 beyond any applicable
grace period; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to
any member of the Consolidated Group; or
(g) Defaults under Other Agreements.
(i) There shall occur a default (beyond the applicable grace
period with respect thereto, if any) under either the Kmart License
Agreement or the Wal-Mart License Agreement, which default could
reasonably be expected to have a Material Adverse Effect; or
(ii) With respect to any Indebtedness (other than Indebtedness
outstanding under this Agreement) in excess of $1,000,000 in the
aggregate for the Consolidated Group taken as a whole, (A) any member
of the Consolidated Group shall (1) default in any payment (beyond the
applicable grace period with respect thereto, if any) with respect to
any such Indebtedness, or (2) default in the observance or performance
relating to such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
or condition
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shall occur or condition exist, the effect of which default or other
event or condition is (after the giving of notice or lapse of time if
required) to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to cause
any such Indebtedness to become due prior to its stated maturity and
such default shall continue unremedied for a period of at least 30
days; or (B) any such Indebtedness shall be declared due and payable,
or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(h) Judgments. One or more judgments or decrees shall have been entered
against one or more of the members of the Consolidated Group involving a
liability of $500,000 or more in the aggregate (to the extent not paid or fully
covered by insurance provided by a carrier who has acknowledged coverage and has
the ability to perform) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or
(i) ERISA. Any of the following events or conditions, if such event or
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of a member of the
Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an
ERISA Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Administrative Agent, likely to result in the
termination of such Plan for purposes of Title IV of ERISA; (3) an ERISA Event
shall occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Administrative Agent, likely to
result in (i) the termination of such Plan for purposes of Title IV of ERISA, or
(ii) a member of the Consolidated Group or any ERISA Affiliate incurring any
liability in connection with a withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency of (within the meaning of
Section 4245 of ERISA) such Plan; or (4) any prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility shall occur which may subject a member of the
Consolidated Group or any ERISA Affiliate to any liability under Sections 406,
409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which a member of the Consolidated
Group or any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
Section 7.2. Acceleration. If any Event of Default specified in Section
7.1(a) occurs and is continuing, the Lenders holding at least 25% in aggregate
principal amount of the then outstanding Loans may, by written notice to the
Borrower, declare the unpaid principal of and any accrued and unpaid interest
and fees on all of the Loans to be immediately due and payable. If any Event of
Default (other than an Event of Default specified in Section 7.1(a) or 7.1(f))
occurs and is continuing, the Lenders holding at least a majority in aggregate
principal amount of the then outstanding Loans may, by written notice to the
Borrower, declare the unpaid principal of and any accrued and unpaid interest
and fees on all of the Loans to be immediately due and payable. Upon such
declaration, all Obligations in respect of the Loans shall become immediately
due and payable immediately. If an Event of Default specified in Section 7.1(f)
occurs, all Obligations in respect of the Loans shall ipso facto become and be
immediately due and payable without any declaration, notice or other act on the
part of any Lender.
Section 7.3. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Lenders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
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assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent or subsequent assertion or employment of any other
appropriate right or remedy.
Section 7.4. Delay or Omission Not Waiver. No delay or omission by any
Lender to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
VII or by law to the Lenders may be exercised from time to time, and as often as
may be deemed expedient, by the Lenders.
Section 7.5. Waiver of Past Defaults. Subject to Section 11.3, the
Required Lenders by written notice to the Borrower may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
Section 7.6. Rights of Lenders To Receive Payment. Notwithstanding
anything to the contrary contained in this Agreement, the right of any Lender to
receive payment of principal of, premium and interest on the Loans and Bridge
Notes held by such Lender, on or after the respective due dates expressed in
this Agreement or the Bridge 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 Lender.
ARTICLE VIII.
PERMANENT SECURITIES
Section 8.1. Permanent Securities. The Borrower and each of the
Guarantors shall use their best efforts to do all things required in the
reasonable opinion of the Investment Banks in connection with the sale of the
Permanent Securities, including, but not limited to (i) commencing the
preparation of a Rule 144A offering memorandum or registration statement under
the Securities Act with respect to the Permanent Securities, and other
documentation (including an indenture), all as deemed reasonably necessary by
the Investment Banks and the Borrower, to effect the offering of Permanent
Securities, (ii) no later than 45 Business Days following the Closing Date,
delivering to the Investment Banks such unaudited consolidated and pro forma
financial information, projections as to future operations and such other
financial information relating to the Borrower and its Subsidiaries and their
respective businesses and any probable or recently completed acquisition as may
be reasonably requested by the Investment Banks, (iii) no later than 45 Business
Days following the Closing Date, finalizing the Offering Documents in form and
substance reasonably satisfactory to the Investment Banks, the Borrower and the
Guarantors, including, if applicable, filings of a registration statement under
the Securities Act, (iv) no later than 45 Business Days following the Closing
Date, making appropriate Officers of the Borrower and its Subsidiaries available
to the Investment Banks for meetings with prospective purchasers of the
Permanent Securities and preparing and presenting to potential investors road
show material in a manner consistent with other new issuances of high yield debt
securities and (v) executing an underwriting or purchase agreement substantially
in the form of NMS' standard underwriting or purchase agreement, as the case may
be, modified as appropriate to reflect the terms of the transactions
contemplated thereby and containing such terms, covenants, conditions,
representations, warranties and indemnities as are customary in similar
transactions and providing for the delivery of legal opinions, comfort letters,
and Officers' Certificates, all in form and substance reasonably satisfactory to
the Investment Banks and their counsel, as well as such other terms and
conditions as the Investment Banks and their counsel may in their reasonable
discretion consider appropriate in light of
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then prevailing market conditions applicable to similar financings or in light
of any aspect of the transactions contemplated hereby that requires such other
terms or conditions. The proceeds from the issuance of the Permanent Securities
shall be used to prepay the Loans pursuant to Section 2.4.
ARTICLE IX.
TERMINATION
Section 9.1. Termination. The Lenders, by notice to the Borrower, may
terminate this Agreement at any time after the earlier of (i) the termination of
the Merger Agreement, (ii) the consummation of the Merger without the making of
any Bridge Loans and (iii) October 31, 1998.
Section 9.2. Survival of Certain Provisions. If this Agreement is
terminated pursuant to this Article IX, such termination shall be without
liability of any party to any other party, except that, whether or not the
transactions contemplated by this Agreement are consummated, (i) the Obligations
of the Borrower and the Guarantors to reimburse the Lenders for all of their
out-of-pocket expenses pursuant to Section 13.1 and the Fee Letter and (ii) the
indemnity provisions contained in Article XII shall, in each case, remain
operative and in full force and effect.
ARTICLE X.
SUBORDINATION
Section 10.1. Agreement to Subordinate.
The Borrower and the Guarantors agree, and each Lender agrees, that the
Indebtedness evidenced by the Loans is subordinated in right of payment, to the
extent and in the manner provided in this Article X, to the prior payment in
full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
Section 10.2. Certain Definitions.
"Designated Senior Debt" means any Senior Debt outstanding under the
Credit Facility.
"Permitted Junior Securities" means Equity Interests in the Borrower or
any Guarantor or debt securities that are subordinated to all Senior Debt (and
any debt securities issued in exchange for Senior Debt) to substantially the
same extent as, or to a greater extent than, the Loans are subordinated to
Senior Debt pursuant to this Agreement.
"Representative" means the agent or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness outstanding under the Credit
Facility and (ii) all Obligations with respect to any of the foregoing.
Notwithstanding anything to the contrary in the foregoing, (i) Senior Debt shall
not include (x) any Indebtedness of the Borrower or the Guarantors to any of its
Subsidiaries or other Affiliates, (y) any Indebtedness incurred for the purchase
of goods or materials or for services obtained in the ordinary course of
business (other than with the proceeds of revolving credit borrowings permitted
hereby) and (z) any Indebtedness that is incurred in violation of this Agreement
and (ii) the aggregate amount of Senior Debt shall not exceed $150.0 million.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
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Section 10.3. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Borrower or the Guarantors in
a liquidation or dissolution of the Borrower or such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Borrower or such Guarantor or its property, in an assignment for
the benefit of creditors or any marshalling of the Borrower's or such
Guarantor's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before any Lender
shall be entitled to receive any payment with respect to its Loan
(except that Lenders may receive Permitted Junior Securities); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, any distribution to
which Lenders would be entitled but for this Article X shall be made to
holders of Senior Debt (except that Lenders may receive Permitted
Junior Securities), as their interests may appear.
Section 10.4. Default on Designated Senior Debt.
The Borrower and the Guarantors may not make any payment or
distribution to the Administrative Agent or any Lender in respect of Obligations
with respect to the Loans and may not acquire from the Administrative Agent or
any Lender any Loans for cash or property (other than Permitted Junior
Securities) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement,
indenture or other document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated
Senior Debt occurs and is continuing that permits holders of the
Designated Senior Debt to accelerate its maturity and the
Administrative Agent receives a notice of the default (a "Payment
Blockage Notice") from a Person who may give it pursuant to Section
10.12 hereof. If the Administrative Agent receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section 10.4 unless and until (i) at
least 360 days shall have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled
payments of principal, premium, if any, and interest on the Loans that
have come due have been paid in full in cash. No nonpayment default
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Administrative Agent shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The Borrower and the Guarantors may and shall resume payments on and
distributions in respect of the Loans and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.4(ii) hereof,
179 days pass after notice is received if the maturity of such Designated Senior
Debt has not been accelerated,
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if this Article X otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.5. Acceleration of Securities.
If payment of the Loans is accelerated because of an Event of Default,
the Borrower shall promptly notify holders of Senior Debt of the acceleration.
Section 10.6. When Distribution Must Be Paid Over.
In the event that the Administrative Agent or any Lender receives any
payment of any Obligations with respect to the Loans at a time when the
Administrative Agent or such Lender, as applicable, has actual knowledge that
such payment is prohibited by Section 10.4 hereof, such payment shall be held by
the Administrative Agent or such Lender, in trust for the benefit of, and shall
be paid forthwith over and delivered, upon written request, to, the holders of
Senior Debt as their interests may appear or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
With respect to the holders of Senior Debt, the Administrative Agent
undertakes to perform only such obligations on the part of the Administrative
Agent as are specifically set forth in this Article X, and no implied covenants
or obligations with respect to the holders of Senior Debt shall be read into
this Agreement against the Administrative Agent. The Administrative Agent shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall
not be liable to any such holders if the Administrative Agent shall pay over or
distribute to or on behalf of Lenders, the Borrower, the Guarantors or any other
Person money or assets to which any holders of Senior Debt shall be entitled by
virtue of this Article X, except if such payment is made as a result of the
willful misconduct or gross negligence of the Administrative Agent.
Section 10.7. Notice by the Borrower.
The Borrower and the Guarantor shall promptly notify the Administrative
Agent of any facts known to the Borrower or any Guarantor that would cause a
payment of any Obligations with respect to the Loans to violate this Article X,
but failure to give such notice shall not affect the subordination of the Loans
to the Senior Debt as provided in this Article X.
Section 10.8. Subrogation.
After all Senior Debt is paid in full and until the Loans are paid in
full, the Lenders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Loans) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Lenders have been applied to the payment
of Senior Debt. A distribution made under this Article X to holders of Senior
Debt that otherwise would have been made to the Lenders is not, as between the
Borrower and the Guarantors, on one hand, and the Lenders, on the other hand, a
payment by the Borrower and the Guarantors on the Loan.
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Section 10.9. Relative Rights.
This Article X defines the relative rights of the Lenders and holders
of Senior Debt. Nothing in this Agreement shall:
(a) impair, as between the Borrower and the Guarantors, on one hand,
and the Lenders, on the other hand, the obligation of the Borrower and the
Guarantors, which is absolute and unconditional, to pay principal of and
interest on the Loans in accordance with their terms;
(b) affect the relative rights of the Lenders and creditors of the
Borrower and the Guarantors other than their rights in relation to holders of
Senior Debt; or
(c) prevent the Administrative Agent or any Lender from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Debt to receive distributions and payments otherwise payable
to the Lenders.
If the Borrower and the Guarantors fail because of this Article X to
pay principal of or interest on a Loan on the due date, the failure is still a
Default or Event of Default.
Section 10.10. Subordination May Not Be Impaired by the Borrower and
the Guarantors.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Loans shall be impaired by any act or failure
to act by the Borrower and the Guarantors or any Lender or by the failure of the
Borrower and the Guarantors or any Lender to comply with this Agreement.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Borrower or any
Guarantor referred to in this Article X, the Administrative Agent and the
Lenders shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Administrative Agent or to the Lenders for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Debt and other Indebtedness of the Borrower and the Guarantors, 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.
Section 10.12. Rights of Administrative Agent.
Notwithstanding the provisions of this Article X or any other provision
of this Agreement, the Administrative Agent shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment or
distribution by the Administrative Agent, and the Administrative Agent may
continue to make payments on the Loans, unless the Administrative Agent shall
have received at the address set forth in Section 14.2 hereof at least five
Business Days prior to the date of such payment written notice of facts that
would cause the payment of any Obligations with respect to the Loans to violate
this Article X. Only a Representative may give the notice. Nothing in this
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Article X shall impair the claims of, or payments to, the Administrative Agent
under or pursuant to Article XIII hereof.
The Administrative Agent in its individual or any other capacity may
hold Senior Debt with the same rights it would have if it were not
Administrative Agent. Any agent may do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Lender, authorizes and directs the Administrative Agent on such
Lender's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article X, and appoints the
Administrative Agent to act as such Lender's attorney-in-fact for any and all
such purposes.
Section 10.14. Amendments.
The provisions of this Article X and Section 11.2 shall not be amended
or modified without the written consent of the holders of all Senior Debt.
ARTICLE XI.
GUARANTEE
Section 11.1. The Guarantee.
(a) Each Guarantor hereby absolutely, unconditionally and irrevocably
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest, fees and premium
(if any) on the Loans and the Bridge Notes, and the full and punctual payment of
all other Obligations of the Borrower under this Agreement, the Bridge Notes and
the other Loan Documents, including all reasonable costs of collection and
enforcement thereof and interest thereon which would be owing by the Borrower
but for the effect of any Bankruptcy Law (collectively, the "Guaranteed
Obligations"). Each Guarantor understands, agrees and confirms that each of the
Lenders may enforce this Guarantee up to the full amount guaranteed by each
Guarantor hereunder against each Guarantor without proceeding against any other
obligor or against any security for the Guaranteed Obligations. All payments
made by each Guarantor under this Guarantee shall be paid at the place and in
the manner specified in Section 2.8. Each Guarantor agrees that this is a
continuing Guarantee of payment and not merely a Guarantee of collection.
(b) The obligations of each Guarantor hereunder shall be unconditional
and absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any Obligation of the Borrower under this
Agreement, the Bridge Notes or any other Loan Document, by operation of
law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement, the Bridge Notes or any of the other Loan Documents;
(iii) any release, non-perfection or invalidity of any direct
or indirect security for, or any other Person's guarantee of, any of
the Guaranteed Obligations;
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(iv) any change in the corporate existence, structure or
ownership of the Borrower or any other guarantor of the Borrower's
Obligations, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Borrower or any obligor or any of
their respective assets or any resulting release or discharge of any
Obligation of the Borrower contained in the Loan Documents;
(v) the existence of any claim, set-off or other rights which
any obligor may have at any time against the Borrower or any other
Person, whether in connection herewith or with any unrelated
transactions, provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Borrower for any reason of this Agreement, the Bridge Notes or any
other Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower of the principal of,
interest, premium or fees on the Loans or any other amount payable by
the Borrower under this Agreement, the Bridge Notes or any of the other
Loan Documents; or
(vii) any other act or omission to act or delay of any kind by
the Borrower or any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of Guaranteed Obligations hereunder.
(c) Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Borrower, any right to require a proceeding first against the Borrower or
another obligor, protest, notice and all demands whatsoever and covenants that,
subject to this Article X, this Guarantee shall not be discharged except by
complete payment and performance of all Guaranteed Obligations.
(d) If any Lender is required by any court or otherwise to return to
the Borrower or any Guarantor, or any Custodian for the Borrower or any of the
other obligors or their respective assets, any amount paid to any Lender, this
Guarantee, to the extent of the amount so returned, shall be reinstated in full
force and effect.
(e) Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Lenders in respect of any Guaranteed Obligations
until payment in full of all Guaranteed Obligations. Each Guarantor further
agrees that (i) the maturity of the Guaranteed Obligations may be accelerated as
provided in Section 7.2 notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations and (ii) in the event of any declaration of acceleration of such
Guaranteed Obligations as provided in Section 7.2, such Guaranteed Obligations
(whether or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guarantee.
Section 11.2. Subordination of Guarantee. The obligations of each
Guarantor under its Guarantee pursuant to this Article 11 shall be junior and
subordinated to the Senior Debt under the Credit Facility on the same basis as
the Loans are junior and subordinated to Senior Debt of the Borrower under the
Credit Facility.
Section 11.3. Limitation on Liability. Each Guarantor and, by its
acceptance of any Bridge Note, each Lender, hereby confirms that it is the
intention of all such parties that this Guarantee not constitute a fraudulent
transfer or conveyance for purposes of any Bankruptcy Law, the Uniform
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Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
law to the extent applicable to this Guarantee. To effectuate the foregoing
intention, the Lenders and the Guarantors hereby irrevocably agree that the
Obligations of each Guarantor under this Guarantee shall be limited to the
maximum amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of each Guarantor that are relevant under such
laws, result in the Obligations of each Guarantor under the Guarantee not
constituting a fraudulent transfer or conveyance.
Section 11.4. Stay of Acceleration. In the event that acceleration of
the time for payment of any Guaranteed Obligation is stayed upon insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise subject
to acceleration under the terms of this Agreement and the Bridge Notes shall
nonetheless by payable by the Guarantors forthwith on demand by any Lender.
Section 11.5. Release of Guarantors. In the event of a sale or other
disposition of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Agreement, including without
limitation Section 4.19(c). Upon delivery by the Borrower to the Administrative
Agent of an Officers' Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Borrower in accordance with the
applicable provisions of this Agreement, including without limitation Section
4.19(c) hereof, the Administrative Agent shall execute any documents reasonably
required in order to evidence the release of any Guarantor from its Obligations
under its Guarantee.
Any Guarantor not released from its Obligations under its Guarantee
shall remain liable for the full amount of principal of and interest on the
Loans and for the other obligations of any Guarantor under this Agreement as
provided in this Article XI.
ARTICLE XII.
INDEMNITY
Section 12.1. Indemnification. In the event that the Lenders or any of
their respective affiliates or any of their respective directors, officers,
employees or agents (the "Indemnified Parties") becomes involved in any capacity
in any action, proceeding or investigation in connection with any matter
contemplated by the Commitment Letter, the Credit Parties (and any successors
thereto), (collectively, the "Indemnifying Parties"), will reimburse such
Indemnified Party for its legal and other expenses (including the cost of any
investigation and preparation) as they are incurred. The Indemnifying Parties
also agree to indemnify and hold harmless each Indemnified Party from and
against any and all losses, claims, damages and liabilities, joint or several,
related to or arising out of any matters contemplated by the Commitment Letter,
unless (and only to the extent that) it shall be finally judicially determined
that such losses, claims, damages or liabilities resulted primarily from the
gross negligence or willful misconduct of such Indemnified Party. The
Indemnified Parties will promptly notify the Indemnifying Parties upon receipt
of written notice of any claim or threat to institute a claim; provided that any
failure by the Indemnified Parties to give such notice shall not relieve the
Indemnifying Parties from the obligation to indemnify the Indemnified Parties,
except to the extent that the Indemnifying Parties are materially prejudiced
thereby.
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If any action, claim, investigation or other proceeding is instituted
or threatened against any Indemnified Parties in respect of which indemnity may
be sought hereunder, the Indemnifying Parties shall be entitled to assume the
defense thereof with counsel selected by the Indemnifying Parties (which counsel
shall be reasonably satisfactory to such Indemnified Parties) and after notice
from the Indemnifying Parties to such Indemnified Parties of their election so
to assume the defense thereof, the Indemnifying Parties will not be liable to
such Indemnified Parties hereunder for any legal or other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof
other than reasonable costs of investigation and such other expenses as have
been approved in advance; provided that (i) if counsel for such Indemnified
Parties determines in good faith that there is a conflict which requires
separate representation for the Indemnifying Parties, on the one hand, and such
Indemnified Parties, on the other hand, or (ii) the Indemnifying Parties fail to
assume or proceed in a timely and reasonable manner with the defense of such
action or fail to employ counsel reasonably satisfactory to such Indemnified
Parties in any such action, then, in either such event, such Indemnified Parties
shall be entitled to select one primary counsel (in addition to any necessary
local counsel) of their own choice to represent such Indemnified Parties, and
the Indemnifying Parties shall not, or shall no longer, be entitled to assume
the defense thereof on behalf of such Indemnified Parties and such Indemnified
Parties shall be entitled to indemnification for their expenses (including fees
and expenses of such counsel) to the extent provided in the preceding paragraph.
Such counsel shall, to the fullest extent consistent with its professional
responsibilities, cooperate with the Indemnifying Parties and any counsel
designated by the Indemnifying Parties. Nothing contained herein shall preclude
any Indemnified Parties, at their own expense, from retaining additional counsel
to represent such Indemnified Parties in any action with respect to which
indemnity may be sought from the Indemnifying Parties hereunder. The
Indemnifying Parties shall not be liable under this agreement for any settlement
made by any Indemnified Parties without the Indemnifying Parties' prior written
consent, and the Indemnifying Parties agree to indemnify and hold harmless any
Indemnified Parties from and against any loss or liability by reason of the
settlement of any claim or action with the consent of the Indemnifying Parties.
The Indemnifying Parties shall not settle any such claim or action without the
prior written consent of the Indemnified Parties unless such settlement provides
for a full release of claims against the Indemnified Parties.
Section 12.2. Indemnity not Available. If the indemnification provided
for herein is unavailable to an Indemnified Party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then the
Indemnifying Parties, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and expenses (i) in such portion as
is appropriate to reflect the relative benefits received by the Indemnifying
Parties, on the one hand, and such Indemnified Party, on the other, from the
Transaction and the other transactions contemplated by the Bridge Commitment
Letter (whether or not consummated) or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Parties, on the one hand,
and such Indemnified Party, on the other, in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations.
Section 12.3. Settlement of Claims. The Borrower and each Guarantor
agree that, neither it nor any of its Subsidiaries will settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding in respect of which indemnification or contribution could be
sought under Section 12.1 or 12.2 (whether or not any Indemnified Party is an
actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or
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consent includes an unconditional release of each Indemnified Party from all
liability arising out of such claim, action or proceeding.
Section 12.4. Appearance Expenses. If an Indemnified Party is requested
or required to appear as a witness in any action brought by or on behalf of or
against the Borrower, any Guarantor or any Affiliate thereof in which such
Indemnified Party is not named as a defendant, each Credit Party agrees to
reimburse such Indemnified Party for all reasonable expenses incurred by it in
connection with such Indemnified Party's appearing and preparing to appear as
such a witness, including, without limitation, the reasonable fees and
disbursements of its legal counsel.
Section 12.5. Indemnity for Taxes, Reserves and Expenses. If, after the
date hereof, the adoption of any law or guideline or any amendment or change in
the administration, interpretation or application of any existing or future law
or guideline by any Governmental Authority charged with the administration,
interpretation or application thereof, or the compliance with any request or
directive of any Governmental Authority (whether or not having the force of
law):
(a) subjects any Affected Party to any tax of any kind with respect to
this Agreement or the Bridge Notes or changes the basis of taxation of payments
of amounts due hereunder or thereunder or with respect to this Agreement or any
of the other Loan Documents, (including, without limitation, any sales, gross
receipts, general corporate, personal property, privilege or license taxes, and
including claims, losses and liabilities arising from any failure to pay or
delay in paying any such tax, but excluding such net income or franchise taxes
that are specifically excluded under Section 2.9(a));
(b) imposes, modifies or deems applicable any reserve (including,
without limitation, any reserve imposed by the Board), special deposit or
similar requirement against assets of the Borrower and the Guarantors held by,
credit to the Borrower and the Guarantors extended by, deposits of the Borrower
and the Guarantors with or for the account of, or other acquisition of funds of
the Borrower and the Guarantors by, any Affected Party;
(c) shall change the amount of capital maintained or requested or
directed to be maintained by an Affected Party; or
(d) imposes upon an Affected Party any other condition or expense
(including, without limitation, (i) loss of margin and (ii) attorneys' fees and
expenses, expenses incurred by officers or employees of an Affected Party (or
any successor thereto) and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement or any of the
other Loan Documents or the purchase, maintenance or funding of the Loans by an
Affected Party,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, reduce the rate of return on capital of, or impose any
expense (including loss of margin) upon, an Affected Party with respect to this
Agreement, any of the other Loan Documents, the obligations hereunder or
thereunder or the funding of the Loans hereunder, the Affected Party may notify
the Indemnifying Party of the amount of such increase, reduction, or imposition,
and the Indemnifying Parties hereby jointly and severally agree to pay to the
Affected Party the amount the Affected Party deems necessary to compensate the
Affected Party for such increase, reduction or imposition which determination
shall be conclusive. Such amounts shall be due and payable by the Indemnifying
Parties 15 days after such notice is given.
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Section 12.6. Survival of Indemnification. The provisions contained in
this Article XII shall remain in full force and effect whether or not any of the
transactions contemplated hereby are consummated and notwithstanding the
termination of this Agreement or the payment in full of all Obligations
hereunder.
Section 12.7. Liability Not Exclusive; Payments. The agreements of each
Indemnifying Party in this Article XII shall be in addition to any liability
that each may otherwise have. All amounts due under this Article XII shall be
payable as incurred upon written demand therefor.
ARTICLE XIII.
THE ADMINISTRATIVE AGENT; THE ARRANGERS
Section 13.1. Appointment. Each Lender hereby irrevocably designates
and appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall have no duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
Section 13.2. Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to the advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
Section 13.3. Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any of its
Subsidiaries or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement, opinion or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Loan Document or for any failure of the Borrower
or any of its Subsidiaries to perform its obligations hereunder or thereunder.
The Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of its Subsidiaries.
Section 13.4. Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Bridge Note, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made
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by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of its
Subsidiaries), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
the Bridge Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Loans.
Section 13.5. Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender, the Borrower or any of its Subsidiaries referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
Section 13.6. Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereafter taken, including any review of the affairs
of the Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon any material or other information provided by the
Administrative Agent (which, if so furnished, are acknowledged by the Lenders to
be for informational purposes only and without representation or warranty) or
any other Lenders, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition, prospects and credit
worthiness of the Borrower and its Subsidiaries and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender confirms
that it is a qualified institutional buyer within the meaning of Rule 144A under
the Securities Act. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition, prospects and credit
worthiness of the Borrower and its Subsidiaries. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial or other condition,
prospects or credit worthiness of the Borrower or any of its Subsidiaries
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which may come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
Section 13.7. Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower or any of its Subsidiaries and without limiting the obligation of
the Borrower and any of its Subsidiaries to do so), ratably according to their
respective Commitments in effect on the date on which indemnification is sought,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (include, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any other Loan Document or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing, provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Loans and all other Obligations
payable hereunder.
Section 13.8. Administrative Agent, in Its Individual Capacities. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not acting in such capacities hereunder and under the
other Loan Documents. With respect to the Loans made or renewed by it and the
Bridge Note issued to it the Administrative Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Administrative Agent, and the terms
"Lender" and "Lenders" shall include the Administrative Agent in its individual
capacity.
Section 13.9. Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Borrower), shall succeed to the rights,
powers and duties of the Administrative Agent, hereunder. Effective upon such
appointment and approval, the term "Administrative Agent" shall mean and include
such successor agent, and the former Administrative Agent's rights, powers and
duties as Administrative Agent shall be terminated, without any other or further
act or deed on the part of such former Administrative Agent any of the parties
to this Agreement or any holders of the Loans. After any retiring Administrative
Agent's resignation as Administrative Agent the provisions of this Article XIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and the other Loan
Documents.
Section 13.10. Arrangers. Except as expressly set forth herein, the
Arrangers, in their capacity as such, shall have no duties or responsibilities,
and shall incur no liabilities, under this Agreement or the other Loan
Documents.
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ARTICLE XIV.
MISCELLANEOUS
Section 14.1. Expenses; Documentary Taxes. The Borrower and the
Guarantors hereby jointly and severally agree to pay (a) all reasonable
out-of-pocket expenses (including, without limitation, expenses incurred in
connection with due diligence of the Lenders) associated with the preparation,
execution and delivery, administration, waiver, enforcement or modification and
enforcement of the documentation contemplated hereby and (b) the reasonable fees
and disbursements of legal counsel to the Lenders in connection with the
transactions contemplated herein, including in each case those incurred prior to
the date hereof. The Borrower and the Guarantors hereby jointly and severally
agree to indemnify the Lenders against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery, or the terms, of this Agreement or any of the other Loan
Documents.
Section 14.2. Notices. All notices and other communications pertaining
to this Agreement or any Bridge Note shall be in writing and shall be delivered
(a) in Person (with receipt acknowledged), (b) by facsimile (confirmed
immediately in writing by a copy mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as hereafter set forth), or (c) by
overnight courier, addressed as follows:
(i) If to the Administrative Agent, to it at:
NationsBridge, L.L.C.
NationsBank Corporate Center
100 North Tryon Street, 7th Floor
Charlotte, N.C. 28255
Attention: Peter Sherman
Facsimile No.: (704) 388-9941
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Kirk A. Davenport
Facsimile No.: (212) 751-4864
(ii) If to any Lender, to it at its address set forth on
the signature pages hereto:
(iii) If to the Borrower or any Guarantor, to it at:
PCA International, Inc.
815 Matthews-Mint Hill Road
Matthews, North Carolina 28105
Attention: Chief Financial Officer
Facsimile No.: (704) 847-1548
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with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Richard Borisoff, Esq.
Facsimile No.: (212) 757-3990
or to such other Person or address as shall be furnished in writing delivered to
the other parties in compliance with this Section.
Section 14.3. Consent to Amendments and Waivers.
(a) Except as provided in Section 14.3(b), this Agreement and the
Bridge Notes may be amended or supplemented with the consent of the Borrower,
each Guarantor and the Required Lenders and any existing default or compliance
with any provision of this Agreement or the Bridge Notes may be waived with the
consent of the Required Lenders. Bridge Notes held by the Borrower or any of its
Affiliates will not be deemed to be outstanding for purposes of this Section
14.3.
(b) Notwithstanding the provisions of Section 14.3(a), without the
consent of each Lender affected thereby, an amendment or waiver may not: (i)
reduce the principal amount of any Loan, (ii) change the fixed maturity of any
Loan, (iii) reduce the rate of or change the time for payment of interest on any
Loan, (iv) waive a Default or Event of Default in the payment of principal of or
premium, or interest, if any, on the Loans or an other amounts payable under any
of the Loan Documents, (v) make any Loan payable in money other than that stated
in the applicable Loan, (vi) make any change in the provisions of this Agreement
relating to the rights of Lenders to receive (A) prepayments on, or (B) payments
of principal of, or premium, fees or interest, if any, or fees or interest on,
the Loans, (vii) make any change to the provisions of Article VIII that would
adversely affect the rights of any Lender, (viii) release any Guarantor from its
Guarantee except as provided herein, (ix) amend the provisions of Article X
hereof if such amendment would adversely affect the rights of any Lenders or
(ix) make any change in the foregoing amendment and waiver provisions.
(c) The Borrower shall not and shall not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Lender for or as an inducement to
any consent, waiver or amendment permitted by Section 14.3(a) unless such
consideration is offered to be paid and is paid to all Lenders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or amendment.
Section 14.4. Parties. This Agreement shall inure to the benefit of and
be binding upon the Borrower, each Guarantor, the Affected Parties and each of
their respective successors and assigns. Except as expressly in this Agreement,
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 provision herein contained. Except
as expressly provided in this Agreement, this Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Affected Parties and their respective successors and assigns, and for the
benefit of no other Person. The Obligations of the Credit Parties hereunder
shall be joint and several obligations of each of them.
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Section 14.5. New York Law; Submission to Jurisdiction; Waiver of Jury
Trial. THIS AGREEMENT AND THE BRIDGE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE BORROWER, EACH GUARANTOR
AND EACH OF THE LENDERS HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY
NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE BRIDGE
NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE BORROWER, EACH GUARANTOR AND EACH OF THE LENDERS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER, EACH GUARANTOR
AND EACH OF THE LENDERS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 14.6. Replacement Notes. If any Bridge Note becomes mutilated
and is surrendered by the applicable Lender to the Borrower, or if any Lender
claims that any of its Bridge Notes has been lost, destroyed or wrongfully
taken, the Borrower shall execute and deliver to such Lender a replacement
Bridge Note, upon the delivery by such Lender of an indemnity to the Borrower to
save it and any agent of it harmless in respect of such loss, destruction or
wrongful taking with respect to such Bridge Note.
Section 14.7. Marshalling; Recapture. Neither the Administrative Agent
nor any Lender shall be under any obligation to marshall any assets in favor of
the Borrower or any other party or against or in payment of any or all of the
Obligations. To the extent any Lender receives any payment by or on behalf of
the Borrower, which payment or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
the Borrower or its estate, trustee, receiver, custodian or any other party
under any Bankruptcy Law, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the obligation or part thereof
which has been paid, reduced or satisfied by the amount so repaid shall be
reinstated by the amount so repaid and shall be included within the liabilities
of Borrower to such Lender as of the date such initial payment, reduction or
satisfaction occurred.
Section 14.8. Limitation of Liability. No claim may be made by the
Borrower any Guarantor or any other Person against the Administrative Agent or
any Lender or the Affiliates, directors, officers, employees, attorneys or
agents of any of them for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or any theory of
liability arising out of or related to the transactions contemplated by this
Agreement or the other Loan Documents, or any act, omission or event occurring
in connection therewith; and the Borrower and each Guarantor hereby waive,
release and agree not to sue and shall cause each of its respective Subsidiaries
to waive, release or agree not to sue (if required), upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
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Section 14.9. Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or Event of Default if such action is
taken or condition exists.
Section 14.10. Currency Indemnity. The Borrower acknowledges and agrees
that this is a credit transaction where specification of dollars is of the
essence and dollars shall be the currency of account and payment in all events.
If, pursuant to a judgment or for any other reason, payment shall be made in
another currency and such payment, after prompt conversion to dollars and
transfer to New York City in accordance with normal banking procedures, falls
short of the sum due the Lenders in dollars, the Borrower shall pay the Lender
such shortfall and the Lenders shall have a separate cause of action for such
amount.
Section 14.11. Waiver of Immunity. To the extent that the Borrower or
any Guarantor has or hereafter may acquire any immunity from:
(a) the jurisdiction of any court of (i) any jurisdiction in
which the Borrower or any Guarantor owns or leases property or assets
or (ii) the United States, the State of New York or any political
subdivision thereof; or
(b) from any legal process (whether through service of notice,
attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets, this
Agreement, any Loan Document or actions to enforce judgments in respect
of any thereof,
it hereby irrevocably waives such immunity in respect of its obligations under
the above-referenced document to the extent such waiver is permitted by law.
Section 14.12. Freedom of Choice. The submission to the jurisdiction of
the courts referred to in this Article XIV shall not (and shall not be construed
so as to) limit the right of any Lender to take proceedings against the Borrower
or any Guarantor in the courts of any country in which the Borrower or such
Guarantor has assets or in any other court of competent jurisdiction nor shall
the taking of proceedings in any one or more jurisdictions preclude the taking
of proceedings in any other jurisdiction (whether concurrently or not) if and to
the extent permitted by applicable law.
Section 14.13. Successors and Assigns. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants and agreements of
the Borrower and each Guarantor in this Agreement shall bind their respective
successors and assigns. Neither the Borrower nor any Guarantor may assign or
transfer any of its rights or obligations hereunder (by operation of law or
otherwise) without the prior written consent of the Required Lenders.
Section 14.14. Merger. This Agreement constitutes the entire contract
among the parties relating to the subject matter hereof and supersedes any and
all previous agreements among the parties relating to the subject matter hereof,
except for those provisions in the Fee Letter (including the exhibits thereto)
and the Engagement Letter that are in addition to the provisions contained
herein.
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Section 14.15. Severability Clause. In case any provision in this
Agreement or any Bridge Note shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and such
provision shall be ineffective in such jurisdiction only to the extent of such
invalidity, illegality or unenforceability.
Section 14.16. Representations, Warranties and Agreements To Survive
Delivery. All representations, warranties and agreements contained in or
incorporated into this Agreement, or contained in Officers' Certificates
submitted pursuant hereto, shall remain operative and in full force and effect
until all Obligations under all of the Loan Documents have been repaid in full,
regardless of any investigation made by or on behalf of the Lenders or any
controlling Person of the Lenders, or by or on behalf of the Borrower or any
controlling Person of the Borrower, and shall survive delivery of the Bridge
Notes.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BORROWER: PCA INTERNATIONAL, INC.,
a North Carolina corporation
By: /s/ John Grasso
--------------------------------
Name:
Title:
GUARANTORS: PCA PHOTO CORPORATION OF CANADA, INC.,
a North Carolina corporation
PCA SPECIALTY RETAIL PHOTO
CORPORATION, INC.,
a North Carolina corporation
PHOTO CORPORATION OF AMERICA,
a North Carolina corporation
PCA NATIONAL, INC.,
a North Carolina corporation
AMERICAN STUDIOS, INC.
a North Carolina corporation
By: /s/ John Grasso
------------------------------
Name:
------------------------------
Title: President of each of the
above-named Guarantors
NATIONSBRIDGE, L.L.C., as
Administrative Agent
By: /s/ L.E. Wentz
---------------------------
Name:
Title:
<PAGE> 75
Lender: NationsBridge, L.L.C.
Commitment Amount:
$60,000,000 NATIONSBRIDGE, L.L.C.
By: /s/ Lynne E. Wentz
------------------------------
Name: Lynne E. Wentz
Title: Managing Director
Wire Transfer Instructions
Name of Bank: NationsBank, National
Association
ABA#:
For the account of
Account No.:
Reference:
Attention:
Telephone:
Lender: The Chase Manhattan Bank
Commitment Amount:
$40,000,000 THE CHASE MANHATTAN BANK
By: /s/ Kathryn A. Duncan
------------------------------
Name: Kathryn A. Duncan
Title: Vice President
Wire Transfer Instructions
Name of Bank: The Chase Manhattan Bank
ABA#: 021000021
For the account of
Commercial Loan Operations
Account No.: Dept IC5 9420
Reference: PCA International, Inc.
Attention: John Knapp
Telephone: (718) 242-0627
<PAGE> 76
Exhibit A
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Bridge Loan Agreement, dated as of August 25,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Bridge Loan Agreement"), by and among PCA International, Inc., a North Carolina
corporation (the "Borrower"), the Guarantors named on the signature pages
thereto as guarantors (each a "Guarantor" and, collectively, the "Guarantors")
and NationsBanc Montgomery Securities LLC, as Arranger (the "Arranger"),
NationsBridge, L.L.C., as Administrative Agent (in such capacity, the
"Administrative Agent") and the lenders named on the signature pages thereto
(the "Lenders"). Unless otherwise defined herein, terms defined in the Bridge
Loan Agreement and used herein shall have the meanings given to them in the
Bridge Loan Agreement.
The Assignor identified on Schedule I hereto (the "Assignor") and the
Assignee identified on Schedule I hereto (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the percentage interest described in Schedule
1 hereto (the "Assigned Interest") in and to the Assignor's rights and
obligations under the Bridge Loan Agreement (the "Assigned Facilities"), in a
principal amount for the Assigned Facilities as set forth on Schedule I hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Bridge Loan Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Bridge Loan Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim: (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Bridge Loan Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Bridge Notes
held by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Bridge
Notes for a new Bridge Note or Bridge Notes payable to the Assignee and (ii) if
the Assignor has retained any interest in the Assigned Facility, requests that
the Administrative Agent exchange the attached Bridge Notes for a new Bridge
Note or Bridge Notes payable to the Assignor, in each case in amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which are effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Bridge Loan Agreement, and all schedules and exhibits
thereto together with copies of the financial information delivered pursuant to
subsection 4.4 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (c) agrees that it will, independently and without
reliance upon the Assignor, the Administrative Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its
<PAGE> 77
own credit decisions in taking or not taking action under the Bridge Loan
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (d) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Bridge Loan Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Administrative Agent by' the terms thereof,
together with such powers as are incidental thereto; (e) agrees that it will be
bound by the provisions of the Bridge Loan Agreement and will perform in
accordance with its terms all the obligations which by the terms of the Bridge
Loan Agreement are required to be performed by it as a Lender; and (f) agrees
that it shall have no recourse against the Assignor with respect to any matters
relating to the Bridge Loan Agreement, the other Loan Documents or any others
instrument or documents furnished pursuant hereto or thereto.
4. The Assignor hereby assigns to Assignee all of its rights and
obligations under the Fee Letter with respect to the Assigned Interest.
5. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule I hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to Section 6.7 of the Bridge Loan Agreement,
effective as of the Effective Date (which shall not, unless otherwise agreed to
by the Administrative Agent, be earlier than five Business Days after the date
of such acceptance and recording by the Administrative Agent).
6. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date. The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
7. From and after the Effective Date, (a) the Assignee shall be a party
to the Bridge Loan Agreement and the Fee Letter and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Bridge Loan Agreement and the Fee Letter.
8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
2
<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule I hereto.
3
<PAGE> 79
Schedule 1
to Assignment and Acceptance
Name of Assignor: _______________________________
Name of Assignee: _______________________________
Effective Date of Assignment: ___________________
Principal Commitment
Credit Facility Assigned Amount Assigned Commitment Percentage Assigned(1)
- ------------------------ --------------- ---------------------------------
$---------------- ----- . ---------%
- ------------
(1) Calculate the Commitment Percentage that is assigned to at least 9
decimal places and show as a percentage of the aggregate commitments of
all Lenders.
<PAGE> 80
[Name of Assignee] [Name of Assignor]
By: _________________________________ By:_______________________________
Title: Title:
Accepted:
NATIONSBRIDGE, L.L.C.
as Administrative Agent
By: _____________________________________
Title:
<PAGE> 81
Exhibit B
THE SECURITY EVIDENCED OR CONSTITUTED HEREBY HAS BEEN ACQUIRED FOR INVESTMENT
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
SECURITY MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE
REGISTRATION PROVISIONS OF SAID ACT (OR AN EXEMPTION THEREFROM) HAVE BEEN
COMPLIED WITH.
No. __ New York, New York
$______________ ______________, 1998
SENIOR SUBORDINATED INCREASING RATE BRIDGE NOTE
FOR VALUE RECEIVED, the undersigned, PCA International, Inc., a North
Carolina corporation (the "Company"), promises to pay to the order of
_______________________________, or its registered assigns (the "Holder"), the
principal sum of the aggregate of (i) __________________ Dollars ($_______) and
(ii) the aggregate amount by which the principal amount of this Bridge Note is
increased pursuant to Section 2.3(e) of the Bridge Loan Agreement referred to
below, and to pay interest from the date hereof on the unpaid principal amount
hereof from time to time outstanding, at the rates per annum and on the dates
specified in that certain Bridge Loan Agreement, dated as of August 25, 1998 (as
amended, restated and/or otherwise modified from time to time, the "Bridge Loan
Agreement"), by and among the Company, the Guarantors named on the signature
pages thereto as guarantors (each a "Guarantor" and, collectively, the
"Guarantors"), NationsBanc Montgomery Securities LLC, as Arranger (the
"Arranger"), NationsBridge, L.L.C., as Administrative Agent (in such capacity,
the "Administrative Agent") and the lenders named on the signature pages thereto
(the "Lenders"). Terms used herein and not otherwise defined have the meanings
assigned to them in the Bridge Loan Agreement. In the event the principal amount
of this Bridge Note is increased in accordance with Section 2.3(e) of the Bridge
Loan Agreement, the Holder may exchange this Bridge Note for a Bridge Note
definitively stating the aggregate principal amount hereof pursuant to Section
6.2 of the Bridge Loan Agreement.
The unpaid principal balance of this Bridge Note, together with all
accrued and unpaid interest thereon, shall become due and payable on the
Maturity Date unless the Conversion Date occurs, in which case the unpaid
principal balance hereof, together with all accrued and unpaid interest thereon,
shall become due and payable on the date that is eight years after the Closing
Date.
The Company promises to pay interest on demand, to the extent permitted
by law, on any overdue principal and interest from their due dates at the rate
per annum as specified in Section 2.3 of the Bridge Loan Agreement.
All payments of the principal of and premium and interest on this
Bridge Note shall be made in money of the United States of America that at the
time of payment is legal tender for the payment of public and private debts, by
transfer of immediately available funds into a bank account designated by the
Holder in writing to the Company. Interest on this Bridge Note shall accrue at
the rate and in the manner provided in Section 2.3 of the Bridge Loan Agreement.
The Company agrees to pay, upon demand, all reasonable out-of-pocket
expenses (including, without limitation, the reasonable fees and disbursements
of legal counsel to the Holder) associated with the waiver, enforcement or
modification of the Bridge Loan Agreement or this Bridge Note.
<PAGE> 82
This Bridge Note is entitled to the benefits of a joint and several
unconditional and irrevocable guarantee (the "Note Guarantee") of, inter alia,
the due and punctual payment of the principal of, premium (if any) and interest
on this Bridge Note as set forth the Bridge Loan Agreement. Each of the
Guarantors has acknowledged its liability under the Note Guarantee by signing
this Bridge Note.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the Holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
This Bridge Note is one of the Bridge Notes referred to in the Bridge
Loan Agreement, which Agreement, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain events, for
optional and mandatory prepayment in full of the principal hereof prior to
maturity and for the amendment or waiver of certain provisions of the Bridge
Loan Agreement, all upon the terms and conditions therein specified. In the
event of any conflict between the provisions of this Bridge Note and the Bridge
Loan Agreement, the provisions of the Bridge Loan Agreement shall govern.
THIS BRIDGE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 83
IN WITNESS WHEREOF, the Company has caused this Bridge Note to be
signed in its corporate name by its duly authorized officer and to be dated as
of the day and year first above written.
PCA INTERNATIONAL, INC.
By: ________________________________
Name:
Title:
Acknowledgment of Note Guarantee:
PCA PHOTO CORPORATION OF
CANADA, INC., a North Carolina corporation
PCA SPECIALTY RETAIL PHOTO
CORPORATION, INC.,
a North Carolina corporation
PHOTO CORPORATION OF AMERICA,
a North Carolina corporation
PCA NATIONAL, INC.,
a North Carolina corporation
AMERICAN STUDIOS, INC.
a North Carolina corporation
By:
Name: ____________________________________
Title: ____________________________________
President of each of the above-named
Guarantors
<PAGE> 84
[Back of Bridge Note]
OPTION OF HOLDER TO ELECT PURCHASE UPON CHANGE OF CONTROL
If you want to elect to have this Bridge Note purchased by the Company
pursuant to Section 4.29 of the Bridge Loan Agreement check the box below.
[ ] Please purchase the entire amount of this Bridge Note
If you want to elect to have only part of this Bridge Note purchased by
the Company pursuant to Section 4.29 of the Bridge Loan Agreement, state the
amount you elect to have purchased: $_____________.
Date: ________________________
Your Signature:
------------------------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No. ____________________
Signature Guarantee:
- ----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PCA INTERNATIONAL, INC. AND SUBSIDIARIES FOR THE NINE
MONTHS ENDED JANUARY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-2-1998
<PERIOD-END> NOV-1-1998
<CASH> 3,425,033
<SECURITIES> 0
<RECEIVABLES> 12,825,674
<ALLOWANCES> 1,792,865
<INVENTORY> 5,519,430
<CURRENT-ASSETS> 33,383,230
<PP&E> 124,465,030
<DEPRECIATION> 71,836,695
<TOTAL-ASSETS> 152,783,383
<CURRENT-LIABILITIES> 49,496,062
<BONDS> 0
0
0
<COMMON> 471,410
<OTHER-SE> (124,272,867)
<TOTAL-LIABILITY-AND-EQUITY> 152,783,383
<SALES> 156,031,866
<TOTAL-REVENUES> 156,031,866
<CGS> 124,254,959
<TOTAL-COSTS> 176,499,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (20,467,372)
<INTEREST-EXPENSE> 8,339,106
<INCOME-PRETAX> (28,806,478)
<INCOME-TAX> (7,403,265)
<INCOME-CONTINUING> (21,403,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,403,213)
<EPS-PRIMARY> (3.27)
<EPS-DILUTED> (3.11)
</TABLE>
