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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 1996
--------------------
Cole National Corporation
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(Exact name of registrant as specified in its charter)
Delaware 33-74228 34-1453189
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
5915 Landerbrook Drive, Mayfield Heights, Ohio 44124
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 449-4100
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Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On November 15, 1996, Cole National Corporation (the "Company")
acquired (i) all of the issued and outstanding shares (the "PSC Shares") of the
capital stock of Pearle Service Corporation ("PSC"), a company holding certain
assets related to Pearle, Inc.'s ("Pearle") Dallas headquarters, and (ii),
following the distribution by Pearle to The Pillsbury Company ("Pillsbury") of
the proceeds from the above purchase, all of the issued and outstanding shares
(the "Pearle Shares") of Pearle capital stock. The acquisition was accomplished
pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") dated
September 24, 1996, by and among the Company, Pearle and Pillsbury. A copy of
the Stock Purchase Agreement is filed as Exhibit 2.1 hereto.
As consideration for the PSC Shares, the Company paid Pearle Vision,
Inc. ("Pearle Vision"), a wholly owned subsidiary of Pearle, $24,350,000 in
cash. Pearle Vision distributed the proceeds of such sale to Pearle, which then
distributed the proceeds to Pillsbury. In addition, as consideration for the
Pearle Shares, the Company paid Pillsbury, subject to claims which may be made
under the Stock Purchase Agreement and subject to adjustment, $135,463,333 in
cash and NLG 100,000,000 in cash.
On November 15, 1996, following such acquisition of the Pearle Shares,
Pearle Vision sold all of the issued and outstanding shares of Pearle Holdings
B.V. ("Pearle Holdings") together with certain related assets to Pearle Trust
B.V. ("Pearle Trust"). The disposition was accomplished pursuant to a Purchase
Agreement (the "BV Purchase Agreement") dated September 24, 1996, by and among
the Company and HAL Investments B.V. ("HAL"). A copy of the BV Purchase
Agreement is filed as Exhibit 2.2 hereto. Prior to such disposition, the Company
assigned all of its rights and obligations under the BV Purchase Agreement to
Pearle and Pearle Vision in order to effectuate the transaction. The Company has
an equity ownership interest of approximately 20% in Pearle Trust. Pursuant to
the BV Purchase Agreement, Pearle, Pearle Vision and Pearle Trust entered into a
Trademark Assignment Agreement dated November 15, 1996, under which certain
trademarks necessary for the continued operation of Pearle Trust were assigned
or licensed to Pearle Trust. A copy of the Trademark Assignment Agreement is
filed as Exhibit 99.2 hereto. Pearle Trust paid an aggregate purchase price of
approximately NLG 102,000,000 for the shares of Pearle Holdings and related
assets.
Following the sale of Pearle Holdings, and the distribution to the
Company of the proceeds thereof, the Company transferred the PSC Shares and the
Pearle Shares to Cole National Group, Inc. ("Cole Group"), a wholly owned
subsidiary of the Company, for an aggregate purchase price of $154,000,000 (the
"Pearle Transfer"). The Pearle Transfer was accomplished pursuant to a Purchase
Agreement (the "Transfer Agreement") dated November 15, 1996, by
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and among the Company and Cole Group. A copy of the Transfer Agreement is filed
as Exhibit 2.3 hereto. Additionally, under the Transfer Agreement, the Company
assigned to Cole Group all of the Company's rights and obligations under the
Stock Purchase Agreement except for those rights and obligations which are
necessary for the Company to fulfil its obligations under the BV Purchase
Agreement.
Cole Group financed the Pearle Transfer and the purchase of the Senior
Notes through (i) cash on hand, (ii) intercompany borrowings from the Company,
and (iii) the private sale of $150,000,000 of Cole Group's 9 7/8% Senior
Subordinated Notes due 2006, under an Indenture (the "Indenture") dated November
15, 1996 by and among Cole Group and Norwest Bank Minnesota, National
Association. A copy of the Indenture is filed as Exhibit 4.1 hereto.
As part of the above transactions, certain wholly owned subsidiaries of
Cole Group entered into a $75,000,000 Credit Agreement (the "Credit Agreement")
dated November 15, 1996, by and among Cole Vision Corporation, Things
Remembered, Inc. Cole Gift Centers, Inc., Pearle and PSC and Canadian Imperial
Bank of Commerce. A copy of the Credit Agreement is filed as Exhibit 99.1
hereto.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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(a) Financial Statements of Businesses Acquired.
To be filed by amendment within 60 days of November 15, 1996.
(b) Pro Forma Financial Information.
To be filed by amendment within 60 days of November 15, 1996.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of
September 24, 1996, among The Pillsbury
Company, Pearle, Inc. and Cole National
Corporation.
2.2 Purchase Agreement, dated as of September
24, 1996, among Cole National Corporation
and HAL Investments B.V.
2.3 Purchase Agreement, dated as of November 15,
1996, among Cole National Corporation and
Cole National Group, Inc.
4.1 Indenture dated November 15, 1996, by and
among Cole National Group, Inc. and Norwest
Bank Minnesota, National Association.
4.2 Registration Rights Agreement dated November
15, 1996, by and among Cole National Group,
Inc. and CIBC Wood Gundy Securities Corp.,
CS First Boston Corporation, NationsBanc
Capital Markets, Inc. and Smith Barney Inc.
99.1 Credit Agreement, dated as of November 15,
1996, among Cole Vision Corporation, Things
Remembered, Inc., Cole Gift Centers, Inc.,
Pearle, Inc. and Pearle Service Corporation
and Canadian Imperial Bank of Commerce.
99.2 Trademark Assignment Agreement, dated
November 15, 1996, between Pearle, Inc.,
Pearle Vision, Inc. and Pearle Trust B.V.
99.3 CNG Guarantee and Cash Collateral Agreement,
dated as of November 15, 1996, by Cole
National Group, Inc. and Cole National
Corporation.
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99.4 Guarantee and Collateral Agreement, dated as
of November 15, 1996, by Cole Vision
Corporation, Things Remembered, Inc., Cole
Gift Centers, Inc., Pearle, Inc. and Pearle
Service Corporation and Canadian Imperial
Bank of Commerce.
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SIGNATURE
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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 hereunto duly authorized.
COLE NATIONAL CORPORATION
Date: December 2, 1996 By:/s/ Wayne L. Mosley
-----------------------------
Wayne L. Mosley
Vice President
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
Pagination by
Sequential Numbering
Exhibit Description of Exhibit System
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<S> <C>
2.1 Stock Purchase Agreement dated
September 24, 1996, by and among
Cole National Corporation, Pearle,
Inc. and The Pillsbury Company.
2.2 Purchase Agreement dated September
24, 1996, by and among Cole National
Corporation and HAL Investments B.V.
2.3 Purchase Agreement dated November 15,
1996, by and among Cole National
Corporation and Cole National Group, Inc.
4.1 Indenture dated November 15, 1996, by
and among Cole National Group, Inc.
and Norwest Bank Minnesota, National
Association.
4.2 Registration Rights Agreement dated
November 15, 1996, by and among Cole
National Group, Inc. and CIBC Wood
Gundy Securities Corp., CS First
Boston Corporation, NationsBanc Capital
Markets, Inc. and Smith Barney Inc.
99.1 Credit Agreement, dated as of November
15, 1996, among Cole Vision Corporation,
Things Remembered, Inc., Cole Gift
Centers, Inc., Pearle, Inc. and Pearle
Service Corporation and Canadian
Imperial Bank of Commerce.
99.2 Trademark Assignment Agreement, dated
November 15, 1996, between Pearle, Inc.,
Pearle Vision, Inc. and Pearle Trust B.V.
99.3 CNG Guarantee and Cash Collateral
Agreement, dated as of November 15,
1996, by Cole National Group, Inc. and
Cole National Corporation.
99.4 Guarantee and Collateral Agreement,
dated as of November 15, 1996, by Cole
Vision Corporation, Things Remembered,
Inc., Cole Gift Centers, Inc., Pearle,
Inc. and Pearle Service Corporation
and Canadian Imperial Bank of Commerce.
</TABLE>
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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
among
THE PILLSBURY COMPANY,
PEARLE, INC.
and
COLE NATIONAL CORPORATION
Dated as of September 24, 1996
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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ARTICLE I
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Section 1.1 Specific Definitions.............................................................. 2
Section 1.2 Other Terms....................................................................... 12
Section 1.3 Other Definitional Provisions..................................................... 12
ARTICLE II
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PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES
-------------------------------------------------
Section 2.1 Purchase and Sale of PSC Shares and Pearle
Shares........................................................................ 12
Section 2.2 Closing; Delivery and Payment..................................................... 13
Section 2.3 Purchase Price Adjustments and Reconciliation
of Debt Reduction Amount...................................................... 14
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Section 3.1 Organization and Authority of Seller.............................................. 19
Section 3.2 Organization, Authority and Qualification of
Pearle........................................................................ 21
Section 3.3 Capitalization of Pearle and PSC.................................................. 22
Section 3.4 Subsidiaries of Pearle............................................................ 24
Section 3.5 Franchise Agreements.............................................................. 26
Section 3.6 Financial Information............................................................. 27
Section 3.7 Absence of Undisclosed Liabilities................................................ 30
Section 3.8 Absence of Certain Changes or Events.............................................. 30
Section 3.9 Title to Properties; Absence of Liens and
Encumbrances, etc............................................................. 31
Section 3.10 Litigation........................................................................ 33
Section 3.11 Compliance with Law............................................................... 33
Section 3.12 Contracts......................................................................... 34
Section 3.13 Consents and Approvals............................................................ 36
Section 3.14 Tax Matters....................................................................... 36
Section 3.15 Intellectual Property............................................................. 37
Section 3.16 Collective Bargaining Agreements.................................................. 39
Section 3.17 Employee Benefits................................................................. 39
Section 3.18 Environmental Matters............................................................. 45
Section 3.19 Insurance......................................................................... 46
Section 3.20 Improper Payments................................................................. 47
Section 3.21 Warranties........................................................................ 47
Section 3.22 Condition of Assets............................................................... 47
Section 3.23 Brokers and Finders............................................................... 48
Section 3.24 No Other Representations or Warranties............................................ 48
</TABLE>
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.1 Organization and Authority of Buyer............................................... 49
Section 4.2 Brokers and Finders............................................................... 50
Section 4.3 Financial Capability.............................................................. 50
Section 4.4 Securities Act.................................................................... 51
Section 4.5 Consents and Approvals............................................................ 52
Section 4.6 No Other Representations or Warranties............................................ 52
ARTICLE V
---------
TAX AND CERTAIN EMPLOYEE MATTERS
--------------------------------
Section 5.1 Tax Sharing....................................................................... 52
Section 5.2 338 Election, Tax Indemnification................................................. 52
Section 5.3 Tax Returns....................................................................... 55
Section 5.4 Contest Provisions................................................................ 56
Section 5.5 Information to Be Provided by Buyer............................................... 58
Section 5.6 Assistance and Cooperation........................................................ 58
Section 5.7 Post-Closing Actions Which May Affect the
Seller's Liability for Taxes.................................................. 59
Section 5.8 Intentionally Deleted............................................................. 60
Section 5.9 Computation of Losses Subject to
Indemnification............................................................... 60
Section 5.10 Transfer Taxes.................................................................... 60
Section 5.11 Certain Employee Payment Obligations.............................................. 60
Section 5.12 Survival of Obligations........................................................... 62
ARTICLE VI
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CERTAIN COVENANTS AND AGREEMENTS
OF SELLER AND BUYER
--------------------------------
Section 6.1 Access and Information............................................................ 62
Section 6.2 Registrations, Filings and Consents............................................... 64
Section 6.3 Conduct of Business............................................................... 65
Section 6.4 Certain Buyer Obligations......................................................... 70
Section 6.5 Employee Matters.................................................................. 71
Section 6.6 Retention of Books and Records.................................................... 74
Section 6.7 Closing Date Financial Information................................................ 75
Section 6.8 Delivery of Corporate Minutes and Bank
Signature Cards............................................................... 75
Section 6.9 Covenant Not-to-Compete........................................................... 76
Section 6.10 Eyelab and Pearle Marks........................................................... 78
Section 6.11 Audited Financial Statements...................................................... 79
Section 6.12 Certain Consents.................................................................. 80
Section 6.13 Transition Services............................................................... 81
Section 6.14 Financing......................................................................... 81
Section 6.15 Insurance Claims.................................................................. 82
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 6.16 Ownership of PSC.................................................................. 83
Section 6.17 Further Assurances................................................................ 83
Section 6.18 BV Pension Provision
ARTICLE VII
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CONDITIONS TO CLOSING
---------------------
Section 7.1 Conditions to Obligations of Buyer................................................ 86
Section 7.2 Conditions to Obligations of Seller............................................... 89
Section 7.3 Conditions to Obligations of Buyer and
Seller........................................................................ 90
ARTICLE VIII
------------
TERMINATION
-----------
Section 8.1 Termination....................................................................... 91
Section 8.2 Effect of Termination............................................................. 92
ARTICLE IX
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SURVIVAL AND INDEMNIFICATION
----------------------------
Section 9.1 Survival of Representations, Warranties,
Covenants and Agreements; Knowledge of
Breach........................................................................ 92
Section 9.2 Indemnification................................................................... 94
Section 9.3 Method of Asserting Claims, etc.................................................. 101
ARTICLE X
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MISCELLANEOUS
-------------
Section 10.1 Amendment and Modification; Waiver................................................105
Section 10.2 Return of Information.............................................................105
Section 10.3 Expenses..........................................................................106
Section 10.4 Public Disclosure.................................................................106
Section 10.5 Assignment........................................................................107
Section 10.6 Entire Agreement..................................................................107
Section 10.7 Fulfillment of Obligations........................................................108
Section 10.8 Parties in Interest; No Third Party
Beneficiaries.................................................................108
Section 10.9 Schedules.........................................................................108
Section 10.10 Counterparts......................................................................108
Section 10.11 Section Headings..................................................................109
Section 10.12 Notices...........................................................................109
Section 10.13 Mediation.........................................................................110
SECTION 10.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM............................................................112
Section 10.15 Severability......................................................................113
</TABLE>
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SCHEDULES
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Schedule 2.2(a) PSC Assets and Liabilities
Schedule 2.3(c) Adjustments to Closing Date Working Capital
Schedule 3.4 Subsidiaries of Pearle
Schedule 3.5 Franchise Agreements
Schedule 3.6(a) Financial Information
Schedule 3.6(b) BV Financial Information
Schedule 3.7 Undisclosed Liabilities
Schedule 3.8 Certain Changes or Events
Schedule 3.9 Liens, Encumbrances, etc.
Schedule 3.10 Litigation
Schedule 3.11 Compliance With Law
Schedule 3.12 Contracts
Schedule 3.13 Consents
Schedule 3.14 Tax Matters
Schedule 3.15 Intellectual Property
Schedule 3.16 Collective Bargaining Agreements
Schedule 3.17 Company Plans
Schedule 3.18 Environmental Matters
Schedule 3.19 Insurance Policies
Schedule 3.21 Warranties
Schedule 3.22 Condition of Assets
Schedule 4.3 Financing Arrangements
Schedule 6.3(g) Promotions
Schedule 6.9(a) Competing Businesses
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Schedule 6.9(c) Solicited Employees
Schedule 7.1(b) Form of Opinion of Counsel of Seller
Schedule 7.2(b) Form of Opinion of Counsel of Buyer
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STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
September 24, 1996, among THE PILLSBURY COMPANY, a Delaware corporation
("Seller"), PEARLE, INC., a Delaware corporation ("Pearle" or the "Company") and
COLE NATIONAL CORPORATION, a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding
shares of capital stock of Pearle;
WHEREAS, Pearle owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of Pearle Service Corporation
("PSC");
WHEREAS, Buyer desires to purchase from Pearle, or one of its
Subsidiaries, all of the issued and outstanding shares of PSC capital stock
(consisting of 100 shares of common stock, par value $1.00 per share (the "PSC
Shares")), after which time Pearle will distribute the proceeds of such sale to
Seller, and Buyer and Pearle, along with Seller and its Continuing Affiliates,
desire to make an election under Section 338(h)(10) of the Code with respect to
the PSC Shares, as more specifically provided herein;
WHEREAS, following the purchase of the PSC Shares and the
distribution of the proceeds of such sale by Pearle, Buyer desires to purchase
from Seller all of the issued and outstanding shares of Pearle capital stock
(consisting of 100 shares of common stock, par value $1.00 per share (the
"Pearle Shares")), as more specifically provided herein; and
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NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
ARTICLE I
---------
Section 1.1 SPECIFIC DEFINITIONS. As used in this Agreement,
the following terms shall have the meanings set forth or as referenced below:
"ADJUSTMENT STATEMENT" shall have the meaning set forth
in Section 2.3(c).
"ADJUSTMENT WORKPAPERS" shall mean the workpapers of KPMG
prepared in the course of auditing the Closing Date Balance Sheet and its
calculation of Closing Date Working Capital and the Adjustment Statement,
excluding any audit planning memoranda or audit programs.
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with
that Person.
"AGREEMENT" shall mean this Agreement and all Schedules
hereto.
"ANTITRUST DIVISION" shall mean the Antitrust Division
of the United States Department of Justice.
"AUDITED BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"AUDITED FINANCIAL INFORMATION" shall have the meaning
set forth in Section 3.6(a).
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"BALANCE SHEET" shall have the meaning set forth in
Section 3.6(a).
"BUSINESS" shall have the meaning set forth in Section
6.9.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City, New York are authorized or
obligated by law or executive order to close.
"BUYER" shall have the meaning set forth in the
Preamble.
"BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"BV PENSION PROVISION" shall have the meaning set forth
in Section 6.18.
"CALCULATED RECEIVABLES SETTLEMENT" shall have the
meaning set forth in Section 9.2(a).
"CLAIM NOTICE" shall have the meaning set forth in
Section 9.3.
"CLOSING" shall have the meaning set forth in
Section 2.2(a).
"CLOSING DATE" shall have the meaning set forth in
Section 2.2(a).
"CLOSING DATE BALANCE SHEET" shall mean an audited
consolidated balance sheet of Pearle and the Subsidiaries as of the Closing
Date, which shall be prepared by Seller in accordance with U.S. generally
accepted accounting principles, applied on a
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basis consistent with the Balance Sheet, based on data and financial statements
supplied by Buyer and Pearle, together with the audit report of KPMG.
"CLOSING DATE WORKING CAPITAL" shall mean the current assets
less the current liabilities of Pearle North America at the Closing Date,
prepared in conformity with the calculation set forth on Schedule 2.3(c).
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY PLANS" shall have the meaning set forth in
Section 3.17.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set
forth, in Section 6.1(b).
"CONSENT" shall have the meaning set forth in Section
6.12.
"CONTINUING AFFILIATE" shall mean Affiliates of Seller other
than Pearle and its Subsidiaries.
"DAMAGE THRESHOLD" shall have the meaning set forth in
Section 9.1.
"DEBT REDUCTION AMOUNT" shall have the meaning set
forth in Section 2.3(a).
"DEBT STATEMENT" shall have the meaning set forth in
Section 2.3(c).
"DEDUCTIBLE" shall have the meaning set forth in
Section 9.1.
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"DETERMINED RECEIVABLES AMOUNT" shall have the meaning
set forth in Section 9.2(a).
"ENCUMBRANCES" shall have the meaning set forth in
Section 3.3.
"ENVIRONMENTAL LAW" means any law, regulation, code, license,
permit, order, judgment, decree or injunction relating to the protection of the
environment (including air, water, soil and natural resources) or the use,
storage, handling, release or disposal of any hazardous or toxic substance as in
effect on the date hereof.
"ERISA" shall have the meaning set forth in Section
3.17.
"ERISA AFFILIATE" shall have the meaning set forth in
Section 3.17.
"EYELAB MARKS" shall have the meaning set forth in
Section 6.10.
"ESTIMATED SHORT-TERM DEBT AMOUNT" shall have the meaning set
forth in Section 2.3(a).
"FINAL ADJUSTMENT STATEMENT" shall have the meaning set
forth in Section 2.3(d).
"FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(a).
"FRANCHISE AGREEMENTS" shall have the meaning set forth
in Section 3.5.
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"FRANCHISE LAWS" shall have the meaning set forth in
Section 3.5.
"FRANCHISEE RECEIVABLES" shall have the meaning set
forth in Section 9.2(a).
"FSA" shall have the meaning set forth in Section 3.17
(i).
"FTC" shall mean the Federal Trade Commission.
"HAZARDOUS SUBSTANCE" means any substance listed,
defined, designated or classified as hazardous, toxic or radioactive under any
applicable Environmental Law, including petroleum and any derivative or
by-products thereof, asbestos that is or may become friable, and polychlorinated
biphenyls in regulated concentrations.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 9.2.
"INDEMNIFYING PARTY" shall have the meaning set forth
in Section 9.2.
"INITIAL SALE" shall have the meaning set forth in
Section 2.1.
"INTELLECTUAL PROPERTY" shall mean trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing, the
rights thereto and registrations in any jurisdiction of, and applications in any
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jurisdiction to register, the foregoing, including any extension, modification
or renewal of any such registration or application; inventions, discoveries and
ideas, whether patentable or not in any jurisdiction; patents, applications for
patents (including, without limitation, divisions, continuations, continuations
in-part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; non-public information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any Person; all copyrights, in writings and other works,
and writings and other works, whether copyrightable or not in any jurisdiction;
registrations or applications for registration of copyrights in any
jurisdiction, any design rights and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any claims or causes of
action arising out of or related to any infringement or misappropriation of any
of the foregoing.
"INTERIM BV FINANCIAL INFORMATION" shall have the meaning set
forth in Section 3.6(b).
"INTERIM FINANCIAL INFORMATION" shall have the meaning
set forth in Section 3.6(a).
"IRS" shall mean the Internal Revenue Service.
"KPMG" shall mean KPMG Peat Marwick LLP.
"LEASE AGREEMENTS" shall have the meaning set forth in
Section 3.9.
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"LIABILITIES" shall have the meaning set forth in
Section 3.7.
"LOSSES" shall have the meaning set forth in Section
9.2(a).
"MAJOR MARKS" shall have the meaning set forth in
Section 3.15(b).
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, assets, liabilities, financial condition, properties,
operations or results of operations of Pearle and the Subsidiaries considered as
a whole.
"NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement, dated September 27, 1991, by and among Pearle Vision, Inc., the
Company and Societe Generale, New York Branch ("SocGen"), as amended.
"NOTICE PERIOD" shall have the meaning set forth in
Section 9.3.
"OWNED REAL PROPERTY" shall have the meaning set forth
in Section 3.9.
"PAST DUE RECEIVABLES" shall have the meaning set forth
in Section 9.2(a).
"PEARLE" shall have the meaning set forth in the
Preamble.
"PEARLE HOLDINGS" shall mean Pearle Holdings B.V., a
corporation organized under the laws of the Netherlands.
"PEARLE MARKS" shall have the meaning set forth in
Section 6.10.
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"PEARLE NORTH AMERICA" shall mean Pearle and its
Subsidiaries to the extent referred to as "Adjusted North America
& Caribbean" on the Condensed Combining Pro Forma Balance Sheet
attached to the Balance Sheet.
"PEARLE SHARES" shall have the meaning set forth in the
Preamble.
"PENSION PLAN" shall have the meaning set forth in
Section 3.17.
"PERMITTED ENCUMBRANCES" shall have the meaning set
forth in Section 3.9.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
"PRE-CLOSING TAX PERIOD" shall have the meaning set
forth in Section 5.2(c).
"PRIME RATE" shall mean the rate per annum equal to the
publicly announced prime commercial lending rate of The Morgan Guaranty Trust
Company of New York in effect from time to time, changing as such publicly
announced rate changes, effective as of the date such change is publicly
announced.
"PSC" shall have the meaning set forth in the Preamble.
"PSC SHARES" shall have the meaning set forth in
the Preamble.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.1.
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"RECEIVABLES CALCULATION DATE" shall have the meaning
set forth in Section 9.2(a).
"RECEIVABLES DETERMINATION PERIOD" shall have the
meaning set forth in Section 9.2(a).
"RECEIVABLES WRITEOFF AMOUNT" shall have the meaning
set forth in Section 9.2(a).
"RECEIVABLES SCHEDULE" shall have the meaning set forth
in Section 9.2(a).
"REPORT" shall have the meaning set forth in
Section 6.2(a).
"SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
"SELLER" shall have the meaning set forth in the
Preamble.
"SELLER'S GROUP" shall mean any "affiliated group" (as defined
in Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that includes Seller and Pearle.
"SUBSEQUENT SALE" shall have the meaning set forth in
Section 2.1.
"SUBSIDIAR[Y][IES]" shall have the meaning set forth in
Section 3.4.
"TAXES" shall mean all federal, state, local or foreign
income, gross receipts, windfall or excess profits, severance, property,
production, sales, use, license, capital, value added, ad valorem, transfer,
excise, franchise, employment, withholding
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or other taxes, duties or similar governmental charges or assessments (whether
or not any such item is accounted for as a tax) imposed by or on behalf of any
governmental authority and, with regard to Pearle Holdings and its subsidiaries,
shall also include customs duties, environmental taxes, national luxury tax on
vehicles, road taxes, social security premiums or employee insurance premiums or
similar governmental charges or assessments (whether or not any such item is
accounted for as a tax) imposed by or on behalf of any governmental authority,
together, in every case, with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.
"TAX PACKAGE" shall have the meaning set forth in
Section 5.5.
"TAX RETURNS" shall mean all federal, state, local or foreign
tax returns, tax reports, and declarations of estimated tax (including any
schedules or attachments to any thereto), including without limitation
consolidated, combined and unitary state tax returns and consolidated federal
income tax returns.
"THIRD PARTY CLAIM NOTICE" shall have the meaning set forth in
Section 9.3.
"UNAFFILIATED FIRM" shall mean an unaffiliated "big six"
accounting firm to be selected and agreed upon by Buyer and Seller.
"WORKING CAPITAL ADJUSTMENT AMOUNT" shall have the meaning set
forth in Section 2.3(e).
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Section 1.2 OTHER TERMS. Other terms may be defined elsewhere
in the text of this Agreement and, unless otherwise indicated, shall have such
meaning indicated throughout this Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words
"hereof", "herein", and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
Dollars. The term "NLG" shall mean Dutch guilders.
ARTICLE II
----------
PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES
-------------------------------------------------
Section 2.1 PURCHASE AND SALE OF PSC SHARES AND PEARLE SHARES.
Buyer agrees to purchase from Pearle, or one of its Subsidiaries, and Pearle, or
one of its Subsidiaries, agrees to sell to Buyer, the PSC Shares, for an
aggregate purchase price of $22,300,000 (the "Initial Sale"). After Pearle has
distributed the proceeds of such sale to Seller, Buyer agrees to purchase from
Seller, and Seller agrees to sell to Buyer, the Pearle Shares, for an aggregate
purchase price of $137,460,000 and 100,000,000 NLG (the "Subsequent Sale"). The
sum of the aggregate purchase price for the Initial Sale and the aggregate
purchase price for the Subsequent Sale is hereinafter referred to
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as the "Purchase Price". The parties agree to negotiate in good faith between
the date hereof and the Closing Date to reallocate the Purchase Price between
the Initial Sale and the Subsequent Sale if the relative values of the PSC
Shares and the Pearle Shares are determined to be different than implied by this
Section 2.1.
Section 2.2 CLOSING; DELIVERY AND PAYMENT.
(a) The closing of the Initial Sale and Subsequent
Sale (collectively, the "Closing") shall take place at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004 at 10:00 A.M. (local time),
on November 15, 1996, or at such other time and place as the parties hereto may
mutually agree. The Subsequent Sale shall occur immediately following the
consummation of the Initial Sale and the distribution of the proceeds of the
Initial Sale. The date on which the Closing occurs is called the "Closing Date,"
and the closing of the Initial Sale shall be deemed effective at 11:58 P.M.
(local time) on the Closing Date and the closing of the Subsequent Sale shall be
deemed effective at 11:59 P.M. (local time) on the Closing Date. Seller agrees
and represents that the tax bases and book values of PSC's assets and
liabilities as of immediately prior to the Closing shall be substantially as set
forth on Schedule 2.2(a) hereto.
(b) On the Closing Date, Seller shall deliver (or cause to be
delivered) to Buyer certificates representing the PSC Shares and the Pearle
Shares duly endorsed and in form for
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transfer to Buyer, and Buyer shall pay to Seller the Purchase Price (minus any
adjustment made pursuant to Section 2.3) for the PSC Shares and the Pearle
Shares in immediately available funds to an account or accounts designated by
Seller not less than two Business Days prior to the Closing.
(c) On the Closing Date, all intercompany accounts between
Pearle or the Subsidiaries, on the one hand, and Seller or its Continuing
Affiliates, on the other hand, shall be cancelled, and the respective amounts
shall be recorded as contributions to capital or by way of distribution in kind,
as the case may be.
Section 2.3 PURCHASE PRICE ADJUSTMENTS AND
RECONCILIATION OF DEBT REDUCTION AMOUNT.
(a) Not less than two Business Days prior to the
Closing Date, Seller shall deliver to Buyer a written statement
identifying (i) the amount of any long-term debt of Pearle or any
of the Subsidiaries as of the Closing Date, (ii) the amount of
the current maturities of long-term debt of Pearle and the
Subsidiaries as of the Closing Date, (iii) an estimate of the
amount equal to the sum of the short-term debt and any cash
overdraft of Pearle and the Subsidiaries (the "Estimated Short-
Term Debt Amount"), and (iv) an amount representing the sum of
clauses (i) through (iii) above (the "Debt Reduction Amount"), in
each case excluding any amounts that will be discharged or
otherwise eliminated as of the Closing Date. The Purchase Price
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shall be reduced dollar-for-dollar (as set forth in (f)) by the amount of the
Debt Reduction Amount, if any.
(b) Any amount to be set forth in a written statement to be
delivered by Seller pursuant to this Section 2.3 which is in a local currency
shall be converted into U.S. currency at an exchange rate equal to the spot rate
for such currency as published in THE WALL STREET JOURNAL on the last day of its
publication prior to the second Business Day prior to the Closing Date.
(c) As soon as reasonably practicable, but not later than 90
calendar days after the Closing Date, Seller shall deliver to Buyer the Closing
Date Balance Sheet, including a calculation of Closing Date Working Capital
(collectively with the Closing Date Balance Sheet, the "Adjustment Statement"),
together with a determination of actual short-term debt and any cash overdraft
of Pearle and the Subsidiaries at the Closing Date (the "Debt Statement") and
shall cause KPMG to give Buyer and its accountants access to all of the
Adjustment Workpapers. The Adjustment Statement, together with any notes
thereto, will be examined by and accompanied by the report of KPMG stating that
in the opinion of such firm, the Adjustment Statement presents fairly, in all
material respects, the Closing Date Balance Sheet and the Closing Date Working
Capital, prepared in accordance with United States generally accepted accounting
principles, subject to any adjustments set forth in Schedule 2.3(c). Buyer and
its representatives and accountants shall have the right to
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participate in and observe the process of the preparation of the Adjustment
Statement, including the taking of a physical inventory, if any, and the pricing
thereof. Buyer shall, and shall cause Pearle to, provide Seller and KPMG (i) all
data and financial statements reasonably requested by Seller and (ii) reasonable
access to the books and records, any other information, including work papers of
its accountants, and to any employees of Pearle and the Subsidiaries to the
extent necessary for the preparation of the Closing Date Balance Sheet and the
Adjustment Statement.
(d) Within 30 calendar days after receipt of the Adjustment
Statement and the giving of access to all of the Adjustment Workpapers, Buyer
shall either inform Seller in writing that the Adjustment Statement is
acceptable or object to the Adjustment Statement in writing setting forth a
specific description of its objections. If Buyer so objects and the parties do
not resolve such objections on a mutually agreeable basis within 30 calendar
days after Seller's receipt thereof, the disagreement shall be resolved within
an additional 30 calendar day period by an Unaffiliated Firm. The decision of
the Unaffiliated Firm shall be final and binding upon the parties. Upon the
agreement of the parties or the decision of the Unaffiliated Firm as to all
matters objected to, or if Buyer fails to deliver an objection to Seller within
the 30 calendar day period provided above in the first sentence hereof, the
Adjustment Statement (as adjusted, if necessary) shall be deemed
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the Final Adjustment Statement (the "Final Adjustment Statement") and the
determination of Closing Date Working Capital as set forth in the Final
Adjustment Statement shall be deemed final. Each party shall bear the fees,
costs and expenses of its own accountants and shall share equally the fees,
costs and expenses of the Unaffiliated Firm. Buyer and Seller shall (and Buyer
shall cause Pearle to) make readily available to the Unaffiliated Firm all
relevant books and records and any work papers (including those of the parties'
respective accountants and the Adjustment Workpapers) relating to the Balance
Sheet and the Closing Date Balance Sheet and all other items reasonably
requested by the Unaffiliated Firm.
(e) Upon the determination of the Final Adjustment Statement
and Closing Date Working Capital in accordance with Section 2.3(d), the Purchase
Price shall be adjusted, up or down, as follows: (i) if the Closing Date Working
Capital is GREATER than $21,885,000, Buyer shall pay or cause to be paid to
Seller the amount of such difference, and (ii) if the Closing Date Working
Capital is LESS than $21,885,000, Seller shall pay or cause to be paid to Buyer
and/or one or more designees of Buyer the amount of such difference (the
"Working Capital Adjustment Amount"), as adjusted pursuant to Section 2.3(f).
(f) Upon the determination of the Final Adjustment Statement
and Closing Date Working Capital in accordance with Section 2.3(d), the Debt
Reduction Amount shall be adjusted, up or down, as follows: (i) if the
short-term debt and any cash
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overdrafts included in the Debt Statement is GREATER than the Estimated
Short-Term Debt Amount, the Working Capital Adjustment Amount shall be adjusted
dollar-for-dollar so that such difference is for the benefit of Buyer (and/or
its designees), and (ii) if the amount of short-term debt and any cash
overdrafts included in Closing Date Working Capital is LESS than the Estimated
Short-Term Debt Amount, the Working Capital Adjustment Amount shall be adjusted
dollar-for-dollar so that such difference is for the benefit of Seller (and/or
its designees).
(g) An amount equal to the Working Capital Adjustment Amount,
as adjusted pursuant to Section 2.3(f), shall be paid by wire transfer of
immediately available funds within five Business Days after the date that the
determination of Closing Date Working Capital is deemed final in accordance with
Section 2.3(d), together with interest thereon from the Closing Date to the date
of payment calculated at the Prime Rate.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Pearle and Seller, with respect only to Sections 3.1, 3.2,
3.3, 3.13, 3.14, 3.23 and 3.24 hereof, represent and warrant to Buyer as of the
date hereof and as of the Closing Date (except that representations and
warranties that are made as of a specific date need be true only as of such
date) as follows:
Section 3.1 ORGANIZATION AND AUTHORITY OF SELLER.
Seller has been duly incorporated, is validly existing and is in
good standing under the laws of the State of Delaware, with full
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power and authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, and no other proceedings on the part of Seller are necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby. Neither the execution and delivery of this Agreement nor compliance by
Seller with its terms and provisions will (a) violate any provision of the
certificate of incorporation or by-laws of Seller; (b) subject to obtaining the
consents referred to in Section 3.13, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of Seller, or to a loss of any benefit to which
Seller is entitled under, any contract, franchise, license, agreement, lease,
indenture or other instrument to which Seller is a party; or (c) assuming
compliance with the matters set forth in Sections 3.13 and 4.5, to the knowledge
of Seller, violate or result in a breach of or constitute a default under any
law, rule, regulation, judgment, injunction, order, decree or other restriction
of any court or governmental authority to which
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Seller is subject, except where, in all cases, individually or in the aggregate
such violation, conflict, breach, termination, default, cancellation,
acceleration or loss would not be reasonably likely to prohibit or materially
impair or delay Seller's ability to perform its obligations under this
Agreement.
Section 3.2 ORGANIZATION, AUTHORITY AND QUALIFICATION OF
PEARLE. Pearle is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with full power and authority to own or lease
its assets and to carry on its business substantially as currently conducted and
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where, individually or in the aggregate, the
failure to be so qualified would be reasonably likely to have a Material Adverse
Effect. Neither the execution and delivery of this Agreement nor compliance by
Pearle or any Subsidiary with its terms and provisions will (a) violate any
provision of the certificate of incorporation or by-laws (or comparable
governing instruments) of Pearle or any Subsidiary; (b) subject to obtaining the
consents referred to in Section 3.13, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of Pearle or any of the Subsidiaries, or to a loss of
any benefit to which Pearle or any of the Subsidiaries is entitled under, any
contract, franchise, license, agreement, lease, indenture or
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other instrument to which Pearle or any of the Subsidiaries is a party; or (c)
assuming compliance with the matters set forth in Sections 3.13 and 4.5, to the
knowledge of Pearle, violate or result in a breach of or constitute a default
under any law, rule, regulation, judgment, injunction, order, decree or other
restriction of any court or governmental authority to which Pearle or any of the
Subsidiaries is subject, except where, in all cases (other than those relating
to the certificate of incorporation or by-laws (or comparable governing
instruments) of Pearle or any Subsidiary or any contract required to be
disclosed on Schedule 3.12 or any governmental permit or license the failure of
which to maintain would be reasonably likely to impair the ability of Pearle or
any Subsidiary to conduct its business substantially in the ordinary and usual
course consistent with past practice), alone or in the aggregate, such
violation, conflict, breach, termination, default, cancellation, acceleration or
loss would not be reasonably likely to have a Material Adverse Effect.
Section 3.3 CAPITALIZATION OF PEARLE AND PSC. (a) The
authorized capital stock of Pearle consists of 1,000 shares of common stock, par
value $1.00 per share, of which only the Pearle Shares are validly issued and
outstanding. The Pearle Shares are duly authorized, validly issued, fully paid
and nonassessable and are owned of record and beneficially by Seller. Seller has
good and valid title to the Pearle Shares and, upon consummation of the
transactions contemplated in this Agreement, shall have
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transferred such title to the Pearle Shares to Buyer pursuant to the terms of
this Agreement, free and clear of any liens, charges, pledges, security
interests, adverse claims or other encumbrances (collectively, "Encumbrances"),
other than such Encumbrances which were incurred by Buyer or caused to be
incurred by Pearle or any Subsidiary by Buyer as a result of the transactions
contemplated by this Agreement. There are no preemptive or other outstanding
rights, subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatsoever under which Seller, Pearle or its Subsidiaries is
or may become obligated to vote, issue, assign or transfer any shares of the
capital stock, or rights or warrants to acquire, or securities convertible into
shares of capital stock, of Pearle or any of its Subsidiaries.
(b) The authorized capital stock of PSC consists of 1,000
shares of common stock, par value $1.00 per share, of which only the PSC Shares
are validly issued and outstanding. The PSC Shares are duly authorized, validly
issued, fully paid and nonassessable and are owned of record and beneficially by
Pearle. Pearle has good and valid title to the PSC Shares and, upon consummation
of the transactions contemplated in this Agreement, shall have transferred such
title to the PSC Shares to Buyer pursuant to the terms of this Agreement, free
and clear of any Encumbrances, other than such Encumbrances which were incurred
by Buyer or caused to be incurred by Pearle or any Subsidiary by
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Buyer as a result of the transactions contemplated by this Agreement. There are
no preemptive or other outstanding rights, subscriptions, options, warrants,
calls, contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatsoever under which
Seller, Pearle or its Subsidiaries is or may become obligated to vote, issue,
assign or transfer any shares of the capital stock, or rights or warrants to
acquire, or securities convertible into shares of capital stock, of PSC or any
of its Subsidiaries.
Section 3.4 SUBSIDIARIES OF PEARLE. Schedule 3.4 hereto lists
the name of each subsidiary of Pearle in which Pearle owns, beneficially or of
record directly or indirectly, securities representing 50 percent (50%) or more
of the aggregate voting power (each a "Subsidiary," and, collectively, the
"Subsidiaries"), together with the jurisdiction of its organization and the
record and beneficial holder of all shares of such Subsidiary. The shares of
capital stock of each Subsidiary that are owned by Pearle or a Subsidiary, as
the case may be, are free and clear of all Encumbrances, other than such
Encumbrances which were incurred by Buyer or caused to be incurred by Buyer,
directly or indirectly, as a result of the transactions contemplated by this
Agreement; all such capital stock is duly authorized, validly issued, fully paid
and nonassessable and, except as set forth on Schedule 3.4 hereto, such shares
are the only shares of capital stock of such Subsidiaries issued and
outstanding. Each Subsidiary is a
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corporation duly organized, validly existing and (in jurisdictions recognizing
the concept of good standing) in good standing under the laws of its
jurisdiction of organization, has the power and authority to own or lease its
assets and to carry on its business substantially as it is now being conducted,
and is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the ownership or operation of its
properties and assets or the conduct of its business requires such
qualification, except where, individually or in the aggregate, the failure to be
so qualified would not be reasonably likely to have a Material Adverse Effect.
With respect to Pearle Holdings and each of its subsidiaries, there has been no
proposal made or resolution adopted (by the competent corporate body(ies)) for
the dissolution or liquidation of such company nor do any circumstances exist,
to the knowledge of Pearle, which may result in the dissolution or liquidation
of such company, and no proposal has been made or resolution adopted (by the
competent corporate body(ies)) for the statutory merger of such company with
another entity or for a splitting of such company, except where, individually or
in the aggregate, such dissolution or liquidation would not be reasonably likely
to have a Material Adverse Effect. Pearle does not own beneficially or of
record, directly or indirectly, an equity or other ownership interest in any
Person other than the Subsidiaries.
Section 3.5 FRANCHISE AGREEMENTS. All franchise
agreements between Pearle or its Subsidiaries and third parties
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as of the date hereof are hereinafter referred to as the Franchise Agreements.
Schedule 3.5(i) hereto lists substantially all Franchise Agreements, copies of
each of which, including any material addenda, modifications or side letters,
have previously been made available to Buyer. Except as set forth on Schedule
3.5(ii) or to the extent that such defects, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect, all of the
Franchise Agreements are valid and binding in accordance with their terms.
Pearle is in compliance in all respects with all of its obligations under the
Franchise Agreements and there exists, on the part of Pearle, no default with
respect to any Franchise Agreement, except for those defaults listed on Schedule
3.5(iii) hereto and such failures to comply and defaults which, individually or
in the aggregate, would not be reasonably likely to have a Material Adverse
Effect. Neither Pearle nor any Subsidiary has received notice of, and neither
Pearle nor any Subsidiary has knowledge of, any default by any other party under
any Franchise Agreement, except for those defaults listed on Schedule 3.5(iv)
hereto and those defaults which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect. Pearle is in compliance
with all laws, rules and regulations of all governmental authorities in
jurisdictions in which Pearle has franchises applicable to the sale of
franchises or the service and operation of a franchise system ("Franchise
Laws"), and the enforcement by Pearle or any Subsidiary of any Franchise
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Agreement in accordance with its terms will not violate any Franchise Law,
except where such noncompliance or enforcement, as the case may be, would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
Section 3.6 FINANCIAL INFORMATION. (a) Attached hereto as
Schedule 3.6 (a) is a copy of (i) the audited consolidated balance sheets of
Pearle and the Subsidiaries as of September 30, 1994 and September 30, 1995 and
the consolidated statements of operations, stockholder's equity and cash flows
for the fiscal years ended September 30, 1993, September 30, 1994 and September
30, 1995 (collectively, with the notes thereto and independent auditors report
therein, the "Audited Financial Information") and (ii) a copy of the pro forma
unaudited consolidated balance sheet (the "Balance Sheet") of Pearle and the
Subsidiaries as of June 30, 1996 and the related consolidated statements of
operations, stockholder's equity and cash flows for the nine months then ended
(collectively, with the notes thereto, the "Interim Financial Information"). The
Audited Financial Information and the Interim Financial Information (together,
the "Financial Information") have been prepared in accordance with U.S.
generally accepted accounting principles applied on a consistent basis (except
as may be noted therein), and present fairly, in all material respects, the
consolidated financial position of Pearle and its Subsidiaries as of September
30, 1994 and September 30, 1995 and June 30, 1996, respectively, and the
consolidated statements of operations, stockholder's equity and
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cash flows of Pearle and its Subsidiaries for the fiscal years ended September
30, 1993, September 30, 1994 and September 30, 1995 and the nine months ended
June 30, 1996, respectively, subject, in the case of the Interim Financial
Information, to normal year-end adjustments and the notes regarding the pro
forma adjustments reflected therein.
(b) Attached hereto as Schedule 3.6(b) is a copy of (a) the
audited consolidated balance sheets of Pearle Holdings and its subsidiaries as
of September 30, 1994 and September 30, 1995 and the consolidated statements of
operations for the fiscal years ended September 30, 1994 and September 30, 1995
and source of funds for the fiscal year ended September 30, 1995 (collectively,
with the notes thereto and the independent auditors' report thereon, the
"Audited BV Financial Information") and (b) a copy of the pro forma unaudited
consolidated balance sheet of Pearle Holdings and its subsidiaries as of June
30, 1996 and the related consolidated statements of operations and source of
funds for the nine months then ended (collectively, with the notes thereto, the
"Interim BV Financial Information"). The Audited BV Financial Information and
the Interim BV Financial Information (together, the "BV Financial Information")
have been prepared in accordance with Dutch generally accepted accounting
principles applied on a consistent basis (except as may be noted therein), and
present, in all material respects, a true and fair view of the financial
position and results of Pearle Holdings and its subsidiaries as of September 30,
1994, September 30, 1995 and
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June 30, 1996, respectively, and the results for the fiscal years ended
September 30, 1994 and September 30, 1995 and the nine months ended June 30,
1996, respectively, subject, in the case of the Interim BV Financial
Information, to normal year-end adjustments and the notes regarding the pro
forma adjustments reflected therein.
Except as set forth in Schedule 3.6(a) or (b) or Schedule 3.8,
from and after October 1, 1995, there has not been any change by Pearle or
Pearle Holdings in accounting principles (including tax accounting principles),
practices or methods.
Section 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth in or provided for and fully reserved against in the Financial Information
or the BV Financial Information or as set forth in Schedule 3.7 hereto, there
are no debts, liabilities or obligations, whether accrued, contingent, absolute,
determined, determinable or otherwise (collectively, the "Liabilities"), of
Pearle or the Subsidiaries except for: (i) Liabilities that have arisen in the
ordinary and usual course of business consistent with past practice since June
30, 1996, none of which, alone or in the aggregate would be likely to have a
Material Adverse Effect, (ii) intercompany accounts between Pearle or the
Subsidiaries and Seller or its Affiliates and (iii) Liabilities incurred by
Buyer or caused to be incurred by Pearle or any Subsidiary by Buyer as a result
of the transactions contemplated by this Agreement.
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Section 3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
set forth in Schedule 3.6(a), Schedule 3.6(b), Schedule 3.8 or Schedule 3.12
hereto, from and after July 1, 1996 Pearle and the Subsidiaries have conducted
their businesses only in, and have not engaged in any material transaction other
than according to, the ordinary and usual course of such businesses consistent
with past practice and there has not been (i) any change in the financial
condition, properties, business or results of operations of Pearle and the
Subsidiaries, except those changes that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect or (ii) any material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by Pearle or any of the Subsidiaries
not covered by insurance. Except as set forth in Schedule 3.6(a), 3.6(b) or
Schedule 3.8 hereto and except for increases or amendments in the ordinary and
usual course of business consistent with past practice or as required by law,
from and after October 1, 1995, there has not been any material increase in the
compensation payable or to become payable by Pearle or any Subsidiary to any of
their directors, officers or employees or any increase in the benefits under, or
adoption of, any bonus, insurance, pension or other employee benefit plan,
payment or arrangement, for or with any such directors, officers or employees.
Section 3.9 TITLE TO PROPERTIES; ABSENCE OF LIENS AND
ENCUMBRANCES, ETC. (a) All leases and subleases entered into by
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Pearle or its Subsidiaries as of the date hereof are hereinafter referred to as
the Lease Agreements. Schedule 3.9(a)(i) hereto lists substantially all Lease
Agreements, copies of each of which, including any material addenda,
modifications or side letters, have previously been made available to Buyer.
Schedule 3.9(a)(ii) hereto lists all properties owned by Pearle or the
Subsidiaries as of the date hereof (the "Owned Real Property"). Except as set
forth on Schedule 3.9(a)(iii) hereto, each of Pearle and the Subsidiaries has
good and, in the case of the Owned Real Property, marketable title to, or a
valid and binding leasehold interest in, all of the properties and assets owned
or leased by Pearle or any Subsidiary free and clear of any Encumbrances, except
for: (i) any Encumbrances reflected in the Financial Information or the BV
Financial Information; (ii) any Encumbrances incurred or created from and after
July 1, 1996 in the ordinary and usual course of business consistent with past
practice and which, alone or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect; (iii) any Encumbrances which, alone or in the
aggregate, would not materially adversely affect Pearle's ability to conduct its
business substantially as heretofore conducted; (iv) any Encumbrances for taxes,
assessments and other governmental charges not yet due and payable or due but
not delinquent or being contested in good faith by appropriate proceedings; (v)
any mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens and encumbrances arising in the ordinary and
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usual course of business consistent with past practice or being contested in
good faith by appropriate proceedings (the "Permitted Encumbrances"); and (vi)
any Encumbrances which are matters of public record or would be shown by a
current title report or survey or physical inspection, such as easements, quasi
easements, covenants, licenses, rights of way, land use, zoning or other legal
requirements, ordinances or plans, which, alone or in the aggregate, would not
be reasonably likely to materially adversely affect Pearle's ability to conduct
its business substantially as heretofore conducted.
(b) Except as set forth on Schedule 3.9(b) hereto, neither
Pearle nor any Subsidiary is in default under any leases (including, without
limitation, the Lease Agreements) under which Pearle or any Subsidiary is the
lessee of real or personal property, and no event has occurred which, with
notice or lapse of time, or both, would constitute such a default, or permit
termination, modification or acceleration under any such lease, except defaults
or events which, alone or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect.
Section 3.10 LITIGATION. Except as set forth in Schedule 3.10
hereto, there are, as of the date hereof, no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of Pearle, threatened against
Pearle or any Subsidiary or any of their respective properties or assets at law,
in equity or otherwise, in, before, or by, any court or governmental agency or
authority.
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Section 3.11 COMPLIANCE WITH LAW. Except as set forth in
Schedule 3.11, the business of Pearle and the Subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, and all governmental approvals, permits and licenses required to conduct
the business (including, without limitation, the franchise business) of Pearle
and the Subsidiaries have been obtained and are in full force and effect and are
being complied with in all respects, except for any violations or noncompliance
which, alone or in the aggregate, do not and would not be reasonably likely to
have a Material Adverse Effect; it being understood that nothing in this
representation is intended to address any compliance issue that is (x) related
to any Environmental Law or (y) the subject of any other representation or
warranty set forth herein.
Section 3.12 CONTRACTS. Except as set forth in Schedule 3.12
and except for contracts entered into by Buyer or caused by Buyer to be entered
into by Pearle or any Subsidiary in connection with this Agreement and the
transactions contemplated hereby, neither Pearle nor any Subsidiary is a party
to, or bound by, any contract of any kind which is to be performed or as to
which Pearle or any Subsidiary may have any right or obligation after the
Closing Date other than (i) purchase orders, franchise agreements, leases and
general contracts and subcontracts relating to store construction which have
been entered into in the ordinary and usual course of business consistent with
past practice, or (ii) any other contracts entered into in the
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ordinary and usual course of business consistent with past practice pursuant to
which Pearle or the Subsidiary, as the case may be, is or would be obligated to
expend, or entitled to receive, less than $100,000 in any 12-month period or
which is subject to cancellation by Pearle or the Subsidiary, as the case may
be, upon less than three (3) months' notice, without incurring any expenditure
and without penalty or increased cost. All contracts to which Pearle or any
Subsidiary is a party constitute valid and binding obligations of Pearle or any
Subsidiary, as the case may be, enforceable against Pearle or any Subsidiary, as
the case may be, in accordance with their respective terms (subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles) and in full force and effect, except for such
contracts the invalidity or unenforceability of which alone or in the aggregate
would not be reasonably likely to have a Material Adverse Effect. There is not
any pending or, to the knowledge of Pearle, threatened cancellation, existing
default, or event under any such contract which, after notice or lapse of time,
or both, would constitute a default, except for such pending or threatened
cancellations, existing defaults or events which, alone or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect.
Section 3.13 CONSENTS AND APPROVALS. Except as set
forth in Schedule 3.13 or as required by the HSR Act, the
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execution, delivery and performance of this Agreement will not require Seller,
Pearle, or any of its Subsidiaries to obtain any consent, waiver, authorization
or approval of, or make any filing with or give notice to, any Person, except
for such consents, waivers, authorizations or approvals (other than those
relating to any contract required to be disclosed on Schedule 3.12 or any
governmental permit or license the failure of which to maintain would impair the
ability of Pearle or any Subsidiary to conduct their businesses in the ordinary
and usual course consistent with past practice) which the failure to obtain
would not be reasonably likely to have a Material Adverse Effect.
Section 3.14 TAX MATTERS. (a) Except as set forth in Schedule
3.14 hereto, as reflected in the Financial Information or BV Financial
Information or as would not be reasonably likely to have a Material Adverse
Effect, (i) all Tax Returns required to be filed prior to the Closing Date with
respect to the Seller's Group or Pearle and/or any of the Subsidiaries have been
duly filed, (ii) all Taxes shown to be due on such Tax Returns have been paid in
full, (iii) no deficiencies for any Taxes with respect to such Tax Returns have
been asserted and (iv) no waivers of statutes of limitation have been given or
requested with respect to any Taxes with respect to such Tax Returns. Except as
set forth on Schedule 3.14 hereto, no material unresolved issue has been raised
either in writing or, to Seller's knowledge, other than in writing, by any
governmental authority in the course of any audit with respect to Taxes on the
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income, assets, operations, activities, etc. of Pearle or any
Subsidiary.
(b) The information set forth on Schedule 3.14 identifying, as
of June 30, 1996, the tax bases of Pearle in the Subsidiaries organized under
the laws of the Netherlands and the tax bases of Pearle Holdings in its
subsidiaries, the tax bases of the assets of the Subsidiaries organized under
the laws of the Netherlands, the foreign tax credits available to Pearle and the
earnings and profits of Pearle Holdings and its subsidiaries is true and correct
in all material respects.
Section 3.15 INTELLECTUAL PROPERTY.
(a) Schedule 3.15(a) sets forth a list and brief
description (including where applicable the country of registration) of (i) all
patents, patent applications, registered trademarks, trademark applications,
registered copyrights and copyright applications that are owned by Pearle or the
Subsidiaries and used in their businesses and (ii) all agreements under which
Pearle or the Subsidiaries are licensed or otherwise permitted to use
Intellectual Property. Except as set forth on Schedule 3.15(a), Pearle or a
Subsidiary owns all right, title and interest in and to all Intellectual
Property owned or used (other than pursuant to agreements under which Pearle or
the Subsidiaries are licensed or otherwise permitted to use such Intellectual
Property) by Pearle or any Subsidiary, free and clear of all Encumbrances
(except Permitted Encumbrances).
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(b) To the knowledge of Pearle (i) except as set forth in
Schedule 3.15(b)(i), with respect to Intellectual Property of Pearle and the
Subsidiaries other than trademarks, no product (or component thereof or process)
used, sold or manufactured by Pearle and the Subsidiaries infringes on or
otherwise violates the valid and enforceable patents of any other Person or any
confidentiality obligation enforceable against Pearle, (ii) with respect to the
trademarks listed in Schedule 3.15(b)(ii) (the "Major Marks"), except as set
forth in Schedule 3.15(b)(iii), there are no restrictions that would materially
impair the use of the Major Marks in connection with the business of Pearle and
the Subsidiaries and the Major Marks, to the knowledge of Pearle, do not
infringe upon or otherwise violate the valid and registered trademarks of any
other Person, and (iii) no Person is challenging or, to the knowledge of Pearle,
infringing or otherwise violating the Intellectual Property of Pearle and the
Subsidiaries (excluding trademarks included on Schedule 3.15(b)(ii)), except in
each case for challenges, infringements or violations, which alone or in the
aggregate, would not be reasonably likely to materially adversely affect
Pearle's ability to conduct its business substantially as heretofore conducted.
Section 3.16 COLLECTIVE BARGAINING AGREEMENTS. Except
as set forth in Schedule 3.16, neither Pearle nor any Subsidiary
is a party to or bound by any labor agreement or collective
bargaining agreement respecting its employees, nor is there
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pending, or to the knowledge of Pearle threatened, any strike, walkout or other
work stoppage or any union organizing effort by or respecting the employees.
From and after October 1, 1995, Pearle and the Subsidiaries have not experienced
any material labor dispute.
Section 3.17 EMPLOYEE BENEFITS.
(i) Schedule 3.17(i) hereto contains a true and complete
list of each employee benefit plan subject to ERISA and each other material
employee benefit, stock purchase, stock option, severance, change-in-control,
fringe benefit, collective bargaining, bonus, incentive and deferred
compensation plan, agreement, program, policy or other arrangement, with respect
to which current or former employees or directors of Pearle or the Subsidiaries
participate, which is maintained, sponsored or contributed to by Pearle or the
Subsidiaries, and each employment agreement maintained by Pearle or any of the
Subsidiaries that is not terminable on less than 90 days' notice without any
payment (other than agreements mandated by foreign statute ("FSAs")) by Pearle
or any of the Subsidiaries. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company Plans".
(ii) With respect to each Company Plan, Seller has
delivered or made available to Buyer a current, accurate and complete copy (or,
to the extent no such copy exists, an accurate description) thereof and, to the
extent applicable: (A) any related trust agreement or other funding instrument;
(B) the most
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recent determination letter; (C) any summary plan description; and (D) for the
three most recent plan years (I) the Form 5500 and attached schedules, (II)
audited financial statements and (III) actuarial valuation reports.
(iii) Except with respect to any "Grand Met Plan which
will not be available after the sale," identified on Schedule 3.17(i), all
Company Plans and all FSAs are in substantial compliance with all applicable
laws, including the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the laws of Puerto Rico, Canada and the Netherlands,
and each Company Plan and each FSA has been established, operated and
administered in all material respects, in accordance with all applicable laws,
including ERISA and the Code and the laws of Puerto Rico, Canada and the
Netherlands. Pearle has received or has requested from the IRS within the
applicable remedial amendment period a favorable determination letter from the
IRS with respect to the qualified status of each Company Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and that is intended to be qualified under Section 401(a) of the
Code, and nothing has occurred, whether by action or failure to act, that would
be reasonably likely to cause the revocation of such letter. Except as set forth
in Schedule 3.10 hereto, there is, as of the date hereof, no pending or, to the
knowledge of Pearle, threatened action, suit, claim or investigation relating to
the Company Plans (other than any "Grand Met plan which will not be available
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after the sale," identified on Schedule 3.17(i)) or the FSAs and, to the
knowledge of Pearle, no facts exist which could give rise to any such action,
suit, claim or investigation. Except with respect to any taxes or penalties
which would not be reasonably likely to result in a material liability, neither
Pearle nor any of the Subsidiaries has engaged in any transactions with respect
to any Company Plan or any FSA that could be reasonably likely to subject Pearle
or any of the Subsidiaries to a tax or penalty imposed by Section 4975 of the
Code or any other applicable rule, regulation or law of any federal, state,
local or foreign governmental authority.
(iv) Except as set forth on Schedule 3.17(iv), as of
the date hereof, no liability under Title IV of ERISA has been or is expected to
be incurred by Pearle or any of the Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), other than the payment of premiums to the Pension Benefit Guaranty
Corporation, or with respect to any "multiemployer plan" (within the meaning of
Section 3(37) of ERISA) contributed to by Pearle or any of the Subsidiaries or
any ERISA Affiliate. Neither Pearle nor any of the Subsidiaries has contributed,
or been obligated to
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contribute, to a single-employer plan or a multiemployer plan at any time during
the six-year period prior to the date hereof.
(v) Except as set forth on Schedule 3.17(v), all
contributions required to be made by Pearle or any of the Subsidiaries under the
terms of any Company Plan or FSA have been timely made or have been reflected in
the Financial Information or the BV Financial Information. Neither Pearle nor
any of the Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code. Except as set forth on Schedule 3.17(v), no
Pension Plan that is maintained or contributed to by Pearle or any of the
Subsidiaries has or has incurred an accumulated funding deficiency within the
meaning of Section 302 of ERISA or Section 412 of the Code, nor has any waiver
of the minimum funding standards of Section 302 of ERISA or Section 412 of the
Code been requested of or granted by the IRS with respect to any such Pension
Plan, nor has any lien in favor of any such Pension Plan arisen under Section
412(n) of the Code or Section 302(f) of ERISA.
(vi) Except as set forth on Schedule 3.17(vi) or as
may be required by law, neither Pearle nor any of the Subsidiaries has any
obligations for retiree health and life benefits under any Company Plan.
(vii) Except as set forth on Schedule 3.17(vii), the
consummation of the transactions contemplated by this Agreement
will not (x) entitle any of the directors, employees or former
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employees (or their beneficiaries or dependents) of Pearle or any of the
Subsidiaries to severance pay or (y) accelerate or provide any other rights or
credits under, or increase the amount payable or trigger any other obligation
pursuant to, any of the Company Plans (other than any "Grand Met plan which will
not be available after the sale," as identified on Schedule 3.17(i)).
(viii) Except with respect to any noncompliance which would
not be reasonably likely to result in a material liability, with respect to each
group health plan that is subject to Section 4980B of the Code, Pearle and each
of the Subsidiaries have complied in all material respects with the continuation
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA and with respect to each group health plan subject to Section 1862(b)(1)
of the Social Security Act (the "Act"), Pearle and each of its Subsidiaries have
complied with the secondary payer requirement of such Act.
(ix) Except as set forth on Schedule 3.17(ix), no
Company Plan is funded through a "welfare benefit fund" as defined in Section
419(e) of the Code, and no benefits under any Company Plan are provided through
a voluntary employees' beneficiary association (within the meaning of Section
501(c)(9) of the Code) or a supplemental unemployment benefit plan (within the
meaning of Section 501(c)(17) of the Code) and, to the knowledge of Pearle, no
material liability is reasonably expected to be incurred due to excise taxes or
other penalties resulting from any such method of funding or provision of
benefits.
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(x) To the knowledge of Pearle, there are no leased employees
within the meaning of Section 414(n) of the Code who perform services for Pearle
or any of the Subsidiaries in a magnitude which would reasonably be expected to
result in the disqualification of any Company Plan under Section 401(a) of the
Code.
(xi)With respect to any insurance policy providing for the
benefits under any Company Plan or FSA, except as set forth on Schedule 3.17
(xi) or would not result in a material liability: (x) there is no liability of
Pearle or any of the Subsidiaries in the nature of a retroactive or
retrospective rate adjustment, loss sharing arrangement, or other actual or
contingent liability, nor would there be any such liability if such insurance
policy were terminated on the date hereof; and (y) to the knowledge of Pearle,
no insurance company issuing such a policy is in receivership, conservatorship,
liquidation or similar proceedings and no such proceedings with respect to any
insurer are imminent.
(xii) To the knowledge of Pearle except as set forth on
Schedule 3.17(xii), the execution and performance of this Agreement will not
result in payments (or transfers of property) being made by Pearle or any of the
Subsidiaries to any "disqualified individual" (within the meaning of Section
280G(c) of the Code); which payments: (x) constitute "excess parachute payments"
(within the meaning of Section 280G(d)(1) of the Code),
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or (y) result in the imposition of any excise tax under
Section 4999 of the Code.
Section 3.18 ENVIRONMENTAL MATTERS. Except as disclosed in
Schedule 3.18, Pearle and the Subsidiaries are and have been (i) in substantial
compliance with applicable Environmental Laws; (ii) have not received any
written notices from any Person alleging the violation of, or any claim or
liability under, any applicable Environmental Law; (iii) are not the subject of
any court order, administrative order or decree arising under any Environmental
Law; (iv) have not generated, stored, used, emitted, discharged or disposed of
any Hazardous Substance that requires reporting, removal, remedial action or
other response under applicable Environmental Laws; and (v) to Pearle's
knowledge, do not own, lease or operate any real property (and any buildings,
structures or materials on such real property) that contains or includes any
asbestos, polychlorinated biphenyls, lead paint, urea formaldehyde, underground
storage tanks or sumps.
Section 3.19 INSURANCE. Schedule 3.19 hereto lists all
insurance policies maintained by or on behalf of Pearle or any of the
Subsidiaries. All such insurance policies are in full force and effect, all
premiums with respect thereto have been paid to the extent due and no notice of
cancellation or termination has been received with respect to any such policy
(other than policies that have been replaced or are intended to be replaced
prior to the expiration thereof by policies providing
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substantially the same coverage), except where any termination of such policies
or the failure to pay premiums with respect thereto would not be reasonably
likely to have a Material Adverse Effect. Except as set forth on Schedule 3.10
hereto under the heading "Insurance Cases", as of the date hereof, there is no
claim by or on behalf of Pearle or any Subsidiary pending under any of such
policies as to which coverage has been denied or, to Pearle's knowledge, is
being disputed, except where any denial of coverage would not be reasonably
likely to have a Material Adverse Effect.
Section 3.20 IMPROPER PAYMENTS. To Pearle's knowledge, no
improper payment has been made by or on behalf of Pearle or any of the
Subsidiaries which is in violation of any applicable federal, state, local or
foreign law, rule or regulation, public disclosure of which would be reasonably
likely to have a Material Adverse Effect.
Section 3.21 WARRANTIES. All products manufactured or sold by
Pearle or any of the Subsidiaries have been in substantial conformity with
applicable contractual commitments and all express or implied warranties, except
as set forth on Schedule 3.10 or to the extent that nonconformity would,
individually or in the aggregate, not have a Material Adverse Effect. Schedule
3.21 contains an accurate summary of all written warranties offered by Pearle or
any of the Subsidiaries as of the date of this Agreement.
Section 3.22 CONDITION OF ASSETS. Except as set forth
on Schedule 3.22, the personal property owned or leased by Pearle
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or any of the Subsidiaries and the improvements and structures located on the
real property owned or leased by Pearle or any of the Subsidiaries and the
fixtures and appurtenances thereto have been reasonably maintained in the
ordinary course of business, are in working order, reasonable wear and tear
excepted, are reasonably suitable for the uses for which they are intended and
conform to the requirements of applicable law, except in all cases to the extent
that any breach, failure or inaccuracy, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect.
Section 3.23 BROKERS AND FINDERS. Other than Morgan Stanley &
Co. Incorporated ("Morgan Stanley"), Seller, Pearle and the Subsidiaries have
not employed any broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement who would be entitled to a
broker's, finder's or similar fee or commission in connection therewith or upon
the consummation thereof, or if the Closing does not occur. Seller agrees to
bear all costs it incurs, including fees and expenses of Morgan Stanley, in
connection with the transactions contemplated by this Agreement unless otherwise
expressly provided herein.
Section 3.24 NO OTHER REPRESENTATIONS OR WARRANTIES. Except
for the representations and warranties contained in this Article III, neither
Seller, Pearle, the Subsidiaries nor any other Person makes any other express or
implied representation or warranty on behalf of Seller, Pearle, or the
Subsidiaries.
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date (except that representations and warranties that are
made as of a specific date need be true only as of such date) as follows:
Section 4.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer has
been duly incorporated, is validly existing and is in good standing under the
laws of its jurisdiction of incorporation, with full power and authority to
enter into this Agreement and perform its obligations hereunder. This Agreement
has been duly authorized, executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and no other proceedings on
the part of Buyer are necessary to authorize this Agreement and the consummation
of transactions contemplated hereby. Neither the execution and delivery of this
Agreement nor compliance by Buyer with its terms and provisions will (a) violate
any provision of the certificate of incorporation or by-laws of Buyer; (b)
subject to obtaining the consents referred to in Section 4.5, conflict with, or
result in the breach of, or constitute a default under, or result in the
termination, cancellation or acceleration (whether after the giving of notice
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or the lapse of time or both) of any right or obligation of Buyer, or to a loss
of any benefit to which Buyer is entitled under, any contract, franchise,
license, agreement, lease, indenture or other instrument to which Buyer is a
party; or (c) assuming compliance with the matters set forth in Sections 3.13
and 4.5, to the knowledge of Buyer, violate or result in a breach of or
constitute a default under any law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or governmental authority to
which Buyer is subject, except where, in all cases, such a violation would not
be reasonably likely to prohibit or materially impair or delay Buyer's ability
to perform its obligations under this Agreement.
Section 4.2 BROKERS AND FINDERS. Other than Houlihan Lokey
Howard & Zukin and Smith Barney Inc., Buyer has not employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or similar fee or
commission in connection therewith or upon the consummation thereof, or if the
Closing does not occur. Buyer agrees to bear all costs it incurs, including fees
and expenses of Houlihan Lokey Howard & Zukin and Smith Barney Inc., in
connection with the transactions contemplated by this Agreement unless otherwise
expressly provided herein.
Section 4.3 FINANCIAL CAPABILITY. Schedule 4.3 hereto
sets forth the source of funds which Buyer contemplates it has or
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will have available to it to purchase the PSC Shares and Pearle Shares in
accordance with the terms and conditions contemplated by this Agreement,
including copies of any and all commitments or agreements with financial
institutions to provide funding for such purchase and any "highly confident"
letters with respect to Buyer's ability to obtain such funding. On the Closing
Date, Buyer will have sufficient funds to purchase the PSC Shares and Pearle
Shares on the terms and conditions contemplated by this Agreement.
Section 4.4 SECURITIES ACT. Buyer is acquiring the PSC Shares
and Pearle Shares solely for the purpose of investment and not with a view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act. Buyer acknowledges that the PSC Shares and Pearle Shares are not
registered under the Securities Act or any applicable state securities law, and
that the PSC Shares and Pearle Shares may not be transferred or sold except
pursuant to the registration provisions of such Securities Act or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations as applicable.
Section 4.5 CONSENTS AND APPROVALS. Except as required by the
HSR Act, the execution, delivery and performance of this Agreement will not
require Buyer to obtain any consent, waiver, authorization or approval of, or
make any filing with or give notice to, any Person.
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Section 4.6 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article IV, neither Buyer
nor any other Person makes any other express or implied representation or
warranty on behalf of Buyer.
ARTICLE V
---------
TAX AND CERTAIN EMPLOYEE MATTERS
--------------------------------
Section 5.1 TAX SHARING. As of the Closing Date, any and all
tax sharing agreements and arrangements shall be cancelled as between Seller and
the Continuing Affiliates, on the one hand, and Pearle and its Subsidiaries on
the other, and no further payments shall be made by Pearle or any of its
Subsidiaries to Seller or any Continuing Affiliate, or by Seller to Pearle or
its Subsidiaries, pursuant thereto.
Section 5.2 338 ELECTION, TAX INDEMNIFICATION. (a) Pearle,
along with Seller and its Continuing Affiliates, and Buyer shall make a joint
election under Section 338(h)(10) of the Code with respect to the purchase of
the PSC Shares and under any similar provisions of state or foreign law. In
consideration of Buyer making such election, 60 days after the Closing Date
Seller shall pay to Buyer $3,500,000. Seller represents that the sale by Pearle
of the PSC Shares is eligible for such election. As soon as practicable after
the date hereof, Seller (and, to the extent required, any Continuing Affiliate)
shall prepare, subject to Buyer's approval, for execution by Pearle and Buyer on
the Closing Date, all IRS Forms, as well as similar state and foreign forms,
necessary to effect such election. Seller and Buyer agree
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that, for purposes of all reports and returns with respect to Taxes, allocations
among the assets of PSC shall be made, subject to the provisions of applicable
law, in accordance with the fair market values of such assets.
(b) Buyer and Seller agree that no election shall be made
under Section 338(h)(10) of the Code or under any similar provisions of state or
foreign law with respect to the purchase of the Pearle Shares.
(c) (i) Seller hereby agrees to indemnify Buyer and hold it
harmless from all liability for Taxes imposed on Pearle and its Subsidiaries
(including without limitation liability under Treasury Regulations section
1.1502-6 or any comparable provision of state or foreign law) for any taxable
year or period ending on or before the Closing Date and, in the case of any
taxable year or period beginning before and ending after the Closing Date, the
portion of such period ending on and including the Closing Date (the
"Pre-Closing Tax Period"), which, for the avoidance of doubt, includes in all
cases all Taxes imposed on Pearle and its Subsidiaries in respect of the sale
of the PSC Shares, the joint election under Section 338(h)(10) of the Code or
under any similar provisions of state or foreign law, and any transaction or
transactions (including transfers of assets) related to either, and (ii) if
Buyer or any Affiliate, within two (2) years following the Closing Date, sells,
in one or more transactions, more than 50% of the capital stock of Pearle
Holdings and/or assets (outside the ordinary course of business) of Pearle
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Holdings and its subsidiaries and distributes the proceeds thereof to Pearle,
Seller agrees to pay Buyer an amount equal to the lesser of (x) the incremental
Taxes imposed upon Buyer or any of its Affiliates by reason of such sale and/or
distribution (after giving effect to any foreign tax credits utilizable by Buyer
or any of its Affiliates or (y) $15,000,000; except to the extent, with respect
to clause (i), such Taxes are reflected as a liability on the Closing Date
Balance Sheet. Seller shall be entitled to all refunds of such Taxes described
in this Section 5.2(c) (except to the extent, with respect to clause (i), such
Taxes are reflected as a liability on the Closing Date Balance Sheet).
(d) Buyer hereby agrees to indemnify Seller and its Affiliates
and hold them harmless from all liability for Taxes imposed on Pearle and its
Subsidiaries for any taxable year or period beginning after the Closing Date
and, in the case of any taxable year or period beginning before and ending after
the Closing Date, the portion of such period beginning after the Closing Date.
Buyer shall be entitled to all refunds of such Taxes.
(e) Whenever it is necessary to determine liability for Taxes
for a portion of a taxable year or period beginning before and ending after the
Closing Date, the determination shall be made assuming that there was a closing
of the books at 11:59 p.m. (local time) on the Closing Date, except that Taxes
(other than Taxes measured by net income or gains), exemptions,
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allowances or deductions that are calculated on an annual basis shall be
apportioned on a time basis.
(f) For purposes of this Article V, a taxable year or period,
or portion thereof (and any phrase of similar import), includes any span of time
(i) for which income is to be determined, with respect to any Tax based on or
measured by income or (ii) during or at the end of which assets are to be
measured, with respect to any Tax based on or measured by assets.
Section 5.3 TAX RETURNS. Seller shall file or cause to be
filed when due all Tax Returns that are required to be filed by or with respect
to Pearle and its Subsidiaries for taxable years or periods ending on or before
the Closing Date and shall pay any Taxes due in respect of such Tax Returns, and
Buyer shall file or cause to be filed when due all Tax Returns that are required
to be filed by or with respect to Pearle and its Subsidiaries for taxable years
or periods ending after the Closing Date and shall remit any Taxes due in
respect of such Tax Returns. Seller shall pay Buyer the Taxes for which Seller
is liable pursuant to Section 5.2(c) but which are payable with Tax Returns to
be filed by Buyer pursuant to the previous sentence not less than 10 days prior
to the due date for the filing of such Tax Returns; provided that an advance
payment calculated by Buyer in respect of any indemnification pursuant to
Section 5.2(c)(ii) shall be made by Seller to Buyer within fifteen (15) days
following the transaction or transactions triggering such indemnification, and
Seller or Buyer, as applicable, shall pay
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over to the other any difference between such advance payment and the
indemnification calculated by reference to the Tax Returns for the taxable year
that includes the triggering transaction or transactions not less than 10 days
prior to the due date for the filing of such Tax Return.
Section 5.4 CONTEST PROVISIONS. Buyer shall promptly notify
Seller in writing upon receipt by Buyer, any of its affiliates or Pearle of
notice of any pending or threatened audits or assessments which may materially
affect the tax liabilities of Pearle for which Seller would be required to
indemnify Buyer pursuant to Section 5.2(c), provided that failure to comply with
this provision shall not affect Buyer's right to indemnification hereunder.
Seller shall have the sole right to represent Pearle's interests in any tax
audit or administrative or court proceeding relating to taxable periods ending
on or before the Closing Date, and to employ counsel of its choice at its
expense; Seller shall keep Buyer informed on a timely basis regarding the
prosecution of such audit or proceeding. Notwithstanding the foregoing, Seller
shall not be entitled to settle, either administratively or after the
commencement of litigation, any claim for Taxes which could adversely affect the
liability for Taxes of the Buyer or Pearle for any period after the Closing Date
to any extent (including, but not limited to, the imposition of income tax
deficiencies, the reduction of asset basis or cost adjustments, the lengthening
of any amortization or depreciation periods, the denial of amortization or
depreciation
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deductions, or the reduction of loss or credit carryforwards) without the prior
written consent of Buyer. Such consent shall not be unreasonably withheld, and
shall not be necessary to the extent that Seller has indemnified the Buyer (and
Buyer agrees that it has been so indemnified) against the effects of any such
settlement.
Seller shall be entitled to participate at its expense in the
defense of any claim for Taxes for a year or period ending after the Closing
Date which may be the subject of indemnification by Seller pursuant to Section
5.2(c) and, with the written consent of Buyer, and at Seller's sole expense, may
assume the entire defense of such tax claim. Neither Buyer nor Pearle may agree
to settle any tax claim for the portion of the year or period ending on the
Closing Date which may be the subject of indemnification by Seller under Section
5.2(c) without the prior written consent of Seller, which consent shall not be
unreasonably withheld.
Section 5.5 INFORMATION TO BE PROVIDED BY BUYER. With respect
to the taxable year of Seller within which the Closing Date occurs, Buyer shall
promptly cause Pearle to prepare and provide to Seller, at Seller's expense, a
package of tax information materials (the "Tax Package"), which shall be
completed in accordance with past practice including past practice as to
providing the information, schedules and work papers and as to the method of
computation of separate taxable income or other relevant measure of income of
Pearle. Buyer
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shall cause the Tax Package for the portion of the taxable period ending on the
Closing Date to be delivered to Seller within one hundred eighty (180) days
after the Closing Date.
Section 5.6 ASSISTANCE AND COOPERATION. After the Closing
Date, each of Seller and Buyer shall at the expense of the party which is either
responsible for the preparation or filing of any Tax Return under this Article V
or for the liability under this Article V, as applicable:
(i) assist (and cause their respective affiliates to
assist) the other party in preparing any Tax Returns or reports which such other
party is responsible for preparing and filing in accordance with this Article V;
(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding, any Tax Returns of
Pearle or any Subsidiary;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of Pearle or any Subsidiary;
(iv) provide timely notice to the other in writing of
any pending or threatened tax audits or assessments of Pearle or any Subsidiary
for taxable periods for which the other may have a liability under this Article
V; and
(v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any tax audit or
information request with respect to any
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taxable periods for which the other may have a liability under this Article V.
Section 5.7 POST-CLOSING ACTIONS WHICH MAY AFFECT THE SELLER'S
LIABILITY FOR TAXES. Except to the extent required by law, neither Buyer,
Pearle, nor any Affiliate of either shall, without the prior written consent of
the Seller which consent shall not be unreasonably withheld, (i) amend any Tax
Return filed by, or with respect to, Pearle or any of its Subsidiaries for any
taxable period, ending on or before the Closing Date, or (ii) carryback any net
operating loss, capital loss, excess foreign tax credit, or other similar
losses, deductions or credits derived with respect to any period beginning after
the Closing Date to any taxable year of Pearle or any of its Subsidiaries ending
on or before the Closing Date.
Section 5.8 INTENTIONALLY DELETED.
Section 5.9 COMPUTATION OF LOSSES SUBJECT TO INDEMNIFICATION.
The amount of any liability or loss for which indemnification is provided under
Section 5.2 (other than Section 5.2(c)(ii)) shall be computed net of the present
value (based on Buyer's cost of capital) of any Tax benefit or savings realized
or to be realized in the future with respect to such liability or loss.
Section 5.10 TRANSFER TAXES. Seller shall be liable for any
transfer taxes arising from Pearle's sale of the PSC Shares and any assets
transferred in connection therewith. Buyer
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and Seller shall each be liable for one-half of any transfer taxes arising from
the sale of the Pearle Shares.
Section 5.11 CERTAIN EMPLOYEE PAYMENT OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary, Seller
and the Continuing Affiliates shall be responsible for, shall pay and shall
indemnify, defend and hold harmless Buyer and its Affiliates (including, after
the Closing Date, Pearle and the Subsidiaries) against and in respect of all
Losses arising out of any of the following:
(a) Any retention payment obligation created before the
Closing Date (whether or not payable on or before the Closing Date or
thereafter) with respect to any directors or employees of Pearle or any of its
Affiliates, including, without limitation, the retention payments referred to in
Item 9 of Schedule 3.7;
(b) Any severance payment obligation created before the
Closing Date with respect to termination of any executive committee members
named in Schedule 5.11(b);
(c) Any obligation for postretirement medical benefits for any
retired employees or covered dependents to the extent that the amount of any
such obligation exceeds any accrued liability on the Closing Date Balance Sheet;
(d) Any obligation arising out of any plan identified on
Schedule 3.17(i) as "a Grand Met plan which will not be available after the
sale"; and
(e) Any obligation for accumulated liability for accrued
vacation obligation under the vacation policy for periods
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prior to January 1, 1996 (whether or not payable on or before the Closing Date
or thereafter) to the extent that the amount of any such obligation exceeds any
accrued liability on the Closing Date Balance Sheet.
Section 5.12 SURVIVAL OF OBLIGATIONS. The obligations of the
parties set forth in this Article V shall be unconditional and absolute and
shall remain in effect without limitation as to time.
ARTICLE VI
----------
CERTAIN COVENANTS AND AGREEMENTS
OF SELLER AND BUYER
--------------------------------
Section 6.1 ACCESS AND INFORMATION. (a) Seller shall permit
Buyer and its representatives after the date of execution of this Agreement to
have reasonable access, during regular business hours and upon reasonable
advance notice, to the real property owned or leased by Pearle and the
Subsidiaries and to the officers and employees of Pearle and the Subsidiaries,
subject to Seller's reasonable rules and regulations, and shall furnish, or
cause to be furnished, to Buyer any financial and operating data and other
information that is available with respect to the business and properties of
Pearle and the Subsidiaries as Buyer shall from time to time reasonably request;
PROVIDED THAT the foregoing shall not require Seller to permit any inspection,
or to disclose any information, that in its reasonable judgment would result in
the disclosure of any trade secrets of third parties or violate any of Seller's,
Pearle's or
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any of the Subsidiaries' obligations with respect to confidentiality if Seller
shall have used reasonable best efforts to obtain the consent of such third
party to such inspection or disclosure. Seller will assist Buyer and its
representatives in gaining access to the franchisees, the associate store owners
and the licensees of Pearle and the Subsidiaries.
(b) In the event of the termination of this Agreement, Buyer
at its own expense shall promptly deliver (without retaining any copies thereof)
to Seller, or (at Seller's option) confirm in writing to Seller that it has
destroyed all information furnished to Buyer or its representatives by Seller,
Pearle, the Subsidiaries or any of their respective agents, employees or
representatives as a result hereof or in connection herewith, whether so
obtained before or after the execution hereof, and all analyses, compilations,
forecasts, studies or other documents prepared by Buyer or its representatives
which contain or reflect any such information. Buyer shall at all times prior to
the Closing Date, and in the event of termination of this Agreement, cause any
information so obtained to be kept confidential and will not use, or permit the
use of, such information in its business or in any other manner or for any other
purpose except as contemplated hereby.
(c) All information provided or obtained pursuant to clause
(a) above shall be held by Buyer in accordance with and subject to the terms of
the confidentiality agreement, dated
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May 21, 1996, between Buyer and Grand Metropolitan PLC (the "Confidentiality
Agreement").
Section 6.2 REGISTRATIONS, FILINGS AND CONSENTS.
(a) Seller and Buyer will cooperate and use their
respective reasonable best efforts to fulfill the conditions precedent to the
other party's obligations hereunder, including but not limited to, securing as
promptly as practicable all consents, approvals, waivers and authorizations
required, necessary or desirable in connection with the transactions
contemplated hereby; PROVIDED THAT Buyer shall not have any obligation to
undertake any financial obligation in connection therewith (other than that
associated with the filing of the Report or any actions contemplated by Section
6.2(b)). Buyer and Seller will promptly file documentary materials required by
the HSR Act, Environmental Laws and each of the other items listed in Section
3.13 and Section 4.5 and promptly file any additional information requested as
soon as practicable after receipt of request thereof; PROVIDED THAT each party
shall duly file with the FTC and the Antitrust Division the notification and
report form (the "Report") required under the HSR Act with respect to the sale
and purchase of PSC Shares and Pearle Shares no later than three Business Days
after the date hereof.
(b) Without limiting the provisions set forth in paragraph (a)
above, Buyer shall use its reasonable best efforts to take or cause to be taken
all actions necessary, proper or advisable to obtain any consent, waiver,
approval or
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authorization relating to the HSR Act that is required for the consummation of
the transactions contemplated by this Agreement.
Section 6.3 CONDUCT OF BUSINESS. Prior to the Closing, and
except as otherwise expressly permitted by this Agreement or consented to or
approved by Buyer in writing, Seller covenants and agrees that:
(a) Pearle and the Subsidiaries shall, and Seller shall cause
Pearle and the Subsidiaries to, operate their business only in the
ordinary and usual course consistent with past practice and use
reasonable best efforts which are consistent with past practice to
preserve their properties and business and relationships with
franchisees, associate store owners, employees, suppliers, customers
and other Persons with whom they have commercial dealings, of Pearle
and the Subsidiaries;
(b) Seller shall cause insurance coverage at presently
existing levels to be maintained on behalf of Pearle and the
Subsidiaries so long as such insurance is available at commercially
reasonable rates;
(c) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) change or amend their
certificates of incorporation or by-laws (or comparable governing
instruments), (ii) authorize, issue or sell any shares of their capital
stock, or authorize, issue or sell any securities convertible into, or
options with respect to, or warrants to purchase or rights to subscribe
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for, any shares of their capital stock or enter into any agreement
obligating them to do any of the foregoing, or (iii) declare or set
aside for payment any dividends or other distributions to be paid after
the Closing; notwithstanding the foregoing, but subject to clause (iii)
above, Pearle and the Subsidiaries shall be permitted at all times
prior to the Closing Date to make distributions of cash to Seller
except to the extent of any applicable cash balances that Pearle or any
Subsidiary is required to maintain pursuant to any applicable rule,
regulation or law;
(d) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, directly or indirectly,
redeem, purchase or otherwise acquire any of the PSC Shares, Pearle
Shares or shares of any Subsidiary;
(e) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, merge or consolidate with or
into any other Person;
(f) Pearle and the Subsidiaries shall, and Seller shall cause
Pearle and the Subsidiaries to, (i) not approve any new capital
expenditures (other than those for cooling or heating units or
commitments identified on the Attachment to Item 4 of Schedule 3.7) in
excess of $50,000 individually and $500,000 in the aggregate; (ii) not
dispose of or incur, create or assume any Encumbrance on any individual
capital asset of Pearle or the Subsidiaries if the greater of the book
value and the fair market value of such capital asset
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exceeds $100,000 other than Permitted Encumbrances or pursuant to
current forecasts of Pearle's business; (iii) not incur any
indebtedness for money borrowed other than bank loans and overdrafts
that consist of issued and outstanding accounts payable and payroll
checks which have not been presented for payment or indebtedness
incurred in the ordinary and usual course of business consistent with
past practice as financed by Seller or a Continuing Affiliate; and (iv)
not enter into a contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(g) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) promote any employees
(other than such promotions that were being processed prior to the date
hereof and which are identified on Schedule 6.3(g) or have the effect
of filling a vacated position), (ii) set any new bonus targets or
opportunities for any period beginning after September 30, 1996, or
(iii) except for increases in the ordinary and usual course of business
consistent with past practice or as required by law, increase the
compensation payable or to become payable by Pearle or any of the
Subsidiaries to any of their directors, officers or employees or
increase the benefits under or establish any bonus, insurance, pension
or other employee benefit plan, payment or arrangement, for or with any
such directors, officers or employees, PROVIDED THAT in
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no event shall the sum total of merit pay increases with respect to all
employees eligible for such merit pay increases exceed current levels
of compensation by more than four percent in the aggregate;
(h) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, change their respective
selling, collection, or payment practices, or the accounting practices
utilized in the preparation of the Financial Information or BV
Financial Information, or the tax accounting practices utilized in the
preparation of Tax Returns, except as required by applicable law;
(i) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, conduct their business in
violation of any law, ordinance or regulation of any governmental
entity (including, without limitation, those relating to environmental
protection, sales or operation of franchises and occupational safety
and health practices), except for possible violations which alone or in
the aggregate do not and are not reasonably likely to have a Material
Adverse Effect;
(j) Pearle and the Subsidiaries shall not, and Seller shall
cause Pearle and the Subsidiaries not to, (i) loan or advance any
monies, except travel and other employee expenses in the ordinary and
usual course of business consistent with past practice, (ii) discharge
any obligation for money borrowed (other than money owed to Seller and
its
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Continuing Affiliates incurred in the ordinary and usual course of
business consistent with past practice), (iii) forgive, release, waive
or terminate any rights of substantial value other than in the ordinary
and usual course of business consistent with past practice, or (iv)
enter into any contract, agreement, commitment or arrangement with
respect to advertising in excess of $250,000; and
(k) Except in connection with the items set forth on the
Attachment to Item 4 of Schedule 3.7 or with the consent of Buyer
(whose consent with respect to this paragraph (k) shall not be
unreasonably withheld), Pearle and the Subsidiaries shall not, and
Seller shall cause Pearle and the Subsidiaries not to, enter into any
franchise agreement or lease agreement or amend in any material respect
or terminate any Franchise Agreement or Lease Agreement or enter into a
contract, agreement, commitment or arrangement with respect to any of
the foregoing.
Section 6.4 CERTAIN BUYER OBLIGATIONS.
(a) Buyer shall promptly amend the Pearle Vision Uniform
Franchise Offering Circular, as amended, to reflect the purchase and sale of the
PSC Shares and the Pearle Shares.
(b) Seller shall, or shall cause one of its Continuing
Affiliates to, satisfy all payment obligations of Pearle Vision, Inc. and Pearle
under the Note Purchase Agreement and Buyer shall cause each of Pearle and
Pearle Vision, Inc. to comply with its
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respective obligations under the terms of the Note Purchase Agreement with
respect to franchisees and shall use its best efforts to cause Pearle and Pearle
Vision, Inc. to collect all principal, interest and other amounts due from the
franchisees on the notes and to cause such amounts to be paid to the Lock-Box
(as defined in the Note Purchase Agreement) or directly to SocGen or, with
respect to any note required to be repurchased by Seller or one of its
Continuing Affiliates under the terms of the Note Purchase Agreement, directly
to Seller or one of its Continuing Affiliates. To the extent that Buyer, Pearle,
Pearle Vision, Inc. or one of their Affiliates, including through lock box
accounts or otherwise, receives any type of payment from franchisees, such party
shall promptly remit a pro rata portion of the amount of such payment from a
franchisee having amounts due on the notes to the Lock-Box, SocGen or Seller or
one of its Continuing Affiliates, as the case may be. With respect to any note
required to be repurchased under the terms of the Note Purchase Agreement, Buyer
shall cooperate with Seller and its Continuing Affiliates to the same extent
that Pearle and Pearle Vision, Inc. are obligated on the date hereof under the
terms of the Note Purchase Agreement to assist in the collection on the amounts
due from the franchisees on the notes and to perform such other obligations to
SocGen.
Section 6.5 EMPLOYEE MATTERS. (a) Buyer shall cause
Pearle to retain in employment all employees of Pearle and the
Subsidiaries who were employed on the Closing Date, for a period
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of at least 30 days, at the same rate of compensation in effect immediately
prior to the Closing, except for any employees (i) who are terminated for cause,
(ii) who voluntarily terminate their employment or (iii) who were employed for a
limited time period and are terminated upon expiration of that time period.
Except for any plan, program or policy, or portion thereof referred to in
Section 5.11 for which Seller or any of the Continuing Affiliates are
responsible and except with respect to any plan, program or policy identified on
Schedule 3.17(i) as "a Grand Met plan which will not be available after the
sale," Buyer shall cause Pearle and the Subsidiaries to maintain for a period of
at least one year after the Closing Date employee compensation and benefit
plans, programs and policies that, in the aggregate, will provide benefits to
employees of Pearle and the Subsidiaries that are substantially equivalent in
the aggregate as those provided pursuant to the employee benefit plans, programs
and policies of Pearle and the Subsidiaries in effect on the date hereof (as
disclosed on Schedule 3.17(i) hereto); PROVIDED, HOWEVER, that any severance
plans maintained by Pearle or any of the Subsidiaries as of the date of this
Agreement shall remain in effect without any modification adverse to the
participants thereunder for at least two years after the Closing Date, and any
participant in either such plan whose employment is terminated and is otherwise
eligible for severance benefits shall be entitled to severance benefits based
upon base pay and employment position at levels at least equal to those
applicable as of the
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Closing Date (other than on account of any reduction in position voluntarily
agreed to in writing by any participant).
(b) Employees of Pearle and the Subsidiaries shall be given
credit for all service with Pearle, the Subsidiaries and Seller and its
Affiliates (including any other service credited for purposes of the Company
Plans) under all employee benefit plans, programs and policies of Buyer
(including vacation) in which they become participants for purposes of
eligibility and vesting and benefit accrual (but not credit for benefit accrual
under defined benefit pension plans).
(c) Subject to the rights of Pearle and the Subsidiaries to
amend, modify or terminate Company Plans in accordance with their terms, Buyer
shall, and shall cause Pearle and its Subsidiaries to, honor all Company Plans
in accordance with their terms other than any "Grand Met plan which will not be
available after the sale," identified on Schedule 3.17(i). Effective as of the
Closing Date, Pearle and its Subsidiaries shall cease being participating
employers with respect to any employee benefit plans maintained by Seller or the
Continuing Affiliates. Effective as of, or as soon as practicable following the
Closing Date, Buyer shall cause Pearle to cause the Trustee of the Pearle, Inc.
Profit Sharing Plus Plan Trust to withdraw from the Pooled Investment Trust
Agreement establishing the Grand Metropolitan ADS Group Trust.
(d) Except as expressly provided in this Agreement, nothing
herein shall create any restriction on the ability of
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Buyer or any of its Affiliates (including Pearle and the Subsidiaries after the
Closing Date), to amend, modify or terminate any employee benefit plan of Buyer
or any of Buyer's Affiliates.
Section 6.6 RETENTION OF BOOKS AND RECORDS. Each party shall
and shall cause its respective Affiliates to, retain until all applicable tax
statutes of limitations (including periods of waiver) have expired all books,
records and other documents pertaining to Pearle and the Subsidiaries in
existence on the Closing Date that are required to be retained under current
retention policies and to make the same available after the Closing Date for
inspection and copying by the other party or its agents at such other party's
expense, during regular business hours and upon reasonable request and upon
reasonable advance notice. After the expiration of such period, no such books
and records shall be destroyed by either party without first advising the other
party in writing detailing the contents thereof and giving the other party at
least 120 days to obtain, at its expense, possession thereof. Each party agrees
that any such records made available by the other party will be kept strictly
confidential and used only for tax purposes or as reasonably required in
connection with any third party claim.
Section 6.7 CLOSING DATE FINANCIAL INFORMATION. For a
period of one year from and after the Closing Date, to the extent
reasonably necessary for Seller or its Affiliates to prepare
consolidated financial statements or any governmental permits,
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licenses or required filings and to comply with reporting obligations in respect
thereof, upon written request of Seller, Pearle and the Subsidiaries will
provide, and Buyer shall use its reasonable best efforts to cause Pearle and the
Subsidiaries to provide, at Seller's expense, to Seller and its accountants
within 20 Business Days of such request with such computer support, access to
employees and Buyer's accountants and financial information of Pearle or the
Subsidiaries as of the Closing Date as Seller may reasonably request in the
format customarily required by Seller or its Affiliates and, upon Seller's
request, it will be accompanied by supplemental financial schedules customarily
required by Seller or its Affiliates in support of such financial information.
Seller agrees that such records will be kept strictly confidential and used only
for tax purposes.
Section 6.8 DELIVERY OF CORPORATE MINUTES AND BANK SIGNATURE
CARDS. At the Closing, Seller shall deliver to Buyer the minutes and stock books
of Pearle and each of the Subsidiaries, and promptly following the Closing shall
deliver signature cards from all banks or financial institutions with which
Pearle or any Subsidiary has any account designating signatures approved by
Buyer.
Section 6.9 COVENANT NOT-TO-COMPETE.
(a) Seller acknowledges and agrees that the value to Buyer of
the transactions provided for herein would be substantially diminished if Seller
or any of the Continuing
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Affiliates were to enter into certain business activities, and Seller has agreed
to the covenant in this Section 6.9 as an inducement to Buyer to enter into this
Agreement. Seller specifically acknowledges and agrees that the covenants in
this Section 6.9 are commercially reasonable and reasonably necessary to protect
the interests Buyer intends to acquire hereunder. If any court of competent
jurisdiction shall in any proceedings refuse to enforce such covenant, in whole
or in part, because the time limit or geographical extent applicable thereto is
deemed unreasonable in the jurisdiction, it is expressly understood and agreed
that such covenant shall not be void. Instead, for the purpose of such
proceedings, such temporal or geographic limitations shall be deemed to be
reduced to the extent necessary to permit the enforcement of such covenant in
the particular jurisdiction. Seller agrees that, for five years after the
Closing Date, it shall not, directly or indirectly through the Continuing
Affiliates, franchisees or otherwise, engage in the ownership, operation or
management of retail stores offering eyecare products anywhere in the world (the
"Business"); PROVIDED, HOWEVER, that Seller and the Continuing Affiliates may:
(i) acquire up to 10% of the outstanding securities
and other interests in any Person that competes with the
Business;
(ii) acquire any securities and other interests in any
Person if (x) the revenues of such Person that are attributable to
business that compete with the Business
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exceed 10% of such Person's total annual revenues, provided that the
Seller hereby agrees to divest or cause the divestiture of such
interest that directly competes with the Business within one calendar
year from any such acquisition or (y) the revenues of such Person that
are attributable to business that compete with the Business do not
exceed 10% of such Person's total annual revenues;
(iii) maintain and continue in accordance with current
and past practice the operations described on Schedule
6.9(a);
(iv) perform any act or conduct any business
contemplated by this Agreement.
(b) Seller and Buyer agree that money damages would be an
inadequate remedy for a violation of the covenant set forth in Section 6.9(a).
(c) Seller agrees that, for a period of two (2) years
following the Closing Date, neither Seller nor any Continuing Affiliate shall
solicit the employment of any person, other than an individual listed on
Schedule 6.9(c) hereto, it knows to be an employee of Pearle or any of its
Subsidiaries or employ any person it knows to be such an employee (other than
any hourly worker or any Employee who serves in a clerical function) without the
prior written consent of Buyer; PROVIDED, HOWEVER, that (i) general
solicitations of employment published in a journal, newspaper or other
publication of general circulation and not specifically directed towards such
employees shall not be deemed
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to constitute solicitation for purposes of this Section 6.9(c) and (ii) Seller,
its Continuing Affiliates and representatives shall not be prohibited from
employing any such person who contacts them on his or her own initiative and
without any solicitation by Seller, its Continuing Affiliates and
representatives.
Section 6.10 EYELAB AND PEARLE MARKS. Prior to the Closing
Date, each of Seller and its Continuing Affiliates which might have an interest
therein will quitclaim to Pearle all its right, title and interest in any of the
"Eyelab" trademarks listed on Schedule 3.15(a) hereto (the "Eyelab Marks") and
all derivatives thereof or in any of the "Pearle" or "Pearle Vision" trademarks
and all derivatives thereof (the "Pearle Marks") and will assign all rights and
the goodwill associated therewith to Pearle. Seller and its Continuing
Affiliates will cease to use the Eyelab Marks, the Pearle Marks or any
confusingly similar names as of the Closing Date. Notwithstanding the foregoing,
Buyer shall permit Seller and its Continuing Affiliates to continue to use the
Eyelab Marks, the Pearle Marks and derivatives thereof for non-commercial
purposes, including winding down their affairs; provided that Seller and its
Continuing Affiliates may continue to use the Eyelab Marks, the Pearle Marks or
any derivatives thereof in its financial reporting, and otherwise may not use
the Eyelab Marks or any derivatives thereof for more than 90 days following the
Closing Date, and following Closing, each of Seller and its Continuing
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Affiliates shall not hold itself out as doing business under the Eyelab Marks,
the Pearle Marks or any derivatives thereof. On or before the Closing Date,
Seller shall cause any Continuing Affiliate which has in its name the word
"Pearle" or the phrase "Pearle Vision" to change such name to eliminate the word
"Pearle" or the phrase "Pearle Vision", as applicable. The parties agree to
negotiate in good faith between the date hereof and the Closing Date upon any
alternative proposals to effect the transfer of the Eyelab Marks.
Section 6.11 AUDITED FINANCIAL STATEMENTS. (a) As soon as
reasonably practicable after September 30, 1996, Seller shall cooperate with
Buyer to prepare (i) an audited consolidated balance sheet and consolidated
statements of income and cash flows of Pearle and the Subsidiaries as of, and
for the year ended, September 30, 1996, accompanied by a standard opinion report
of KPMG, (ii) such other financial statements and schedules as Buyer shall
reasonably request, in each case in order for Buyer to comply with the
requirements of the Securities and Exchange Commission.
(b) Seller acknowledges that KPMG has agreed, subject to
review of the offering documents, to the inclusion of the Audited Financial
Information, together with the additional information to be provided pursuant to
Section 6.11, in any materials, including materials filed with the Securities
and Exchange Commission and any state or foreign regulatory authority, used in
connection with obtaining the financing of the
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transaction contemplated by this Agreement, any registered exchange offer
required to be made in connection with such financing and any subsequent
financing or securities offering. Seller shall use reasonable efforts to cause
KPMG to provide to Buyer, at Buyer's expense, (i) any consents required in
connection with such use of such financial information, (ii) comfort letters, in
form and substance customary for such matters, with respect to the periods
covered by such financial information, and (iii) such other assistance as Buyer
may reasonably request.
Section 6.12 CERTAIN CONSENTS. Prior to the Closing, each of
Seller and Pearle shall use its reasonable best efforts to obtain (and Buyer
shall cooperate in obtaining) all consents, approvals, authorizations, waivers
or notifications from any third party, including any governmental authority
(each a "Consent") necessary to effect the transfer of all contracts, Franchise
Agreements, Lease Agreements, governmental permits and licenses and other
instruments and arrangements as contemplated hereby; PROVIDED, HOWEVER, that
neither party shall be required to pay or commit to pay any amount to (or incur
any obligation in favor of) any person from whom any such Consent may be
required (other than nominal governmental filing fees payable to any
governmental authority).
Section 6.13 TRANSITION SERVICES. Seller shall
provide Buyer certain transition services that Seller or its
Continuing Affiliates currently provide for Pearle or the
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Subsidiaries, including cash management, insurance, treasury, tax and data
processing services, at current charges for a period (a) with respect to all
services other than data processing, not to exceed six months after the Closing
Date and (b) with respect to data processing services not to exceed 18 months
after the Closing Date, in each case pursuant to and in accordance with the
terms of an agreement to be negotiated in good faith by Buyer and Seller and
executed on or before the Closing Date.
Section 6.14 FINANCING. Buyer shall use its reasonable best
efforts to obtain the funds necessary to purchase the PSC Shares and the Pearle
Shares as contemplated by Section 4.3 hereof or otherwise.
Section 6.15 INSURANCE CLAIMS. Following the Closing, but with
respect only to occurrences occurring prior to Closing: (a) Seller and the
Continuing Affiliates shall provide Pearle and the Subsidiaries with (i) the
benefit of such existing workers compensation or general liability, automobile
liability or other insurance policies as currently cover Pearle and the
Subsidiaries and (ii) the benefit of such existing claims made policies,
including director and officer and pension trust liability insurance policies,
which policies will be continued in force by Seller or a Continuing Affiliate
for claims made after the Closing Date based upon wrongful acts committed or
allegedly committed prior to the Closing Date, but only to the extent Seller or
such Continuing Affiliate is able, using its reasonable best efforts (which
shall not require the expenditure of funds in
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excess of amounts reimbursed as provided in Section 6.15(b), or the filing of
any lawsuit), to obtain such benefits and (b) Buyer shall, or shall cause Pearle
or a Subsidiary to, promptly reimburse Seller or any such Continuing Affiliate,
with respect to any amounts required to be paid after the Closing Date by Seller
and the Continuing Affiliates with respect to insurance premiums, including any
taxes, assessments and claims handling charges, and deductibles or self-insured
retentions applicable to such policies. Notwithstanding the foregoing, nothing
in this Agreement shall prevent or interfere with Seller's or any of its
Continuing Affiliates' right to terminate or otherwise discontinue any insurance
policy applicable to losses relating to claims arising from incidents occurring
after the Closing Date for any reason, including without limitation, in
connection with the settlement or discharge of any claim. Buyer agrees to assume
any obligation of Seller or any of its Continuing Affiliates to provide
collateral or security on behalf of Pearle or any Subsidiary with respect to
such insurance polices covering workers' compensation, general liability,
product liability and auto liability; PROVIDED that the aggregate amount of
collateral or security in respect of any such coverage shall not be required to
exceed at any time the sum of (a) the reserves then allocable to the liability
covered thereby and (b) the applicable claims handling expenses.
Section 6.16 OWNERSHIP OF PSC. Buyer agrees that, for a period
of two (2) years following the Closing Date, neither
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Pearle nor any Subsidiary shall become the owner of the PSC Shares nor shall PSC
be merged or liquidated with or into Pearle or any Subsidiary.
Section 6.17 FURTHER ASSURANCES. At any time after the Closing
Date, Seller and Buyer shall, and Buyer shall cause Pearle or any Subsidiary to,
promptly execute, acknowledge and deliver any other assurances or documents
reasonably requested by Buyer or Seller, as the case may be, and necessary for
Buyer or Seller, as the case may be, to satisfy its obligations hereunder or
obtain the benefits contemplated hereby.
Section 6.18 BV PENSION PROVISION. To the extent all of the
following time periods are commercially reasonable, within 21 calendar days
after the date hereof, Seller shall cause its actuary to calculate the provision
for pension backservice liabilities of Pearle Holdings and its subsidiaries, as
of September 30, 1996, determined on the same basis as used in calculating the
pension backservice liability provision of NLG 1,424,612 reflected in the
September 30, 1995 balance sheet included in the Audited BV Financial
Information; PROVIDED that Seller's actuary shall use the most recent available
actuarial tables in use in the Netherlands including, without limitation, the
most recent available mortality rates, and Seller shall deliver such calculation
(the "BV Pension Provision") to Buyer, together with all relevant books and
records and any work papers (including those of Seller's actuary) relating to
the calculation of the BV Pension Provision. Within 10 calendar days after
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receipt of the calculation of the BV Pension Provision, Buyer shall either
inform Seller in writing that the BV Pension Provision is acceptable or object
to it in writing setting forth a specific description of its objections. If
Buyer so objects and the parties do not resolve such objection on a mutually
agreeable basis within 10 calendar days after Seller's receipt thereof, the
disagreement shall be resolved within an additional 14 calendar day period by an
Unaffiliated Firm. The decision of the Unaffiliated Firm shall be final and
binding upon the parties. Upon the agreement of the parties or the decision of
the Unaffiliated Firm as to all matters objected to, or if Buyer fails to
deliver an objection to Seller within the 10 calendar day period provided above,
the BV Pension Plan shall be deemed final. Each party shall bear the fees, costs
and expenses of its own accountants and shall share equally the fees, costs and
expenses of the Unaffiliated Firm. Buyer and Seller shall (and prior to the
Closing Date Seller shall cause Pearle to and, if the BV Pension Provision is
not then final, after the Closing Date Buyer shall cause Pearle to) make readily
available to the Unaffiliated Firm all relevant books and records and any work
papers (including those of the parties' respective actuaries) relating to the
calculation of the BV Pension Provision and all other items reasonably requested
by the Unaffiliated Firm. Promptly following the final determination of the BV
Pension Provision, (a) if such determination is made on or prior to the Closing
Date, Seller shall cause to remain in Pearle Holdings or
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the applicable pension plans a cash balance (together with insurance for which
premiums have been paid) in an amount equal to the lesser of the amount of the
BV Pension Provision or NLG 2,000,000 or (b) if such determination is made after
the Closing Date, (i) in the event Seller shall have caused to remain in Pearle
Holdings or the applicable pension plans a cash balance (together with insurance
for which premiums have been paid) of NLG 2,000,000 and such amount exceeds the
later determined BV Pension Plan Provision, Buyer shall pay to Seller such
difference, or (ii) Seller shall pay to Buyer an amount equal to the lesser of
the amount of the BV Pension Provision or NLG 2,000,000.
ARTICLE VII
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CONDITIONS TO CLOSING
---------------------
Section 7.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation
of Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver by Buyer in writing on or prior to the
Closing Date of each of the following conditions:
(a) Each of the representations and warranties of Seller and
Pearle contained in this Agreement which refer to a Material Adverse
Effect or otherwise reference a concept of materiality shall be true
when made and as of the Closing Date, and each of the other
representations and warranties of Seller and Pearle contained in this
Agreement shall be true in all material respects when made and as of
the
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Closing Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except (i)
representations and warranties that are made as of a specific date need
be true, or true in all material respects, as the case may be, only as
of such date and (ii) as expressly permitted by this Agreement to
change between the date of this Agreement and the Closing Date);
PROVIDED, THAT exclusively for purposes of this Section 7.1(a), the
representations and warranties contained in Sections 3.10 and Section
3.18 shall be read as though they were qualified by reference to a
requirement of, or the requirement of a reasonable likelihood of,
"Material Adverse Effect"; each of the covenants and agreements of
Seller to be performed on or prior to the Closing Date shall have been
duly performed in all material respects; and Buyer shall have received
at the Closing certificates to that effect dated as of the Closing Date
and executed on behalf of each of Pearle and Seller by its President or
any of its Vice Presidents and its Secretary or any of its Assistant
Secretaries.
(b) Buyer shall have received from Seller an opinion of Jerome
J. Jenko, counsel to Seller, dated as of the Closing Date,
substantially in the form of Schedule 7.1(b) hereof.
(c) Seller shall have delivered to Buyer resignations
of all directors of Pearle and the Subsidiaries (in their
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capacity as directors) and all officers of Pearle and the
Subsidiaries who are not also employees of Pearle or a
Subsidiary.
(d) Buyer shall have funds available to it sufficient to
purchase the PSC Shares and the Pearle Shares in accordance with the
terms and conditions contemplated by this Agreement.
(e) Pearle, Pearle Vision, Inc. and Seller or one of its
Continuing Affiliates shall have entered into an amendment to the Note
Purchase Agreement with SocGen pursuant to which (i) Seller or one of
its Continuing Affiliates shall have assumed all payment obligations of
Pearle Vision, Inc. and Pearle under the terms of the Note Purchase
Agreement and (ii) Pearle and Pearle Vision, Inc. shall have been
released from all payment obligations thereunder and from all of their
respective covenant obligations under the Note Purchase Agreement to
the extent that such covenant obligations relate solely to Pearle
and/or Pearle Vision, Inc. and not to their obligations to assist in
the collection of the principal, interest and other amounts due from
the franchisees on the notes or to cause franchisees to take, or
prevent them from taking, certain actions.
Section 7.2 CONDITIONS TO OBLIGATIONS OF SELLER. The
obligation of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver
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in writing by Seller on or prior to the Closing Date of each of
the following conditions:
(a) Each of the representations and warranties of Buyer
contained in this Agreement qualified by a concept of materiality shall
be true when made and as of the Closing Date, and each of the other
representations and warranties of Buyer contained in this Agreement
shall be true in all material respects when made and as of the Closing
Date, with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except (i)
representations and warranties that are made as of a specific date need
be true, or true in all material respects, as the case may be, only as
of such date and (ii) as expressly permitted by this Agreement to
change between the date of this Agreement and the Closing Date); each
of the covenants and agreements of Buyer to be performed on or prior to
the Closing Date shall have been duly performed in all material
respects; and Seller shall have received at the Closing certificates to
that effect dated as of the Closing Date and executed on behalf of
Buyer by its President or any of its Vice Presidents and its Secretary
or any of its Assistant Secretaries.
(b) Seller shall have received from Jones, Day, Reavis &
Pogue, as counsel for Buyer, an opinion, dated as of the Closing Date,
substantially in the form of Schedule 7.2(b) hereof.
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Section 7.3 CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER. The
obligations of the parties to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver by both parties on or
prior to the Closing Date of the following conditions:
(a) Each party shall have duly filed with the FTC and the
Antitrust Division the Report required under the HSR Act with respect
to the sale and purchase of the PSC Shares and the Pearle Shares and
the waiting period required by the HSR Act, and any extensions thereof
obtained by request or other action of the FTC and/or the Antitrust
Division, shall have expired or been earlier terminated by the FTC and
the Antitrust Division.
(b) No court or governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, or non-appealable judgment,
decree, injunction or other order which is in effect on the Closing
Date and prohibits the consummation of the Closing.
ARTICLE VIII
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TERMINATION
-----------
Section 8.1 TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by agreement of Buyer and Seller;
(b) by either Buyer or Seller, by giving written notice of
such termination to the other party, if (x) any
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condition to the terminating party's obligations hereunder has not been
satisfied or waived and (y) the Closing shall not have occurred on or prior to
January 31, 1997; PROVIDED THAT the terminating party is not in material breach
of its obligations under this Agreement;
(c) by either Buyer or Seller, by giving written notice of
such termination to the other party, if (x) each condition thereto shall have
been satisfied or waived and (y) the Closing shall not have occurred on or prior
to January 31, 1997; PROVIDED THAT the terminating party is not in material
breach of its obligations under this Agreement;
(d) by either Buyer or Seller if there shall be in effect any
law or regulation that prohibits the consummation of the Closing or if
consummation of the Closing would violate any non-appealable final order, decree
or judgment of any court or governmental body having competent jurisdiction;
(e) by Seller if the Closing shall not have occurred on or
prior to 10 Business Days following the satisfaction of all the conditions to
Closing set forth in Sections 7.1 and 7.3 hereof as a result of any action or
inaction by Buyer.
(f) by Buyer if the Closing shall not have occurred on or
prior to 10 Business Days following the satisfaction of all the conditions to
Closing set forth in Sections 7.2 and 7.3 hereof as a result of any action or
inaction by Seller.
Section 8.2 EFFECT OF TERMINATION. In the event of
the termination of this Agreement in accordance with Section 8.1
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hereof, this Agreement shall thereafter become void and have no effect, and no
party hereto shall have any liability to the other party hereto or their
respective Affiliates, directors, officers or employees, except for the
obligations of the parties hereto contained in this Section 8.2 and in Sections
10.2, 10.3, 10.4, 10.11 and 10.12 hereof, and except that nothing herein will
relieve any party from liability for any breach of this Agreement prior to such
termination.
ARTICLE IX
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SURVIVAL AND INDEMNIFICATION
----------------------------
Section 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS; KNOWLEDGE OF BREACH. Notwithstanding any otherwise applicable
statute of limitations, the representations and warranties included or provided
for herein shall survive the Closing until the later to occur of: (i) April 30,
1998 and (ii) the first anniversary of the Closing Date; PROVIDED, HOWEVER, that
any representation or warranty contained in Section 3.18 hereof shall survive
the Closing until the third anniversary of the Closing Date and any
representation, warranty, covenant or agreement contained in Sections 3.14,
3.23, 4.2 and 4.4 and Article V hereof shall survive the Closing until the
expiration of the applicable statute of limitations (including any waivers or
extensions thereof) with respect to such matters and PROVIDED, FURTHER, however,
that any representation, warranty, covenant or agreement contained in Sections
3.1, 3.2 and 3.3 shall survive the Closing and shall remain in effect
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without limitation as to time. The covenants and other agreements contained in
this Agreement shall survive the Closing until the date or dates specified
therein or (except as to Section 6.5(a)) the expiration of the applicable
statute of limitations (including any waivers or extensions thereof) with
respect to such matters, whichever is later. Except with respect to the
representations, warranties, covenants and agreements contained in Sections 2.4,
3.14(b), 3.23, 4.2 and 6.4 and Article V hereof, in no event shall Buyer be
liable to Seller or Seller be liable to Buyer, as the case may be, for any
breach of the representations, warranties, covenants and agreements included or
provided for herein or in any schedule or certificate or other document
delivered pursuant to this Agreement, unless and until all claims for which
Losses are recoverable hereunder by Buyer or Seller, as the case may be, exceed
$2,500,000 (the "Deductible") (PROVIDED THAT those Losses recoverable by Buyer
pursuant to Section 9.2(a)(ii) shall not be included in the calculation of such
Deductible), in which case Buyer or Seller, as the case may be, shall be
entitled to Losses in an amount up to the Purchase Price in the aggregate;
PROVIDED, HOWEVER, that Buyer or Seller, as the case may be, shall be liable
only for the amount by which all such Losses exceed the Deductible, PROVIDED,
FURTHER, that to the extent any representation or warranty is not qualified by
the terms "material", "materiality" or "Material Adverse Effect" Buyer or
Seller, as the case may be, shall only be liable for such Losses attributable to
each individual proven
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damage (or group of damages arising from the same event, condition or course of
conduct) that is in excess of $50,000 (the "Damage Threshold") without regard to
the Damage Threshold once the amount of the Damage Threshold has been exceeded
in the particular instance.
Section 9.2 INDEMNIFICATION.
(a) (i) With respect to any claim for which the Seller, on the
one hand, or Buyer, on the other hand (the "Indemnifying Party"), receives
notice from the Buyer, on the one hand, or Seller, on the other hand, as the
case may be (the "Indemnified Party") during the period commencing on the
Closing Date and ending, as the case may be, upon the expiration of the periods,
if any, specified in Section 9.1 hereof, the Indemnifying Party shall, subject
to the limitations set forth in Sections 9.1 hereof, indemnify, defend and hold
harmless the Indemnified Party, against and in respect of all losses, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses incurred in investigating, preparing or defending any claims covered
hereby, net of the recovery of any insurance proceeds) ("Losses") sustained or
incurred arising out of any breaches of the Indemnifying Party's or Pearle's
representations, warranties, covenants and agreements set forth in this
Agreement (other than representations, warranties, covenants and agreements set
forth in Article V, as to which the indemnification provisions set forth in
Article V shall govern) and (ii) Seller shall, subject to the limitations set
forth in
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Sections 9.1 hereof other than the Deductible and the Damage Threshold,
indemnify, defend and hold harmless Buyer against and in respect of:
(A) all Losses sustained or incurred arising out of the
presence, removal or cleanup relating to the underground storage tanks
referred to in Item 7 of Schedule 3.7; PROVIDED THAT Seller shall only
be liable for Losses in an amount up to $250,000;
(B) 75% of the aggregate sum of (I) the excess (the
"Determined Receivables Amount") of the resultant of (a) the amount of
any and all writeoffs, writedowns and/or reductions as reflected in the
audited financial statements of the Buyer for the fiscal years ending
February 1, 1997, January 31, 1998 and January 30, 1999 (the
"Receivables Determination Period") specifically relating to or in
connection with the failure to collect any receivables owed by
franchisees pursuant to any notes, accounts and deferred rents, in each
case, as reflected in the Closing Date Balance Sheet (the "Franchisee
Receivables"), less any recovery of fixed assets or inventory (in each
case, valued on a basis consistent with the respective valuation
practices of Pearle in effect as of the date hereof) recognized upon
store closings, takebacks or the seizure of assets in connection
therewith during, and as reflected in the audited financial statements
of the Buyer for, each fiscal year during the Receivables Determination
Period
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(individually, with respect to each such fiscal year, and collectively,
with respect to all such fiscal years, the "Receivables Writeoff
Amount"), over (b) the amount reserved for bad debts specifically
identified in connection with the Franchisee Receivables reflected in
the Closing Date Balance Sheet and (II) an amount (the "Calculated
Receivables Settlement") equal to the aggregate sum of the principal
amounts of the notes, accounts and deferred rents underlying the
Franchisee Receivables in which payments of interest on or of such
principal as of January 30, 1999 (the "Receivables Calculation Date")
are more than 90 days past due (the "Past Due Receivables") as set
forth on a Franchisee Receivables aging schedule to be delivered by
Buyer to Seller no later than April 30, 1999 (the "Receivables
Schedule"). Within 30 calendar days after receipt of the Receivables
Schedule, Seller shall either inform Buyer in writing that the
Receivables Schedule, Determined Receivables Amount and the Calculated
Receivables Settlement are acceptable or object to any of them in
writing setting forth a specific description of its objections. If
Seller so objects and the parties do not resolve such objections on a
mutually agreeable basis within 30 calendar days after Seller's receipt
thereof, the disagreement shall be resolved within an additional 30
calendar day period by an Unaffiliated Firm. The decision of the
Unaffiliated Firm shall be final and binding upon the
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parties. Upon the agreement of the parties or the decision of the
Unaffiliated Firm as to all matters objected to, or if Seller fails to
deliver an objection to Buyer within the 30 calendar day period
provided above, the Receivables Schedule, Determined Receivables Amount
and the Calculated Receivables Settlement (as adjusted, if necessary)
shall be deemed final. Each Party shall bear the fees, costs and
expenses of its own accountants and shall share equally the fees, costs
and expenses of the Unaffiliated Firm. Buyer and Seller shall (and
Buyer shall cause Pearle to) make readily available to the Unaffiliated
Firm all relevant books and records and any work papers (including
those of the parties' respective accountants) relating to the
Receivables Schedule and the calculation of the Determined Receivables
Amount and the Calculated Receivables Settlement and all other items
reasonably requested by the Unaffiliated Firm. Seller shall pay Buyer
75% of the Determined Receivables Amount with respect to any fiscal
year in which there is a cumulative positive Determined Receivables
Amount and 75% of the Calculated Receivables Settlement within 15
Business Days of the final determination of each such amount; PROVIDED
THAT, if with respect to any fiscal year in which there is a cumulative
positive Receivables Writeoff Amount there is not a cumulative positive
Determined Receivables Amount, the Receivables Writeoff Amount shall be
carried forward into the next fiscal year. Within 15
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Business Days of April 30, 2003, Buyer shall pay Seller an amount equal
to 75% of the sum of any and all receivables collected between January
31, 1999 and April 30, 2003 and fixed assets and inventory recovered
(in each case, valued on a basis consistent with the respective
valuation practices of Pearle in effect as of the date hereof), in each
case in connection with (i) the Determined Receivables Amounts and (ii)
the Calculated Receivables Settlement; PROVIDED THAT the maximum amount
of such payment shall not exceed 75% of the sum of all Determined
Receivables Amounts and the Calculated Receivables Settlement.
(C) 50% of all Losses relating to workers' compensation
claims arising from incidents occurring prior to the Closing Date which
are first presented, filed or made within one year after the Closing
Date, to the extent that the amount of all such Losses exceed the
reserve relating to workers' compensation liabilities reflected in the
Closing Date Balance Sheet.
(D) 50% of all Losses relating to personal injury claims
arising from incidents occurring prior to the Closing Date which are
first presented, filed or made within three years after the Closing
Date, to the extent that the amount of all such Losses exceed the
reserve relating to personal injury claims reflected in the Closing
Date Balance Sheet;
(E) all Losses relating to obligations of Seller or
any of its Affiliates with respect to Pearle GMBH;
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(F) all Losses relating to any liabilities for net costs
incurred by Buyer or any of its Affiliates in connection with the
closing of stores closed prior to the Closing Date to the extent such
costs exceed the amounts reflected in the Closing Date Balance Sheet;
(G) up to NLG 300,000 of Losses sustained or incurred
arising out of any breaches of Seller's or Pearle's representations or
warranties set forth in Section 3.18 to the extent they relate to
Pearle Holdings or its subsidiaries;
(H) all Losses relating to any breach by Seller of any funding
obligation in Section 6.18.
The parties agree that, with respect to all claims for which
Losses would be recoverable pursuant to clauses (A) through (H) above, Section
9.2(a)(ii) hereto shall be the sole and exclusive remedy of Buyer and any
amounts not recovered pursuant to Section 9.2(a)(ii) shall be deemed not to be
Losses for any other purposes.
Any payments pursuant to this Section 9.2 or Article V shall
be treated as an adjustment to the Subsequent Sale Purchase Price for all Tax
purposes.
(b) Seller releases and waives any right of indemnity
and contribution from Pearle and the Subsidiaries.
(c) The indemnity provided herein and in Article V as it
relates to this Agreement and the transactions contemplated by this Agreement
shall be the sole and exclusive remedy of the
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parties hereto, their Affiliates, successors and assigns with respect to any and
all claims for losses, damages, liabilities, costs and expenses sustained or
incurred arising out of this Agreement and the transactions contemplated by this
Agreement, except for the right of the parties hereto to seek specific
performance of the obligations set forth in Article II and Sections 6.4, 6.5 and
6.9 of this Agreement.
Section 9.3 METHOD OF ASSERTING CLAIMS, ETC. All claims for
indemnification by any Indemnified Party hereunder shall be asserted and
resolved as set forth in this Section 9.3 except for claims pursuant to Article
V hereof (as to which the provisions of Article V shall be applicable). In the
event that any written claim or demand for which an Indemnifying Party would be
liable to any Indemnified Party hereunder is asserted against or sought to be
collected from any Indemnified Party by a third party, such Indemnified Party
shall promptly, but in no event more than 15 days following such Indemnified
Party's receipt of such claim or demand, notify the Indemnifying Party of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not in any manner prejudice the right of the
Indemnified Party to indemnification to the fullest extent provided hereunder)
(the "Third Party Claim Notice") and in the event that an Indemnified Party
shall assert a claim for indemnity under this Article IX, not including a third
party claim, the Indemnified Party shall notify the Indemnifying Party promptly
following its discovery of the facts
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or circumstances giving rise thereto (together, with a Third Party Claim Notice,
a "Claim Notice"); PROVIDED, THAT no such notice need be provided to an
Indemnifying Party if the Deductible has not been exceeded and will not be
exceeded by such claim or demand; and PROVIDED, FURTHER, that the failure to
notify on the part of the Indemnified Party in the manner set forth herein shall
not foreclose any rights otherwise available to such Indemnified Party
hereunder, except to the extent that the Indemnifying Party is prejudiced by
such failure to notify. The Indemnifying Party shall have 30 days from the
personal delivery or mailing of the Third Party Claim Notice (except that such a
period shall be decreased to a time 10 days before a scheduled appearance date
in a litigated matter) (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or demand
and (ii) whether or not it desires to defend the Indemnified Party against such
claim or demand, which it shall not be entitled to do until the Deductible is
exceeded. All costs and expenses incurred by the Indemnifying Party in defending
such claim or demand shall be a liability of, and shall be paid by, the
Indemnifying Party; PROVIDED, HOWEVER, that the amount of such expenses shall be
a liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 9.1 hereof. In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it
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desires to defend the Indemnified Party against such claim or demand, which it
shall not be entitled to do until the Deductible is exceeded and except as
hereinafter provided, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and by counsel reasonably
acceptable to the Indemnified Party. If any Indemnified Party desires to
participate in, but not control, any such defense or settlement it may do so at
its sole cost and expense. The Indemnified Party shall not settle a claim or
demand without the consent of the Indemnifying Party. The Indemnifying Party
shall not, without the prior written consent of the Indemnified Party, settle,
compromise or offer to settle or compromise any such claim or demand on a basis
which would result in the imposition of a consent order, injunction or decree
which would restrict the future activity or conduct of, or which would otherwise
have a material adverse effect on, the Indemnified Party or any subsidiary or
Affiliate thereof. If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party shall have the right to assume the defense of such claim and
the amount of any such claim or demand, or, if the same be contested by the
Indemnified Party, then that portion of any such claim or demand as to which
such defense is unsuccessful (and all reasonable costs and expenses pertaining
to such defense) shall be the liability of the Indemnifying Party hereunder,
subject to the
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limitations set forth in Section 9.1 hereof. In such event, the Indemnified
Party may defend against any such claim in any manner it deems appropriate and
may settle any such claim or consent to the entry of any judgment with respect
thereto; PROVIDED THAT it shall (i) act reasonably and in good faith, (ii)
notify the Indemnifying Party of its intent to settle such claim or consent to
such judgment and (iii) receive the consent of the Indemnifying Party for such
settlement or consent to judgment (which consent shall not be unreasonably
withheld and shall be deemed to have been received if the Indemnifying Party
shall not have objected within five Business Days after the receipt of the
notification referred to in (ii) above). To the extent the Indemnifying Party
shall control or participate in the defense or settlement of any third party
claim or demand, the Indemnified Party will give to the Indemnifying Party and
its counsel reasonable access to all business records and other documents
relevant to such defense or settlement, and shall permit them to consult with
the employees and counsel of the Indemnified Party. The Indemnifying Party will
keep such business records and other documents strictly confidential and will
use them only for the purposes of defense or settlement pursuant hereto. The
Indemnified Party shall use its reasonable best efforts in the defense of all
such claims, and in connection therewith shall be entitled to reimbursement by
the Indemnifying Party of expenses directly related to efforts undertaken at the
specific request of the Indemnifying Party.
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ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1 AMENDMENT AND MODIFICATION; WAIVER. This
Agreement may only be amended or modified in writing, signed by Seller and
Buyer, at any time prior to the Closing with respect to any of the terms
contained herein. At any time prior to the Closing either Seller or Buyer may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party granting such extension or waiver.
Section 10.2 RETURN OF INFORMATION. If for any reason
whatsoever the sale and purchase of the PSC Shares and the Pearle Shares
pursuant to this Agreement is not consummated, Buyer shall promptly return to
Seller or Pearle all books, records and documents of Seller, Pearle or any
Subsidiary (including all copies, if any, thereof) furnished by Seller, Pearle,
or any of their respective agents, employees, or representatives, and shall not
use or disclose the information contained in such books, records or documents
for any purpose or make such information available to any other entity or
person.
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Section 10.3 EXPENSES. Except as otherwise expressly provided
in this Agreement, whether or not the transactions contemplated by this
Agreement are consummated, the parties shall bear their own respective expenses
(including, but not limited to, all compensation and expenses of counsel,
financial advisors, consultants, actuaries and independent accountants) incurred
in connection with this Agreement and the transactions contemplated hereby.
Section 10.4 PUBLIC DISCLOSURE. Each of the parties to this
Agreement hereby agrees with the other parties hereto that, except as may be
required to comply with the requirements of applicable law or the rules and
regulations of each stock exchange upon which the securities of either of the
parties or its Affiliates is listed, no press release or similar public
announcement or communication will be made or caused to be made concerning the
execution or performance of this Agreement unless specifically approved in
advance by all parties hereto; PROVIDED, HOWEVER, that to the extent that either
party to this Agreement is required by law or the rules and regulations of any
stock exchange upon which the securities of either of the parties or its
Affiliates is listed to make such a public disclosure, such public disclosure
shall only be made after prior consultation with the other party to this
Agreement.
Section 10.5 ASSIGNMENT. No party to this Agreement
may assign any of its rights or obligations under this Agreement
without the prior written consent of the other party hereto;
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PROVIDED, THAT Buyer may assign this Agreement to a wholly owned subsidiary;
PROVIDED, HOWEVER, that such assignment shall not be permitted if it would
subject Seller or any Continuing Affiliate to any additional obligations and
shall not, in any case, relieve Buyer of any of its obligations under this
Agreement.
Section 10.6 ENTIRE AGREEMENT. This Agreement (including all
Schedules hereto) contains the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, except for the
Confidentiality Agreement which will remain in full force and effect for the
term provided for therein.
Section 10.7 FULFILLMENT OF OBLIGATIONS. Any obligation of any
party to any other party under this Agreement, which obligation is performed,
satisfied or fulfilled by an Affiliate of such party, shall be deemed to have
been performed, satisfied or fulfilled by such party.
Section 10.8 PARTIES IN INTEREST; NO THIRD PARTY
BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
Person other than Buyer, Seller, or their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
Section 10.9 SCHEDULES. The inclusion of any matter
in any schedule to this Agreement shall be deemed to be an
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inclusion for all purposes of this Agreement, including each representation and
warranty to which it may relate (PROVIDED that the relevance of such inclusion
is reasonably apparent in the context), but inclusion therein shall expressly
not be deemed to constitute an admission by Seller, or otherwise imply, that any
such matter is material or creates a measure for materiality for the purposes of
this Agreement.
Section 10.10 COUNTERPARTS. This Agreement and any amendments
hereto may be executed in one or more counterparts, each of which shall be
deemed to be an original by the parties executing such counterpart, but all of
which shall be considered one and the same instrument.
Section 10.11 SECTION HEADINGS. The section and paragraph
headings and table of contents contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
Section 10.12 NOTICES. All notices hereunder shall be deemed
given if in writing and delivered personally or sent by telecopy, telex or
telegram or by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other addresses as shall be
specified by like notice):
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<PAGE> 108
(a) if to Seller, to:
The Pillsbury Company
Pillsbury Center
200 South Sixth Street
Minneapolis, MN 55402-1464
Attention: Jerome J. Jenko
Senior Vice President,
General Counsel and
Secretary
fax: (612) 330-4543
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Francis J. Aquila, Esq.
fax: (212) 558-3588
(b) if to the Company, to:
Pearle, Inc.
2534 Royal Lane
Dallas, TX 75229
Attention: Barbara McAninch
General Counsel
fax: (972) 277-5798
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Francis J. Aquila, Esq.
fax: (212) 558-3588
(c) if to Buyer, to:
Cole National Corporation
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Treasurer
fax: (216) 461-3489
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<PAGE> 109
With a copy to:
Jones, Day, Reavis & Pogue
North Point
401 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
fax: (216) 579-0212
Any notice given by mail or telegram shall be effective when received. Any
notice given by telex shall be effective when the appropriate telex or telecopy
answerback is received.
Section 10.13 MEDIATION. All disputes arising under this
Agreement shall be submitted to a mediation panel prior to the filing of any
lawsuit; PROVIDED, HOWEVER, that either party may seek a preliminary injunction
or other preliminary judicial relief regardless of the provisions of this
Section, if, in its judgment, such action is necessary to avoid irreparable
damage. The mediation panel shall consist of three persons. One shall be an
internationally recognized firm of independent public accountants as to which
Seller and Buyer mutually agree. The panel shall have one former judge from the
Southern District of New York who regularly is employed as a mediator for
disputes. The third member of the panel shall be an investment banker from a
firm of recognized national standing, but not from Morgan Stanley or Houlihan
Lokey Howard & Zukin or Smith Barney Inc. The party desiring to submit any
matter to mediation shall do so by written notice to the other party, which
notice shall set forth the items to be mediated and the party's choice of the
three panel members along with a written statement of their
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credentials. The party receiving the notice shall within fifteen (15) days after
receipt of the notice either approve the proposed mediation panel choices, or
designate other individuals by written notice to the first party. The first
party shall within fifteen (15) days after receipt of such notice either approve
such choices or disapprove the same. If both parties shall have approved three
persons then such persons shall be the mediation panel for the purposes of
working with the parties to resolve the dispute; otherwise, the dispute shall be
referred to the National Association for Dispute Resolution, Inc., which shall
select a panel of persons with the qualifications set forth above. The mediation
panel shall be required to conduct a mediation session within fifteen (15) days
after being notified of their selection. All parties shall send high level
representatives with the ability to resolve the dispute but no outside lawyers
shall participate. The parties shall work with the mediation panel in good faith
for at least a period of three (3) days if necessary to resolve the dispute. If
the parties are unable to resolve the dispute, litigation may then be filed. The
fees and expenses of the mediation panel will be paid equally by Buyer and
Seller.
SECTION 10.14 GOVERNING LAW; SUBMISSION TO JURISDICTION;
SELECTION OF FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING
ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO
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<PAGE> 111
THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE
SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN
COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR
PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 10.12 OF THIS AGREEMENT. BUYER IRREVOCABLY DESIGNATES CT CORPORATION
SYSTEM AS ITS AGENT AND ATTORNEY-IN-FACT FOR THE ACCEPTANCE OF SERVICE OF
PROCESS AND MAKING AN APPEARANCE ON ITS BEHALF IN ANY SUCH CLAIM OR PROCEEDING
AND TAKING ALL SUCH ACTS AS MAY BE NECESSARY OR APPROPRIATE IN ORDER TO CONFER
JURISDICTION OVER IT UPON THE CHOSEN COURTS AND BUYER STIPULATES THAT SUCH
CONSENT AND APPOINTMENT IS IRREVOCABLE AND COUPLED WITH AN INTEREST.
Section 10.15 SEVERABILITY. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or
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<PAGE> 112
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
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<PAGE> 113
IN WITNESS WHEREOF, this Agreement has been signed on
behalf of each of the parties hereto as of the date first written
above.
THE PILLSBURY COMPANY
By /S/ JEROME J. JENKO
--------------------------------
Name: Jerome J. Jenko
Title: Senior Vice President
PEARLE, INC.
By /S/ JEROME J. JENKO
--------------------------------
Name: Jerome J. Jenko
Title: Senior Vice President
COLE NATIONAL CORPORATION
By /S/ JEFFREY A. COLE
--------------------------------
Name: Jeffrey A. Cole
Title: Chairman and Chief
Executive Officer
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<PAGE> 1
Exhibit 2.2
----------------------------------------
PURCHASE AGREEMENT
among
COLE NATIONAL CORPORATION
and
HAL INVESTMENTS B.V.
Dated as of 24 September, 1996
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 DEFINITIONS......................................... 2
Section 1.1 Specific Definitions................................ 2
Section 1.2 Other Terms......................................... 6
Section 1.3 Other Definitional Provisions....................... 6
ARTICLE 2 PURCHASE AND SALE OF THE SHARES AND CERTAIN
ASSETS.............................................. 6
Section 2.1 Purchase and Sale of the Shares and the
Other Assets........................................ 6
Section 2.2 Closing; Delivery and Payment....................... 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CNC............... 7
Section 3.1 Organization and Authority of CNC................... 7
Section 3.2 Capital Stock of Pearle B.V......................... 8
Section 3.3 European Intellectual Property...................... 9
Section 3.4 Representations and Warranties under
Master Agreement.................................... 9
Section 3.5 No Other Representations or Warranties.............. 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............. 10
Section 4.1 Organization and Authority of Buyer................. 10
Section 4.2 Securities Act...................................... 11
Section 4.3 No Other Representations or Warranties.............. 11
ARTICLE 5 ENFORCEMENT, COOPERATION AND CERTAIN OTHER
COVENANTS........................................... 12
Section 5.1 Enforcement......................................... 12
Section 5.2 Enforcement of Master Agreement Non-
Compete............................................. 13
Section 5.3 Cooperation......................................... 13
ARTICLE 6 NON-COMPETE......................................... 14
Section 6.1 CNC's Covenant Not-to-Compete....................... 14
Section 6.2 Buyer's Covenant Not-to-Compete..................... 15
Section 6.3 Injunctive Relief................................... 15
Section 6.4 Hiring of Employees................................. 16
ARTICLE 7 CONDITIONS TO CLOSING............................... 16
Section 7.1 Conditions to Obligations of Buyer.................. 16
Section 7.2 Conditions to Obligations of Buyer and
CNC................................................. 17
ARTICLE 8 TERMINATION......................................... 17
ARTICLE 9 MISCELLANEOUS....................................... 18
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 9.1 Amendment and Modification; Waiver.................. 18
Section 9.2 Expenses............................................ 18
Section 9.3 Public Disclosure................................... 19
Section 9.4 Assignment.......................................... 19
Section 9.5 Entire Agreement.................................... 20
Section 9.6 Fulfillment of Obligations.......................... 20
Section 9.7 Parties in Interest; No Third Party
Beneficiaries....................................... 20
Section 9.8 Counterparts........................................ 20
Section 9.9 Section Headings.................................... 21
Section 9.10 Notices............................................. 21
Section 9.11 Mediation........................................... 22
Section 9.12 Severability........................................ 23
</TABLE>
ii
<PAGE> 4
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement"), dated as of 24
September, 1996, among COLE NATIONAL CORPORATION, a Delaware corporation
("CNC"), and HAL Investments B.V., a company organized under the laws of the
Netherlands ("HAL").
W I T N E S S E T H:
WHEREAS, CNC is purchasing all of the issued and outstanding
shares of capital stock of Pearle, Inc., a Delaware corporation, pursuant to
that certain Stock Purchase Agreement among The Pillsbury Company ("Pillsbury"),
Pearle, Inc. and CNC, dated as of September 30, 1996 (the "Master Agreement");
WHEREAS, Pearle Holdings B.V., a company organized under the
laws of the Netherlands ("Pearle B.V."), is a wholly-owned subsidiary of Pearle,
Inc;
WHEREAS, after consummation of the transactions contemplated
by the Master Agreement, CNC will own indirectly all of the issued and
outstanding shares of capital stock of Pearle B.V.;
WHEREAS, CNC desires to sell and transfer to Buyer, and Buyer
desires to purchase from CNC, all of the issued and outstanding shares of Pearle
B.V. capital stock (consisting of 500 shares of common stock, par value NLG
1,000.00 per share (the "Shares")), together with certain assets, as more
specifically provided herein; and
<PAGE> 5
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 SPECIFIC DEFINITIONS. As used in this
Agreement, the following terms shall have the meanings set forth
or as referenced below:
"AFFILIATE", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with
that Person.
"AGREEMENT" shall mean this Agreement and all Schedules
hereto.
"BELGIAN CONTRACTS" shall mean the GIB Contract, the Agency
Agreement by and between Pearle Vision, Inc., as successor to Pearle Health
Services Inc., Brilmij Maatschappij Tot Exploitatie Van Optiek Bedrijven B.V.
and GB.Inno.BM S.A., dated November 1, 1985, as amended, and all franchising
agreements for franchises in the countries of Belgium or Luxembourg to which
Pearle Vision, Inc., as successor to Pearle Health Services Inc., and GIB are
parties, all as they exist as of the Closing Date.
"BELGIAN ROYALTY PAYMENTS" shall mean the royalty payments
paid under the Belgian Contracts.
2
<PAGE> 6
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banks in New York City, New York or Rotterdam, the
Netherlands are authorized or obligated by law or executive order to close.
"BUYER" shall mean HAL, until HAL has assigned this Agreement
pursuant to Section 9.4 and, thereafter, shall mean Newco.
"BUYER'S TERRITORY" shall mean the now existing European Union
countries, the no existing European Free Trade Association countries, Albania,
Andorra, Belarus, Bulgaria, the Czech Republic, Cyprus, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Romania, Russia, Slovakia, Slovenia, Turkey,
Ukraine, the former Yugoslavia and any other territories that as of the date
hereof are usually referred to as being part of Europe.
"CLOSING" shall have the meaning set forth in
Section 2.2(a).
"CLOSING DATE" shall have the meaning set forth in
Section 2.2(a).
"CNC" shall have the meaning set forth in the Preamble.
"CNC'S TERRITORY" shall mean all territories in the
world except those territories specifically in Buyer's Territory.
"ENCUMBRANCES" shall have the meaning set forth in
Section 3.3.
3
<PAGE> 7
"EUROPEAN INTELLECTUAL PROPERTY RIGHTS" shall mean the
Intellectual Property rights to be assigned to Buyer pursuant to the Trademark
Assignment Agreement.
"GIB" shall mean GB.Inno.BM S.A. or any successor or
Affiliate thereof.
"GIB CONTRACT" shall mean the Sales, Marketing and
Distribution Agreement between Pearle Vision, Inc., as successor to Pearle
Health Services Inc., Brilmij Maatschappij Tot Exploitatie Van Optiek Bedrijven
B.V. and GB.Inno.BM S.A., dated October 3, 1983, as amended.
"NEWCO" means a company yet to be incorporated under the laws
of the Netherlands, with such corporate power and authority and capitalization
as shall be determined by HAL, which shall be sufficient to support Newco's
obligations under this Agreement.
OTHER ASSETS" shall mean such assets as the parties may agree,
including, without limitation, (a) the European Intellectual Property Rights,
(b) the assignment of the Belgian Royalty Payments and the agreement by Buyer to
perform certain obligations pursuant to Section 5.4 hereof, and (c) CNC's
covenant not-to-compete contained in Section 6.1 hereof.
"PEARLE B.V." shall have the meaning set forth in the
Preamble.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock
4
<PAGE> 8
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"PILLSBURY" shall have the meaning set forth in the
Preamble.
"PILLSBURY PAYMENT" shall have the meaning set forth in
Section 2.3.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.1.
"SECURITIES ACT" shall mean the United States Securities Act
of 1933, as amended.
"SHARES" shall have the meaning set forth in the
Preamble.
"SUBSIDIARY][IES]" shall mean each subsidiary of Pearle B.V.
in which Pearle B.V. owns, beneficially or of record directly or indirectly,
securities representing 50 percent (50%) or more of the aggregate voting power
as listed on Schedule 3.4 to the Master Agreement (collectively, the
"Subsidiaries").
"TRADEMARK ASSIGNMENT AGREEMENT" shall mean an agreement on
terms mutually acceptable to Buyer and CNC pursuant to which CNC shall assign to
Buyer or, at Buyer's direction, Pearle B.V. or any of its Subsidiaries, all
Intellectual Property rights owned or used by Pearle, Inc. or its Subsidiaries
as of the Closing Date to the extent such rights relate to Buyer's Territory.
5
<PAGE> 9
Section 1.2 OTHER TERMS. Other terms may be defined elsewhere
in the text of this Agreement and, unless otherwise indicated, shall have such
meaning indicated throughout this Agreement. Capitalized terms used and not
defined herein shall have the meanings ascribed to such terms in the Master
Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words
"hereof", "herein", and "hereunder" and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The term "NLG" shall mean Dutch guilders.
ARTICLE 2
PURCHASE AND SALE OF THE SHARES AND CERTAIN ASSETS
--------------------------------------------------
Section 2.1 PURCHASE AND SALE OF THE SHARES AND THE OTHER
ASSETS. Upon the terms and subject to the conditions set forth herein, Buyer
shall purchase from CNC and CNC shall sell to Buyer the Shares and the Other
Assets, for an aggregate purchase price of NLG 102,920,000 (the "Purchase
Price") to be allocated among the Shares and the respective Other Assets prior
to the Closing.
6
<PAGE> 10
Section 2.2 CLOSING; DELIVERY AND PAYMENT.
(a) The closing (the "Closing") shall take place simultaneously with the
closing of the Master Agreement. The date on which the Closing occurs is called
the "Closing Date," and the Closing shall be deemed effective at 11:59 P.M.
(local time) on the Closing Date.
(b) On the Closing Date, CNC shall cause (i) the Shares to be transferred
pursuant to a Notarial Deed of Transfer before any civil law notary of Nauta
Dutilh, Rotterdam or any of their deputies and (ii) shall cause the Other Assets
to be transferred and (A) the parties shall execute any and all documents and do
such other acts as are reasonably necessary in connection therewith and (B)
Buyer shall pay to CNC the Purchase Price in immediately available funds an
account or accounts to be designated by CNC. These accounts will be designated
by CNC not less than two Business Days prior to the Closing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CNC
-------------------------------------
CNC represents and warrants to Buyer as of the date hereof and as of the
Closing Date (except that representations and warranties that are made as of a
specific date need be true only as of such date) as follows:
Section 3.1 ORGANIZATION AND AUTHORITY OF CNC. CNC has been duly
incorporated, is validly existing and is in good
7
<PAGE> 11
standing under the laws of the State of Delaware, with full power and authority
to enter into this Agreement and to perform its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by CNC and
constitutes a legal, valid and binding obligation of CNC, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles, and
no other proceedings on the part of CNC, are necessary to authorize this
Agreement and the consummation of the transactions contemplated hereby. Neither
the execution and delivery of this Agreement nor compliance by CNC with its
terms and provisions will violate any provision of the certificate of
incorporation or by-laws of CNC.
Section 3.2 CAPITAL STOCK OF PEARLE B.V.. Between the date hereof and the
delivery of the Shares pursuant to the Notarial Deed of Transfer referred to in
Section 2.2, CNC shall not, and shall cause each of its Subsidiaries (including,
following the closing under the Master Agreement, Pearle and Pearle B.V.) not
to, grant or agree to grant any preemptive or other outstanding rights,
subscriptions, options, warrants, calls, contracts, demands, commitments,
convertible securities or other agreements or arrangements of any character or
nature whatsoever under which CNC or any of its Subsidiaries is or may become
obligated to vote, issue, assign or transfer any shares of
8
<PAGE> 12
the capital stock, or rights or warrants to acquire, or securities convertible
into shares of capital stock, of Pearle B.V. or any of its Subsidiaries. As of
the Closing, Pearle will have good and valid title to the Shares and, upon
consummation of the transactions contemplated in this Agreement, shall have
transferred such title to the Shares to Buyer pursuant to the terms of this
Agreement, free and clear of any Encumbrances, other than such Encumbrances
which were incurred by Buyer or caused to be incurred by Pearle B.V. or any
Subsidiary by Buyer as a result of the transactions contemplated by this
Agreement.
Section 3.3 EUROPEAN INTELLECTUAL PROPERTY. Between the date hereof and the
delivery of the Trademark Assignment Agreement, CNC shall not, and shall cause
each of its Subsidiaries (including, following the closing under the Master
Agreement, Pearle and Pearle B.V.) not to, grant or agree to grant any rights to
the European Intellectual Property to any third party.
Section 3.4 REPRESENTATIONS AND WARRANTIES UNDER MASTER AGREEMENT. From and
after the closing under the Master Agreement, CNC makes to Buyer the
representations and warranties made in Sections 3.2 through 3.24 of the Master
Agreement, to the extent such representations and warranties relate to Pearle
B.V. or any of its Subsidiaries.
Section 3.5 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this
9
<PAGE> 13
Article 3, neither CNC nor any other Person makes any other express or implied
representation or warranty on behalf of CNC.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to CNC as of the date hereof and as of the
Closing Date (except that representations and warranties that are made as of a
specific date need be true only as of such date) as follows:
Section 4.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer is duly incorporated
and validly existing under the laws of the Netherlands, with full power and
authority to own or lease its assets and to carry on its business substantially
as currently conducted. There has been no proposal made or resolution adopted
(by the competent corporate body(ies)) for the dissolution or liquidation of
such company, and no proposal has been made or resolution adopted (by the
competent corporate body(ies)) for the statutory merger of such company with
another entity or for a splitting of such company. This Agreement has been duly
authorized, executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles, and no other
10
<PAGE> 14
proceedings on the part of Buyer are necessary to authorize this Agreement and
the consummation of transactions contemplated hereby. Neither the execution and
delivery of this Agreement nor compliance by Buyer with its terms and provisions
will violate any provision of the Articles of Association (in Dutch "Statuten")
of Buyer.
Section 4.2 SECURITIES ACT. Buyer is acquiring the Shares solely for the
purpose of investment and not with a view to, or for sale in connection with,
any distribution thereof in violation of the Securities Act. Buyer acknowledges
that the Shares are not registered under the Securities Act or any applicable
state securities law, and that such Shares may not be transferred or sold except
pursuant to the registration provisions of such Securities Act or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations as applicable.
Section 4.3 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of Buyer.
11
<PAGE> 15
ARTICLE 5
ENFORCEMENT, COOPERATION AND CERTAIN OTHER COVENANTS
----------------------------------------------------
Section 5.1 ENFORCEMENT. In the event of any breach of Section 3.4 hereof,
if Buyer gives notice to CNC within the applicable time period therefor under
the Master Agreement that Pillsbury or Pearle, Inc. has breached any
representation, warranty, covenant or agreement contained in the Master
Agreement with respect to Pearle B.V. or its Subsidiaries for which CNC is
entitled to indemnification pursuant to the Master Agreement, CNC shall promptly
(a) enforce, for and on behalf of Buyer and under Buyer's direction, its rights
to indemnification with respect to any Losses related thereto pursuant to the
Master Agreement and (b) pay to Buyer any amounts received (or with respect to
which the benefit through the set-off of any claim under the Master Agreement
has been received) by CNC with respect thereto; PROVIDED, however, that, (i) the
rights hereunder shall be subject to the Damage Threshold, (ii) Buyer shall be
entitled to Losses in an amount up to the Purchase Price in the aggregate, and
(iii) for purposes of the Deductible, (A) all Losses of CNC under the Master
Agreement and of Buyer hereunder shall be accumulated, (B) to the extent the
Deductible has been exceeded, with respect to all Losses recoverable by CNC
under the Master Agreement, CNC shall first satisfy to the fullest possible
extent any claim of Buyer hereunder within two Business Days after CNC receives
payment from Pillsbury for any Losses.
12
<PAGE> 16
Section 5.2 ENFORCEMENT OF MASTER AGREEMENT NON-COMPETE. If Buyer gives
notice to CNC that there has been any breach by Pillsbury or any of its
Affiliates of the non-competition agreement in the Master Agreement with respect
to the Buyer's Territory, CNC shall promptly enforce, for and on behalf of Buyer
and under Buyer's direction, its rights under Section 6.9 of the Master
Agreement, including, without limitation, including the procurement of
injunctive relief. In order to effect such enforcement, CNC hereby constitutes
and appoints Buyer its attorney-in-fact, with full power of substitution and
resubstitution, for it and in its name, place and stead, to sign any and all
pleadings and other documents in connection with the enforcement of Section 6.9
of the Master Agreement with respect to Buyer's Territory, granting unto said
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite or necessary to have done in and about the premises, as full
to all intents and purposes as CNC might or could do.
Section 5.3 COOPERATION. CNC and Buyer shall cooperate and use their
respective reasonable best efforts to fulfill CNC's obligations under the Master
Agreement with respect to Pearle B.V. and the Subsidiaries, within the
applicable time period therefor under the Master Agreement, including but not
limited to Sections 2.4, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 6.1, 6.2, 6.4, 6.5, 6.6,
6.7 and 7.2 of the Master Agreement.
13
<PAGE> 17
ARTICLE 6
NON-COMPETE
-----------
Section 6.1 CNC'S COVENANT NOT-TO-COMPETE. CNC acknowledges and agrees that
the value to Buyer of the transactions provided for herein would be
substantially diminished if CNC were to enter into certain business activities
in Buyer's Territory and CNC has agreed to the covenant in this Section 6.1 as
an inducement to Buyer to enter into this Agreement. CNC specifically
acknowledges and agrees that the covenants in this Section 6.1 are commercially
reasonable and reasonably necessary to protect the interests Buyer intends to
acquire hereunder. If any court of competent jurisdiction shall in any
proceedings refuse to enforce such covenant, in whole or in part, because the
time limit or geographical extent applicable thereto is deemed unreasonable in
the jurisdiction, it is expressly understood and agreed that such covenant shall
not be void. Instead, for the purpose of such proceedings, such temporal or
geographic limitations shall be deemed to be reduced to the extent necessary to
permit the enforcement of such covenant in the particular jurisdiction. CNC
agrees that, for five years after the Closing Date, it shall not, directly or
indirectly through franchisees or otherwise, engage in the ownership, operation
or management of retail stores offering eyecare products in Buyer's Territory
other than through its participation in Newco or any of its Affiliates.
14
<PAGE> 18
Section 6.2 BUYER'S COVENANT NOT-TO-COMPETE. Buyer acknowledges and agrees
that the value to CNC of the transactions provided for herein would be
substantially diminished if Buyer were to enter into certain business activities
in CNC's Territory and Buyer has agreed to the covenant in this Section 6.2 as
an inducement to CNC to enter into this Agreement. Buyer specifically
acknowledges and agrees that the covenants in this Section 6.2 are commercially
reasonable and reasonably necessary to protect the interests of CNC. If any
court of competent jurisdiction shall in any proceedings refuse to enforce such
covenant, in whole or in part, because the time limit or geographical extent
applicable thereto is deemed unreasonable in the jurisdiction, it is expressly
understood and agreed that such covenant shall not be void. Instead, for the
purpose of such proceedings, such temporal or geographic limitations shall be
deemed to be reduced to the extent necessary to permit the enforcement of such
covenant in the particular jurisdiction. Buyer agrees that, for five years after
the Closing Date, it shall not, directly or indirectly through franchisees or
otherwise, engage in the ownership, operation or management of retail stores
offering eyecare products in CNC's Territory other than through the
participation by HAL or Newco in CNC or any of its Affiliates.
Section 6.3 INJUNCTIVE RELIEF. CNC and Buyer agree that money damages would
be an inadequate remedy for a violation
15
<PAGE> 19
of the covenant set forth in this Article 6. Accordingly, Buyer and CNC shall
each be entitled, in addition to any other rights and remedies that it may have,
to injunctive relief to enjoin any such breach.
Section 6.4 HIRING OF EMPLOYEES. Each party agrees that, for a period of
two (2) years following the Closing Date, neither party shall solicit the
employment of any person, it knows to be an employee of the other (other than
any hourly worker or any Employee who serves in clerical function) without the
prior written consent of the other party; PROVIDED, HOWEVER, that (i) general
solicitations of employment published in a journal, newspaper or other
publication of general circulation and not specifically directed towards such
employees shall not be deemed to constitute solicitation for purposes of this
Section 6.4 and (ii) each party and their respective representatives shall not
be prohibited from employing any such person who contacts them on his or her own
initiative and without any solicitation by the other party.
ARTICLE 7
CONDITIONS TO CLOSING
---------------------
Section 7.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver
16
<PAGE> 20
by Buyer in writing on or prior to the Closing Date of the
following condition:
(a) CNC shall have executed and delivered to Buyer a Trademark
Assignment Agreement.
Section 7.2 CONDITIONS TO OBLIGATIONS OF BUYER AND CNC. The obligations of
the parties to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction or waiver by both parties on or prior to the
Closing Date of the following conditions:
(a) The Subsequent Sale under the Master Agreement shall have
occurred.
(b) No court or governmental authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, or non-appealable judgment, decree, injunction or other order
which is in effect on the Closing Date and prohibits the consummation of
the Closing.
ARTICLE 8
TERMINATION
-----------
This Agreement shall terminate automatically upon the termination of the
Master Agreement and otherwise may be terminated at any time prior to the
Closing only by agreement of Buyer and CNC.
17
<PAGE> 21
ARTICLE 9
MISCELLANEOUS
-------------
Section 9.1 AMENDMENT AND MODIFICATION; WAIVER. This Agreement may only be
amended or modified in writing, signed by CNC and Buyer, at any time prior to
the Closing with respect to any of the terms contained herein. At any time prior
to the Closing either CNC or Buyer may (a) extend the time for the performance
of any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
granting such extension or waiver.
Section 9.2 EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the parties shall bear their own respective expenses (including,
but not limited to, all compensation and expenses of their respective employees
and all fees and expenses of financial advisors and financing sources,
consultants and other advisors, incurred in connection with this Agreement and
the transactions contemplated hereby. Notwithstanding the foregoing, CNC shall
bear all fees and expenses of Jones, Day, Reavis & Pogue and Arthur Andersen LLP
18
<PAGE> 22
(U.S.) and Buyer shall bear all fees and expenses of Nauta Dutilh, Stibbe Simont
Monahan Duhot and Arthur Andersen (Europe).
Section 9.3 PUBLIC DISCLOSURE. Each of the parties to this Agreement hereby
agrees with the other parties hereto that, except as may be required to comply
with the requirements of applicable law or the rules and regulations of each
stock exchange upon which the securities of either of the parties or its
Affiliates is listed, no press release or similar public announcement or
communication shall be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in advance by all
parties hereto; PROVIDED, HOWEVER, that to the extent that either party to this
Agreement is required by law or the rules and regulations of any stock exchange
upon which the securities of either of the parties or its Affiliates is listed
to make such a public disclosure, such public disclosure shall only be made
after prior consultation with the other party to this Agreement.
Section 9.4 ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto; PROVIDED, that CNC may assign this Agreement to a
wholly-owned subsidiary, PROVIDED, HOWEVER, that such assignment shall not be
permitted if it would subject Buyer to any additional obligations and PROVIDED
FURTHER that HAL may assign this Agreement to Newco.
19
<PAGE> 23
Section 9.5 ENTIRE AGREEMENT. This Agreement (including all Schedules
hereto) contains the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, except for the
Confidentiality Agreement which shall remain in full force and effect for the
term provided for therein.
Section 9.6 FULFILLMENT OF OBLIGATIONS. Any obligation of any party to any
other party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such party, shall be deemed to have been performed,
satisfied or fulfilled by such party.
Section 9.7 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Buyer, CNC, or their successors or respective permitted assigns, any rights or
remedies under or by reason of this Agreement.
Section 9.8 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in one or more counterparts, each of which shall be deemed to be an
original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.
20
<PAGE> 24
Section 9.9 SECTION HEADINGS. The section and paragraph headings and table
of contents contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
Section 9.10 NOTICES. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by telecopy, telex or telegram or by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses as shall be specified by like
notice):
(a) if to CNC, to:
Cole National Corporation
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Treasurer
Fax: 216-461-3489
With a copy to:
Jones, Day, Reavis & Pogue
North Point
401 Lakeside Avenue
Cleveland, Ohio 44114
United States
Attention: David P. Porter
Fax: 216-579-0212
(b) if to Buyer, to:
HAL Investments B.V.
"Plaza", Weena 674
3012 CN Rotterdam
The Netherlands
Attention: Mel Groot
Fax: 31-10-281-6528
21
<PAGE> 25
With a copy to:
Nauta Dutilh
Weena 750
3014 DA Rotterdam
The Netherlands
Attention: Peter Goes
Fax: 31-10-414-8444
Any notice given by mail or telegram shall be effective when received. Any
notice given by telex shall be effective when the appropriate telex or telecopy
answer back is received.
Section 9.11 MEDIATION. All disputes arising under this Agreement shall be
governed under the laws of the Netherlands and shall be submitted to a mediation
panel to be conducted in accordance with the rules of the Netherlands Mediation
Institute in the English language prior to the commencement of arbitration;
PROVIDED, HOWEVER, that either party may seek a preliminary injunction or other
preliminary judicial relief regardless of the provisions of this Section, if, in
its judgment, such action is necessary to avoid irreparable damage. The
mediation panel shall consist of three persons. One shall be Arthur Andersen
L.L.P. One shall be an internationally recognized firm of independent public
accountants of Buyer's choice. The third member of the mediation panel shall be
chosen by the other two members of the mediation panel. The party desiring to
submit any matter to mediation shall do so by written notice to the other party,
which notice shall set forth the items to be mediated. The mediation panel shall
be required to conduct
22
<PAGE> 26
a mediation session within fifteen (15) days after the receiving party receives
such notification. All parties shall send high level representatives with the
ability to resolve the dispute but no outside lawyers shall participate. The
parties shall work with the mediation panel in good faith for at least a period
of three (3) days if necessary to resolve the dispute. If the parties are unable
to resolve the dispute, arbitration may then be initiated by either party. Any
such arbitration will be in accordance with the rules of the Netherlands
Arbitration Institute. The arbitration proceedings and all documents delivered
to or by the arbitrators shall be in English and the arbitrators shall make
their award in accordance with the rules of law. The venue for the proceedings
shall be Rotterdam. The fees and expenses of the mediation panel shall be paid
equally by Buyer and CNC.
Section 9.12 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement
23
<PAGE> 27
and the application of such provision to other persons, entities or
circumstances shall not be affected by such invalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
24
<PAGE> 28
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties hereto as of the date first written above.
COLE NATIONAL CORPORATION
By /S/ JEFFREY A. COLE
-----------------------------
Name: Jeffrey A. Cole
Title: Chairman and Chief
Executive Officer
HAL INVESTMENTS B.V.
By /S/ MEL GROOT
-----------------------------
Name: Mel Groot
Title: Director
<PAGE> 1
Exhibit 2.3
----------------------------------------
PURCHASE AGREEMENT
among
COLE NATIONAL CORPORATION
and
COLE NATIONAL GROUP, INC.
Dated as of 15 November, 1996
----------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEFINITIONS................................................... 2
Section 1.1 Specific Definitions............................... 2
Section 1.2 Other Terms........................................ 3
Section 1.3 Other Definitional Provisions...................... 3
ARTICLE II. PURCHASE AND SALE OF THE SHARES.............................. 4
Section 2.1 Purchase and Sale of the Shares.................... 4
Section 2.2 Closing; Delivery and Payment...................... 4
Section 2.3 Retention of Certain Rights and
Obligations Under the Pillsbury
Purchase Agreement................................. 4
Section 2.4 Assumption of Certain Rights and
Obligations Under the Pillsbury
Purchase Agreement................................. 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.................... 5
Section 3.1 Organization and Authority of Seller............... 5
Section 3.2 Capital Stock of Pearle and PSC.................... 6
Section 3.3 No Other Representations or Warranties............. 6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER...................... 6
Section 4.1 Organization and Authority of Buyer................ 6
Section 4.2 Securities Act..................................... 7
Section 4.3 No Other Representations or Warranties............. 7
ARTICLE V. CONDITIONS TO CLOSING......................................... 7
ARTICLE VI. TERMINATION.................................................. 8
ARTICLE VII. MISCELLANEOUS............................................... 8
Section 7.1 Amendment and Modification; Waiver................. 8
Section 7.2 Assignment......................................... 9
Section 7.3 Entire Agreement................................... 9
Section 7.4 Parties in Interest; No Third Party Beneficiaries.. 9
Section 7.5 Counterparts....................................... 9
Section 7.6 Section Headings................................... 10
Section 7.7 Notices............................................ 10
Section 7.8 Severability....................................... 11
Section 7.9 Cooperation........................................ 11
Section 7.10 Expenses........................................... 11
</TABLE>
i
<PAGE> 3
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made as of the
15th day of November, 1996 by and between Cole National Corporation, a Delaware
Corporation ("Seller") and Cole National Group, Inc., a Delaware corporation
("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is purchasing (i) all of the issued and
outstanding shares (the "PSC Shares") of capital stock of Pearle Service
Corporation, a Delaware corporation ("PSC") and (ii) all of the issued and
outstanding shares (the "Pearle Shares", and together with the PSC Shares, the
"Shares") of capital stock of Pearle, Inc., a Delaware corporation ("Pearle")
pursuant to that certain Stock Purchase Agreement among The Pillsbury Company
("Pillsbury"), Pearle and Seller dated as of September 24, 1996 (the "Pillsbury
Purchase Agreement");
WHEREAS, Seller is causing the sale of all of the issued and
outstanding shares of Pearle Holdings B.V., a company organized under the laws
of the Netherlands and a wholly owned indirect subsidiary of Pearle, along with
certain assets, pursuant to that certain Purchase Agreement among Seller and HAL
Investments B.V. dated as of September 24, 1996 (the "BV Purchase Agreement");
WHEREAS, Seller desires to sell and transfer to Buyer, and
Buyer desires to purchase from Seller, (a) the Shares and (b) all of the
Seller's rights and obligations of Seller under the Pillsbury Purchase Agreement
except for (i) those rights and
<PAGE> 4
obligations that are necessary for the Seller to fulfill its obligations under
the BV Purchase Agreement, (ii) Seller's right to receive payment under Section
5.2(a) of the Pillsbury Purchase Agreement (iii) Seller's right to receive
payment under Section 4 of the Side Agreement (the "Side Agreement") dated
September 24, 1996 by and among Seller and Pillsbury and (iv) the right to
receive the consideration to be paid to Seller pursuant to the BV Purchase
Agreement (collectively (i), (ii), (iii) and (iv) above hereinafter referred to
as the "Excluded Rights" and (a) and (b) above hereinafter referred to as the
"Agreement Rights"); and
WHEREAS, the transactions contemplated by this Agreement (the
"Transfer") are to be consummated immediately following the consummation of the
Pillsbury Purchase Agreement and the BV Purchase Agreement.
NOW THEREFORE, in consideration of the premises,
representations, warranties and agreements contained herein, the parties agree
as follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.1 SPECIFIC DEFINITIONS. As used in this Agreement,
the following terms have the meanings set forth or as referenced below:
"AGREEMENT" means this Agreement.
"AGREEMENT RIGHTS" has the meaning set forth in the Preamble.
"BUYER" has the meaning set forth in the Preamble.
"CLOSING" has the meaning set forth in Section 2.2(a).
2
<PAGE> 5
"CLOSING DATE" has the meaning set forth in Section 2.2(a).
"EXCLUDED RIGHTS" has the meaning set forth in the preamble.
"PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.
"PILLSBURY" has the meaning set forth in the Preamble.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning set forth in the Preamble.
"SHARES" has the meaning set forth in the Preamble.
Section 1.2 OTHER TERMS. Other terms may be defined elsewhere
in the text of this Agreement and, unless otherwise indicated, have such meaning
indicated throughout this Agreement. Capitalized terms used and not defined
herein have the meanings ascribed to such terms in the Pillsbury Purchase
Agreement.
Section 1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words
"hereof", "herein", and "hereunder" and words of similar import, when used in
this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in the singular have a comparable
meaning when used in the plural, and vice versa.
3
<PAGE> 6
ARTICLE II.
PURCHASE AND SALE OF THE SHARES
-------------------------------
Section 2.1 PURCHASE AND SALE OF THE SHARES. Upon the terms
and subject to the conditions set forth herein, Buyer shall purchase from Seller
and Seller shall sell to Buyer the Shares for an aggregate purchase price of One
Hundred Fifty-Four Million Dollars ($154,000,000) (the "Purchase Price")
Section 2.2 CLOSING; DELIVERY AND PAYMENT.
(a) The closing (the "Closing") shall take place immediately
following the closing of the Pillsbury Purchase Agreement, the BV Purchase
Agreement and the transfer to Seller of the proceeds of the BV Purchase
Agreement. The date on which the closing occurs is called the "Closing Date,"
and the Closing shall be deemed effective at 11:59:30 P.M. (local time) on the
Closing Date.
(b) On the Closing Date, (i) Seller shall cause the Shares to
be transferred to Buyer pursuant to a Stock Power, (ii) shall execute any and
all documents and to do such other acts as are necessary to assign the Agreement
Rights to Buyer, and (iii) Buyer shall pay to Seller the Purchase Price in
immediately available funds to an account to be designated by Seller or through
a credit in the intercompany account between Seller and Buyer.
Section 2.3 RETENTION OF CERTAIN RIGHTS AND OBLIGATIONS UNDER
THE PILLSBURY PURCHASE AGREEMENT. Notwithstanding anything contained in this
Agreement to the
4
<PAGE> 7
contrary, the Seller will retain and will not transfer to Buyer the Excluded
Rights.
Section 2.4 ASSUMPTION OF CERTAIN RIGHTS AND OBLIGATIONS UNDER
THE PILLSBURY PURCHASE AGREEMENT. The Buyer will assume and Seller shall assign
those rights and obligations under the Pillsbury Purchase Agreement that not are
Excluded Rights.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer as of the date hereof
and as of the Closing Date (except that representations and warranties that are
made as of a specific date need be true only as of such date) as follows:
Section 3.1 ORGANIZATION AND AUTHORITY OF SELLER. Seller has
been duly incorporated, is validly existing and is in good standing under the
laws of the State of Delaware, with full power and authority to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles, and no other proceedings on the part of
Seller, are necessary to authorize this Agreement and the consummation of the
transactions contemplated hereby.
5
<PAGE> 8
Section 3.2 CAPITAL STOCK OF PEARLE AND PSC. As of the
Closing, Seller will have good and valid title to the Shares and, upon
consummation of the transactions contemplated in this Agreement, will have
transferred such title to the Shares to Buyer pursuant to the terms of this
Agreement.
Section 3.3 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article 3, neither Seller
nor any other Person makes any other express or implied representation or
warranty on behalf of Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as of the date hereof
and as of the Closing Date (except that representations and warranties that are
made as of a specific date need be true only as of such date) as follows:
Section 4.1 ORGANIZATION AND AUTHORITY OF BUYER. Buyer is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with full power and authority to enter into this Agreement and to
perform its obligations hereunder. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to
6
<PAGE> 9
general equity principles, and no other proceedings on the part of Buyer are
necessary to authorize this Agreement and the consummation of transactions
contemplated hereby.
Section 4.2 SECURITIES ACT. Buyer is acquiring the Shares
solely for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act.
Buyer acknowledges that the Shares are not registered under the Securities Act
or any applicable state securities law, and that such Shares may not be
transferred or sold except pursuant to the registration provisions of such
Securities Act or pursuant to an applicable exemption therefrom and pursuant to
state securities laws and regulations as applicable.
Section 4.3 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for
the representations and warranties contained in this Article IV, neither Buyer
nor any other Person makes any other express or implied representation or
warranty on behalf of Buyer.
ARTICLE V.
CONDITIONS TO CLOSING
---------------------
The obligations of the parties to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver by both
parties on or prior to the Closing Date of the following conditions:
(a) The closing of the Pillsbury Purchase Agreement must
have occurred;
7
<PAGE> 10
(b) The closing of the BV Purchase Agreement must have
occurred; and
(c) No court or governmental authority of competent
jurisdiction has enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, or non-appealable
judgment, decree, injunction or other order that is in effect on
the Closing Date and prohibits the consummation of the Closing.
ARTICLE VI.
TERMINATION
-----------
This Agreement will terminate automatically upon the
termination of the Pillsbury Purchase Agreement and otherwise may be terminated
at any time prior to the Closing only by agreement of Buyer and Seller.
ARTICLE VII.
MISCELLANEOUS
-------------
Section 7.1 AMENDMENT AND MODIFICATION; WAIVER. This Agreement
may only be amended or modified in writing, signed by Seller and Buyer, at any
time prior to the Closing with respect to any of the terms contained herein. At
any time prior to the Closing either Seller or Buyer may (a) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained
8
<PAGE> 11
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions of the other party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver will
be valid if set forth in an instrument in writing signed by the party granting
such extension or waiver.
Section 7.2 ASSIGNMENT. No party to this Agreement may assign
any of its rights or obligations under this Agreement without the prior written
consent of the other party hereto.
Section 7.3 ENTIRE AGREEMENT. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect to such matters.
Section 7.4 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
This Agreement inures to the benefit of and will be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Buyer, Seller, or their successors or respective permitted assigns, any rights
or remedies under or by reason of this Agreement.
Section 7.5 COUNTERPARTS. This Agreement and any amendments
hereto may be executed in one or more counterparts, each of which will be deemed
to be an original by the parties executing such counterpart, but all of which
will be considered one and the same instrument.
9
<PAGE> 12
Section 7.6 SECTION HEADINGS. The section and paragraph
headings and table of contents contained in this Agreement are for reference
purposes only and will not in any way affect the meaning or interpretation of
this Agreement.
Section 7.7 NOTICES. All notices hereunder will be deemed
given if in writing and delivered personally or sent by telecopy, telex or
telegram or by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other addresses as may be
specified by like notice):
(a) if to Seller, to:
Cole National Corporation
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Treasurer
Fax: 216-461-3489
With a copy to:
Jones, Day, Reavis & Pogue
North Point
401 Lakeside Avenue
Cleveland, Ohio 44114
United States
Attention: David P. Porter
Fax: 216-579-0212
(b) if to Buyer, to:
Cole National Group, Inc.
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Treasurer
Fax: 216-461-3489
With a copy to:
Jones, Day, Reavis & Pogue
North Point
401 Lakeside Avenue
Cleveland, Ohio 44114
United States
Attention: David P. Porter
10
<PAGE> 13
Fax: 216-579-0212
Any notice given by mail or telegram will be effective when received. Any notice
given by telex will be effective when the appropriate telex or telecopy answer
back is received.
Section 7.8 SEVERABILITY. The provisions of this Agreement are
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision will be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances will not be affected by
such invalidity or unenforceability, nor will such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
Section 7.9 COOPERATION. Buyer and Seller shall cooperate and
use their respective reasonable best efforts to (i) enforce the other party's
rights under the Pillsbury Purchase Agreement and (ii) fulfill the other party's
obligations under the Pillsbury Purchase Agreement.
Section 7.10 EXPENSES. Buyer shall be responsible for the
payment of all expenses in connection with the transactions contemplated by this
Agreement.
11
<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
COLE NATIONAL CORPORATION
By /s/Joseph Gaglioti
----------------------------
Name: Joseph Gaglioti
Title: Vice President and
Treasurer
COLE NATIONAL GROUP, INC.
By /s/Joseph Gaglioti
----------------------------
Name: Joseph Gaglioti
Title: Vice President and
Treasurer
12
<PAGE> 1
Exhibit 4.1
================================================================================
COLE NATIONAL GROUP, INC., as Issuer,
and
NORWEST BANK MINNESOTA, National Association, as Trustee
--------------------
INDENTURE
Dated as of November 15, 1996
--------------------
$150,000,000
9 7/8% Senior Subordinated Notes due 2006
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C> <C>
310(a)(1)..................................................................................... 7.10
(a)(2).................................................................................. 7.10
(a)(3)
N.A.
(a)(4)
N.A.
(b)..................................................................................... 7.08; 7.10;
........................................................................................ 11.02
(b)(1).................................................................................. 7.10
(b)(9).................................................................................. 7.10
(c)..................................................................................... N.A.
311(a)........................................................................................ 7.11
(b)..................................................................................... 7.11
(c)..................................................................................... N.A.
312(a)........................................................................................ 2.05
(b)..................................................................................... 11.03
(c)..................................................................................... 11.03
313(a)........................................................................................ 7.06
(b)(1).................................................................................. 7.06
(b)(2).................................................................................. 7.06
(c)..................................................................................... 11.02; 7.06
(d)..................................................................................... 7.06
314(a)........................................................................................ 4.02; 4.04
........................................................................................ 11.02
(b)..................................................................................... N.A.
(c)(1).................................................................................. 11.04; 11.05
(c)(2).................................................................................. 11.04; 11.05
(c)(3).................................................................................. N.A.
(d)..................................................................................... N.A.
(e)..................................................................................... 11.05
(f)..................................................................................... N.A.
315(a)........................................................................................ 7.01; 7.02
(b)..................................................................................... 7.05; 11.02
(c)..................................................................................... 7.01
(d)..................................................................................... 6.05; 7.01;
........................................................................................ 7.02
(e)..................................................................................... 6.11
316(a) (last sentence)........................................................................ 11.06
(a)(1)(A)............................................................................... 6.05
(a)(1)(B)............................................................................... 6.04
(a)(2).................................................................................. 8.02
(b)..................................................................................... 6.07
(c)..................................................................................... 8.04
317(a)(1)..................................................................................... 6.08
(a)(2).................................................................................. 6.09
(b)..................................................................................... 7.12
318(a)........................................................................................ 11.01
<FN>
N.A. means Not Applicable
- --------------------
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions.................................................................. 1
Section 1.02. Other Definitions............................................................ 21
Section 1.03. Incorporation by Reference of Trust
Indenture Act............................................................. 22
Section 1.04. Rules of Construction........................................................ 22
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in
Indenture................................................................. 23
Section 2.02. Execution and Authentication................................................. 24
Section 2.03. Registrar and Paying Agent................................................... 24
Section 2.04. Paying Agent to Hold Money in Trust.......................................... 25
Section 2.05. Noteholder Lists............................................................. 25
Section 2.06. Transfer and Exchange........................................................ 25
Section 2.07. Replacement Notes............................................................ 26
Section 2.08. Outstanding Notes............................................................ 27
Section 2.09. Temporary Notes.............................................................. 27
Section 2.10. Cancellation................................................................. 27
Section 2.11. Defaulted Interest........................................................... 28
Section 2.12. Deposit of Moneys............................................................ 28
Section 2.13. CUSIP Number................................................................. 28
Section 2.14. Book-Entry Provisions for Global Notes....................................... 29
Section 2.15. Special Transfer Provisions.................................................. 30
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee........................................................... 32
Section 3.02. Selection by Trustee of Notes to Be
Redeemed.................................................................. 32
Section 3.03. Notice of Redemption......................................................... 33
Section 3.04. Effect of Notice of Redemption............................................... 34
Section 3.05. Deposit of Redemption Price.................................................. 34
Section 3.06. Notes Redeemed in Part....................................................... 35
Section 3.07. Optional Redemption.......................................................... 35
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes............................................................. 36
Section 4.02. SEC Reports.................................................................. 36
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.03. Waiver of Stay, Extension or Usury Laws...................................... 37
Section 4.04. Compliance Certificate....................................................... 37
Section 4.05. Taxes........................................................................ 38
Section 4.06. Limitation on Additional Indebtedness........................................ 38
Section 4.07. Limitation on Capital Stock Subsidiaries..................................... 40
Section 4.08. Limitation on Restricted Payments............................................ 40
Section 4.09. Limitation on Certain Asset Sales............................................ 42
Section 4.10. Limitation on Transactions with
Affiliates................................................................ 45
Section 4.11. Limitations on Liens......................................................... 46
Section 4.12. Limitation on Other Senior Subordinated
Debt...................................................................... 46
Section 4.13. Limitation on Sale and Lease-Back
Transactions.............................................................. 46
Section 4.14. Payments for Consent......................................................... 46
Section 4.15. Corporate Existence.......................................................... 47
Section 4.16. Change of Control............................................................ 47
Section 4.17. Maintenance of Office or Agency.............................................. 50
Section 4.18. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries.............................................................. 50
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and
Sale of Assets............................................................ 51
Section 5.02. Successor Person Substituted................................................. 52
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default............................................................ 53
Section 6.02. Acceleration................................................................. 54
Section 6.03. Other Remedies............................................................... 55
Section 6.04. Waiver of Past Defaults and Events of
Default................................................................... 56
Section 6.05. Control by Majority.......................................................... 56
Section 6.06. Limitation on Suits.......................................................... 56
Section 6.07. Rights of Holders to Receive Payment......................................... 57
Section 6.08. Collection Suit by Trustee................................................... 57
Section 6.09. Trustee May File Proofs of Claim............................................. 57
Section 6.10. Priorities................................................................... 58
Section 6.11. Undertaking for Costs........................................................ 58
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee............................................................ 59
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.02. Rights of Trustee............................................................ 60
Section 7.03. Individual Rights of Trustee................................................. 61
Section 7.04. Trustee's Disclaimer......................................................... 61
Section 7.05. Notice of Defaults........................................................... 61
Section 7.06. Reports by Trustee to Holders................................................ 61
Section 7.07. Compensation and Indemnity................................................... 62
Section 7.08. Replacement of Trustee....................................................... 63
Section 7.09. Successor Trustee by Consolidation,
Merger or Conversion...................................................... 64
Section 7.10. Eligibility; Disqualification................................................ 64
Section 7.11. Preferential Collection of Claims Against
Company................................................................... 64
Section 7.12. Paying Agents................................................................ 64
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders................................................... 65
Section 8.02. With Consent of Holders...................................................... 66
Section 8.03. Compliance with Trust Indenture Act.......................................... 67
Section 8.04. Revocation and Effect of Consents............................................ 67
Section 8.05. Notation on or Exchange of Notes............................................. 68
Section 8.06. Trustee to Sign Amendments, etc.............................................. 68
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture....................................................... 69
Section 9.02. Legal Defeasance............................................................. 69
Section 9.03. Covenant Defeasance.......................................................... 70
Section 9.04. Conditions to Legal Defeasance or
Covenant Defeasance....................................................... 70
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions............................................ 72
Section 9.06. Reinstatement................................................................ 73
Section 9.07. Moneys Held by Paying Agent.................................................. 73
Section 9.08. Moneys Held by Trustee....................................................... 73
ARTICLE 10
SUBORDINATION OF NOTES
Section 10.01. Notes Subordinate to Senior
Indebtedness.............................................................. 74
Section 10.02. Payment Over of Proceeds upon
Dissolution, etc.......................................................... 75
Section 10.03. Suspension of Payment When Senior
Indebtedness in Default................................................... 76
Section 10.04. Trustee's Relation to Senior
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Indebtedness.............................................................. 78
Section 10.05. Subrogation to Rights of Holders of
Senior Indebtedness....................................................... 78
Section 10.06. Provisions Solely to Define Relative
Rights.................................................................... 79
Section 10.07. Trustee to Effectuate Subordination.......................................... 80
Section 10.08. No Waiver of Subordination Provisions........................................ 80
Section 10.09. Notice to Trustee............................................................ 81
Section 10.10. Reliance on Judicial Order or
Certificate of Liquidating Agent.......................................... 82
Section 10.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation of
Trustee's Rights.......................................................... 82
Section 10.12. Article Applicable to Paying Agents.......................................... 83
Section 10.13. No Suspension of Remedies.................................................... 83
ARTICLE 12
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls................................................. 83
Section 11.02. Notices...................................................................... 83
Section 11.03. Communications by Holders with Other
Holders................................................................... 84
Section 11.04. Certificate and Opinion as to Conditions
Precedent................................................................. 85
Section 11.05. Statements Required in Certificate and
Opinion................................................................... 85
Section 11.06. When Treasury Notes Disregarded.............................................. 85
Section 11.07. Rules by Trustee and Agents.................................................. 86
Section 11.08. Business Days; Legal Holidays................................................ 86
Section 11.09. Governing Law................................................................ 86
Section 11.10. No Adverse Interpretation of Other
Agreements................................................................ 86
Section 11.11. No Recourse Against Others................................................... 86
Section 11.12. Successors................................................................... 87
Section 11.13. Multiple Counterparts........................................................ 87
Section 11.14. Table of Contents, Headings, etc............................................. 87
Section 11.15. Separability................................................................. 87
EXHIBITS
Exhibit A. Form of Note....................................................................... A-1
Exhibit B. Form of Legend for Global Notes.................................................... B-1
Exhibit C. Form of Certificate to Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors........................................................... C-1
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Exhibit D. Form of Certificate to Be Delivered in
Connection with Transfers Pursuant to
Regulation S................................................................... D-1
</TABLE>
-v-
<PAGE> 8
INDENTURE, dated as of November 15, 1996, between COLE
NATIONAL GROUP, INC., a Delaware corporation, as Issuer (the "Company"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's 9
7/8% Senior Subordinated Notes due 2006 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
------------
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed in connection
with the acquisition of assets from such Person.
"Additional Interest" means additional interest on the Notes
which the Company agrees to pay to the Holders pursuant to Section 4 of the
Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Asset Sale" means the sale, transfer or other disposition
(other than to the Company or any of its Subsidiaries) in any single transaction
or series of related transactions having a fair market value in excess of
$2,500,000 of (a) any Capital Stock of or other equity interest in any
Subsidiary of the Company, (b) all or substantially all of the assets of the
Company or of any Subsidiary, (c) real property or (d) all or substantially all
of the assets of a division, line of business or comparable
<PAGE> 9
-2-
business segment or part thereof of the Company or any Subsidiary thereof;
PROVIDED that Asset Sales shall not include sales, transfers or other
dispositions to the Company or to a Subsidiary or to any other Person if after
giving effect to such sale, lease, conveyance, transfer or other disposition
such other Person becomes a Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(i) cash received by the Company or any Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or a Subsidiary as a reserve,
in accordance with GAAP, against any liabilities associated with the assets sold
or disposed of in such Asset Sale and retained by the Company or a Subsidiary
after such Asset Sale, including, without limitation, pension and other
postemployment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with the assets
sold or disposed of in such Asset Sale, and (ii) promissory notes and other
noncash consideration received by the Company or any Subsidiary from such Asset
Sale or other disposition upon the liquidation or conversion of such notes or
noncash consideration into cash.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the Property subject to such arrangement (as determined by
the Board of Directors of the Company) and (ii) the present value (discounted at
a rate of 10%, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sales that have
not been applied in accordance with clause (iii)(a) or (iii)(b) of Section
4.09(a) and which have not been the basis for an Excess Proceeds Offer in
accordance with clause (iii)(c) of such Section 4.09(a).
<PAGE> 10
-3-
"Board of Directors" means the board of directors of the
Company or any committee authorized to act therefor.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered to
the Trustee.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Change of Control" of the Company will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner (as
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of 50% or more of the total voting or economic power of the
Common Stock of the Company or the Parent and/or warrants or options to acquire
such Common Stock on a fully diluted basis, (ii) either the Company or Parent
consolidates with, or merges with or into, another Person or conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, either the
Company or Parent, in any such event pursuant to a transaction in which the
outstanding Common Stock of either the Company or Parent is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (a) (1) the outstanding Common Stock of the Company or Parent,
as the case may be, is not converted or exchanged at all (except to the extent
necessary to reflect a change in the jurisdiction of incorporation) or is
converted into or exchanged for Common Stock (other than Disqualified Capital
Stock) of the surviving or transferee corporation (the "Surviving Entity") and
(2) immediately after such transaction, no "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted
Holder is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person
<PAGE> 11
-4-
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than a
majority of the total outstanding Common Stock of the Surviving Entity, or (b)
the holders of the Common Stock of the Company outstanding immediately prior to
the consolidation or merger hold, directly or indirectly, at least a majority of
the Common Stock of the surviving corporation immediately after such
consolidation or merger, or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company or the Parent (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company or the Parent has been approved by 66 2/3% of the
directors then still in office who either were directors at the beginning of
such period or whose election or recommendation for election was previously so
approved) cease to constitute a majority of the Board of Directors of the
Company or the Parent.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor and any other obligor on the
Notes.
"Company Request" means any written request signed in the name
of the Company by the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, Controller, Secretary or any Vice-President
and attested to by the
Secretary or any Assistant Secretary of the Company.
"Consolidated Fixed Charges" means, with respect to any Person
and with respect to any determination date, the sum of a Person's (i)
Consolidated Interest Expense, plus (ii) the product of (x) the aggregate amount
of all dividends paid on Disqualified Capital Stock of the Company or on each
series of Preferred Stock of each Subsidiary of such Person (other than
dividends paid or payable in additional shares of Preferred Stock or to the
Company or any of its Wholly Owned Subsidiaries) times (y) a fraction, the
<PAGE> 12
-5-
numerator of which is one and the denominator of which is one minus the then
current effective combined federal, state and local tax rate of such Person
(expressed as a decimal), in each case, for the prior four full fiscal quarter
period for which financial results are available.
"Consolidated Interest Expense" means, with respect to any
Person, for any period and without duplication, the aggregate amount of interest
which, in conformity with GAAP, would be set forth opposite the caption
"interest expense" or any like caption on an income statement for such Person
and its Subsidiaries on a consolidated basis (including, but not limited to, (i)
imputed interest included in Capitalized Lease Obligations, (ii) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (iii) net payments made in
connection with Interest Rate Agreements, (iv) the interest portion of any
deferred payment obligation, (v) amortization of discount or premium, if any,
and (vi) all other non-cash interest expense (other than interest amortized to
cost of sales)) plus all net capitalized interest for such period and all
interest paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, and minus (a) net
payments received in connection with Interest Rate Agreements and (b)
amortization of deferred financing costs and expenses.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED, HOWEVER, that (a) the Net Income of any Person (the "other
Person") in which the Person in question or any of its Subsidiaries has less
than a 100% interest (which interest does not cause the net income of such other
Person to be consolidated into the net income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary, (b)
the Net Income of any Subsidiary of the Person in question that is subject to
any restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or this Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be
<PAGE> 13
-6-
excluded, (d) extraordinary, unusual and non-recurring gains and
losses shall be excluded.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069.
"Cumulative Consolidated Net Income" means with respect to any
Person, as of any date of determination, Consolidated Net Income from October
31, 1993 to the end of the Company's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"Default" means any event that is, or with the passing of time
or giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company, means any
Senior Indebtedness (a) under the New Credit Facility, or (b) which at the time
of determination exceeds $25,000,000 in aggregate principal amount (or accreted
value in the case of Indebtedness issued at a discount) outstanding or available
under a committed facility.
"Disqualified Capital Stock" means any Capital Stock of the
Company or a Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limiting the foregoing, Disqualified Capital Stock shall
be deemed to include (i) any Preferred Stock of a Subsidiary of the Company and
(ii) any Preferred Stock of the Company, with respect to either of which, under
the terms of such Preferred Stock, by agreement or otherwise, such Subsidiary or
the Company is obligated to pay current dividends or distributions in cash
during the period prior to the maturity date of the Notes; provided, however,
that Preferred Stock of the Company or any Subsidiary thereof that is issued
with the benefit of provisions
<PAGE> 14
-7-
requiring a change of control offer to be made for such Preferred Stock in the
event of a Change of Control of the Company or such Subsidiary, which provisions
have substantially the same effect as the provisions described in Section 4.16,
shall not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of (i) Consolidated Net Income for such period, plus (ii)
the provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period (but only including
Redeemable Dividends in the calculation of such Consolidated Interest Expense to
the extent that such Redeemable Dividends have not been excluded in the
calculation of Consolidated Net Income), plus (iv) depreciation for such period
on a consolidated basis, plus (v) amortization of intangibles for such period on
a consolidated basis, plus (vi) any other non-cash items reducing Consolidated
Net Income for such period including the write-off of franchise receivables
acquired in the Pearle Acquisition which have not been restructured or
refinanced since the consummation of the Pearle Acquisition but excluding the
write-off of all other franchise receivables, minus (b) all non-cash items
increasing Consolidated Net Income for such period, all for such Person and its
Subsidiaries determined in accordance with GAAP, except that with respect to the
Company each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and its Subsidiaries only.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Fixed Charge Coverage Ratio" of any Person means, with
respect to any determination date, the ratio of (i) EBITDA for such Person's
prior four full fiscal quarters for which financial results have been reported
prior to the determination date, to (ii) Consolidated Fixed Charges of such
Person.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
<PAGE> 15
-8-
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the Property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed (PROVIDED, HOWEVER, that if such obligation or obligations
shall not have been assumed, the amount of such Indebtedness shall be deemed to
be the lesser of the principal amount of the obligation or the fair market value
of the pledged Property or assets), (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in the case of
any such letters of credit, the items for which such letters of credit provide
credit support are those of other Persons which would be included within this
definition for such other Persons), (v) Disqualified Capital Stock of the
Company or any Subsidiary thereof, and (vi) obligations of any such Person under
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such Interest Rate Agreement obligations would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP). The amount of
<PAGE> 16
-9-
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, PROVIDED (i) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the principal amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP and (ii) that Indebtedness shall not include
any liability for Federal, state, local or other taxes. Notwithstanding any
other provision of the foregoing definition, any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business shall not be deemed to be "Indebtedness" of the Company or any
Subsidiaries for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3)
or (7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance,
account receivable (other than an account receivable arising in the ordinary
course of business or acquired as part of the assets acquired by the Company in
connection with an acquisition of assets which is otherwise permitted by the
terms of this Indenture), loan or capital contribution to (by means of transfers
of Property to others, payments for Property or services for the account or use
of others or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the acquisition,
by purchase or otherwise, of all or substantially all of the business or assets
or stock or other
<PAGE> 17
-10-
evidence of beneficial ownership of, any Person or the making of any investment
in any Person. Investments shall exclude (i) extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices and (ii)
the repurchase of securities of any Person by such Person.
"Issue Date" means the date the Notes are first issued by the
Company and authenticated by the Trustee under this Indenture.
"Lien" means, with respect to any Property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means December 31, 2006.
"Moody's" means Moody's Investors Service and its
successors.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital
Stock by the Company, the aggregate net proceeds received by the Company, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in Property (valued at the fair market
value thereof, as determined in good faith by the Board of Directors, at the
time of receipt) and (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of Capital
Stock of the Company which is not Disqualified Capital Stock, the net book value
of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender,
less any and all payments made to the holders, E.G., on account of fractional
shares and less all expenses incurred by the Company in connection therewith).
<PAGE> 18
-11-
"Net Sales" means Net Sales as shown on the Company's audited
consolidated statement of income for the applicable fiscal year.
"New Credit Facility" means the term and revolving credit
agreement, dated November 15, 1996, by and among Canadian Imperial Bank of
Commerce, as agent, the lenders named therein and one or more borrowers parties
thereto, as the same may be amended, extended, increased, renewed, restated,
supplemented or otherwise modified from time to time.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S.
person, as defined in Regulation S.
"Notes" means the securities that are issued under this
Indenture, as amended or supplemented from time to time pursuant to this
Indenture.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Notes as described
in the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated
November 13, 1996 pursuant to which the Notes were offered.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary or any
Vice-President of the Company or any Subsidiary, as the case may be.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom must be the principal executive officer, principal
financial officer, treasurer, or principal accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
<PAGE> 19
-12-
"Parent" means Cole National Corporation, a Delaware
corporation and the Company's sole stockholder.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an Event of Default has occurred, in the
payment of principal of (or premium, if any) or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Pearl Acquisition" means the acquisition of the capital stock
of Pearle, Inc. and Pearle Service Corporation by the Parent from The Pillsbury
Company pursuant to a stock purchase agreement dated as of September 24, 1996
and various documents related thereto.
"Permitted Holders" means (i) Jeffrey A. Cole, (ii) any
employee stock ownership or any "group" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) in which employees of Parent or its Subsidiaries
beneficially own at least 25% of the Common Stock of the Company or Parent owned
by such group, (iii) Parent and (iv) any Person that is controlled by any one or
more of the Persons set forth in (i) - (iii) above.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Subsidiary arising
under or in connection with the New Credit Facility in an amount not to
exceed the greater of (a) $75,000,000 less any mandatory prepayments
actually made thereunder (to the extent, in the case of payments of
revolving credit indebtedness, that the corresponding commitments have
been permanently reduced) or scheduled payments actually made
thereunder or (b) the sum of (x) 80% of consolidated accounts
receivable of the Company and its Subsidiaries and (y) 50% of
consolidated inventory of the Company and its Subsidiaries;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this
definition which is outstanding on the date of this Indenture;
(iv) Indebtedness of the Company to any Subsidiary and
Indebtedness of any Subsidiary to the Company or another
Subsidiary;
<PAGE> 20
-13-
(v) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred by the Company or its Subsidiaries to acquire
property in the ordinary course of business which Indebtedness and
Capitalized Lease Obligations do not in the aggregate exceed
$15,000,000 at any time outstanding;
(vi) Interest Rate Agreements;
(vii) Indebtedness of the Company or its Subsidiaries which do
not in the aggregate exceed $3,000,000 in principal amount at any time
outstanding with respect to guarantees of obligations of franchisees in
a business related to the optical business of the Company or any
Subsidiary as conducted on the Issue Date;
(viii) Indebtedness incurred in connection with the financing
of a new warehouse facility relating to the Company's Gifts business in
an amount not to exceed $7,500,000 in the aggregate;
(ix) additional Indebtedness of the Company not to exceed
$15,000,000 in principal amount outstanding at any time; and
(x) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments
made on or after the date of this Indenture consisting of:
(i) Investments by the Company, or by a Subsidiary
thereof, in the Company or a Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Subsidiary thereof,
in a Person, if as a result of such Investment (a) such Person becomes
a Subsidiary of the Company or (b) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all
of its assets to, or is liquidated into, the Company or a Subsidiary
thereof;
(iv) reasonable and customary loans made to employees in
connection with their relocation;
(v) an Investment that is made by the Company or a
Subsidiary thereof in the form of any stock, bonds, notes,
<PAGE> 21
-14-
debentures, partnership or joint venture interests or other securities
that are issued by a third party to the Company or Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted by Section 4.09;
(vi) Investments made by the Company or any Subsidiary in
franchises in a business related to the optical business of the Company
as conducted on the Issue Date; PROVIDED, that immediately after giving
pro forma effect to such Investment, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
Section 4.06; PROVIDED, HOWEVER, that if the Company may not incur
$1.00 of additional Indebtedness, but otherwise satisfies the
requirements of this clause (vi), the Company may make Investments in
such franchises in an amount not to exceed $7,500,000 in any fiscal
year, which unused portion of any such annual amount, if any, may not
be applied to any Investment in a subsequent fiscal year; and
(vii) other Investments that do not exceed $10,000,000 at
any time outstanding.
"Permitted Liens" means (i) Liens on Property or assets of, or
any shares of stock of or secured debt of, any corporation existing at the time
such corporation becomes a Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Subsidiaries; PROVIDED that
such Liens are not incurred in connection with, or in contemplation of, such
corporation becoming a Subsidiary of the Company or merging into the Company or
any of its Subsidiaries, (ii) Liens securing Refinancing Indebtedness; PROVIDED
that any such Lien on subordinated Indebtedness does not extend to or cover any
Property, shares or debt other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended, (iii) Liens in favor of the
Company or any of its Subsidiaries, (iv) Liens securing industrial revenue
bonds, (v) Liens to secure Purchase Money Indebtedness that is otherwise
permitted under this Indenture; PROVIDED that (a) any such Lien is created
solely for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost (including sales and excise taxes,
installation and delivery charges and other direct costs of, and other direct
expenses paid or charged in connection with, such purchase or construction) of
such Property and (b) such Lien does not extend to or cover any Property other
than such item of Property and any improvements on such item, (vi) statutory
liens or landlords', carriers', warehousemen's, mechanics', suppliers',
<PAGE> 22
-15-
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which do not secure any Indebtedness and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (vii) other Liens securing
obligations incurred in the ordinary course of business which obligations do not
exceed $3,000,000 in the aggregate at any one time outstanding, (viii) Liens
securing Interest Rate Agreements, (ix) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other Property
relating to such letters of credit and the products and proceeds thereof, (x)
any extensions, substitutions, replacements or renewals of the foregoing, (xi)
Liens for taxes, assessments or governmental charges that are being contested in
good faith by appropriate proceedings and (xii) Liens securing Capitalized Lease
Obligations permitted to be incurred under clause (v) of the definition of
"Permitted Indebtedness," PROVIDED that such Lien does not extend to any
property other than that subject to the underlying lease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred
by a Person to finance the cost (including the cost of construction) of an item
of Property, the principal amount of which Indebtedness does not exceed the sum
of (i) 100% of such cost and (ii) reasonable fees and expenses of such Person
incurred in connection therewith.
<PAGE> 23
-16-
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Qualified Equity Offering" means an offering by the Company
or the Parent of shares of its Common Stock (however designated and whether
voting or non-voting) and any and all rights, warrants or options to acquire
such Common Stock whether registered or exempt from registration under the
Securities Act; PROVIDED, HOWEVER, that in connection with a Qualified Equity
Offering of the Parent the net proceeds of such Qualified Equity Offering are
contributed to the Company as common equity.
"Redeemable Dividend" means, for any dividend or distribution
with regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being
<PAGE> 24
-17-
refunded, refinanced or extended, plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase and (c) the amount of customary fees,
expenses and costs related to the incurrence of such Refinancing Indebtedness,
and (v) such Refinancing Indebtedness is incurred by the same Person that
initially incurred the Indebtedness being refunded, refinanced or extended,
except that the Company may incur Refinancing Indebtedness to refund, refinance
or extend Indebtedness of any Wholly-Owned Subsidiary of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of November 15, 1996 among the Company and CIBC Wood Gundy
Securities Corp., CS First Boston Corporation, NationsBanc Capital Markets,
Inc., and Smith Barney Inc., as Initial Purchasers.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any Subsidiary of the Company or any payment
made to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Subsidiary of the Company (other than (x) dividends
or distributions payable solely in Capital Stock (other than Disqualified
Capital Stock) and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly Owned Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries (other than
Capital Stock owned by the Company or a Wholly Owned Subsidiary of the Company),
(iii) the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled
<PAGE> 25
-18-
repayment or scheduled sinking fund payment, of any Indebtedness which is
subordinated in right of payment to the Notes other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity (in each case due within one
year of the date of acquisition), (iv) the making of any Investment in any
Person other than a Permitted Investment, and (v) forgiveness of any
Indebtedness of an Affiliate of the Company to the Company or a Subsidiary. For
purposes of determining the amount expended for Restricted Payments, cash
distributed or invested shall be valued at the face amount thereof and property
other than cash shall be valued at its fair market value.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) promulgated under the Securities Act; provided that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Revolving Credit Facility" means the Loan and Security
Agreement dated Septmeber 30, 1993, by and among Barclays Business
Credit (currently Fleet Capital Corporation), Cole Vision
Corporation, Things Remembered, Inc. and Cole Key Corporation
(currently Cole Gift Centers), as borrowers.
"Rule 144A" means Rule 144A promulgated under the
Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Subsidiary of the
Company of any real or tangible personal Property, which Property has been or is
to be sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Service, a division of
McGraw Hill, Inc., and its successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Senior Indebtedness" means the principal of and premium,
if any, and interest (including, without limitation, interest
<PAGE> 26
-19-
accruing or that would have accrued but for the filing of a bankruptcy,
reorganization or other insolvency proceeding whether or not such interest
constitutes an allowed claim in such proceeding) on, and any and all other fees,
expense reimbursement obligations and other amounts due pursuant to the terms of
all agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness of
the Company owed to lenders under the New Credit Facility, (b) the Senior Notes,
(c) all obligations of the Company with respect to any Interest Rate Agreement,
(d) all obligations of the Company to reimburse any bank or other person in
respect of amounts paid under letters of credit, acceptances or other similar
instruments, (e) all other Indebtedness of the Company which does not provide
that it is to rank PARI PASSU with or subordinate to the Notes and (f) all
deferrals, renewals, extensions and refundings of, and amendments, modifications
and supplements to, any of the Senior Indebtedness described above.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (i) Indebtedness of the Company to any of its Subsidiaries,
(ii) Indebtedness represented by the Notes, (iii) any Indebtedness which by the
express terms of the agreement or instrument creating, evidencing or governing
the same is junior or subordinate in right of payment to any item of Senior
Indebtedness, (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or (v)
Indebtedness (other than that described in clause (a) above) incurred in
violation of this Indenture.
"Senior Note Indenture" means the Indenture dated as of
October 1, 1993 between the Company and Norwest Bank Minnesota, N.A., as
trustee.
"Senior Notes" means the Company's 11 1/4% Senior Notes
due 2001.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act and the Exchange Act, as in effect on the Issue
Date.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such
<PAGE> 27
-20-
first-named Person or any of its Subsidiaries; or (ii) in the case of a
partnership, joint venture, association or other business entity, with respect
to which such first-named Person or any of its Subsidiaries has the power to
direct or cause the direction of the management and policies of such entity by
contract or otherwise or if in accordance with GAAP such entity is consolidated
with the first-named Person for financial statement purposes.
"Subsidiary Preferred Stock" means Preferred Stock issued
by a Subsidiary of the Company.
"Tax Allocation Agreement" means the Tax Allocation Agreement,
dated as of August 23, 1995, as amended, between the Parent and its
Subsidiaries, including the Company, as the same may be amended or extended from
time to time provided that no such amendment may create greater additional
liability of the Company and its Subsidiaries than existing as of the Issue Date
under such agreement.
"Temporary Cash Investments" means (i) Investments in
marketable, direct obligations issued or guaranteed by the United States of
America, or of any governmental agency or political subdivision thereof,
maturing within 365 days of the date of purchase, (ii) Investments in United
States dollar denominated time deposits and United States dollar denominated
certificates of deposit (including Eurodollar time deposits and certificates of
deposit) maturing within 365 days of the date of purchase thereof issued by any
United States or Canadian national, provincial or state (including the District
of Columbia) banking institution having capital, surplus and undivided profits
aggregating at least $250,000,000, or by any British, French, German, Japanese
or Swiss national banking institution having capital, surplus and undivided
profits aggregating at least $1,000,000,000, in each case that is (a) rated at
least "A" by S&P or at least "A-2" by Moody's, or (b) that is a party to the New
Credit Facility, (iii) Investments in commercial paper maturing within 270 days
after the issuance thereof that has the highest credit rating of either of such
rating agencies, (iv) Investments in readily marketable direct obligations
issued by any state of the United States of America or any political subdivision
thereof having the highest rating obtainable from either of such rating
agencies, (v) Investments in tax exempted and tax advantaged instruments
including, without limitation, municipal bonds, commercial paper, auction rate
preferred stock and variable rate demand obligations with the highest short-term
ratings by either of such rating agencies and a long-term debt rating of AAA
from S&P (vi) Investments in repurchase agreements and reverse repurchase
agreements with
<PAGE> 28
-21-
institutions described in clause (ii) above that are fully secured by
obligations described in clause (i) above and (vii) Investments not exceeding
365 days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) through
(v).
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture
(except as provided in Section 8.03 hereof).
"Triggering Default Event" means a Default or Event of Default
described in clauses (1), (2), (4), (5) or (6) under Section 6.01 or any breach
or violation under Sections 4.06 through 4.15 inclusive, Section 4.16 or Section
5.01.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer trust accounts.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"U.S. Government Obligations" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly Owned Subsidiary" means any Subsidiary all of the
outstanding Capital Stock (other than directors' qualifying shares) of which is
owned, directly or indirectly, by the Company.
<PAGE> 29
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Section 1.02. Other Definitions.
------------------
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"Acquisition"...................................................................... 4.06
"Affiliate Transaction"............................................................ 4.10
"Agent Members".................................................................... 2.14
"Authorized Person"................................................................ 10.03
"Bankruptcy Law"................................................................... 6.01
"Business Day"..................................................................... 11.08
"Change of Control Offer".......................................................... 4.16
"Change of Control Payment Date"................................................... 4.16
"Covenant Defeasance".............................................................. 9.03
"Custodian"........................................................................ 6.01
"Event of Default"................................................................. 6.01
"Excess Proceeds Offer"............................................................ 4.09
"Global Notes"..................................................................... 2.01
"Initial Blockage Period".......................................................... 10.03
"Legal Defeasance"................................................................. 9.02
"Legal Holiday".................................................................... 11.08
"Offer Period"..................................................................... 4.09
"Offshore Physical Notes".......................................................... 2.01
"Paying Agent"..................................................................... 2.03
"Payment Blockage Period".......................................................... 10.03
"Physical Notes"................................................................... 2.01
"Purchase Date".................................................................... 4.09
"Registrar"........................................................................ 2.03
"Reinvestment Date"................................................................ 4.09
"Required Filing Dates"............................................................ 4.02
"U.S. Physical Notes".............................................................. 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
<PAGE> 30
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"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Company
or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
----------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein,
whether defined expressly or by reference;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) words used herein implying any gender shall apply to
every gender.
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
-------------------------------------------
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A which is incorporated in and
made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company may use
"CUSIP" numbers in issuing the Notes. The Company shall approve the form of the
Notes. Each Note shall be dated the date of its authentication.
<PAGE> 31
-24-
The Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Notes in registered
form, substantially in the form set forth in Exhibit A ("Global Notes"),
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided and shall
bear the legend set forth on Exhibit B. The aggregate principal amount of any
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Notes in registered
form set forth in Exhibit A (the "Offshore Physical Notes"). Notes offered and
sold in reliance on any other exemption from registration under the Securities
Act other than as described in the preceding paragraph shall be issued, and
Notes offered and sold in reliance on Rule 144A may be issued, in the form of
certificated Notes in registered form in substantially the form set forth in
Exhibit A (the "U.S. Physical Notes"). The Offshore Physical Notes and the U.S.
Physical Notes are sometimes collectively herein referred to as the "Physical
Notes."
Section 2.02. Execution and Authentication.
-----------------------------
The Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant Secretary of the Company.
Such signature may be either manual or facsimile. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate
Notes for original issue in the aggregate principal amount of $150,000,000 upon
a Company Request. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof. Upon
receipt of the Company Request, the Trustee shall authenticate an additional
<PAGE> 32
-25-
series of Notes in an aggregate principal amount not to exceed $150,000,000 for
issuance in exchange for all Notes previously issued pursuant to an exchange
offer registered under the Securities Act or pursuant to a Private Exchange (as
defined in the Registration Rights Agreement). Exchange Notes may have such
distinctive series designation as and such changes in the form thereof as are
specified in the Company Request referred to in the preceding sentence. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same right as an Agent to deal with the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
---------------------------
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency located in the Borough of Manhattan, City of New York, State of
New York where Notes may be presented for payment ("Paying Agent") and an office
or agency where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. Neither the Company nor
any Affiliate may act as Paying Agent. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
<PAGE> 33
-26-
Section 2.04. Paying Agent to Hold Money in Trust.
------------------------------------
On or before each due date of the principal of and interest on
any Notes, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest so becoming due. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent together with a
complete accounting of such sums. Upon doing so, the Paying Agent shall have no
further liability for the money.
Section 2.05. Noteholder Lists.
-----------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each December 15 and June 15 in each year,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
Section 2.06. Transfer and Exchange.
----------------------
When a Note is presented to the Registrar with a request to
register the transfer thereof, the Registrar shall register the transfer as
requested if the requirements of applicable law are met and, when Notes are
presented to the Registrar with a request to exchange them for an equal
principal amount of Notes of other authorized denominations, the Registrar shall
make the exchange as requested provided that every Note presented or surrendered
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit transfers and exchanges, upon surrender of
any Note for registration of transfer at the office or agency maintained
pursuant to Section 2.03 hereof, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Company may require payment by the Holder of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Sections 2.09, 3.06 or 8.05
<PAGE> 34
-27-
hereof. The Trustee shall not be required to register transfers of Notes or to
exchange Notes for a period of 15 days before selection of any Notes to be
redeemed. The Trustee shall not be required to exchange or register transfers of
any Notes called or being called for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the Holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
Section 2.07. Replacement Notes.
------------------
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note presents evidence to the satisfaction of the Company and the
Trustee that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. An indemnity bond may be required by the Company
or the Trustee that is sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. In every case of destruction, loss or theft,
the applicant shall also furnish to the Company and to the Trustee evidence to
their satisfaction of the destruction, loss or the theft of such Note and the
ownership thereof. The Company and the Trustee may charge for its expenses in
replacing a Note. Every replacement Note is an additional obligation of the
Company.
Section 2.08. Outstanding Notes.
------------------
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and accrued interest
on Notes payable on that date, then on and after
<PAGE> 35
-28-
that date such Notes cease to be outstanding and interest on them ceases to
accrue.
Subject to Section 11.06, a Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
----------------
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes
presented to it.
Section 2.10. Cancellation.
-------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and destroy or return to the Company in accordance with its normal
practice, all Notes surrendered for transfer, exchange, payment or cancellation
unless the Company instructs the Trustee in writing to deliver the Notes to the
Company. Subject to Section 2.07 hereof, the Company may not issue new Notes to
replace Notes in respect of which it has previously paid all principal, premium
and interest accrued thereon, or delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
-------------------
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus any interest payable on defaulted
amounts pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Company shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of default interest to be paid
and the special payment date. At least 15 days before the special record date,
the Company shall mail or cause to be mailed to each Noteholder at his address
as it appears on the Notes register maintained by the Registrar a notice that
states the special record date, the payment date (which shall be not less than
five nor more than ten days after the special record date), and the
<PAGE> 36
-29-
amount to be paid. In lieu of the foregoing procedures, the Company may pay
defaulted interest in any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
------------------
Prior to 11:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the Holders on
such Interest Payment Date or Maturity Date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby. The principal and interest on Notes in
certificated form shall be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
-------------
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the appropriate CUSIP number(s) in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.
Section 2.14. Book-Entry Provisions for Global Notes.
---------------------------------------
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Exhibit B.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Note, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written
<PAGE> 37
-30-
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.15. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for any Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.15, bear the legend regarding transfer restrictions applicable
to the Physical Notes set forth in Exhibit A.
<PAGE> 38
-31-
(f) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
Section 2.15. Special Transfer Provisions.
----------------------------
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after
November 15, 1999 or (y) (1) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto
or (2) in the case of a transfer to a Non-U.S. Person (including a
QIB), the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
<PAGE> 39
-32-
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Note for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this
Section 2.15 exist, (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act or
(iii) such Note has been sold pursuant to an effective registration statement
under the Securities Act.
<PAGE> 40
-33-
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.14 or this Section
2.15. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable notice to the Registrar.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
-------------------
If the Company elects to redeem Notes pursuant to Section 3.07
hereof, (i) at least 60 days prior to the Redemption Date in the case of a
partial redemption, (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to, the Company shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the redemption price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in Section 3.07 hereof, as
appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
---------------------------------------------
In the event that fewer than all of the Notes are to be
redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, on either a pro rata basis or by
lot, or such other method as it shall deem fair and equitable; PROVIDED,
HOWEVER, that if a partial redemption is made with the proceeds of a Qualified
Equity Offering, selection of the Notes or portion thereof for redemption shall
be made by the Trustee on a PRO RATA basis, unless such a method is prohibited.
The Trustee shall promptly notify the Company of the Notes selected for
redemption and, in the case of any Notes selected for partial redemption, the
principal amount thereof to be redeemed. The Trustee may select for redemption
<PAGE> 41
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portions of the principal of the Notes that have denominations larger than
$1,000. Notes and portions thereof the Trustee selects shall be redeemed in
amounts of $1,000 or whole multiples of $1,000. For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
Section 3.03. Notice of Redemption.
---------------------
At least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date;
(7) the paragraph of Section 3.07 hereof pursuant to
which the Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are
being redeemed.
<PAGE> 42
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
-------------------------------
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date, PROVIDED that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, the
accrued interest shall be payable to the Holder of the redeemed Notes registered
on the relevant record date, and PROVIDED, FURTHER, that if a Redemption Date is
a Legal Holiday, payment shall be made on the next succeeding Business Day and
no interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
----------------------------
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note called for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.06. Notes Redeemed in Part.
-----------------------
<PAGE> 43
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Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
--------------------
(a) The Company may redeem the Notes, in whole or in part, at
any time on or after December 31, 2001 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve-month period beginning on December 31 of each year listed below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001................................................ 104.9375%
2002................................................ 102.4688%
2003................................................ 101.2343%
2004................................................ 100.6172%
2005 and thereafter................................. 100.0000%
</TABLE>
(b) Notwithstanding the foregoing, the Company may redeem in
the aggregate up to 35% of the original principal amount of Notes at any time
and from time to time prior to December 31, 1999 at a redemption price equal to
109.875% of the aggregate principal amount so redeemed plus accrued interest to
the Redemption Date out of the Net Proceeds of one or more Qualified Equity
Offerings; PROVIDED that at least $97,500,000 of the principal amount of Notes
originally issued remain outstanding immediately after the occurrence of any
such redemption and that any such redemption occurs within 90 days following the
closing of any such Qualified Equity Offering.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
-----------------
The Company shall pay the principal of and interest (including
all Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is
<PAGE> 44
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due if the Trustee or Paying Agent holds on that date money designated for and
sufficient to pay such installment.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
------------
(a) The Company will file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company (at its
own expense) will file with the Trustee within 15 days after it files them with
the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a). Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(b) At the Company's expense, regardless of whether the
Company is required to furnish such reports and other information referred to in
paragraph (a) above to its stockholders pursuant to the Exchange Act, the
Company shall cause such reports and other information to be mailed to the
Holders at their addresses appearing in the register of Notes maintained by the
Registrar within 15 days after it files them with the SEC.
(c) The Company will, upon request, provide to any Holder of
Notes or any prospective transferee of any such Holder any information
concerning the Company (including financial statements) necessary in order to
permit such Holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
----------------------------------------
<PAGE> 45
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The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
-----------------------
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year and on or before 60 days after the end of the
first, second and third quarters of each fiscal year, an Officers' Certificate
(one of the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that a
review of the activities of the Company and its Subsidiaries during such fiscal
year or fiscal quarter, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether each has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all or
such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto) and that to
the the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action each is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the year-end financial statements delivered pursuant
<PAGE> 46
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to Section 4.02 above shall be accompanied by a written statement of the
Company's independent public accountants (who shall be a firm of established
national reputation) that in making the examination necessary for certification
of such financial statements nothing has come to their attention which would
lead them to believe that the Company has violated any provisions of this
Article 4 or Article 5 hereof of this Indenture or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly for
any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
------
The Company shall, and shall cause each of its Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
--------------------------------------
The Company will not, and will not permit any Subsidiary of
the Company to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness); PROVIDED that the Company (but not any Subsidiary of the
Company) may incur Indebtedness if (a) after giving effect to the incurrence of
such Indebtedness and the receipt and application of the proceeds thereof, the
Company's Fixed Charge Coverage Ratio (determined on a pro forma basis for the
last four fiscal quarters of the Company for which financial statements are
available at the date of determination) is at least 2.00 to 1 if the
Indebtedness is incurred prior to December 31, 2000 and 2.25 to 1 thereafter,
and (b) no Triggering Default Event shall have occurred and be continuing at the
time or as a consequence of the incurrence of such Indebtedness. For purposes of
computing the Fixed Charge Coverage Ratio, (A) if the Indebtedness which is the
subject of a determination under this provision is Acquired Indebtedness, or
Indebtedness incurred in connection with the simultaneous acquisition (by way of
merger, consolidation or otherwise) of any Person, business, property or assets
(an "Acquisition"), then such ratio shall be determined by
<PAGE> 47
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giving effect (on a pro forma basis, as if the transaction had occurred at the
beginning of a four-quarter period) to both the incurrence or assumption of such
Acquired Indebtedness or such other Indebtedness by the Company and the
inclusion in the Company's EBITDA of the EBITDA of the acquired Person,
business, property or assets, (B) if any Indebtedness outstanding or to be
incurred (x) bears a floating rate of interest, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account on a pro forma basis any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term as at the date
of determination in excess of 12 months), (y) bears, at the option of the
Company or a Subsidiary, a fixed or floating rate of interest, the interest
expense on such Indebtedness shall be computed by applying, at the option of the
Company or such Subsidiary, either a fixed or floating rate and (z) was incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period, (C) for any quarter prior to the date hereof
included in the calculation of such ratio, such calculation shall be made on a
pro forma basis, giving effect to the Pearle Acquisition, the issuance of the
Notes, the incurrence of Indebtedness under the New Credit Facility and the use
of the net proceeds therefrom as if the same had occurred at the beginning of
the four-quarter period used to make such calculation and (D) for any quarter
included in the calculation of such ratio prior to the date that any Asset Sale
was consummated, or that any Indebtedness was incurred, or that any Acquisition
was effected, by the Company or any of its Subsidiaries, such calculation shall
be made on a pro forma basis, giving effect to each Asset Sale, incurrence of
Indebtedness or Acquisition, as the case may be, and the use of any proceeds
therefrom, as if the same had occurred at the beginning of the four quarter
period used to make such calculation.
Notwithstanding the foregoing, the Company and its
Subsidiaries may incur Permitted Indebtedness; PROVIDED, that the Company will
not incur any Permitted Indebtedness, without meeting the Indebtedness
incurrence provisions of the preceding paragraph, that ranks pari passu or
junior in right of payment to the Notes and that has a maturity or mandatory
sinking fund payment prior to the maturity of the Notes.
Section 4.07. Limitation on Capital Stock of
Subsidiaries.
------------------------------
<PAGE> 48
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The Company will not (i) sell, pledge, hypothecate or
otherwise convey or dispose of any Capital Stock of a Subsidiary (other than
under the New Credit Facility or a successor facility or under the terms of any
Designated Senior Indebtedness) or (ii) permit any of its Subsidiaries to issue
any Capital Stock, other than to the Company or a Wholly Owned Subsidiary of the
Company. The foregoing restrictions shall not apply to an Asset Sale (other than
the sale of Preferred Stock of a Subsidiary) made in compliance with Section
4.09 hereof.
Section 4.08. Limitation on Restricted Payments.
----------------------------------
The Company will not make, and will not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Triggering Default Event shall have occurred and
be continuing at the time of or immediately after giving effect to
such Restricted Payment;
(b) immediately after giving PRO FORMA effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06
hereof; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) 50% of the
Cumulative Consolidated Net Income of the Company (or minus 100% of any
cumulative deficit in Consolidated Net Income during such period); (2)
100% of the aggregate Net Proceeds and the fair market value (as
determined in good faith by the Board of Directors of the Company) of
securities or other property received by the Company from the issue or
sale, after the Issue Date, of Capital Stock (other than Disqualified
Capital Stock or Capital Stock of the Company issued to any Subsidiary
of the Company) of the Company or any Indebtedness or other securities
of the Company convertible into or exercisable or exchangeable for
Capital Stock (other than Disqualified Capital Stock) of the Company
which has been so converted or exercised or exchanged, as the case may
be; (3) 100% of the capital contributions made by the Parent to the
Company after the Issue Date (other than capital contributions which
constitute Indebtedness); and (4) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment made
after the Issue Date, an amount equal to the lesser of the return of
capital with
<PAGE> 49
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respect to such Investment and the initial amount of such Investment,
in either case, less the cost of disposition of such Investment. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face
amount thereof and property other than cash shall be valued at its fair
market value (as determined in good faith by the Board of Directors of
the Company).
The provisions of this Section 4.08 shall not prohibit: (i)
the payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture; (ii) the repurchase, redemption or other
acquisition or retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock); (iii) the repurchase, redemption or other
acquisition or retirement of Indebtedness of the Company subordinated to the
Notes in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale or incurrence of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
subordinated Indebtedness being redeemed or retired; (iv) the retirement of any
shares of Disqualified Capital Stock by conversion into, or by exchange for,
shares of Disqualified Capital Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock; (v) the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company or
the Parent or any current or former Subsidiary of the Company held by any member
of the Company's (or any of its Subsidiaries') current or former employees;
PROVIDED, that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Capital Stock shall not exceed $4,000,000; (vi) the payment
of dividends to the Parent solely for the purpose of enabling Parent to pay the
ordinary operating and administrative expenses of the Parent (including all
reasonable professional fees and expenses) in connection with its complying with
its reporting obligations and obligations to prepare and distribute business
records in the ordinary course of business and the Parent's costs and expenses
relating to taxes (which taxes are attributable to the operations of the Company
and its Subsidiaries or to the Parent's ownership thereof); PROVIDED,
<PAGE> 50
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HOWEVER, that the aggregate dividend payments paid in each fiscal year pursuant
to this clause (vi) will at no time exceed .25% of the Company's Net Sales for
such fiscal year; (vii) payments to the Parent for income taxes pursuant to the
Tax Allocation Agreement; and (viii) the payment of dividends to the Parent
solely for the purpose of enabling the Parent to pay taxes other than income
taxes, to the extent actually owed and attributable to the operations of the
Company and its Subsidiaries or to the Parent's ownership thereof; PROVIDED,
that, for purposes of determining whether Restricted Payments can be made
pursuant to the previous paragraph, all payments made pursuant to clauses (ii),
(iv), (v), (vi), (vii) and (viii) of this paragraph will reduce the amount that
would otherwise be available for such Restricted Payments and payments made
pursuant to the other clauses of this paragraph shall not so reduce the amount
available for Restricted Payments.
Not later than the date of making any Restricted Payment which
may only be made pursuant to subclause (c) above, the Company shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.08 were computed, which calculations may be based upon the
Company's latest available financial statements, and that no Triggering Default
Event exists and is continuing and no Triggering Default Event will occur
immediately after giving effect to any Restricted Payments.
Section 4.09. Limitation on Certain Asset Sales.
----------------------------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Subsidiaries, as the case may be, receives consideration at the time of such
sale or other disposition at least equal to the fair market value thereof (as
determined in good faith by the Company's Board of Directors); (ii) except in
the case of the sale, transfer or other disposition of Company-owned stores to
franchisees in a business related to the optical business that result in the
conversion of such stores to franchised stores, not less than 75% of the
consideration received by the Company or its Subsidiaries, as the case may be,
is in the form of cash or Temporary Cash Investments; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied (a) first, to
the extent the Company elects, or is required, to prepay, repay or purchase debt
under any then existing Senior Indebtedness of the Company or any Subsidiary
within 12 months following the receipt of the Asset Sale Proceeds from any Asset
Sale, provided that any such repayment shall result in a permanent reduction of
the commitments thereunder in an amount equal to the principal amount so repaid;
<PAGE> 51
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(b) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company elects, to an
Investment in assets (including Capital Stock or other securities purchased in
connection with the acquisition of Capital Stock or property of another person)
used or useful in businesses similar or ancillary to the business of the Company
or Subsidiary as conducted at the time of such Asset Sale, PROVIDED that such
Investment occurs on or prior to the 365th day following receipt of such Asset
Sale Proceeds (the "Reinvestment Date"); and (c) third, if on the Reinvestment
Date with respect to any Asset Sale, the Available Asset Sale Proceeds exceed
$10,000,000, the Company shall apply an amount equal to such Available Asset
Sale Proceeds to an offer to repurchase the Notes, at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase (an "Excess Proceeds Offer").
(b) If the Company is required to make an Excess Proceeds
Offer, the Company shall mail, within 30 days following the Reinvestment Date, a
notice to the Holders stating, among other things: (1) that such Holders have
the right to require the Company to apply the Available Asset Sale Proceeds to
repurchase such Notes at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase; (2) the purchase date (the "Purchase Date"), which shall be no earlier
than 30 days and not later than 60 days from the date such notice is mailed; (3)
the instructions, determined by the Company, that each Holder must follow in
order to have such Notes repurchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
repurchase of such Notes. The Excess Proceeds Offer shall remain open for a
period of 20 Business Days following its commencement (the "Offer Period"). The
notice, which shall govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.09 and the length of time the Excess Proceeds Offer will
remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will
continue to accrue interest;
(4) that any Note accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accrue interest on and
after the Purchase Date;
<PAGE> 52
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(5) that Holders electing to have a Note purchased pursuant to
any Excess Proceeds Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice
at least three Business Days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Note the Holder delivered for purchase and
a statement that such Holder is withdrawing his election to have the
Note purchased;
(7) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Available Asset Sale Proceeds, the
Company shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part will
be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
Notes or portions thereof tendered pursuant to the Excess Proceeds Offer,
deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase
price plus accrued interest, if any, on the Notes to be purchased and deliver to
the Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 4.09. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee shall authenticate and mail or make available for delivery such new
Note to such Holder equal in principal amount to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or delivered
by the Company to the Holder thereof. The Company will publicly announce the
results of the Excess Proceeds Offer on the Purchase Date. If an Excess
<PAGE> 53
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Proceeds Offer is not fully subscribed, the Company may retain that portion of
the Available Asset Sale Proceeds not required to repurchase Notes.
Section 4.10. Limitation on Transactions with Affiliates.
-------------------------------------------
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including Parent and entities in which the Company or any of its
Subsidiaries own a minority interest) or holder of 10% or more of the Company's
Common Stock (an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Issue
Date unless (i) such Affiliate Transaction is between or among the Company and
its Wholly Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction
are fair and reasonable to the Company or such Subsidiary, as the case may be,
and the terms of such Affiliate Transaction are at least as favorable as the
terms which could be obtained by the Company or such Subsidiary, as the case may
be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction involving an amount or having
a value in excess of $5,000,000 which is not permitted under clause (i) above,
the Company must obtain a Board Resolution certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $10,000,000 which are not permitted under clause (i) above (other than
loans from the Parent to the Company at a rate not in excess of the incremental
borrowing rate of the Company as determined in good faith by the Board of
Directors of the Company, or loans from the Company or any Subsidiary to the
Parent, in each case at a rate not in excess of the Parent's incremental
borrowing rate, as determined in good faith by the Board of Directors of the
Company), the Company must obtain a written opinion as to the fairness of such a
transaction from an independent investment banking firm.
(b) The limitations set forth in Section 4.10(a) will not
apply to (i) any Restricted Payment that is not prohibited by Section 4.08
hereof, (ii) Indebtedness incurred by the Company to the Parent, provided such
Indebtedness has terms no more onerous than those contained in the New Credit
Facility, or (iii) any compensation-related transaction, approved by an
independent committee of the Board of Directors of the Company, with an officer
or director of the Company or of any Subsidiary in his or her
<PAGE> 54
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capacity as officer or director entered into in the ordinary course
of business.
Section 4.11. Limitations on Liens.
---------------------
The Company will not create, incur or otherwise cause or
suffer to exist or become effective any Liens of any kind (other than Permitted
Liens) upon any property or asset of the Company to secure Indebtedness which is
PARI PASSU with or subordinate in right of payment to the Notes, unless (i) if
such Lien secures Indebtedness which is PARI PASSU with the Notes, then the
Notes are secured on an equal and ratable basis with the obligations so secured
until such time as such obligation is no longer secured by a Lien or (ii) if
such Lien secures Indebtedness which is subordinated to the Notes, such
Indebtedness secured by such Lien and such Lien shall be subordinated to the
Lien granted to the Holders of the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Section 4.12. Limitation on Other Senior Subordinated Debt.
---------------------------------------------
The Company will not, directly or indirectly, incur any
Indebtedness that is both (i) subordinate in right of payment to any Senior
Indebtedness of the Company and (ii) senior in right of payment to the Notes.
For purposes of this Section 4.12, Indebtedness is deemed to be senior in right
of payment to the Notes if it is not explicitly subordinate in right of payment
to Senior Indebtedness at least to the same extent as the Notes are subordinate
to Senior Indebtedness.
Section 4.13. Limitation on Sale and Lease-Back Transactions.
-----------------------------------------------
The Company will not, and will not permit any Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a Board Resolution of the
Company and (ii) the Company could incur Indebtedness in an amount equal to the
Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in
compliance with Section 4.06.
Section 4.14. Payments for Consent.
---------------------
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment
<PAGE> 55
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of any of the terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders of the
Notes which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
Section 4.15. Corporate Existence.
--------------------
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each Subsidiary, in accordance with the respective organizational documents (as
the same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.16. Change of Control.
------------------
(a) Within 30 days of the occurrence of a Change of Control,
the Company shall notify the Trustee in writing of such occurrence and shall
make an offer to purchase (the "Change of Control Offer") the outstanding Notes
at a purchase price equal to 101% of the principal amount thereof plus any
accrued and unpaid interest thereon to the Change of Control Payment Date (such
purchase price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this Section 4.16.
If the New Credit Facility is in effect and the Senior Notes
are outstanding, or any amounts are owing thereunder or in respect thereof, at
the time of the occurrence of a Change of Control, prior to the mailing of the
notice to Holders described in paragraph (b) below, but in any event within 30
days following any Change of Control, the Company covenants to (i) repay in full
all obligations under or in respect of the New Credit Facility and the Senior
Notes or offer to repay in full all obligations under or in respect of the New
Credit Facility and the Senior Notes and repay the obligations under or in
respect of the New Credit Facility and the Senior Notes of each lender or
holder, as the case may be, who
<PAGE> 56
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has accepted such offer or (ii) obtain the requisite consent under the New
Credit Facility and the Senior Notes to permit the repurchase of the Notes
pursuant to this Section 4.16. The Company must first comply with the covenant
described in the preceding sentence before it shall be required to purchase
Notes in the event of a Change of Control; PROVIDED that the Company's failure
to comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (3) under Section 6.01 hereof if not cured
within 60 days after the notice required by such clause.
(b) Within 40 days of the occurrence of a Change of Control,
the Company also shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage prepaid,
to the Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant
to this Section 4.16 and that all Notes tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
(ii) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day no earlier than 30 nor later than
40 days from the date such notice is mailed (the "Change of Control
Payment Date"));
(iii) that any Note not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date;
<PAGE> 57
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(vi) that Holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later than the close of
business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes
delivered for purchase, and a statement that such Holder is withdrawing
his election to have such Notes purchased;
(vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, PROVIDED that each Note
purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples
thereof;
(viii) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
Holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such Holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; PROVIDED that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
(c) (i) If the Company or any Subsidiary thereof has issued
any outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and the Company or such Subsidiary is required to
repurchase, or make an offer to repurchase, such Indebtedness, or redeem, or
make an offer to redeem, such Preferred Stock, in the event of a Change of
Control or to make a distribution with respect to such subordinated Indebtedness
or Preferred Stock in the event of a Change of
<PAGE> 58
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Control, the Company shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes and (ii) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under this
Indenture.
In the event that a Change of Control occurs and the Holders
of Notes exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
Section 4.17. Maintenance of Office or Agency.
--------------------------------
The Company shall maintain an office or agency where Notes may
be surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee set forth in Section 11.02 as such office of the Company.
Section 4.18. Limitation on Dividend and
Other Payment Restrictions
<PAGE> 59
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Affecting Subsidiaries.
-----------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (a)(i) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (A) on its Capital Stock or (B) with respect
to any other interest or participation in, or measured by, its profits, or (ii)
pay any Indebtedness owed to the Company or any of its Subsidiaries or (b) make
loans or advances to the Company or any of its Subsidiaries or (c) transfer any
of its properties or assets to the Company or any of its Subsidiaries, except
for such encumbrances or restrictions existing under or by reasons of (i)
Indebtedness outstanding on the date hereof, (ii) the Revolving Credit Facility
as in effect as of the date hereof, or as replaced by the New Credit Facilty
having terms no more restrictive than those contained in the Revolving Credit
Facility as in effect on the date hereof, (iii) the Senior Note Indenture, the
Senior Notes and this Indenture, (iv) applicable law, (v) customary
nonassignment provisions in leases, (vi) permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Refinancing Indebtedness shall not be materially more restrictive than those
contained in the agreements governing the Indebtedness being refinanced, (vii)
customary restrictions imposed in connection with Purchase Money Indebtedness or
Capital Lease Obligations permitted under Section 4.06 as long as such customary
restrictions are not materially more restrictive than those set forth in the
Revolving Credit Facility on the date hereof and the New Credit Facility (except
that they may impose restrictions on the transfer of the asset so financed), or
(viii) restrictions in agreements with Persons acquired by the Company or any
Subsidiary which do not extend to Property or assets other than the Property or
assets of such Persons.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets.
----------------------------
(a) The Company will not and will not permit any Subsidiary
to consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially
<PAGE> 60
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as an entirety in one transaction or a series of related transactions), to any
Person unless: (i) the Company or the Subsidiary, as the case may be, shall be
the continuing Person, or the Person (if other than the Company or the
Subsidiary) formed by such consolidation or into which the Company or the
Subsidiary, as the case may be, is merged or to which the properties and assets
of the Company or the Subsidiary, as the case may be, are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company or the
Subsidiary, as the case may be, under the Notes and this Indenture, and the
obligations under this Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 4.06 hereof, PROVIDED that a
Person that is a Subsidiary on the Issue Date may merge into the Company or
another Person that is a Subsidiary on the Issue Date without complying with
this clause (iii).
(b) In connection with any consolidation, merger or transfer
of assets contemplated by this Section 5.01, the Company shall deliver or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.01 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
Section 5.02. Successor Person Substituted.
-----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Subsidiary in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Subsidiary under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Subsidiary
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
<PAGE> 61
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
------------------
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article 11 hereof;
(2) there is a default in the payment of any interest on any
Note when the same becomes due and payable and the Default continues
for a period of 30 days, whether or not such payment is prohibited by
the provisions of Article 10 hereof;
(3) the Company or any Subsidiary defaults in the observance
or performance of any other covenant in the Notes or this Indenture for
60 days after written notice from the Trustee or the Holders of not
less than 25% in the aggregate principal amount of the Notes then
outstanding;
(4) there is a default in the payment at final maturity
(within the grace period provided by such Indebtedness) of principal,
interest or premium in an aggregate amount of $5,000,000 or more with
respect to any Indebtedness of the Company or any Subsidiary thereof,
or the acceleration of any such Indebtedness aggregating $5,000,000 or
more, which default or acceleration shall not be cured, waived or
postponed pursuant to an agreement with the holders of such
Indebtedness within 60 days after written notice, or such acceleration
shall not be rescinded or annulled within 20 days after written notice
to the Company of such Default by the Trustee or any Holder;
(5) a court of competent jurisdiction enters a final judgment
or judgments which can no longer be appealed for the payment of money
in excess of $5,000,000 against the Company or any Subsidiary thereof
(other than a judgment or portion thereof as to which an insurance
company of national reputation has accepted full liability) and such
judgment remains undischarged and not fully bonded, for a period of 60
<PAGE> 62
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consecutive days during which a stay of enforcement of such
judgment shall not be in effect;
(6) the Company or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(D) makes a general assignment for the benefit of
its creditors, or
(E) generally is not paying its debts as they
become due; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of
the property of the Company or any Significant
Subsidiary, or
(C) orders the liquidation of the Company or any
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
The Trustee may withhold notice to the Holders of the Notes of
any Default (except in payment of principal or premium, if any, or interest on
the Notes) if the Trustee considers it to be in the best interest of the Holders
of the Notes to do so.
Section 6.02. Acceleration.
-------------
<PAGE> 63
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If an Event of Default (other than an Event of Default arising
under Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Company and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration and (i) such amounts
shall become immediately due and payable or (ii) if there are any amounts
outstanding under or in respect of the New Credit Facility, such amounts shall
become due and payable upon the first to occur of an acceleration of amounts
under or in respect of the New Credit Facility or five Business Days after
receipt by the Company and the Representative of notice of the acceleration of
the Notes; PROVIDED, HOWEVER, that after such acceleration but before a judgment
or decree based on such acceleration is obtained by the Trustee, the Holders of
a majority in aggregate principal amount of the outstanding Notes may, under
certain circumstances, rescind and annul such acceleration and its consequences
if all existing Events of Default, other than the nonpayment of accelerated
principal, premium or interest that has become due solely because of the
acceleration, have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto. In case an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company occurs, such
principal, premium, if any, and interest amount with respect to all of the Notes
shall be due and payable immediately without any declaration or other act on the
part of the Trustee or the Holders of the Notes.
Section 6.03. Other Remedies.
---------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or
<PAGE> 64
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acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
----------------------------------------------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of
a majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
--------------------
The Holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall, by a Trust Officer, determine that the
proceedings so directed may involve it in personal liability; PROVIDED that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
--------------------
Subject to Section 6.07 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding make a written request to
the Trustee to pursue the remedy;
<PAGE> 65
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(3) such Holder or Holders offer to the Trustee
indemnity reasonably satisfactory to the Trustee against any
loss, liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
-------------------------------------
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal of, or premium, if
any, and interest of the Note on or after the respective due dates expressed in
the Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
---------------------------
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company (or any other obligor on the Notes) for the whole
amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate then borne by the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.09. Trustee May File Proofs of Claim.
---------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the
<PAGE> 66
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and the Noteholders allowed in any judicial proceedings
relative to the Company (or any other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to collect and receive any
monies or other property payable or deliverable on any such claims and to
distribute the same after deduction of its charges and expenses to the extent
that any such charges and expenses are not paid out of the estate in any such
proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
Section 6.10. Priorities.
-----------
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
SECOND: to Noteholders for amounts due and unpaid on the
Notes for principal, premium, if any, and interest as to each,
ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
----------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion
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may require the filing by any party litigant in the suit of an undertaking to
pay the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders
of more than 10% in principal amount of the Notes then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
------------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
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(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 and 6.05 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, paragraphs
(a), (b), (c) and (d) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
Section 7.02. Rights of Trustee.
------------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed
by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Sections 11.04 and 11.05
hereof. The Trustee shall be protected and shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
<PAGE> 69
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(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed by it with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
Section 7.03. Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company, or any Affiliates
thereof, with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, shall be subject to
Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
---------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes other than its certificate of authentication.
Section 7.05. Notice of Defaults.
-------------------
If a Default occurs and is continuing and if it is known to
the Trustee, the Trustee shall mail to each Noteholder notice of the Default
within 90 days after it occurs. Except in the case of a Default in payment of
the principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as the board of directors of the Trustee, the
executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interest of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
------------------------------
<PAGE> 70
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If required by TIA Section 313(a), within 60 days after May 15 of any year,
commencing the May 15 following the date of this Indenture, the Trustee shall
mail to each Noteholder a brief report dated as of such May 15 that complies
with TIA Section 313(a). The Trustee shall also comply with TIA Section
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA Section 313(c) and TIA Section 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by
mail:
(1) to all registered Holders of Notes, as the names and
addresses of such Holders appear on the Registrar's books; and
(2) to such Holder of Notes as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for that purpose.
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange, if any, on
which the Notes are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
---------------------------
The Company shall pay to the Trustee from time to time
reasonable compensation for its services rendered hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it in
connection with its duties under this Indenture, including the reasonable fees
and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all loss, damage,
claim, liability or reasonable expense, incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder (including, without limitation, settlement costs). The Trustee shall
notify the Company in writing promptly of any claim asserted against the Trustee
for which it may seek indemnity. However, the failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder
except to the extent the Company is prejudiced thereby.
<PAGE> 71
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Notwithstanding the foregoing, the Company need not reimburse
the Trustee for any expense or indemnify it against any loss or liability
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the payment obligations of the Company in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Company
under this Section 7.07 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
-----------------------
The Trustee may resign by so notifying the Company in writing.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Company's written consent which consent shall not be
unreasonably withheld. The Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
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If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger
or Conversion.
------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
------------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA section 310(b), including the provision in section 310(b)(1).
Section 7.11. Preferential Collection of Claims Against
Company.
-----------------------------------------
The Trustee shall comply with TIA section 311(a), excluding
any creditor relationship listed in TIA section 311 (b). A Trustee who has
<PAGE> 73
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resigned or been removed shall be subject to TIA section 311(a) to the extent
indicated therein.
Section 7.12. Paying Agents.
--------------
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any
obligor on the Notes) in trust for the benefit of Holders of the Notes
or the Trustee;
(B) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Company (or by any obligor on
the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due
and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
---------------------------
The Company, when authorized by a Board Resolution, and the
Trustee may amend or supplement this Indenture or the Notes without notice to or
consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to
or in place of certificated Notes;
(3) to comply with any requirements of the SEC under the
TIA;
<PAGE> 74
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(4) to cure any ambiguity, defect or inconsistency, or to make
any other change that does not materially and adversely affect the
rights of any Noteholder; or
(5) to make any other change that does not, in the opinion of
the Trustee, adversely affect in any material respect the rights of any
Noteholders hereunder.
The Trustee is hereby authorized to join with the Company in
the execution of any supplemental indenture authorized or permitted by the terms
of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture which adversely affects
its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
------------------------
The Company and the Trustee may modify or supplement this
Indenture or the Notes with the written consent of the Holders of not less than
a majority in aggregate principal amount of the outstanding Notes without notice
to any Noteholder. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes
without notice to any Noteholder. Subject to Section 8.04, without the consent
of each Noteholder affected, however, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to
an amendment, supplement or waiver to this Indenture or the Notes;
(2) reduce the rate of or change the time for payment of
interest on any Note;
(3) reduce the principal of or premium on or change the
stated maturity of any Note;
(4) make any Note payable in money other than that stated in
the Note or change the place the note may be presented for payment from
New York, New York;
(5) change the amount or time of any payment required by
the Notes or reduce the premium payable upon any redemption of
<PAGE> 75
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the Notes in accordance with Section 3.07 hereof, or change
the time before which no such redemption may be made;
(6) waive a default in the payment of the principal of, or
interest on, or redemption payment with respect to, any Note (including
any obligation to make a Change of Control Offer or, after the
Company's obligation to purchase Notes arises thereunder, an Excess
Proceeds Offer or modify any of the provisions or definitions with
respect to such offers);
(7) make any changes in Sections 6.04 or 6.07 hereof or
this sentence of Section 8.02; or
(8) affect the ranking of the Notes in a manner adverse
to the Holders.
After an amendment, supplement or waiver under this Section
8.02 becomes effective, the Company shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
------------------------------------
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
----------------------------------
Until an amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Note is a
<PAGE> 76
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continuing consent conclusive and binding upon such Holder and every subsequent
Holder of the same Note or portion thereof, and of any Note issued upon the
transfer thereof or in exchange therefor or in place thereof, even if notation
of the consent is not made on any such Note. Any such Holder or subsequent
Holder, however, may revoke the consent as to his Note or portion of a Note, if
the Trustee receives the notice of revocation before the date the amendment,
supplement, waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date unless the consent of the requisite number
of Holders has been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (8) of Section 8.02 hereof. In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
---------------------------------
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee may request the Holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
--------------------------------
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment,
<PAGE> 77
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supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such amendment, supplement or waiver the
Trustee shall be entitled to receive and, subject to Section 7.01 hereof, shall
be fully protected in relying upon an Officers' Certificate and an Opinion of
Counsel stating that such amendment, supplement or waiver is authorized or
permitted by this Indenture. The Company may not sign an amendment or supplement
until the Board of Directors of the Company approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
-----------------------
The Company may terminate its obligations under the Notes and
this Indenture, except the obligations referred to in the last paragraph of this
Section 9.01, if there shall have been cancelled by the Trustee or delivered to
the Trustee for cancellation all Notes theretofore authenticated and delivered
(other than any Notes that are asserted to have been destroyed, lost or stolen
and that shall have been replaced as provided in Section 2.07 hereof) and the
Company has paid all sums payable by it hereunder or deposited all required sums
with the Trustee.
After such delivery the Trustee upon request shall acknowledge
in writing the discharge of the Company's obligations under the Notes and this
Indenture except for those surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 7.07, 9.05 and 9.06 hereof
shall survive.
Section 9.02. Legal Defeasance.
-----------------
The Company may at its option, by Board Resolution, be
discharged from its obligations with respect to the Notes on the date the
conditions set forth in Section 9.04 below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Notes and to have satisfied all its other obligations under such Notes
and this
<PAGE> 78
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Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of the Company, shall, subject to Section 9.06 hereof, execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of outstanding Notes to receive solely from the trust funds described in
Section 9.04 hereof and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (B) the Company's obligations with respect to such Notes
under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 4.17 hereof, (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof) and (D) this Article 9. Subject to compliance with this Article 9,
the Company may exercise its option under this Section 9.02 with respect to the
Notes notwithstanding the prior exercise of its option under Section 9.03 below
with respect to the Notes.
Section 9.03. Covenant Defeasance.
--------------------
At the option of the Company, pursuant to a Board Resolution,
the Company shall be released from its obligations under Sections 4.02 through
4.16 hereof, inclusive, Section 4.18, and clause (a)(iii) of Section 5.01 hereof
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 9.04 hereof are satisfied (hereinafter, "Covenant Defeasance").
For this purpose, such Covenant Defeasance means that the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section or portion thereof, whether
directly or indirectly by reason of any reference elsewhere herein to any such
specified Section or portion thereof or by reason of any reference in any such
specified Section or portion thereof to any other provision herein or in any
other document, but the remainder of this Indenture and the Notes shall be
unaffected thereby.
Section 9.04. Conditions to Legal Defeasance or
Covenant Defeasance.
---------------------------------
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9
<PAGE> 79
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applicable to it) as funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Notes, (A) money in an
amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally-recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of, premium, if any, and accrued interest on the outstanding
Notes at the maturity date of such principal, premium, if any, or
interest, or on dates for payment and redemption of such principal,
premium, if any, and interest selected in accordance with the terms of
this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period
ending on the 91st day after the date of such deposit or, if longer,
ending on the day following the expiration of the longest preference
period under any Bankruptcy Law applicable to the Company in respect of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute default under any
other agreement or instrument to which the Company is a party or by
which it is bound;
(5) the Company shall have delivered to the Trustee an Opinion
of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act
of 1940, as amended;
(6) in the case of an election under Section 9.02 above,
the Company shall have delivered to the Trustee an Opinion of
<PAGE> 80
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Counsel stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling to the effect
that or (ii) there has been a change in any applicable Federal income
tax law with the effect that, and such opinion shall confirm that, the
Holders of the outstanding Notes or persons in their positions will not
recognize income, gain or loss for Federal income tax purposes solely
as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Company with the intent of defeating, hindering, delaying
or defrauding any creditors of the Company or others; and
(10) the Company shall have paid or duly provided for payment
under terms mutually satisfactory to the Company and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof.
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions.
--------------------------------------
<PAGE> 81
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All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 9.04 hereof or the principal, premium,
if any, and interest received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the Holders of the outstanding
Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
--------------
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 9 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
9.01 hereof; PROVIDED, HOWEVER, that if the Company has made any payment of
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
<PAGE> 82
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Section 9.07. Moneys Held by Paying Agent.
----------------------------
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
-----------------------
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company in trust for the payment of the principal of, or
premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Company upon Company
Request, or if such moneys are then held by the Company in trust, such moneys
shall be released from such trust; and the Holder of such Note entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Company for the payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or any such Paying Agent, before being
required to make any such repayment, may, at the expense of the Company, either
mail to each Noteholder affected, at the address shown in the register of the
Notes maintained by the Registrar pursuant to Section 2.03 hereof, or cause to
be published once a week for two successive weeks, in a newspaper published in
the English language, customarily published each Business Day and of general
circulation in the City of New York, New York, a notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Company. After payment to the
Company or the release of any money held in trust by the Company, Noteholders
entitled to the money must look only to the Company for payment as general
creditors unless applicable abandoned property law designates another person.
ARTICLE 10
SUBORDINATION OF NOTES
<PAGE> 83
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Section 10.01. Notes Subordinate to Senior Indebtedness.
-----------------------------------------
The Company covenants and agrees, and each Holder of Notes, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article 10, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 10 to the prior payment in full in
cash of all Senior Indebtedness.
This Article 10 shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of or continue to
hold Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder and
they or each of them may enforce such provisions.
Section 10.02. Payment Over of Proceeds upon
Dissolution, etc.
-----------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, whether voluntary or involuntary or (b)
any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any general assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company, then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all amounts due on or in respect of
all Senior Indebtedness, or provision shall be made for such payment,
before the Holders of the Notes are entitled to receive any payment or
distribution of any kind or character on account of principal of,
premium, if any, or interest on the Notes; and
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the provisions of this Article 10 shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or
<PAGE> 84
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otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full in
cash of all Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution, or provision therefor, to
the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.02, the Trustee or the Holder of any Note
shall have received any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities, including, without limitation, by way of set-off or
otherwise, in respect of principal of, premium, if any, and interest on
the Notes before all Senior Indebtedness is paid in full or payment
thereof provided for, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of the
Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full in cash after giving effect to any concurrent
payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 10 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 10.03. Suspension of Payment When Senior
<PAGE> 85
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Indebtedness in Default.
------------------------
(a) Unless Section 10.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of the Company or any Subsidiary of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of the
Company being subordinated to the payment of the Notes by the Company) may be
made by or on behalf of the Company or any Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of principal of,
premium, if any, or interest on the Notes, or for or on account of the purchase,
redemption or other acquisition of the Notes, and neither the Trustee nor any
holder or owner of any Notes shall take or receive from the Company or any
Subsidiary, directly or indirectly in any manner, payment in respect of all or
any portion of Notes following the occurrence of a Payment Default, and in any
such event, such prohibition shall continue until such Payment Default is cured,
waived in writing or ceases to exist. At such time as the prohibition set forth
in the preceding sentence shall no longer be in effect, subject to the
provisions of the following paragraph (b), the Company shall resume making any
and all required payments in respect of the Notes, including any missed
payments.
(b) Unless Section 10.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of the Company of any kind or character
shall be made by the Company, including, without limitation, by way of set-off
or otherwise, on account of any principal of, premium, if any, or interest on
the Notes or on account of the purchase, redemption, defeasance or other
acquisition of Notes and neither the Trustee nor any holder or owner of Notes
shall take or receive from the Company or any Subsidiary, directly or
indirectly, in any manner, payment in respect of all or any portion of the Notes
for a period ("Payment Blockage Period") commencing on the date of receipt by
the Trustee of written notice from an authorized Person on behalf of the holders
of Designated Senior Indebtedness (the "Authorized Person") of such Non-Payment
Event of Default unless and until (subject to any blockage of payments that may
then be in effect under the preceding paragraph (a)) the earliest to occur of
the following events: (w) more than 179 days shall have elapsed since the date
of receipt of such written notice by the Trustee, (x) such NonPayment Event of
Default shall have been cured or waived in writing or shall have ceased to
exist, (y) such Designated Senior Indebtedness shall have been discharged or
paid in full in cash or
<PAGE> 86
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(z) such Payment Blockage Period shall have been terminated by written notice to
the Company or the Trustee from such Authorized Person initiating such Payment
Blockage Period, after which, in the case of clause (w), (x), (y) or (z), the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provisions of
this Indenture, no Non-Payment Event of Default with respect to Designated
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period initiated by such Authorized Person
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by such Authorized Person unless such event of default
shall have been cured or waived for a period of not less than 90 consecutive
days. In no event shall a Payment Blockage Period extend beyond 179 days from
the date of the receipt by the Trustee of the notice referred to in this Section
10.03(b) (the "Initial Blockage Period"). Any number of additional Payment
Blockage Periods may be commenced during the Initial Blockage Period; PROVIDED,
HOWEVER, that no such additional Payment Blockage Period shall extend beyond the
Initial Blockage Period. After the expiration of the Initial Blockage Period, no
Payment Blockage Period may be commenced under this Section 10.03(b) until at
least 180 consecutive days have elapsed from the last day of the Initial
Blockage Period.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the Holder of any Note shall have received any payment prohibited by
the foregoing provisions of this Section 10.03, then and in such event such
payment shall be paid over and delivered forthwith to the Authorized Person
initiating the Payment Blockage Period, in trust for distribution to the holders
of Senior Indebtedness or, if no amounts are then due in respect of Senior
Indebtedness, promptly returned to the Company, or otherwise as a court of
competent jurisdiction shall direct.
Section 10.04. Trustee's Relation to Senior
Indebtedness.
----------------------------
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness if it shall
mistakenly pay over or deliver to Holders,
<PAGE> 87
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the Company or any other Person moneys or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article 10 or otherwise.
Section 10.05. Subrogation to Rights of Holders
of Senior Indebtedness.
-----------------------------------
Upon the payment in full of all Senior Indebtedness, the
Holders of the Notes shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
10, and no payments over pursuant to the provisions of this Article 10 to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of all amounts payable under the Senior Indebtedness of the Company, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash.
Section 10.06. Provisions Solely to Define Relative
Rights.
------------------------------------
The provisions of this Article 10 are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of, premium, if any,
<PAGE> 88
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and interest on the Notes as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Notes and creditors of the Company other than the
holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights, if
any, under this Article 10 of the holders of Senior Indebtedness (1) in any
case, proceeding, dissolution, liquidation or other winding-up, assignment for
the benefit of creditors or other marshaling of assets and liabilities of the
Company referred to in Section 10.02 hereof, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder, or (2) under the conditions specified
in Section 10.03, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 10.03(c) hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Notes by reason of any provision of this
Article 10 shall not be construed as preventing the occurrence of a Default or
an Event of Default hereunder.
Section 10.07. Trustee to Effectuate Subordination.
------------------------------------
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any Authorized Person,
may file such a claim on behalf of Holders of the Notes.
Section 10.08. No Waiver of Subordination
Provisions.
--------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or
<PAGE> 89
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failure to act, in good faith, by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 10 or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; PROVIDED, HOWEVER, that in no
event shall any such actions limit the right of the Holders of the Notes to take
any action to accelerate the maturity of the Notes pursuant to Article 6 hereof
or to pursue any rights or remedies hereunder or under applicable laws if the
taking of such action does not otherwise violate the terms of this Indenture.
Section 10.09. Notice to Trustee.
------------------
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee at its Corporate Trust Office in respect of the
Notes. Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
this Section 10.09, shall be entitled in all respects to assume that no such
facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received the
notice provided for in this Section 10.09 at least five Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose under this Indenture (including,
<PAGE> 90
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without limitation, the payment of the principal of, premium, if any, or
interest on any Note), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent therefor, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice to the contrary which may be received by it within five Business Days
prior to such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or the elimination of the act or condition preventing
any such payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the
Trustee shall be entitled to rely on the delivery to it of a written notice to
the Trustee and the Company by a Person representing itself to be a holder of
Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish
that such notice has been given by a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor); PROVIDED, HOWEVER, that failure to give
such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 10.10. Reliance on Judicial Order or
Certificate of Liquidating Agent.
---------------------------------
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee, subject to the provisions of
Section 7.01 hereof, and the Holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian,
<PAGE> 91
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assignee for the benefit of creditors, agent or other Person making such payment
or distribution, delivered to the Trustee or to the Holders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10;
PROVIDED that the foregoing shall apply only if such court has been fully
apprised of the provisions of this Article 10.
Section 10.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights.
---------------------------------
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article 10 with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
Section 10.12. Article Applicable to Paying Agents.
------------------------------------
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 10 shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 10 in addition to or in place of the Trustee.
Section 10.13. No Suspension of Remedies.
--------------------------
Nothing contained in this Article 10 shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article 6 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article 10 of the holders, from time to time, of Senior Indebtedness.
ARTICLE 11
MISCELLANEOUS
<PAGE> 92
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Section 11.01. Trust Indenture Act Controls.
-----------------------------
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 11.02. Notices.
--------
Any notice or communication shall be given in writing and
delivered in person, sent by facsimile, delivered by commercial courier service
or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
Cole National Group, Inc.
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Secretary
Copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Fax Number: (612) 667-9825
Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
The Company or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.
<PAGE> 93
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Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03. Communications by Holders with Other Holders.
---------------------------------------------
Noteholders may communicate pursuant to TIA section 312(b)
with other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA section 312(c).
Section 11.04. Certificate and Opinion as to Conditions
Precedent.
----------------------------------------
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (which shall include the statements
set forth in Section 11.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 11.05. Statements Required in Certificate and Opinion.
-----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
<PAGE> 94
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(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he
has made such examination or investigation as is necessary to enable it
or him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 11.06. When Treasury Notes Disregarded.
--------------------------------
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company or any other obligor on the Notes or by any Affiliate
of any of them shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee actually knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of any of them.
Section 11.07. Rules by Trustee and Agents.
----------------------------
The Trustee may make reasonable rules for action by or
meetings of Noteholders. The Registrar and Paying Agent may make
reasonable rules for their functions.
Section 11.08. Business Days; Legal Holidays.
------------------------------
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day
on which banking institutions are not required to be open in the State of New
York. If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on
<PAGE> 95
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the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
Section 11.09. Governing Law.
--------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 11.10. No Adverse Interpretation of Other Agreements.
----------------------------------------------
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.11. No Recourse Against Others.
---------------------------
A director, officer, employee, stockholder or incorporator, as
such, of the Company shall not have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creations. Each Noteholder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
Section 11.12. Successors.
-----------
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee, any additional trustee
and any Paying Agents in this Indenture shall bind its successor.
Section 11.13. Multiple Counterparts.
----------------------
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
---------------------------------
<PAGE> 96
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The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15. Separability.
-------------
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 97
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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
COLE NATIONAL GROUP, INC.
By:
--------------------------------
Name:
Title:
ATTEST:
- -------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------------
Name:
Title:
<PAGE> 98
EXHIBIT A
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE> 99
CUSIP 193292 AB 5
Number 1
COLE NATIONAL GROUP, INC.
9 7/8% SENIOR SUBORDINATED NOTE DUE 2006
Cole National Group, Inc., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to CEDE & CO. or registered assigns the principal sum of
$150,000,000 Dollars, on December 31, 2006.
Interest Payment Dates: December 31 and June 30, commencing
June 30, 1997
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 100
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
COLE NATIONAL GROUP, INC.
By:
------------------------
By:
------------------------
[SEAL]
Certificate of Authentication:
This is one of the 9 7/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
----------------------------------
Authorized Signatory
A-3
<PAGE> 101
(REVERSE SIDE)
COLE NATIONAL GROUP, INC.
9 7/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Cole National Group, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on December 31 and June 30 of each year (each an "Interest Payment
Date"), commencing on June 30, 1997, at the rate of 9 7/8% per annum. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of the original
issuance of the Notes.
The Company shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 1% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the December 15 or
June 15 preceding the Interest Payment Date (whether or not such day is a
Business Day). The Holder must surrender this Note to a Paying Agent to collect
principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that the
Company may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, National Association, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to the Holders of the Notes. Neither the Company nor any of its Subsidiaries or
Affiliates may act as Paying Agent but may act as registrar or co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
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<PAGE> 102
The Company issued this Note under an Indenture dated as of
November 15, 1996 (the "Indenture") between the Company and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa- 77bbbb) as in effect on the date of the Indenture. This
Note is subject to all such terms, and the Holder of this Note is referred to
the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company
limited to $150,000,000 aggregate principal amount. The Indenture imposes
certain restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of preferred stock by the Company and its
subsidiaries, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Company and its subsidiaries, certain other
restricted payments by the Company and its subsidiaries, certain transactions
with, and investments in, its affiliates, certain sale and lease-back
transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each Holder
of this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; PROVIDED, HOWEVER, that the
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Company may redeem the Notes, in whole or in part, at any
time on or after December 31, 2001 at the redemption prices set forth in Section
3.07 of the Indenture, together, in each case, with accrued and unpaid interest
to the redemption date.
In addition, the Company may redeem Notes out of the Net
Proceeds of one or more Qualified Equity Offerings at the redemption price, in
the amount and under the terms set forth in the Indenture.
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<PAGE> 103
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the redemption date to each
Holder of Notes to be redeemed at its registered address as it shall appear on
the register of the Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Notes or portions thereof
called for redemption unless the Company shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the
Company and CIBC Wood Gundy Securities Corp., CS First Boston Corporation,
NationsBanc Capital Markets, Inc. and Smith Barney Inc., as initial purchasers
of the Notes, the Company will be obligated to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note for Notes of a separate series issued under the Indenture (or a trust
indenture substantially identical to the Indenture in accordance with the terms
of the Registration Rights Agreement) which have been registered under the
Securities Act, in like principal amount and having substantially identical
terms as the Notes. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A Holder may register
the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Note selected for redemption or register the transfer of or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed or any Note after it is called for
A-6
<PAGE> 104
redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner
of it for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on
any Note remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its request. After that, Holders entitled to
money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be modified, amended or supplemented by the Company and the Trustee with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding and any existing default or compliance with any provision may
be waived in a particular instance with the consent of the Holders of a majority
in principal amount of the Notes then outstanding. Without the consent of
Holders, the Company and the Trustee may amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an
Event of Default (other than an Event of Default pursuant to Section 6.01(6) or
(7) of the Indenture with respect to the Company) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of
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<PAGE> 105
acceleration; PROVIDED, HOWEVER, that after such acceleration but before
judgement or decree based on such acceleration is obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the outstanding Notes
may, under certain circumstances, rescind and annul such acceleration and its
consequences if all existing Events of Default, other than the nonpayment of
principal, premium or interest that has become due solely because of the
acceleration, have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto. In case an Event of Default
specified in Section 6.01(6) or (7) of the Indenture with respect to the Company
occurs, such principal amount, together with premium, if any, and interest with
respect to all of the Notes, shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company and may otherwise deal with the Company as if it were not
Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect or by reason of, such obligations or their creation.
The Holder of this Note by accepting this Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to
Minors Act).
20. CUSIP NUMBERS.
A-8
<PAGE> 106
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP Numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON
WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE
TO: Cole National Group, Inc., 5915 Landerbrook Drive, Mayfield Heights, Ohio
44124, Attention: Secretary.
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<PAGE> 107
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: Your Signature:
--------------------- --------------------------
-----------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
<PAGE> 108
Signature Guarantee:
--------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-------------------- --------------------------------
NOTICE: To be executed by
an executive officer
<PAGE> 109
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.09 or Section 4.16 of the
Indenture, check the appropriate box:
[ ] Section 4.09 [ ] Section 4.16
If you want to have only part of the Note purchased by the
Company pursuant to Section 4.09 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
-----------------
Date:
-------------
Your Signature:
----------------------------------
(Sign exactly as your name appears on the face
of this Note)
- ---------------------------
Signature Guaranteed
<PAGE> 110
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE
OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION)
("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 111
EXHIBIT C
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-----------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Cole National Group, Inc.
(the "Company") 9 7/8% Senior
Subordinated Notes due 2006
(the "Notes")
-----------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture dated as of November 15, 1996 relating to the Notes and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the Notes have not been registered under
the Securities Act, and that the Notes may not be offered or sold
except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes within three years
after the original issuance of the Notes, we will do so only (A) to the
Company or any subsidiary thereof, (B) inside the United States in
compliance with Rule 144A under the Securities Act, to a "qualified
institutional buyer" (as defined in Rule 144A), (C) inside the United
States to an "accredited investor" (as defined below) that, prior to
such transfer, furnishes to you a signed letter substantially in the
form of this letter, (D) outside the United States to a foreign person
C-1
<PAGE> 112
in compliance with Rule 904 of Regulation S under the Securities Act,
(E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from
us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications,
legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-----------------------
Authorized Signature
C-2
<PAGE> 113
EXHIBIT D
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
--------------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Cole National Group, Inc.
(the "Company") 9 7/8% Senior
Subordinated Notes due 2006
(the "Notes")
-----------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
D-1
<PAGE> 114
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
------------------------------
Authorized Signature
D-2
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of November 15, 1996
by and among
COLE NATIONAL GROUP, INC.,
and
CIBC WOOD GUNDY SECURITIES CORP.,
CS FIRST BOSTON CORPORATION,
NATIONSBANC CAPITAL MARKETS, INC.,
and SMITH BARNEY INC.
as Initial Purchasers
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
1. Definitions.................................................................................. 1
2. Exchange Offer............................................................................... 5
3. Shelf Registration........................................................................... 8
4. Additional Interest.......................................................................... 10
5. Registration Procedures...................................................................... 11
6. Registration Expenses........................................................................ 21
7. Indemnification.............................................................................. 22
8. Rules 144 and 144A........................................................................... 26
9. Underwritten Registrations................................................................... 26
10. Miscellaneous................................................................................ 27
a. Remedies............................................................................ 27
b. Enforcement......................................................................... 27
c. No Inconsistent Agreements.......................................................... 27
d. Adjustments Affecting Registrable Notes............................................. 27
e. Amendments and Waivers.............................................................. 27
f. Notices............................................................................. 28
g. Successors and Assigns.............................................................. 28
h. Counterparts........................................................................ 28
i. Headings............................................................................ 28
j. Governing Law....................................................................... 28
k. Severability........................................................................ 29
l. Entire Agreement.................................................................... 29
m. Notes Held by the Company or Its Affiliates......................................... 29
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
November 15, 1996, by and among COLE NATIONAL GROUP, INC., a Delaware
corporation (the "Company"), and CIBC WOOD GUNDY SECURITIES CORP., CS FIRST
BOSTON CORPORATION, NATIONSBANC CAPITAL MARKETS, INC., and SMITH BARNEY INC., as
initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the
Securities Purchase Agreement, dated as of November 13, 1996, among the Company
and the Initial Purchasers (the "Purchase Agreement") relating to the sale by
the Company to the Initial Purchasers of $150,000,000 aggregate principal amount
of the Company's 9 7/8% Senior Subordinated Notes due 2006 (the "Notes"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchasers. The execution and delivery
of this Agreement is a condition to the Initial Purchasers' obligation to
purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a).
ADVICE: See Section 5.
AGREEMENT: See the first introductory paragraph of this
Agreement.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
COMPANY: See the first introductory paragraph to this
Agreement.
EFFECTIVENESS DATE: The 120th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
<PAGE> 4
-2-
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of November 15, 1996,
between the Company and Northwest Bank Minnesota, N.A., as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
INITIAL PURCHASERS: See the first introductory paragraph to
this Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to
the Initial Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
NASD: See Section 5(t).
NOTES: See the second introductory paragraph to this
Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
<PAGE> 5
-3-
PERSON: An individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the second introductory paragraph to
this Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be, (i) a Registration Statement covering such Notes or such
Private Exchange Notes has been declared effective by the SEC and such Notes or
such Private Exchange Notes, as the case may be, have been disposed of in
accordance with such effective Registration Statement, (ii) such Notes or such
Private Exchange Notes, as the case may be, are sold in compliance with Rule
144, (iii) in the case of any Note, such Note has been exchanged for an Exchange
Note or Exchange Notes pursuant to an Exchange Offer or (iv) such Notes or such
Private Exchange Notes, as the case may be, cease to be outstanding.
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of
the Company, including, but not limited to, the Exchange
Registration Statement, which covers any of the Registrable Notes
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
<PAGE> 6
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statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public.
<PAGE> 7
-5-
2. Exchange Offer
--------------
(a) The Company agrees to file with the SEC as soon as
practicable after the Closing, but in no event later than the Filing Date, an
offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
for a like aggregate principal amount of debt securities of the Company which
are identical to the Notes (the "Exchange Notes") (and which are entitled to the
benefits of the Indenture or a trust indenture which is substantially identical
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the Exchange Notes shall
have been registered pursuant to an effective Registration Statement under the
Securities Act. The Exchange Offer will be registered under the Securities Act
on the appropriate form (the "Exchange Registration Statement") and will comply
with all applicable tender offer rules and regulations under the Exchange Act.
The Company agrees to use its best efforts to (x) cause the Exchange
Registration Statement to become effective under the Securities Act on or before
the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days
(or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 60th day following the date on which the Exchange Registration
Statement is declared effective. If after such Exchange Registration Statement
is initially declared effective by the SEC, the Exchange Offer or the issuance
of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Registration Statement shall be deemed not to
have become effective for purposes of this agreement. Each Holder who
participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and that such Holder is not an affiliate of
the Company within the meaning of Rule 405 promulgated under the Securities Act
or if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers (as defined
below),
<PAGE> 8
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and the Company shall have no further obligation to register Registrable Notes
(other than Private Exchange Notes) pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of the Initial Purchasers,
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also allow the use of the Prospectus by all persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, provided that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Company upon the request of either Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Company that are identical in all material respects to
the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange Notes). The Private Exchange Notes shall
bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes
and Private
<PAGE> 9
-7-
Exchange Notes will accrue from the last interest payment date on which interest
was paid on the Notes surrendered in exchange therefor or, if no interest has
been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes tendered and not
validly withdrawn pursuant to the Exchange Offer or the
Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes
so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Notes of such Holder
so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and that
the Exchange Notes, the Private Exchange Notes and the Notes will vote and
consent together on all matters as one class and that neither the Exchange
Notes, the Private Exchange Notes nor the Notes will have the right to vote or
consent as a separate class on any matter.
<PAGE> 10
-8-
(c) If (1) prior to the consummation of the Exchange Offer,
the Company or Holders of at least a majority in aggregate principal amount of
the Registrable Notes reasonably determine in good faith that (i) the Exchange
Notes would not, upon receipt, be tradeable by such Holders which are not
affiliates (within the meaning of the Securities Act) of the Company without
restriction under the Securities Act and without restrictions under applicable
state securities laws, or (ii) after conferring with counsel, the SEC is
unlikely to permit the consummation of the Exchange Offer prior to the
Effectiveness Date, (2) subsequent to the consummation of the Private Exchange,
any holder of the Private Exchange Notes so requests or (3) the Exchange Offer
is commenced and not consummated within 180 days of the date of this Agreement,
then the Company shall promptly deliver to the Holders and the Trustee written
notice thereof (the "Shelf Notice") and shall file an Initial Shelf Registration
pursuant to Section 3. Following the delivery of a Shelf Notice to the Holders
of Registrable Notes (in the circumstances contemplated by clauses (1) and (3)
of the preceding sentence), the Company shall not have any further obligation to
conduct the Exchange Offer or the Private Exchange under this Section 2.
(d) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder represents and warrants to
the Company that, (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange
Notes to be issued in the Exchange Offer, and (C) it is acquiring the Exchange
Notes in its ordinary course of business. Each Holder hereby acknowledges and
agrees that any Participating Broker-Dealer and any Holder using the Exchange
Offer to participate in a distribution of Exchange Notes (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available
June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
as interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and similar no-action letters, and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must be covered
by an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if the
resales are of Notes obtained by such Holder in exchange for Notes acquired by
such Holder directly from the Company or an affiliate thereof.
<PAGE> 11
-9-
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the
"Initial Shelf Registration"). If the Company shall have not yet filed an
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date. In
any other instance, the Company shall use its best efforts to file with the SEC
the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below). The
Company shall use its best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the Effectiveness
Date and to keep the Initial Shelf Registration continuously effective under the
Securities Act until the date which is 36 months from the date on which such
Initial Shelf Registration is declared effective (subject to extension pursuant
to the last paragraph of Section 5 hereof) (the "Effectiveness Period"), or such
shorter period ending when (i) all Registrable Notes covered by the Initial
Shelf Registration have been sold in the manner set forth and as contemplated in
the Initial Shelf Registration, (ii) a Subsequent Shelf Registration covering
all of the Registrable Notes has been declared effective under the Securities
Act or (iii) no Registrable Notes remain outstanding.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf
<PAGE> 12
-10-
Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
for a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. Additional Interest
-------------------
(a) The Company and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("Additional
Interest") under the circumstances set forth below:
(i) if the Exchange Registration Statement or the Initial
Shelf Registration has not been filed on or prior to the Filing Date;
(ii) if the Exchange Registration Statement or the Initial
Shelf Registration has not been declared effective on or prior to the
Effectiveness Date; or
(iii) if either (A) the Company has not exchanged the Exchange
Notes for all Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to 60 days after the date on which the
Exchange Registration Statement was declared effective or (B) the
Exchange Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period;
<PAGE> 13
-11-
(each such events referred to in clauses (i) through (iii) above is a
"Registration Default"), then the sole remedy available to holders of the Notes
will be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by 50 basis points; and the per annum
interest rate will increase by an additional 25 basis points for each subsequent
90-day period during which the Registration Default remains uncured, up to a
maximum additional interest rate of 200 basis points PER ANNUM, provided,
however, that (1) upon the filing of the Exchange Registration Statement or the
Initial Shelf Registration (in the case of (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf Registration (in
the case of (ii) above) or (3) upon the exchange of Exchange Notes for all Notes
tendered (in the case of (iii)(A) above), or upon the effectiveness of the
Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) above), or upon the effectiveness of the Shelf Registration
which had ceased to remain effective (in the case of (iii)(C) above), Additional
Interest on the Notes as a result of such clause (i), (ii) or (iii) (or the
relevant subclause thereof), as the case may be, shall cease to accrue and the
interest rate on the Notes will revert to the interest rate originally borne by
the Notes.
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semi-annually on each December 31 and June 30 (to the
Holders of record on the December 15 and June 15 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue, by depositing with the Trustee, in trust for the
benefit of such Holders, immediately available funds in sums sufficient to pay
such Additional Interest. The amount of Additional Interest will be determined
by multiplying the applicable Additional Interest rate by the principal amount
of the Registrable Notes, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Notes
or Private Exchange Notes pursuant to Section 2 or 3 hereof, the Company shall
effect such registrations to permit the sale of such Registrable Notes or
Private Exchange Notes in
<PAGE> 14
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accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use its best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein, PROVIDED that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriter(s), if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (at least 5
business days prior to such filing). The Company shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity
to review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Registrable Notes covered
by such Registration Statement, or such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriter(s), if any,
shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to them with respect to the
disposition of all securities covered by such Registration Statement as
so amended or in such Prospectus as so supplemented and with respect to
the subsequent resale of any securities being
<PAGE> 15
-13-
sold by a Participating Broker-Dealer covered by any such Prospectus;
the Company shall be deemed not to have used its best efforts to keep a
Registration Statement effective during the Applicable Period if it
voluntarily takes any action that would result in selling Holders of
the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless such action is
required by applicable law or unless the Company complies with this
Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto,
when the same has become effective (including in such notice a written
statement that any Holder may, upon request, obtain, without charge,
one conformed copy of such Registration Statement or post-effective
amendment thereto including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary Prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time
when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes the representations and
warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5(n) below cease to be
true and correct, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any
<PAGE> 16
-14-
proceeding for such purpose, (v) of the happening of any event or any
information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in,
or amendments or supplements to, such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (vi)
of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use
of a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use its best efforts
to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter(s), if any, or the Holders of
a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment
thereto such information as the managing underwriter(s), if any, or
such Holders reasonably request to be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment thereto as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement
<PAGE> 17
-15-
or post-effective amendment thereto and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating
Broker-Dealer who so requests and to counsel and the managing
underwriter(s), if any, who so request, without charge, one conformed
copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Company hereby consents to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers, if any, in
connection with the offering and sale of the Registrable Notes covered
by or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use its best efforts to register
or qualify (to the extent required by applicable law), and to cooperate
with the selling Holders of Registrable Notes or each such
<PAGE> 18
-16-
Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes for offer
and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters, if any,
reasonably request in writing, PROVIDED that where Exchange Notes held
by Participating Broker-Dealers or Registrable Notes are offered other
than through an underwritten offering, the Company agrees to cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement;
PROVIDED that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of
<PAGE> 19
-17-
the nature of such selling Holder's business, in which case the Company
will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly
as practicable prepare and (subject to Section 5(a) above) file with
the SEC, at the expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the
case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with printed certificates for the Registrable Notes in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes and take all such other actions as are reasonably
<PAGE> 20
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requested by the managing underwriter(s), if any, in order to expedite
or facilitate the registration or the disposition of such Registrable
Notes, and in such connection, (i) make such representations and
warranties to the managing underwriter or underwriters on behalf of any
underwriters, with respect to the business of the Company and its
respective subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities, and confirm
the same if and when requested; (ii) obtain opinions of counsel to the
Company and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to
the managing underwriter or underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt securities and such other matters as may be reasonably requested
by underwriters; (iii) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of any of the Company or
of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to the managing underwriter or
underwriters on behalf of any underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of
debt securities and such other matters as reasonably requested by the
managing underwriter or underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in
Section 7 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents) with respect to all parties to
be indemnified pursuant to said Section. The above shall be done at
each closing under such underwriting agreement, or as and to the extent
required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any
<PAGE> 21
-19-
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or
underwriters participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent retained by
any such selling Holder or each such Participating Broker-Dealer, as
the case may be (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the
Company and its respective subsidiaries (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and its respective subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement. Records which
the Company determines, in good faith, to be confidential and any
Records which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (i) the disclosure of such Records
is necessary to avoid or correct a material misstatement or material
omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) the information in such Records has
been made generally available to the public. Each selling Holder of
such Registrable Notes and each such Participating Broker-Dealer or
underwriter will be required to agree that information obtained by it
as a result of such inspections shall be deemed confidential and shall
not be used by it as the basis for any market transactions in the
securities of the Company or of Cole National Corporation unless and
until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company to undertake appropriate action to prevent disclosure of the
Records deemed confidential at its expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the
Registrable
<PAGE> 22
-20-
Notes; and in connection therewith, cooperate with the trustee under
any such indenture and the Holders of the Registrable Notes, to effect
such changes to such indenture as may be required for such indenture to
be so qualified in accordance with the terms of the TIA; and execute,
and use its best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its security- holders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i)
the Company has duly authorized, executed and delivered the Exchange
Notes and Private Exchange Notes and the related indenture and (ii) the
Exchange Notes or the Private Exchange Notes, as the case may be, and
related indenture constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
respective terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being cancelled in
exchange
<PAGE> 23
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for the Exchange Notes or the Private Exchange Notes, as the case may
be; and, in no event shall such Registrable Notes be marked as paid or
otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other
steps necessary to effect the registration of the
Registrable Notes covered by a Registration Statement
contemplated hereby.
The Company may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Holder or
<PAGE> 24
-22-
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k) or
(y) the Advice.
6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel (which may be
counsel to the Company) in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and, if requested, determination of the
eligibility of the Registrable Notes or Exchange Notes for investment under the
laws of such jurisdictions (x) where the Holders of Registrable Notes are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(h),
in the case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing Prospectuses if the printing of Prospectuses is reasonably
requested by the managing underwriter or underwriters, if any, or, in respect of
Registrable Notes or Exchange Notes to be sold by any Participating
Broker-Dealer during the Applicable Period, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or of such Exchange Notes, as the case may be), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and fees and disbursements of special counsel (which will be limited to
a single firm for each related transaction) for the sellers of Registrable
Notes, (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Company desires such insurance, (viii) fees and expenses of
the Trustee, (ix) fees and expenses of all other Persons retained by the
Company, (x) internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company performing
legal or accounting duties), (xi) the expense of any
<PAGE> 25
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annual audit, (xii) the fees and expenses incurred in connection with any
listing of the securities to be registered on any securities exchange, (xiii)
the fees and disbursements of underwriters, if any, customarily paid by issuers
or sellers of securities (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of the
Registrable Notes which discounts, commissions or taxes shall be paid by Holders
of such Registrable Notes), and (xiv) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Notes and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, the officers and directors of each
such person, and each person, if any, who controls any such person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
Prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Company in writing by
such Participant expressly for use therein; provided that the foregoing
indemnity with respect to any preliminary Prospectus shall not inure to the
benefit of any Participant (or to the benefit of any person controlling such
Participant) from whom the person asserting any such losses, claims, damages or
liabilities purchased Registrable Notes or Exchange Notes if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary Prospectus is eliminated or remedied in the related Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) and a copy of the related
<PAGE> 26
-24-
Prospectus (as so amended or supplemented) shall have been furnished to such
Participant at or prior to the sale of such Registrable or Exchange Notes, as
the case may be, to such person.
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless the Company, its directors and
officers and each person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnity may be sought pursuant
to either paragraph (a) or (b) of this Section 7, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain one counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses incurred by such counsel related
to such proceeding. In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representations of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate law firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any
<PAGE> 27
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such separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes sold by all such Participants and any such separate firm
for the Company, its directors, officers and such control persons of the Company
shall be designated in writing by the Company. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; PROVIDED,
HOWEVER, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and of which
indemnity could have been sought hereunder by such Indemnified Person, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in paragraphs (a) and (b)
of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraphs, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and the Participants on the other
shall be determined by reference to, among other things,
<PAGE> 28
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whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Participants and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The parties shall agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the request
of any Holder of Registrable Notes, make publicly available other information of
a like nature so long as necessary to permit sales pursuant to Rule 144 or Rule
144A. The Company further covenants that so long as any Registrable Notes remain
outstanding to make available to any Holder of Registrable Notes in connection
with any sale thereof, the information required by Rule 144A(d)(4)
<PAGE> 29
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under the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements. No underwritten
offering shall include less than $10,000,000 principal amount of the Notes
covered by such Shelf Registration.
10. Miscellaneous
-------------
(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, other than the occurrence of an event
which requires payment of Additional Interest, each Holder of Registrable Notes,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, under this Agreement.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the
date hereof, and shall not, after the date of this Agreement, enter into any
agreement with respect to any of its securities that is inconsistent with the
rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered nor
will it enter into any agreement with respect to any of its securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement.
<PAGE> 30
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(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement, PROVIDED that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(f) NOTICES. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company, Cole National Group, Inc., 5915
Landerbrook Drive, Suite 300, Mayfield Heights, Ohio 44124, Attention:
Chief Financial Officer, with a copy to Jones, Day, Reavis & Pogue, 901
Lakeside Avenue, Cleveland, Ohio 44114, Attention: David P. Porter,
Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
<PAGE> 31
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Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein.
(m) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified
<PAGE> 32
-30-
percentage of Registrable Notes is required hereunder, Registrable Notes held by
the Company or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
COLE NATIONAL GROUP, INC.
(a Delaware corporation)
By:
------------------------------
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By:
-----------------------------
Name:
Title:
CS FIRST BOSTON CORPORATION
By:
-----------------------------
Name:
Title:
NATIONSBANC CAPITAL MARKETS, INC.
By:
-----------------------------
Name:
Title:
SMITH BARNEY INC.
By:
-----------------------------
Name:
Title:
<PAGE> 1
Exhibit 99.1
================================================================================
CREDIT AGREEMENT
among
COLE VISION CORPORATION,
THINGS REMEMBERED, INC.,
COLE GIFT CENTERS, INC.,
PEARLE, INC.
and
PEARLE SERVICE CORPORATION,
The Several Lenders
from Time to Time Parties Hereto,
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
Dated as of November 15, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. DEFINITIONS..................................................... 2
1.1 Defined Terms................................................. 2
1.2 Other Definitional Provisions................................. 26
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS........................................................ 26
2.1 Revolving Credit Commitments.................................. 27
2.2 Revolving Credit Notes........................................ 27
2.3 Procedure for Revolving Credit Borrowing...................... 27
2.4 Commitment Fees; Other Fees................................... 28
2.5 Termination or Reduction of Revolving Credit Commitments...... 28
2.6 Repayment of Revolving Credit Loans........................... 29
SECTION 3. LETTERS OF CREDIT............................................... 30
3.1 L/C Commitment................................................ 30
3.2 Procedure for Issuance of Letters of Credit................... 30
3.3 Fees, Commissions and Other Charges........................... 31
3.4 L/C Participations............................................ 31
3.5 Reimbursement Obligation of the Borrowers..................... 32
3.6 Obligations Absolute.......................................... 33
3.7 Letter of Credit Payments..................................... 33
3.8 Application................................................... 33
SECTION 4. GENERAL PROVISIONS.............................................. 34
4.1 Interest Rates and Payment Dates.............................. 34
4.2 Optional Prepayments.......................................... 34
4.3 Mandatory Prepayments and Reduction of Revolving Credit
Commitments............................................... 34
4.4 Conversion and Continuation Options........................... 36
4.5 Minimum Amounts and Maximum Number of Tranches................ 37
4.6 Computation of Interest and Fees.............................. 37
4.7 Inability to Determine Interest Rate.......................... 38
4.8 Pro Rata Treatment and Payments............................... 38
4.9 Illegality.................................................... 39
4.10 Requirements of Law.......................................... 39
4.11 Taxes........................................................ 40
4.12 Indemnity.................................................... 42
4.13 Change of Lending Office; Replacement of Lenders............. 43
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................. 44
5.1 Financial Condition........................................... 44
5.2 No Change; Solvency........................................... 45
5.3 Corporate Existence; Compliance with Law...................... 46
5.4 Corporate Power; Authorization; Enforceable Obligations....... 46
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
5.5 No Legal Bar.................................................. 47
5.6 No Material Litigation........................................ 47
5.7 No Default.................................................... 47
5.8 Ownership of Property; Liens.................................. 47
5.9 Intellectual Property......................................... 47
5.10 No Burdensome Restrictions................................... 48
5.11 Taxes........................................................ 48
5.12 Federal Reserve Regulations.................................. 48
5.13 ERISA........................................................ 48
5.14 Collateral................................................... 48
5.15 Investment Company Act; Other Regulations.................... 49
5.16 Subsidiaries and Joint Ventures.............................. 49
5.17 Purpose of Revolving Credit Loans............................ 49
5.18 Environmental Matters........................................ 49
5.19 Regulation H................................................. 50
5.20 No Material Misstatements.................................... 51
SECTION 6. CONDITIONS PRECEDENT............................................ 51
6.1 Conditions to Initial Extension of Credit..................... 51
6.2 Conditions to Each Extension of Credit........................ 55
SECTION 7. AFFIRMATIVE COVENANTS........................................... 56
7.1 Financial Statements.......................................... 56
7.2 Certificates; Other Information............................... 57
7.3 Payment of Obligations........................................ 58
7.4 Conduct of Business and Maintenance of Existence.............. 58
7.5 Maintenance of Property; Insurance............................ 59
7.6 Inspection of Property; Books and Records; Discussions........ 59
7.7 Notices....................................................... 60
7.8 Environmental Laws............................................ 61
7.9 Further Assurances............................................ 62
7.10 Mortgages; Additional Collateral............................. 62
7.11 September 30, 1996 Financial Statements of Pearle............ 63
SECTION 8. NEGATIVE COVENANTS.............................................. 64
8.1 Financial Condition Covenants................................. 64
8.2 Limitation on Indebtedness.................................... 66
8.3 Limitation on Liens........................................... 67
8.4 Limitation on Guarantee Obligations........................... 68
8.5 Limitation on Fundamental Changes............................. 69
8.6 Limitation on Sale of Assets.................................. 69
8.7 Limitation on Dividends....................................... 69
8.8 Limitation on Capital Expenditures............................ 70
8.9 Limitation on Investments, Loans and Advances................. 71
8.10 Limitation on Transactions with Affiliates................... 71
8.11 Limitation on Changes in Fiscal Year......................... 71
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.12 Limitation on Negative Pledge Clauses........................ 71
8.13 Limitation on Lines of Business.............................. 72
8.14 Limitations on Currency and Commodity Hedging Transactions... 72
8.16 Changes to Cash Management Collection System................. 72
SECTION 9. EVENTS OF DEFAULT............................................... 72
SECTION 10. THE ADMINISTRATIVE AGENT....................................... 76
10.1 Appointment.................................................. 76
10.2 Delegation of Duties......................................... 77
10.3 Exculpatory Provisions....................................... 77
10.4 Reliance by Administrative Agent............................. 77
10.5 Notice of Default............................................ 77
10.6 Non-Reliance on Administrative Agent and Other Lenders....... 78
10.7 Indemnification.............................................. 78
10.8 Administrative Agent in Its Individual Capacity.............. 79
10.9 Successor Administrative Agent............................... 79
10.10 Issuing Lender.............................................. 79
10.11 Releases of Guarantees and Collateral....................... 79
SECTION 11. MISCELLANEOUS.................................................. 80
11.1 Amendments and Waivers....................................... 80
11.2 Notices...................................................... 81
11.3 No Waiver; Cumulative Remedies............................... 81
11.4 Survival of Representations and Warranties................... 82
11.5 Payment of Expenses and Taxes................................ 82
11.6 Successors and Assigns; Participations and Assignments....... 83
11.7 Adjustments; Set-off......................................... 85
11.8 Counterparts................................................. 86
11.9 Severability................................................. 86
11.10 Integration................................................. 86
11.11 GOVERNING LAW............................................... 86
11.12 Submission To Jurisdiction; Waivers......................... 86
11.13 Acknowledgements............................................ 87
11.14 WAIVERS OF JURY TRIAL....................................... 87
11.15 Confidentiality............................................. 87
</TABLE>
- iii -
<PAGE> 5
SCHEDULES
I Revolving Credit Commitments and Addresses
II Applicable Margin Calculation for Revolving Credit Loans
5.4 Consents
5.5 Material Contracts; Court Orders and Decrees
5.8 Owned Real Properties
5.14 Equipment and Inventory of Borrowers and Subsidiaries
5.16 Subsidiaries and Joint Ventures
8.2(d) Permitted Indebtedness
8.3(h) Permitted Liens
8.4(a) Permitted Guarantee Obligations
EXHIBITS
A Form of Revolving Credit Note
B-1 Form of Guarantee and Collateral Agreement
B-2 Form of Copyright, Patent and Trademark Security Agreement
B-3 Form of CNG Guarantee and Cash Collateral Agreement
C Form of Borrowing Certificate
D Form of Opinion of Counsel to Borrowers
E Form of U.S. Tax Compliance Certificate
F Form of Assignment and Acceptance
G Form of Borrowing Base Certificate
H Form of Compliance Package
I Form of Borrowing Notice
J Form of Continuation/Conversion Notice
- iv -
<PAGE> 6
CREDIT AGREEMENT, dated as of November 15, 1996, among COLE
VISION CORPORATION, a Delaware corporation ("COLE VISION"), THINGS REMEMBERED,
INC., a Delaware corporation ("THINGS REMEMBERED"), COLE GIFT CENTERS, INC., a
Delaware corporation ("COLE GIFTS"), PEARLE, INC., a Delaware corporation
("PEARLE") and PEARLE SERVICE CORPORATION, a Delaware corporation ("PSC"; Cole
Vision, Things Remembered, Cole Gifts, Pearle and PSC each being referred to as
a "BORROWER" and collectively as the "BORROWERS"), the several banks and other
financial institutions from time to time parties to this Agreement
(collectively, the "LENDERS") and CANADIAN IMPERIAL BANK OF COMMERCE, a
Canadian-chartered bank acting through its New York Agency, as administrative
agent for the Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
---------------------
WHEREAS, Cole National Corporation, a Delaware corporation
("CNC"), intends to acquire all of the capital stock of Pearle and PSC for an
aggregate purchase price in cash of $220,000,000 (such transaction hereinafter
called the "ACQUISITION"); and
WHEREAS, simultaneously with the closing of the Acquisition,
(i) CNC will sell Pearle's European business (the "EUROPEAN BUSINESS"), operated
through Pearle B.V., to HAL Investments B.V. and certain members of Pearle
B.V.'s management for a purchase price in cash of approximately 96,477,350
Netherlands Guilders and a promissory note in the principal amount of 6,442,650
Netherlands Guilders in a transaction or transactions pursuant to which CNC will
retain a minority interest in the European Business and (ii) CNC will sell all
of the capital stock of Pearle and PSC to its wholly-owned subsidiary, Cole
National Group, Inc., a Delaware corporation ("CNG"; such transactions,
collectively with the Acquisition, the "TRANSACTION"); and
WHEREAS, in connection with the Transaction, the Borrowers
have requested the Lenders to establish a revolving credit facility in the
amount of $75,000,000 (the "REVOLVING CREDIT FACILITY"), pursuant to which
revolving credit loans may be made, jointly and severally, to the Borrowers and
Letters of Credit (as hereinafter defined) may be issued for the joint and
several account of the Borrowers; and
WHEREAS, the proceeds of the Revolving Credit Facility will be
used by the Borrowers for the general corporate purposes of the Borrowers and
their Subsidiaries (as hereinafter defined) in the ordinary course of business;
and
WHEREAS, the Administrative Agent and the Lenders are willing
to provide the Revolving Credit Facilities to the Borrowers upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
<PAGE> 7
2
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such terms to be equally applicable to
the singular and plural forms thereof):
"ABR LOANS": Revolving Credit Loans the rate of interest
applicable to which is based upon the CIBC Alternate Base Rate.
"ACCOUNT": as defined in the Uniform Commercial Code as in
effect in the State of New York; and, with respect to the Borrowers and
their Subsidiaries, all such Accounts of such Persons, whether now
existing or existing in the future, including, without limitation (i)
all accounts receivable of such Person including, without limitation,
all accounts created by or arising from all of such Person's sales of
goods or rendition of services made under any of its trade names, or
through any of its divisions, (ii) all unpaid rights of such Person
(including rescission, replevin, reclamation and stopping in transit)
relating to the foregoing or arising therefrom, (iii) all rights to any
goods represented by any of the foregoing, including returned or
repossessed goods and (iv) all reserves and credit balances held by
such Person with respect to any such accounts receivable or any
Obligors.
"ACQUISITION": as defined in the recitals hereto.
"ADJUSTED INTEREST COVERAGE RATIO": as of the end of each
fiscal quarter of CNG, with respect to CNG and its Subsidiaries on a
Consolidated basis, the ratio of (a) EBITDAR for the twelve month
period ending on such date to (b) the sum of (i) the aggregate amount
paid in cash during the twelve month period ending on such date in
respect of items of Interest Expense and (ii) Rental Expense for the
twelve month period ending on such date (in each case, after giving
effect to the relevant Interim Adjustment).
"ADJUSTMENT DATE": each date on or after the first anniversary
of the Closing Date that is the second Business Day following receipt
by the Lenders of both (i) the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, for
the most recently completed fiscal period and (ii) the related
Compliance Certificate required to be delivered pursuant to subsection
7.2(b) with respect to such fiscal period.
"ADMINISTRATIVE AGENT": CIBC, together with its affiliates,
as the arranger of the Revolving Credit Commitments and as the
administrative agent for the Lenders under this Agreement and the
other Loan Documents.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common
<PAGE> 8
3
control with, such Person. For purposes of this definition, "control"
of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for
the election of directors of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by
contract or otherwise.
"AGGREGATE OUTSTANDING REVOLVING CREDIT": as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount
of all Revolving Credit Loans made by such Lender then outstanding and
(b) such Lender's Revolving Credit Commitment Percentage of the L/C
Obligations then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE MARGIN": as applied to a given Type of Revolving
Credit Loan, the rate per annum determined as follows: during the
period from the Closing Date until the first Adjustment Date, the
Applicable Margin in respect of Revolving Credit Loans shall equal (i)
with respect to ABR Loans, .25% per annum and (ii) with respect to
Eurodollar Loans, 1.25% per annum; PROVIDED such Applicable Margin
will be adjusted on each Adjustment Date to the applicable rate per
annum set forth under the heading "ABR Loans Applicable Margin" or
"Eurodollar Loans Applicable Margin" on Schedule II which corresponds
to the Adjusted Interest Coverage Ratio determined from the financial
statements and Compliance Certificate relating to the end of the
fiscal quarter immediately preceding such Adjustment Date; PROVIDED,
FURTHER that in the event that the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, and
the related Compliance Certificate required to be delivered pursuant
to subsection 7.2(b), are not delivered when due, then
(a) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered (without
giving effect to any applicable cure period) and the Applicable
Margin increases from that previously in effect as a result of
the delivery of such financial statements and Compliance
Certificate, then the Applicable Margin in respect of Revolving
Credit Loans during the period from the date upon which such
financial statements and Compliance Certificate were required to
be delivered (without giving effect to any applicable cure
period) until the date upon which they actually are delivered
shall, except as otherwise provided in clause (c) below, be the
Applicable Margin as so increased;
(b) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance
<PAGE> 9
4
Certificate were required to be delivered and the Applicable
Margin decreases from that previously in effect as a result of
the delivery of such financial statements and Compliance
Certificate, then such decrease in the Applicable Margin shall
not become applicable until the date upon which such financial
statements and Compliance Certificate actually are delivered;
and
(c) if such financial statements and Compliance
Certificate are not delivered prior to the expiration of the
applicable cure period, then, effective upon such expiration,
for the period from the date upon which such financial
statements and Compliance Certificate were required to be
delivered (after the expiration of the applicable cure period)
until two Business Days following the date upon which such
financial statements and Compliance Certificate actually are
delivered, the Applicable Margin in respect of Revolving
Credit Loans shall be .25% per annum, in the case of ABR
Loans, and 1.25% per annum, in the case of Eurodollar Loans.
"ASSIGNEE": as defined in subsection 11.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender at
any time, an amount equal to the excess, if any, of (a) the amount of
such Lender's Revolving Credit Commitment at such time OVER (b) the sum
of (i) the aggregate unpaid principal amount at such time of all
Revolving Credit Loans made by such Lender and (ii) an amount equal to
such Lender's Revolving Credit Commitment Percentage of the outstanding
L/C Obligations at such time; collectively, as to all the Lenders, the
"AVAILABLE REVOLVING CREDIT COMMITMENTS".
"BORROWER" and "BORROWERS": as defined in the preamble
hereto.
"BORROWING BASE CERTIFICATE": as defined in subsection 7.2(e).
"BORROWING BASE": an amount, calculated on a monthly basis
based upon the most recent Borrowing Base Certificate delivered
pursuant to subsection 7.2(e), equal to the sum (without duplication)
of (a) 80% of Eligible Accounts, (b) 50% of Eligible Inventory and (c)
25% of Eligible Property. All determinations in connection with the
Borrowing Base shall be made by the Borrowers and certified to the
Administrative Agent by a Responsible Officer of the Borrowers;
PROVIDED, HOWEVER, that the Administrative Agent shall have the final
right to review and adjust, in its reasonable judgment after
consultation with the Borrowers, any such determination to the extent
such determination is not in accordance with this Agreement. The
Borrowing Base determined on the basis of any Borrowing Base
Certificate shall remain in effect from and including the date on which
such Borrowing Base Certificate is delivered, to but excluding the date
on which the next Borrowing Base Certificate is delivered.
<PAGE> 10
5
"BORROWING BASE DEFICIENCY": a condition wherein the sum of (a)
the aggregate principal amount of all Revolving Credit Loans
outstanding at such time and (b) the aggregate amount of L/C
Obligations outstanding at such time exceeds the Borrowing Base then
in effect.
"BORROWING DATE": any Business Day specified in a notice pursuant
to subsection 2.3 or 3.2 as a date on which a Borrower requests the
Lenders to make Revolving Credit Loans hereunder or the Issuing Lender
to issue Letters of Credit hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required
by law to close, except that, when used in connection with a
Eurodollar Loan, "Business Day" shall mean any Business Day on which
dealings in Dollars between banks may be carried on in London, England
and New York, New York.
"CAPITAL EXPENDITURE": as defined in subsection 8.8.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH EQUIVALENTS": (i) marketable, direct obligations issued or
guaranteed by the United States of America, or of any governmental
agency or political subdivision thereof, maturing within 365 days of
the date of purchase, (ii) Dollar-denominated time deposits and
Dollar-denominated certificates of deposit (including eurodollar time
deposits and certificates of deposit) maturing within 365 days of the
date of purchase thereof issued by any United States or Canadian
national, provincial or state (including the District of Columbia)
banking institution having capital, surplus and undivided profits
aggregating at least $250,000,000, or by any British, French, German,
Japanese or Swiss national banking institution having capital, surplus
and undivided profits aggregating at least $1,000,000,000, in each
case that is (a) rated at least "A" by Standard & Poor's, a division
of McGraw-Hill, Inc. ("S&P"), or at least "A-2" by Moody's Investors
Service Inc. ("MOODY'S"), or (b) that is a Lender, (iii) commercial
paper maturing within 270 days after the issuance thereof that has the
highest credit rating of either of S&P or Moody's, (iv) readily
marketable direct obligations issued by any state of the United States
of America or any political subdivision thereof having the highest
rating obtainable from either of S&P or Moody's, (v) tax exempted and
tax advantaged instruments including, without limitation, municipal
bonds, commercial paper, auction rate preferred stock and variable
rate demand obligations with the highest short-term ratings by either
of S&P or Moody's or a long-term debt rating of AAA from S&P, as
applicable, (vi) repurchase agreements and reverse repurchase
agreements with institutions
<PAGE> 11
6
described in clause (ii) above that are fully secured by obligations
described in clause (i) above and (vii) investments not exceeding 365
days in duration in money market funds that invest substantially all of
such funds' assets in the investments described in the preceding
clauses (i) through (v).
"CASH MANAGEMENT COLLECTION SYSTEM": as defined in subsection
6.1(j).
"C/D PUBLISHED MOVING RATE": on any particular date, the latest
three-week moving average of daily secondary market morning offering
rates in the United States for three-month certificates of deposit of
major United States money market lenders, such three-week moving
average (adjusted to the basis of a year of 360 days) being determined
weekly for the three-week period ending on the previous Friday by the
Administrative Agent on the basis of:
(a) such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New
York (as adjusted for reserves and assessments in the same
manner as the C/D Quoted Rate); or
(b) if such publication shall be suspended or
terminated, the C/D Quoted Rate determined by the
Administrative Agent on the basis of quotations for such rates
by the Administrative Agent.
"C/D QUOTED RATE": relative to any determination of the C/D
Published Moving Rate in circumstances when publication of the rates
referred to in clause (a) of the definition thereof has been suspended
or terminated, the rate of interest per annum determined by the
Administrative Agent to be the sum (rounded upward to the nearest
1/16th of 1%) of:
(a) the rate obtained by dividing (i) the average
(rounded upward to the nearest 1/16th of 1%) of the bid rates
quoted to the Administrative Agent, in CIBC's secondary market
at approximately 10:00 A.M., New York City time (or as soon
thereafter as practicable), from time to time by three
certificate of deposit dealers of recognized standing selected
by the Administrative Agent in its reasonable discretion for
the purchase at face value of three-month certificates of
deposit of CIBC in an amount approximately equal or comparable
to the amount of CIBC's portion of the Revolving Credit Loans
outstanding hereunder with respect to which the C/D Quoted
Rate is being determined by (ii) a percentage equal to 100%
MINUS the average of the daily percentages specified during
such period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any marginal
reserve requirement) for a member bank of the Federal Reserve
System in respect of liabilities consisting of or including
(among other liabilities) three-month Dollar nonpersonal time
deposits in the United States; and
<PAGE> 12
7
(b) the daily average during such period of the net
annual assessment rates estimated by the Administrative Agent
for determining the then current annual assessment payable by
CIBC to the Federal Deposit Insurance Corporation for insuring
Dollar deposits of CIBC in the United States.
"CHANGE OF CONTROL": (i) any Person (including such Person's
Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 50% or more of the
total voting or economic power of the Capital Stock of CNC and/or
warrants or options to acquire such Capital Stock on a fully diluted
basis, (ii) CNC consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, CNC, in any such event
pursuant to a transaction in which the outstanding Capital Stock of
CNC is converted into or exchanged for cash, securities or other
property, other than any such transaction where (a) (1) the
outstanding common stock of CNC is not converted or exchanged at all
(except to the extent necessary to reflect a change in the
jurisdiction of incorporation) or is converted into or exchanged for
Capital Stock of the surviving or transferee corporation (the
"SURVIVING ENTITY") and (2) immediately after such transaction, no
"person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) other than a Permitted Holder is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than a majority
of the total outstanding Capital Stock of the Surviving Entity, or (b)
the holders of the Capital Stock of CNC outstanding immediately prior
to the consolidation or merger hold, directly or indirectly, at least
a majority of the Capital Stock of the surviving corporation
immediately after such consolidation or merger, (iii) during any
period of two consecutive years, individuals who at the beginning of
such period constituted the board of directors of CNC (together with
any new directors whose election by such board of directors or whose
nomination for election by the shareholders of CNC has been approved
by 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to
constitute a majority of the board of directors of CNC, (iv) CNC shall
cease to own and control, beneficially, all of the issued and
outstanding Capital Stock of CNG or (v) CNG shall cease to own and
control all of the issued and outstanding capital stock of each
Borrower.
"CIBC": Canadian Imperial Bank of Commerce, a Canadian-chartered
bank, acting through its New York Agency.
<PAGE> 13
8
"CIBC ALTERNATE BASE RATE": on any particular date, a rate of
interest per annum equal to the highest of:
(a) the rate of interest most recently announced by CIBC as
its base rate in effect at its principal office in New York City
(the "CIBC PRIME RATE");
(b) the Federal Funds Rate for such date plus 1/2 of 1%; and
(c) the CD Published Moving Rate most recently determined by
CIBC plus 1%.
The CIBC Alternate Base Rate is not necessarily intended to be the
lowest rate of interest charged by CIBC in connection with extensions
of credit.
"CLEAN-DOWN AMOUNT": $10,000,000.
"CLOSING DATE": the date on which the conditions precedent set
forth in subsection 6.1 shall be satisfied.
"CNC": as defined in the recitals hereto.
"CNG": as defined in the recitals hereto.
"CNG GUARANTEE AND CASH COLLATERAL AGREEMENT": the CNG Guarantee
and Cash Collateral Agreement to be executed and delivered by CNG,
substantially in the form of Exhibit B-3, as the same may be amended,
supplemented or otherwise modified from time to time.
"CNG NOTES": the 11-1/4% Senior Notes due 2001, in an original
aggregate principal amount of $190,000,000, of CNG, as the same have
been amended, supplemented or otherwise modified from time to time,
and, following the Closing Date, as the same may be amended,
supplemented or otherwise modified from time to time without violating
Section 9(m).
"CODE": the Internal Revenue Code of 1986, as amended from time
to time.
"COLE GIFTS:" as defined in the preamble hereto.
"COLE VISION": as defined in the preamble hereto.
"COLLATERAL": all assets (including assets constituting shares of
Capital Stock) of the Loan Parties, now owned or hereinafter acquired,
upon which a Lien is purported to be created by any Security Document.
<PAGE> 14
9
"COMMITMENT LETTER": the Commitment Letter dated October 11, 1996
among CIBC, CIBC Wood Gundy Securities Corp. and CNG, as the same may
be amended, supplemented or otherwise modified from time to time.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with any Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes any Borrower and which is treated as a single employer under
Section 414 of the Code.
"COMPLIANCE CERTIFICATE": as defined in subsection 7.2(b).
"COMPLIANCE PACKAGE": the Cole National Group, Inc. and
Subsidiaries Consolidated Financial Statements and Supplementary Data,
in substantially the form of Exhibit H.
"CONSOLIDATED": when used in connection with any financial
statements required to be delivered pursuant to subsection 7.1 or 7.11
or computation of the financial covenants set forth in subsections 8.1
and 8.8, means such term as it applies to CNG and its Subsidiaries on
a consolidated basis, after eliminating all intercompany items.
"CONSOLIDATED NET WORTH": of any Person, as of the date of
determination, all items which in conformity with GAAP would be
included under shareholders' equity on a consolidated balance sheet of
such Person at such date; PROVIDED that, with respect to CNG, the
following items shall be added back to Consolidated Net Worth (i)
non-cash restructuring charges incurred during the fiscal years ending
February 1, 1997 and January 31, 1998, to the extent deducted from the
determination of Consolidated Net Worth and (ii) cash dividends paid
by CNG to CNC, in an aggregate amount not to exceed $14,000,000,
during the period from the Closing Date to January 31, 1998.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"COPYRIGHT, PATENT AND TRADEMARK SECURITY AGREEMENT": the
Copyright, Patent and Trademark Security Agreement to be executed and
delivered by the Borrowers and certain Subsidiaries, substantially in
the form of Exhibit B-2, as the same may be amended, supplemented or
otherwise modified from time to time.
"CORESTATES" as defined in subsection 6.1(a).
"DEFAULT": any of the events specified in Section 9, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
<PAGE> 15
10
"DEFAULTED ACCOUNT": any Account which has been or should have
been charged-off as not collectable in conformity with the accounting
policies of the Borrowers and their Subsidiaries as in effect from
time to time.
"DEFAULTING LENDER": at any time, any Lender that has defaulted,
and at the time of determination continues to default, in its
obligation to make available its Revolving Credit Commitment with
respect to any Revolving Credit Loan.
"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"EBITDA": for any period, with respect to CNG and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, an amount equal to the sum of (a) Net Income for such period,
plus (b) income taxes, excluding income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or
losses or sales or other dispositions of assets permitted under
subsection 8.6, plus (c) Interest Expense for such period, plus (d)
depreciation for such period, plus (e) amortization for such period,
plus (f) any other non-cash items (including minority interests)
reducing Net Income for such period, plus (g) amortization of deferred
financing costs and expenses for such period, minus (h) all non-cash
items increasing Net Income for such period, minus (i) all cash
payments made in such period in respect of restructuring charges
deducted in calculating Net Income for such period or any prior
period, PROVIDED that the first $10,000,000 of such cash payments made
after the Closing Date shall not be required to be subtracted pursuant
to this clause (i).
"EBITDAR": for any period, with respect to CNG and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, an amount equal to the sum of EBITDA and Rental Expense for such
period.
"ELIGIBLE ACCOUNTS": at any time, an amount equal to the
aggregate outstanding balance of all Accounts of the Borrowers and
their Subsidiaries (other than Accounts consisting of payment
obligations with respect to which the Obligor is a franchisee of any
Borrower or any Subsidiary arising from Investments made pursuant to
subsection 8.9(e)) payable in the United States of America in Dollars
as set forth in the aging reports of billed Accounts for the Borrowers
and their Subsidiaries as of such time, PROVIDED that, unless
otherwise approved in writing by the Administrative Agent, no amount
owing in respect of any Account shall be deemed to be included in any
calculation of Eligible Accounts if:
(a) such Account was, at the date of the original issuance of the
respective invoice therefor, payable more than 60 days after such
date;
(b) such Account is not a bona fide, valid and legally
enforceable obligation of the account debtor in respect thereof
arising from the actual
<PAGE> 16
11
sale and delivery of goods or rendition and acceptance of
services in the ordinary course of business to such account
debtor;
(c) such Account remains unpaid for more than 60 days after the
date set forth for payment in the invoice originally issued
therefor;
(d) the Obligor is any Borrower or any Subsidiary or Affiliate
thereof;
(e) the sale giving rise thereto is to an Obligor in any
jurisdiction outside the United States unless the obligation
thereunder is backed by a letter of credit acceptable to the
Administrative Agent;
(f) such Account is a Defaulted Account;
(g) such Account is the result of a charge-back or a reinvoice of
a disputed Account or Defaulted Account;
(h) the Obligor thereon has been the obligor in respect of
Defaulted Accounts at any time during the immediately preceding
12-month period;
(i) it is an Account which may be set off or charged against (i)
any adverse security deposit or other similar deposit made by or
for the benefit of the applicable Obligor or (ii) any trade
payable, rebate obligation or other similar liability owing to
the applicable Obligor; PROVIDED that any Account deemed
ineligible pursuant to this clause (i) shall only be ineligible
to the extent of such set-off or charge against such adverse
security deposit, trade payable, rebate obligation or other
similar deposit or liability;
(j) it arises from the sale to the Obligor on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval or consignment
basis or made pursuant to any other written agreement providing
for repurchase or return; PROVIDED, HOWEVER, that no Account
shall be excluded pursuant to this clause (j) solely as a result
of customary quality warranties or the general right to return
goods provided by the Borrower or its Subsidiaries;
(k) the Obligor thereon has disputed its liability on, or the
Obligor thereon has made any claim or defense with respect to,
such Account or any other Account due from such Obligor to any
Loan Party, which has not been resolved; PROVIDED that any
Account deemed ineligible pursuant to this clause (k) shall only
be ineligible to the extent of the amount owed by such Loan Party
to the Obligor thereon or the amount of such dispute, claim or
defense;
<PAGE> 17
12
(l) a proceeding under bankruptcy or similar laws has occurred
and is continuing with respect to the Obligor thereon;
(m) the Obligor thereon is any Governmental Authority unless all
Requirements of Law relating to the creation and perfection of a
Lien thereon in favor of the Lenders shall have been satisfied;
(n) the goods giving rise to such Account have not been shipped
and delivered to the Obligor thereon or the services giving rise
to such Account have not been performed or such Account otherwise
does not represent a final sale or transfer of title to such
Obligor;
(o) such Account does not comply in all material respects with
all applicable legal requirements;
(p) if the Accounts due from any Obligor exceed an amount equal
to 20% of the aggregate of all Accounts at said time, an amount
of such Accounts equal to such excess;
(q) such Account is not owned solely by such Person free and
clear of all Liens or other rights or claims of any other Person
(except in favor of the Administrative Agent);
(r) such Account is subject to any material restrictions on the
transfer, assignability or sale thereof, enforceable against the
assignee, except pursuant to any Loan Document; or
(s) the Administrative Agent does not have a valid and perfected
first priority security interest in such Account for the benefit
of the Lenders or such Account does not otherwise conform in all
material respects to the representations and warranties contained
in this Agreement or any of the Security Documents.
"ELIGIBLE INVENTORY": at any time, an amount equal to the
aggregate value (determined in accordance with the immediately
succeeding sentence) of all Inventory of (i) Cole Vision, located at
distribution centers and laboratories owned or operated by Cole
Vision, (ii) Pearle, located at stores owned by Pearle and
distribution centers and laboratories owned or operated by Pearle,
(iii) Things Remembered, located at stores owned by Things Remembered
and distribution centers owned or operated by Things Remembered, (iv)
Cole Gifts, located at distribution centers owned or operated by Cole
Gifts and (v) PSC, located at distribution centers and laboratories
owned or operated by PSC, in each case that consists of finished goods
available for sales to customers, excluding all Inventory located at a
distribution center received from a third-party customer in exchange
for the initial stocking of Inventory of such third-party customer in
any changeover
<PAGE> 18
13
or conversion. In determining the amount to be so included, the amount
of such Inventory shall be valued at the lower of cost or market on a
basis consistent with such Borrower's or such Subsidiary's current and
historical accounting practice LESS reserves taken, if any, (i) on
account of physical inventory adjustments, (ii) for warranty and price
changes as recorded in such Borrower's or such Subsidiary's accounting
records, (iii) for any goods returned or rejected by such Borrower's or
such Subsidiary's customers as damaged or defective, scrap, obsolete or
otherwise non-salable, return to vendor goods, miscellaneous
non-perpetual inventory, cores, rental tools, supplies, (iv) for goods
in transit to third parties that are not excluded pursuant to clause
(a), (b), (c), (d) or (e) below, (v) for Liens referred to in clause
(c)(i) below and (vi) for Liens referred to in clause (c)(ii) below as
established by the Administrative Agent in its reasonable judgment.
Unless otherwise approved in writing by the Administrative Agent, no
Inventory shall be deemed Eligible Inventory of the Borrowers or its
Subsidiaries if:
(a) the Inventory is not owned solely by such Borrower or such
Subsidiary or is leased or on consignment or such Borrower or
such Subsidiary does not have good and valid title thereto;
(b) the Inventory is not located at or in transit to property
that is owned or leased by such Borrower or such Subsidiary;
(c) the Inventory is not subject to a perfected Lien in favor of
the Administrative Agent prior to all other Liens except for (i)
Liens arising by operation of law with respect to which either a
Landlord Consent has been obtained or a Rent Reserve has been
established and (ii) with respect to Eligible Inventory located
at or in transit to sites described in clause (b) above, for
Liens for normal and customary warehousing and transportation
charges (appropriate reserves for which have been reasonably
established for borrowing base purposes by such Borrower or such
Subsidiary);
(d) the Inventory is not located in the United States; or
(e) the Inventory does not conform in all material respects to
the representations and warranties contained in this Agreement or
any of the Security Documents.
"ELIGIBLE PROPERTY": at any time, an amount equal to the
aggregate book value of all tangible assets (other than Inventory) of
(i) Cole Vision, located at distribution centers, stores and
laboratories owned or operated by Cole Vision, (ii) Pearle, located at
stores owned by Pearle and offices, distribution centers, laboratories
and other facilities owned or operated by Pearle, (iii) Things
Remembered, located at stores owned by Things Remembered and
distribution centers owned or operated by Things Remembered, (iv) Cole
Gifts, located at distribution centers or stores owned or operated by
Cole Gifts and (v) PSC,
<PAGE> 19
14
located at distribution centers and laboratories owned or operated by
PSC, in each case less the amount of any Indebtedness (other than
Indebtedness under any Loan Document) secured by a Lien on such
assets, PROVIDED that no amount shall be included in any calculation
of Eligible Property with respect to an asset (i) which is subject to
any material restrictions on the transfer, assignability or sale
thereof, enforceable against the assignee (except pursuant to any Loan
Document), (ii) upon which the Administrative Agent does not have a
valid and perfected first priority security interest for the benefit
of the Lenders or (iii) which does not otherwise conform in all
material respects to the representations and warranties contained in
this Agreement or any of the Security Documents.
"ENVIRONMENTAL COSTS": any and all costs or expenses (including,
without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and
litigation expenses, fines, penalties, damages, settlement payments,
judgments and awards), of whatever kind or nature, contingent or
otherwise, arising out of, or in any way relating to, any violation
of, noncompliance with or liability under any Environmental Laws or
any orders, requirements, demands, or investigations of any person
related to any Environmental Laws. Environmental Costs include any and
all of the foregoing, without regard to whether they arise out of or
are related to any past, pending or threatened proceeding of any kind.
"ENVIRONMENTAL LAWS": any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law)
of any foreign government, the United States, or any state, local,
municipal or other Governmental Authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of
the environment or of human health, or employee health and safety, as
has been, is now, or may at any time hereafter be, in effect.
"ENVIRONMENTAL PERMITS": any and all permits, licenses,
registrations, notifications, exemptions and any other authorization
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
<PAGE> 20
15
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the arithmetic mean of the
offered rates for deposits in Dollars with a term comparable to such
Interest Period that appears on the Telerate British Bankers Assoc.
Interest Settlement Rates Page (as defined below) at approximately
11:00 A.M., London time, on the second full Business Day preceding the
first day of such Interest Period; PROVIDED, HOWEVER, that if there
shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "Eurodollar Base Rate" shall mean, with
respect to each day during each Interest Period pertaining to a
Eurodollar Loan, the rate per annum equal to the rate at which CIBC is
offered Dollar deposits at or about 10:00 A.M., New York City time, two
Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Loans are then
being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to
the amount of its Eurodollar Loan to be outstanding during such
Interest Period. "TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT
RATES PAGE" shall mean the display designated as Page 3750 on the
Telerate System Incorporated Service (or such other page as may replace
such page on such service for the purpose of displaying the rates at
which Dollar deposits are offered by leading banks in the London
interbank deposit market).
"EURODOLLAR LOANS": Revolving Credit Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EUROPEAN BUSINESS": as defined in the recitals hereto.
"EVENT OF DEFAULT": any of the events specified in Section 9,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as
amended.
<PAGE> 21
16
"EXISTING CREDIT AGREEMENT": the Loan and Security Agreement,
dated as of September 30, 1993, among Fleet Financial Corporation,
successor in interest to Barclays Business Credit, Inc., Cole Vision,
Things Remembered and Cole Key Corporation, as the same may have been
amended, restated or otherwise modified.
"FEDERAL FUNDS RATE": for any particular date, an interest rate
per annum equal to the interest rate (rounded upwards, if necessary,
to the nearest 1/16th of 1%) offered in the interbank market to the
Administrative Agent as the overnight Federal Funds Rate at or about
10:00 A.M. New York City time, on such day (or if such day is not a
Business Day, for the next preceding Business Day).
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"GAAP": generally accepted accounting principles in the United
States set forth from time to time in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the accounting
profession), or in such other statement by such other entity as may be
in general use by significant segments of the U.S. accounting
profession; PROVIDED, that, with respect to the calculation of the
financial ratios and the terms used in the covenants contained in this
Agreement and the definitions related thereto, "GAAP" means generally
accepted accounting principles in effect in the United States on the
dates of the financial statements referred to in subsection 5.1, it
being understood that, upon any change in GAAP as at such dates that
in the reasonable opinion of the Administrative Agent affects in any
material respect the financial ratios and covenants contained in this
Agreement, the Borrowers and the Administrative Agent, on behalf of
the Lenders, will negotiate in good faith to adapt or conform any such
financial ratios and covenants and the definitions related thereto to
any such changes in GAAP to the extent necessary to maintain the
original economic terms of such financial ratios and covenants as in
effect under this Agreement on the date hereof, the Administrative
Agent shall promptly notify the Lenders in writing of the negotiated
changes to such financial ratios, covenants and definitions, and if,
by the 30th day after the date such notice is given (i) the Majority
Lenders shall not have objected in writing to such changes, such
changes shall be deemed to be effective, and this Agreement shall be
deemed to be amended accordingly, as of such 30th day, without further
action on the part of any party hereto or (ii) the Majority Lenders
shall have objected to such changes, then, until this Agreement shall
be amended in accordance with the terms of Section 11.1 to reflect
such changes as may be necessary to maintain the original economic
terms of such financial ratios and covenants, the financial ratios
<PAGE> 22
17
and covenants immediately in effect prior to such amendment shall
remain in effect.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity (including, without
limitation, any central bank) exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government. For purposes of subsections 4.9, 4.10 and 11.15, the term
"Governmental Authority" shall be deemed to include, without
limitation, the National Association of Insurance Commissioners.
"GUARANTEE": as defined in the definition of "Guarantor."
"GUARANTEE AND COLLATERAL AGREEMENT": the Guarantee and
Collateral Agreement to be executed and delivered by each Borrower and
each Subsidiary, substantially in the form of Exhibit B-1, as the same
may be amended, supplemented or otherwise modified from time to time.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of
any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation
in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably
<PAGE> 23
18
anticipated liability in respect thereof as determined by the
Borrowers in good faith.
"GUARANTOR": any Person which is now or hereafter a party to (a)
the Guarantee and Collateral Agreement or (b) any other guarantee (a
"GUARANTEE") hereafter delivered to the Administrative Agent
guaranteeing the obligations and liabilities of each of the Loan
Parties hereunder or under any other Loan Documents, including,
without limitations, any guarantee delivered pursuant to subsection
7.10.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily
paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding accounts payable
incurred in the ordinary course of such Person's business), (f) 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 property owned or acquired by such Person,
whether or not the Indebtedness secured thereby has been assumed, (g)
all obligations of such Person under Financing Leases, (h) for
purposes of subsection 8.2 and Section 9(e), all obligations of such
Person in respect of interest rate protection agreements, interest
rate futures, interest rate options, interest rate caps and any other
interest rate, currency, commodity or other hedging arrangement, (i)
all Guarantee Obligations of such Person with respect to Indebtedness
of others, (j) all obligations of such Person under Financing Leases,
(k) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty
and (l) all obligations, contingent or otherwise, of such Person in
respect of bankers' acceptances. The Indebtedness of any Person shall
include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent
such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not
liable therefor.
"INSOLVENCY": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST EXPENSE": for any period and without duplication, with
respect to CNG and its Subsidiaries on a consolidated basis, (a) the
aggregate amount of interest which would be set forth opposite the
caption "interest expense" or any
<PAGE> 24
19
like caption on an income statement for CNG and its Subsidiaries on a
consolidated basis, determined in accordance with GAAP, for such
period plus, to the extent not included in such interest, (i) imputed
interest included in Financing Leases for such period, (ii) all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing permitted by
subsection 8.2 for such period; (iii) the net payments made in
connection with Interest Rate Protection Agreements for such period,
(iv) the interest portion of any deferred payment obligation for such
period, (v) amortization of discount or premium, if any, for such
period, (vi) all other non-cash interest expense (other than interest
amortized to cost of sales) for such period, (vii) all net capitalized
interest for such period and (viii) all interest paid under any
Guarantee Obligation, minus (b) net payments received in connection
with Interest Rate Protection Agreements for such period, minus (c)
amortization of deferred financing costs and expenses for such period.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of
each fiscal quarter of CNG, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period
longer than three months, each day which is three months, or a whole
multiple thereof, after the first day of such Interest Period and the
last day of such Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the
borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the respective Borrower in
its notice of borrowing or notice of conversion, as the case
may be, given with respect thereto; and
(ii) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by such Borrower by irrevocable notice
to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with
respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar
Loan would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar
<PAGE> 25
20
month in which event such Interest Period shall end on the
immediately preceding Business Day;
(2) any Interest Period that would otherwise extend
beyond the Revolving Credit Commitment Termination Date
shall end on the Revolving Credit Commitment Termination
Date;
(3) any Interest Period pertaining to a Eurodollar Loan
that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(4) the Borrowers shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Revolving Credit
Loan.
"INTEREST RATE PROTECTION AGREEMENT": any interest rate
protection agreement, interest rate future, interest rate option,
interest rate cap or collar or other interest rate hedge arrangement,
to or under which any Borrower or any of its Subsidiaries is a party
or a beneficiary on the Closing Date or becomes a party or a
beneficiary after the Closing Date.
"INTERIM ADJUSTMENTS": for the period from the Closing Date to
the end of the second fiscal quarter of the 1997 fiscal year of CNG,
the Adjusted Interest Coverage Ratio and the Leverage Ratio shall be
calculated using the adjustments and assumptions set forth below:
(a) EBITDA and Rental Expense for the twelve month
period for which the Adjusted Interest Coverage Ratio and
the Leverage Ratio are being calculated shall be deemed to
be the actual EBITDA and Rental Expense, respectively, of
CNG on a PRO FORMA basis as if the Transaction had been
consummated on the first day of such period and, in the case
of the calculations as at the end of the fourth quarter of
the 1996 fiscal year of CNG and the first and second fiscal
quarters of the 1997 fiscal year of CNG, such amounts shall
be calculated by combining the results of operations of CNG
and its Subsidiaries (other than Pearle and PSC) for the
four fiscal quarters then ending with the results of
operations of Pearle (after giving effect to the sale of the
European Business) and PSC for the corresponding fiscal
quarters of Pearle's and PSC's fiscal year; and
(b) Interest Expense for the twelve month period ending
on the date for which the Adjusted Interest Coverage Ratio
is being calculated (but only in cases where such date is
prior to the date which is the first anniversary of the
Closing Date) shall be deemed to be the result obtained
<PAGE> 26
21
by multiplying (i) the actual Interest Expense for the period
from the Closing Date through such date times (ii) a ratio
equal to (x) 365 divided by (y) the number of days elapsed
from the Closing Date until such date.
"INVENTORY": as defined in the Uniform Commercial Code as in
effect in the State of New York; and, with respect to the Borrowers and
their Subsidiaries, all such Inventory of such Borrower or such
Subsidiary including, without limitation, all finished goods, wares and
merchandise, finished or unfinished parts, components, assemblies held
for sale to third party customers by such Borrower or such Subsidiary.
"INVESTMENT": as defined in subsection 8.9.
"ISSUING LENDER": CIBC or any of its affiliates.
"LANDLORD CONSENT": a written agreement reasonably acceptable
to the Administrative Agent, pursuant to which a Person shall waive or
subordinate its rights and claims as landlord in any Inventory of the
Borrowers or their Subsidiaries for unpaid rents, grant access to the
Administrative Agent for the repossession and sale of such inventory
and make other agreements relative thereto.
"L/C FEE PAYMENT DATE": the last day of each fiscal quarter
of CNG.
"L/C OBLIGATIONS": at any date, the sum of (a) the aggregate
amount then available to be drawn under all outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed by the Borrowers pursuant to
subsection 3.5.
"L/C PARTICIPANTS": the collective reference to all the
Lenders other than the Issuing Lender.
"L/C SUBLIMIT": $30,000,000.
"LENDERS": as defined in the preamble hereto and including,
without limitation, the Issuing Lender.
"LETTERS OF CREDIT": as defined in subsection 3.1.
"LETTER OF CREDIT APPLICATION": an application in such form
as the Issuing Lender may specify from time to time, requesting the
Issuing Lender to issue a Letter of Credit.
"LEVERAGE RATIO": as of the end of each fiscal quarter of
CNG, with respect to CNG and its Subsidiaries on a consolidated basis,
the ratio of (a) Total
<PAGE> 27
22
Indebtedness on such date to (b) EBITDA for the twelve month period
ending on such date (after giving effect to the Interim Adjustment).
"LIEN": any mortgage, pledge, hypothecation, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing).
"LOAN DOCUMENTS": this Agreement, any Revolving Credit Notes, any
Letter of Credit Applications, any Letters of Credit, the Security
Documents and any Guarantees.
"LOAN PARTIES": CNG, the Borrowers and each Subsidiary of a
Borrower which is a party to a Loan Document, individually, a "LOAN
PARTY".
"MAJORITY LENDERS": at any time, Non-Defaulting Lenders the
Revolving Credit Commitment Percentages of which aggregate more than
50% of the aggregate Revolving Credit Commitment Percentages of all
Non-Defaulting Lenders.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise)
of the Borrowers and their Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan
Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos or
asbestos-containing materials, pollutants, contaminants,
radioactivity, and any other substances of any kind, whether or not
any such substance is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to
liability under any Environmental Law.
"MOODY'S": as defined in the definition of "Cash Equivalents."
"MORTGAGES": the mortgages and deeds of trust to be executed and
delivered by the Borrowers and certain Subsidiaries, in a form
reasonably satisfactory to the Administrative Agent, as the same may
be amended, supplemented or otherwise modified from time to time.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
<PAGE> 28
23
"NET CASH PROCEEDS": with respect to any sale or other
disposition of assets by CNG, any Borrower or any of their
Subsidiaries, the net amount equal to the aggregate amount received in
cash (including any cash received by way of deferred payment pursuant
to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) MINUS the sum of (i) the
reasonable fees, commissions and other out-of-pocket expenses incurred
by CNG, such Borrower or such Subsidiary in connection with such sale
or other disposition, (ii) federal, state and local taxes incurred in
connection with such sale or other disposition, whether payable at
such time or thereafter, (iii) in the case of any such sale or other
disposition of assets subject to a Lien securing any Indebtedness
(which Lien and Indebtedness are permitted by this Agreement), any
amounts required to be repaid by CNG, such Borrower or such Subsidiary
in respect of such Indebtedness (other than Indebtedness under this
Agreement and any Revolving Credit Notes) in connection with such sale
or other disposition and (iv) any amounts deposited in escrow or on
deposit as collateral in respect of environmental or other liabilities
not assumed by the purchaser in connection with a sale or other
disposition of assets, but only so long as such amounts remain on
deposit or in escrow.
"NET INCOME": for any period, the aggregate of the net income of
the Borrower and its Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP, for such period; PROVIDED,
HOWEVER, that there shall be excluded from Net Income (a) the net
income of a Person whose net income is not consolidated with the
Borrower's under GAAP (other than the amount of dividends and other
distributions paid or made by such Person to CNG or any of its
Subsidiaries during such period), (b) the net income of any Person for
such period acquired in a pooling of interests transaction for any
period prior to the date of such acquisition, (c) any net gain or loss
for such period (net of the related tax effect thereof) resulting from
any sale or other disposition of assets or any sale or other
disposition of any Capital Stock of any Person by CNG or any of its
Subsidiaries, in each case, other than in the ordinary course of
business and permitted by subsection 8.6, (d) extraordinary gains and
losses for such period (net of the related tax effect thereof), and
(e) non-recurring gains and losses for such period (net of the related
tax effect thereof); PROVIDED that there shall be added back to Net
Income non-cash restructuring charges deducted in calculating Net
Income for such period.
"NON-DEFAULTING LENDER": each Lender other than a Defaulting
Lender.
"NON-EXCLUDED TAXES": as defined in subsection 4.11.
"OBLIGOR": any purchaser of goods or services or other Person
obligated to make payment to any Borrower or any Subsidiary in respect
of a purchase of such goods or services.
<PAGE> 29
24
"PARTICIPANT": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PEARLE": as defined in the preamble hereto.
"PERMITTED HEDGING ARRANGEMENT": as defined in subsection 8.14.
"PERMITTED HOLDERS": (i) Jeffrey A. Cole, (ii) any employee stock
ownership plan or any "group" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act) in which employees of CNC or its Subsidiaries
beneficially own at least 25% of the capital stock of CNC owned by
such group and (iii) any Person that is controlled by any one or more
of the Persons set forth in (i) or (ii) above.
"PERSON": an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which any Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PSC": as defined in the preamble hereto.
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATIONS": the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts
drawn under Letters of Credit.
"RENT RESERVE": with respect to any store, distribution center or
depot where any Inventory subject to Liens arising by operation of law
is located, a reserve equal to three (3) months' rent at such store,
distribution center or depot.
"RENTAL EXPENSE": for any period, the excess, if any, of (i) the
aggregate amount of fixed rentals payable by CNG, the Borrowers and
their Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, with respect to leases (other than Financing
Leases) of real and personal property over (ii) the aggregate amount
of fixed rental sublease income received by CNG, the
<PAGE> 30
25
Borrowers and their Subsidiaries from subleases during such period
with respect to such real and personal property.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043
of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of
PBGC Reg. sec. 2615.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"RESPONSIBLE OFFICER": the chief executive officer, the
president, any vice president and the treasurer of CNG.
"REVOLVING CREDIT COMMITMENT": as to any Lender, its obligation
to make Revolving Credit Loans to, and/or issue or participate in
Letters of Credit issued on behalf of, the Borrowers in an aggregate
amount not to exceed at any one time outstanding the amount set forth
under such Lender's name in Schedule I opposite the heading "Revolving
Credit Commitment" or, in the case of any Lender that is an Assignee,
the amount of the assigning Lender's Revolving Credit Commitment
assigned to such Assignee pursuant to subsection 11.6 (in each case as
such amount may be adjusted from time to time as provided herein).
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender, the
percentage of the aggregate Revolving Credit Commitments constituted
by such Lender's Revolving Credit Commitment, or following the Closing
Date, the percentage representing a fraction the numerator of which is
the Revolving Credit Commitment of such Lender (or, following the
termination or expiration of the Revolving Credit Commitments, the sum
of (x) the aggregate principal amount of such Lender's Revolving
Credit Loans then outstanding PLUS (y) such Lender's Revolving
Commitment Percentage of all L/C Obligations then outstanding), and
the denominator of which is the aggregate Revolving Credit Commitments
of all Lenders (or, following the termination or expiration of the
Revolving Credit Commitments, the sum of (x) the aggregate principal
amount of all Revolving Credit Loans then outstanding PLUS (y) the
aggregate principal amount of all L/C Obligations then outstanding).
<PAGE> 31
26
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and
including the Closing Date to but not including the Revolving Credit
Commitment Termination Date.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE": the earlier of
(a) November 15, 2000 or, if such date is not a Business Day, the
Business Day next preceding such date and (b) the date upon which the
Revolving Credit Commitments shall be terminated pursuant hereto.
"REVOLVING CREDIT FACILITY": as defined in the recitals hereto.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.2.
"SECURITY DOCUMENTS": the collective reference to the Guarantee
and Collateral Agreement, the CNG Guarantee and Cash Collateral
Agreement, the Copyright, Patent and Trademark Security Agreement, the
Mortgages and all other security documents hereafter delivered to the
Administrative Agent granting a Lien on any asset or assets of any
Person to secure the obligations and liabilities of the Borrowers
hereunder or under any of the other Loan Documents or to secure any
guarantee of any such obligations and liabilities, including, without
limitation, any security document delivered pursuant to subsection
7.10.
"SENIOR SUBORDINATED NOTES": the 9.875% Senior Subordinated Notes
due 2006 of CNG issued pursuant to the Senior Subordinated Notes
Indenture, as the same may be amended, supplemented or otherwise
modified from time to time without violating Section 9(m).
"SENIOR SUBORDINATED NOTES INDENTURE": the Indenture to be dated
as of the Closing Date between CNG and Norwest Bank Minnesota, N.A.,
as trustee, as the same may be amended, supplemented or otherwise
modified from time to time without violating Section 9(m).
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"S&P": as defined in the definition of "Cash Equivalents."
"STOCK PURCHASE AGREEMENT": the Stock Purchase Agreement, dated
as of September 24, 1996, among The Pillsbury Company, a Delaware
corporation, Pearle and CNC.
"SUBSIDIARY": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or
other ownership interests
<PAGE> 32
27
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity ("VOTING
STOCK") are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless otherwise qualified, all references to
a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrowers.
"TAX SHARING AGREEMENT": the Agreement for the Allocation of
Federal Income Tax Liability and Benefits among Members of the CNC
Holding Corporation Group dated as of August 23, 1985, as amended,
supplemented or otherwise modified from time to time.
"THINGS REMEMBERED": as defined in the preamble hereto.
"TOTAL INDEBTEDNESS": on any date, with respect to CNG and its
Subsidiaries, all Indebtedness of CNG and its Subsidiaries on such
date on a Consolidated basis.
"TRANCHE": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such
Revolving Credit Loans shall originally have been made on the same
day).
"TRANSACTION": as defined in the recitals hereto.
"TRANSACTION DOCUMENTS": the collective reference to the Stock
Purchase Agreement, the Senior Subordinated Notes Indenture and any
other documents entered into in connection therewith, as the same may
be amended, supplemented or otherwise modified from time to time
without violating Section 9(m) and (n).
"TRANSFEREE": as defined in subsection 11.6(f).
"TYPE": as to any Revolving Credit Loan, its nature as an ABR
Loan or a Eurodollar Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"WHOLLY OWNED SUBSIDIARY": means any Subsidiary, all of the
outstanding voting securities of which are owned, directly or
indirectly, by a Borrower.
<PAGE> 33
28
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any Revolving Credit Notes, any other Loan Documents or
any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in any Revolving Credit Notes, any
other Loan Documents and any certificate or other document made or delivered
pursuant hereto, accounting terms relating to the Borrowers and their
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP. Fiscal years referred to in this Agreement are
identified according to the calendar year in which they begin.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
(each a "REVOLVING CREDIT LOAN", collectively, "REVOLVING CREDIT LOANS") to the
Borrowers, jointly and severally, from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Credit Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the amount of such Lender's
Revolving Credit Commitment. Notwithstanding the foregoing, in no event shall
any Revolving Credit Loans be made or Letters of Credit be issued pursuant to
subsection 3.1 (i) if the aggregate amount of the Revolving Credit Loans to be
made and Letters of Credit to be issued would, after giving effect to the use of
proceeds, if any, thereof, exceed the aggregate Available Revolving Credit
Commitments or (ii) if, after giving effect to such Revolving Credit Loan or
Letter of Credit, a Borrowing Base Deficiency would exist. During the Revolving
Credit Commitment Period, the Borrowers may use the Revolving Credit Commitments
by borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof, PROVIDED,
HOWEVER, that the Aggregate Outstanding Revolving Credit (other than in respect
of the undrawn portion of any Letters of Credit) with respect to all Lenders at
any time during any consecutive thirty day period during each fiscal year of the
Borrowers (such thirty day period during each fiscal year to be selected by the
Borrowers) may in no event exceed the Clean-Down Amount.
<PAGE> 34
29
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrowers and notified to the Administrative Agent in accordance with
subsections 2.3 and 4.4, PROVIDED that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Revolving Credit
Commitment Termination Date.
2.2 REVOLVING CREDIT NOTES. The Borrowers agree that, upon the
request to the Administrative Agent by any Lender or in connection with any
assignment pursuant to subsection 11.6, to evidence such Lender's Revolving
Credit Loans each Borrower will execute and deliver to such Lender a promissory
note substantially in the form of Exhibit A, with appropriate insertions as to
payee, date and principal amount (each, as amended, supplemented, replaced or
otherwise modified from time to time, a "REVOLVING CREDIT NOTE"), payable to the
order of such Lender and in a principal amount equal to the lesser of (a) the
amount set forth under such Lender's name in Schedule I opposite the heading
"Revolving Credit Commitment" and (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by such Lender to such Borrower. Each Revolving
Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the
Revolving Credit Commitment Termination Date and (z) provide for the payment of
interest in accordance with subsection 4.1.
2.3 PROCEDURE FOR REVOLVING CREDIT BORROWING. Any Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, PROVIDED that such Borrower shall give
the Administrative Agent irrevocable notice, in substantially the form of
Exhibit I (which notice must be received by the Administrative Agent prior to
11:00 A.M., New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested Revolving Credit Loans are
to be initially Eurodollar Loans or (b) on the requested Borrowing Date,
otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amount of such Type of Revolving
Credit Loan and the respective length of the initial Interest Period therefor.
Each borrowing under the Revolving Credit Commitments shall be in an amount
equal to (x) in the case of ABR Loans, $500,000 or a whole multiple of $100,000
in excess thereof (or, if the aggregate Available Revolving Credit Commitments
then in effect are less than $500,000, such lesser amount) and (y) in the case
of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in excess
thereof. Upon receipt of any such notice from such Borrower, the Administrative
Agent shall promptly notify each such Lender thereof. Each Lender will make the
amount of its pro rata share of each borrowing available to the Administrative
Agent for the account of such Borrower at the office of the Administrative Agent
specified in subsection 11.2 prior to 1:00 P.M., New York City time, on the
Borrowing Date requested by such Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to such
Borrower by the Administrative Agent crediting the account of such Borrower on
the books of such office with the
<PAGE> 35
30
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.4 COMMITMENT FEES; OTHER FEES. (a) The Borrowers agree,
jointly and severally, to pay to the Administrative Agent for the account of
each Lender, a commitment fee for the period from and including the first day of
the Revolving Credit Commitment Period to the Revolving Credit Commitment
Termination Date, computed at the rate of 3/8 of 1% per annum (as adjusted on
each Adjustment Date to the applicable rate per annum set forth under the
heading "Commitment Fees" on Schedule II which corresponds to the Adjusted
Interest Coverage Ratio determined from the financial statements and Compliance
Certificate relating to the end of the fiscal quarter immediately preceding such
Adjustment Date and subject to the additional adjustment provisions set forth in
the definition of "Applicable Margin") on the average daily amount of the
Available Revolving Credit Commitment of such Lender during the period for which
payment is made, payable quarterly in arrears on the last day of each fiscal
quarter of CNG and on the Revolving Credit Commitment Termination Date,
commencing on the first of such days to occur after the Closing Date.
(b) The Borrowers, jointly and severally, shall pay to CIBC
the amounts set forth in the Fee Letter dated October 11, 1996 among CIBC, CIBC
Wood Gundy Securities Corp. and CNG on the dates set forth therein.
2.5 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS.
(a) The Borrowers shall have the right, upon not less than three Business Days'
notice to the Administrative Agent (which will promptly notify the Lenders
thereof), to terminate the Revolving Credit Commitments or, from time to time,
to reduce the amount of the Revolving Credit Commitments; PROVIDED that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans then
outstanding when added to the sum of the then outstanding L/C Obligations, would
exceed the Revolving Credit Commitments then in effect. Any such reduction shall
be in an amount equal to $1,000,000 or a whole multiple of $500,000 in excess
thereof and shall reduce permanently the Revolving Credit Commitments then in
effect.
(b) The Revolving Credit Commitments shall be automatically
reduced in connection with any reductions of the Revolving Credit Commitments in
accordance with subsection 4.3. Any such reduction shall reduce permanently the
Revolving Credit Commitments then in effect.
2.6 REPAYMENT OF REVOLVING CREDIT LOANS. (a) The Borrowers
hereby unconditionally promise, jointly and severally, to pay to the
Administrative Agent for the account of each Lender, the then unpaid principal
amount of each Revolving Credit Loan of such Lender made to each Borrower, on
the Revolving Credit Commitment Termination Date (or such earlier date on which
the Revolving Credit Loans become
<PAGE> 36
31
due and payable pursuant to Section 9). The Borrowers hereby further agree,
jointly and severally, to pay interest on the unpaid principal amount of the
Revolving Credit Loans from time to time outstanding from the date of the making
of the Revolving Credit Loans until payment in full thereof at the rates per
annum, and on the dates, set forth in subsection 4.1.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrowers to such
Lender resulting from each Revolving Credit Loan of such Lender from time to
time, including, without limitation, the amounts of principal and interest
payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to subsection 11.6(d), and a subaccount therein for each Lender, in
which shall be recorded (i) the amount of each Revolving Credit Loan made
hereunder, the Type thereof and each Interest Period, if any, applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrowers to each Lender hereunder and (iii)
both the amount of any sum received by the Administrative Agent hereunder from
the Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.6(c) shall, to the extent permitted
by applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrowers to repay, jointly and severally (with applicable
interest), the Revolving Credit Loans made to any Borrower by such Lender in
accordance with the terms of this Agreement.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in subsection 3.4(a), agrees to issue standby letters of credit
("LETTERS OF CREDIT") for the account of any Borrower on any Business Day during
the Revolving Credit Commitment Period in such form as may be approved from time
to time by the Issuing Lender; PROVIDED that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Sublimit (ii) the
Available Revolving Credit Commitment of all Lenders would be less than zero or
(iii) a Borrowing Base Deficiency would exist.
(b) Each Letter of Credit shall (i) be denominated in Dollars,
(ii) be a standby letter of credit issued to support obligations of such
Borrower or any of its Subsidiaries, contingent or otherwise, to finance the
working capital and business needs of
<PAGE> 37
32
such Borrower or any of its Subsidiaries in the ordinary course of business and
(iii) expire no later than the earlier of (x) the date that is 12 months after
the date of its issuance and (y) the fifth Business Day prior to the Revolving
Credit Commitment Termination Date, PROVIDED that any Letter of Credit with an
expiration date of 12 months after the date of its issuance may provide for the
renewal thereof for additional 12 month periods, but in no event shall the
expiration date as extended be later than the fifth Business Day prior to the
Revolving Credit Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. A Borrower
may request that the Issuing Lender issue a Letter of Credit at any time prior
to the fifth Business Day prior to the Revolving Credit Commitment Termination
Date by delivering to the Issuing Lender at its address for notices specified
herein a Letter of Credit Application therefor, completed to the satisfaction of
the Issuing Lender, and such other certificates, documents and other papers and
information as the Issuing Lender may request. Upon receipt of any Letter of
Credit Application, the Issuing Lender will process such Letter of Credit
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall promptly issue the Letter of Credit requested thereby (but
in no event shall the Issuing Lender be required to issue any Letter of Credit
earlier than three Business Days after its receipt of the Letter of Credit
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Lender and such Borrower. The Issuing Lender shall furnish a copy of such Letter
of Credit to such Borrower promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrowers
shall pay, jointly and severally, to the Administrative Agent, for the account
of the Issuing Lender and the L/C Participants, a letter of credit fee with
respect to each Letter of Credit, computed for the period from and including the
date of issuance of such Letter of Credit to the expiration date of such Letter
of Credit, computed at a rate per annum equal to the Applicable Margin then in
effect for Eurodollar Loans calculated on the basis of the actual number of days
elapsed over a 360-day year, of the aggregate face amount of Letters of Credit
outstanding, payable in arrears on each L/C Fee Payment Date and on the
Revolving Credit Commitment Termination Date. Such fee shall be payable to the
Administrative Agent to be shared ratably among the Lenders in accordance with
their respective Revolving Credit Commitment Percentages. In addition, the
Borrowers shall pay, jointly and severally, to the Issuing Lender, for its own
account a fee equal to 0.25%
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33
per annum of the aggregate face amount of outstanding Letters of Credit, payable
quarterly in arrears on each L/C Fee Payment Date and on the Revolving Credit
Commitment Termination Date and calculated on the basis of the actual number of
days elapsed over a 360-day year.
(b) In addition to the foregoing fees and commissions, the
Borrowers shall pay or reimburse, jointly and severally, the Issuing Lender for
such normal and customary costs and expenses as are incurred or charged by the
Issuing Lender in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit.
(c) The Administrative Agent shall, promptly following its
receipt thereof, distribute to the Issuing Lender and the L/C Participants all
fees and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.4 L/C PARTICIPATIONS. (a) The Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Commitment Percentage from time to time in effect
in the Issuing Lender's obligations and rights under each Letter of Credit
issued hereunder and the amount of each draft paid by the Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with the
Issuing Lender that, if a draft is paid under any Letter of Credit for which the
Issuing Lender is not reimbursed in full by the Borrowers in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Issuing Lender
upon demand at the Issuing Lender's address for notices specified herein an
amount equal to such L/C Participant's then Revolving Credit Commitment
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed; PROVIDED that, if such demand is made prior to 12:00 Noon, New York
City time, on a Business Day, such L/C Participant shall make such payment to
the Issuing Lender prior to the end of such Business Day and otherwise such L/C
Participant shall make such payment on the next succeeding Business Day.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Lender pursuant to paragraph 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit is paid to the Issuing Lender within three Business Days after the
date such payment is due, such L/C Participant shall pay to the Issuing Lender
on demand an amount equal to the product of (i) such amount, times (ii) the
daily average federal funds rate, as quoted by the Issuing Lender, during the
period from and including the date such payment is required to the date on which
such payment is immediately available to the Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by
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any L/C Participant pursuant to paragraph 3.4(a) is not in fact made available
to the Issuing Lender by such L/C Participant within three Business Days after
the date such payment is due, the Issuing Lender shall be entitled to recover
from such L/C Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum applicable to ABR Loans
hereunder. A certificate of the Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this subsection shall be conclusive in
the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from a Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will, if such payment is received prior to 12:00 Noon, New York
City time, on a Business Day, distribute to such L/C Participant its pro rata
share thereof prior to the end of such Business Day and otherwise the Issuing
Lender will distribute such payment on the next succeeding Business Day;
PROVIDED, HOWEVER, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS. (a) The
Borrowers agree to reimburse, jointly and severally, the Issuing Lender on the
same Business Day on which a draft is presented under any Letter of Credit and
paid by the Issuing Lender, PROVIDED that the Issuing Lender provides notice to
the Borrowers prior to 12:00 Noon, New York City time, on such Business Day and
otherwise the Borrowers will reimburse the Issuing Lender on the next succeeding
Business Day; PROVIDED, FURTHER, that the failure to provide such notice shall
not affect the Borrowers' absolute and unconditional obligation to reimburse the
Issuing Lender for any draft paid under any Letter of Credit. The Issuing Lender
shall provide notice to the Borrowers on such Business Day as a draft is
presented and paid by the Issuing Lender indicating the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment. Each such payment shall be
made to the Issuing Lender at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrowers under this subsection from the date such amounts become
payable (whether at stated maturity, by acceleration or otherwise) until payment
in full at the rate which would be payable on any outstanding Revolving Credit
Loans that are ABR Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute a
request by the Borrowers to the Administrative Agent for a borrowing pursuant to
subsection 2.3 of
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ABR Loans in the amount of such drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.
3.6 OBLIGATIONS ABSOLUTE. (a) The Borrowers' obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrowers may have or have had against the Issuing Lender, any
L/C Participant or any beneficiary of a Letter of Credit.
(b) The Borrowers also agree with the Issuing Lender that the
Issuing Lender shall not be responsible for, and the Borrowers' Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (ii) any dispute between or among any Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of any Borrower against
any beneficiary of such Letter of Credit or any such transferee.
(c) Neither the Issuing Lender nor any L/C Participant shall
be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions caused by
the Issuing Lender's gross negligence or willful misconduct.
(d) The Borrowers agree that any action taken or omitted by
the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of New York, shall be binding on the
Borrowers and shall not result in any liability of the Issuing Lender or any L/C
Participant to any Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented
for payment under any Letter of Credit, the responsibility of the Issuing Lender
to the Borrowers in connection with such draft shall, in addition to any payment
obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.8 APPLICATION. To the extent that any provision of any
Letter of Credit Application related to any Letter of Credit is inconsistent
with the provisions of this Agreement or any other Loan Document, the provisions
of this Agreement or such Loan Document shall apply.
SECTION 4. GENERAL PROVISIONS
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4.1 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to the CIBC Alternate Base Rate plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Revolving
Credit Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv)
any other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), the principal of the Revolving
Credit Loans and any such overdue interest, commitment fee or other amount shall
bear interest at a rate per annum which is (x) in the case of principal, the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this subsection plus 2% or (y) in the case of any such overdue
interest, commitment fee or other amount, the rate described in paragraph (b) of
this subsection plus 2%, in each case from the date of such non-payment until
such overdue principal, interest, commitment fee or other amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
4.2 OPTIONAL PREPAYMENTS. Any Borrower may at any time and
from time to time prepay the Revolving Credit Loans made to it in whole or in
part, without premium or penalty, on any Business Day, PROVIDED that (i) such
Borrower shall have given (x) at least three Business Days' irrevocable notice
to the Administrative Agent (in the case of Eurodollar Loans) or (y) same-day
irrevocable notice to the Administrative Agent (in the case of ABR Loans), (ii)
such notice specifies the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, in
each case if a combination thereof, the principal amount allocable to each and
(iii) each prepayment is in a minimum principal amount of $100,000 and a
multiple of $100,000 in excess thereof. Upon the receipt of any such notice the
Administrative Agent shall promptly notify each of the Lenders thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with any amounts payable
pursuant to subsection 4.12.
4.3 MANDATORY PREPAYMENTS AND REDUCTION OF REVOLVING CREDIT
COMMITMENTS. (a) If, subsequent to the Closing Date, CNG, any Borrower or any of
their Subsidiaries shall receive Net Cash Proceeds from any sale or other
disposition of assets (other than the sale of inventory in the ordinary course
of business and sales or other dispositions of assets permitted by subsections
8.6(c), (d) or (e)), then 100% of such Net Cash Proceeds shall on the first
Business Day after receipt thereof, be applied
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37
toward the prepayment of the Revolving Credit Loans and the cash
collateralization of outstanding L/C Obligations and the permanent reduction of
the Revolving Credit Commitments in accordance with subsection 4.3(c); PROVIDED
that the first $10,000,000 of such Net Cash Proceeds received by CNG, the
Borrowers and their Subsidiaries, in the aggregate, shall not be required to be
applied to make mandatory prepayments and permanent reductions of the Revolving
Credit Commitments hereunder; and PROVIDED FURTHER, the Borrowers and their
Subsidiaries may use or commit to use any or all of such Net Cash Proceeds to
acquire fixed or capital assets within 180 days of receipt of such Net Cash
Proceeds and any such Net Cash Proceeds so used within 180 days of receipt or
within 180 days of being committed to be used shall not be required to be
applied to make mandatory prepayments, cash collaterizations and permanent
reductions of the Revolving Credit Commitments hereunder, but any such Net Cash
Proceeds not so used shall be applied toward the repayment of the Revolving
Credit Loans, cash collateralization of outstanding L/C Obligations and the
permanent reduction of the Revolving Credit Commitments on the earlier of (x)
the later of (I) 180th day after receipt of such Net Cash Proceeds and (II) the
180th day after such Net Cash Proceeds were committed to be used, as the case
may be, and (y) the date on which the Borrowers have reasonably determined that
such Net Cash Proceeds shall not be so used.
(b) If, subsequent to the Closing Date, CNG, any Borrower or
any of their Subsidiaries shall receive any cash proceeds of any casualty or
condemnation, then 100% of such proceeds shall on the first Business Day after
receipt thereof be deposited with the Administrative Agent, which shall hold
such proceeds in a cash collateral account upon terms reasonably satisfactory to
it. From time to time upon the request of a Borrower, the Administrative Agent
shall release such proceeds to CNG, such Borrower or such Subsidiary, as
necessary, to pay for replacement or rebuilding of the property lost or
condemned. If such property is not replaced or rebuilt within one year (subject
to reasonable extension for force majeure or weather delays) following the
condemnation or casualty or if a Borrower fails to notify the Administrative
Agent in writing on or before 180 days after such casualty or condemnation that
CNG, the respective Borrower or the respective subsidiary shall commence the
replacement or rebuilding of such property, then, in either case, the
Administrative Agent shall apply any amounts in the cash collateral account
toward the prepayment of the Revolving Credit Loans and the permanent reduction
of the Revolving Credit Commitments.
(c) If, at any time during the Revolving Credit Commitment
Period, the Aggregate Outstanding Revolving Credit with respect to all Lenders
exceeds the aggregate Revolving Credit Commitments then in effect, the Borrowers
shall, without notice or demand, immediately repay the Revolving Credit Loans in
an aggregate principal amount equal to such excess, together with interest
accrued to the date of such payment or prepayment and any amounts payable under
subsection 4.12. To the extent that after giving effect to any prepayment of the
Revolving Credit Loans required by the preceding sentence, the Aggregate
Outstanding Revolving Credit with respect to all Lenders exceeds the aggregate
Revolving Credit Commitments then in effect, the Borrowers shall, without notice
or demand, immediately cash collateralize the then
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38
outstanding L/C Obligations in an amount equal to such excess upon terms
reasonably satisfactory to the Administrative Agent. On the Business Day next
succeeding the date on which a payment has caused the Aggregate Outstanding
Revolving Credit with respect to all Lenders to be equal to or less than the
Revolving Credit Commitments then in effect, the Administrative Agent shall
return to the Borrowers the cash used to cash collateralize the then outstanding
L/C Obligations pursuant to the preceding sentence.
(d) If, at any time during the Revolving Credit Commitment
Period, the Aggregate Outstanding Revolving Credit (other than in respect of the
undrawn portion of any Letters of Credit) with respect to all Lenders is not
less than the Clean-Down Amount for at least a consecutive thirty day period
during each fiscal year of the Borrowers, the Borrowers shall, without notice or
demand, immediately repay the Revolving Credit Loans in an aggregate principal
amount equal to such excess, together with interest accrued to the date of such
payment or prepayment and any amounts payable under subsection 4.12, and any
borrowings of Revolving Credit Loans during such thirty day period shall be
subject to the proviso to subsection 2.1(a). To the extent that after giving
effect to any prepayment of the Revolving Credit Loans required by the preceding
sentence, such Aggregate Outstanding Revolving Credit with respect to all
Lenders exceeds the Clean-Down Amount, the Borrowers shall, without notice or
demand, immediately cash collateralize the then outstanding L/C Obligations in
an amount equal to such excess upon terms reasonably satisfactory to the
Administrative Agent. On the Business Day next succeeding the date on which the
thirty day period described above has expired, the Administrative Agent shall
return to the Borrowers the cash, if any, used to cash collateralize the then
outstanding L/C Obligations pursuant to the preceding sentence.
(e) If, at any time during the Revolving Credit Commitment
Period, a Borrowing Base Deficiency shall exist, the Borrowers shall, without
notice or demand, immediately prepay the Revolving Credit Loans in an aggregate
principal amount equal to such Borrowing Base Deficiency, together with interest
accrued to the date of such payment or prepayment and any amounts payable under
subsection 4.12. To the extent that after giving effect to any prepayment of the
Revolving Credit Loans required by the preceding sentence, a Borrowing Base
Deficiency shall continue to exist, the Borrowers shall, without notice or
demand, immediately cash collateralize the then outstanding L/C Obligations in
an amount equal to such Borrowing Base Deficiency upon terms reasonably
satisfactory to the Administrative Agent. On the Business Day next succeeding
the date on which a payment has cured such Borrowing Base Deficiency, the
Administrative Agent shall return to the Borrowers the cash used to cash
collateralize the then outstanding L/C Obligations pursuant to the preceding
sentence.
(f) Prepayments of the Revolving Credit Loans and permanent
reductions of the Revolving Credit Commitments pursuant to subsections 4.3(a)
and (b) shall be applied to permanent reduction of the Revolving Credit
Commitments then in effect.
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4.4 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrowers may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least three Business Days' prior irrevocable notice of
such election, in substantially the form of Exhibit J, PROVIDED that any such
conversion of Eurodollar Loans may only be made on the last day of an Interest
Period with respect thereto. The Borrowers may elect from time to time to
convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days' prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the initial
Interest Period or Interest Periods therefor. Upon receipt of any such notice
the Administrative Agent shall promptly notify each Lender thereof. All or any
part of outstanding Eurodollar Loans and ABR Loans may be converted as provided
herein, PROVIDED that (i) unless the Majority Lenders otherwise consent, no
Revolving Credit Loan may be converted into a Eurodollar Loan when any Event of
Default has occurred and is continuing and (ii) no Revolving Credit Loan may be
converted into a Eurodollar Loan after the date that is one month prior to the
Revolving Credit Commitment Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
respective Borrower giving notice to the Administrative Agent, in substantially
the form of Exhibit J, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Revolving Credit Loans, PROVIDED that
no Eurodollar Loan may be continued as such (i) unless the Majority Lenders
otherwise consent, when any Event of Default has occurred and is continuing or
(ii) after the date that is one month prior to the Revolving Credit Commitment
Termination Date and PROVIDED, FURTHER, that if such Borrower shall fail to give
such notice or if such continuation is not permitted such Revolving Credit Loans
shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period.
4.5 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All
borrowings, conversions and continuations of Revolving Credit Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of the Revolving Credit Loans comprising each Tranche
shall be equal to $1,000,000 or a whole multiple of $500,000 in excess thereof.
In no event shall there be more than 15 Tranches outstanding at any time.
4.6 COMPUTATION OF INTEREST AND FEES. (a) Interest (other than
interest based on the CIBC Prime Rate) on all Revolving Credit Loans and
commitment fees payable pursuant hereto shall be calculated on the basis of a
year of 360 days for the actual days elapsed; interest based on the CIBC Prime
Rate shall be calculated on the basis of a 365-(or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrowers and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on the
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Revolving Credit Loans resulting from a change in the CIBC Alternate Base Rate
or the Eurocurrency Reserve Requirements shall become effective as of the
opening of business on the day on which such change shall become effective,
PROVIDED that such change becomes effective prior to 5:00 P.M., New York City
time, on such day. The Administrative Agent shall as soon as practicable notify
the Borrowers and each Lender of the effective date and the amount of each such
change.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrowers and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the Borrowers,
deliver to the Borrowers a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection
4.1.
4.7 INABILITY TO DETERMINE INTEREST RATE. If prior to the
first day of any Interest Period: (a) the Administrative Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrowers) 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, or (b) the Administrative Agent shall have received
notice from the Majority Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the
cost to such Lenders (or any affiliate of any such Lender from which such Lender
customarily obtains funds) (as conclusively certified by such Lenders) of making
or maintaining their affected Revolving Credit Loans during such Interest
Period, then the Administrative Agent shall give telecopy or telephonic notice
thereof to the Borrowers and the Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as ABR Loans, (y) any ABR Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall the Borrowers have the right to convert ABR Loans to Eurodollar
Loans.
4.8 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of
Revolving Credit Loans by any Borrower from the Lenders hereunder shall be made,
each payment by any Borrower on account of any commitment fee in respect of the
Revolving Credit Commitments hereunder shall be allocated by the Administrative
Agent, and any reduction of the Revolving Credit Commitments of the Lenders
shall be allocated by the Administrative Agent, PRO RATA according to the
Revolving Credit Commitment Percentages of the Lenders. Each payment (including
each prepayment) by any Borrower on account of principal of and interest on any
Revolving Credit Loan shall be allocated by the Administrative Agent PRO RATA
according to the respective outstanding principal amounts of such Revolving
Credit Loans then held by the Lenders. All payments (including prepayments) to
be made by the Borrowers hereunder and under
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any Revolving Credit Notes, whether on account of principal, interest, fees,
Reimbursement Obligations or otherwise, shall be made without set-off or
counterclaim and shall be made prior to 2:30 p.m., New York City time, on the
due date thereof to the Administrative Agent, for the account of the Lenders
holding the relevant Revolving Credit Loans or the L/C Participants, as the case
may be, at the Administrative Agent's office specified in subsection 11.2, in
Dollars and in immediately available funds. Payments received by the
Administrative Agent after such time shall be deemed to have been received on
the next Business Day. If any payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day other than a Business Day,
the maturity of such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity of such payment shall be extended to the next succeeding Business Day
(and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension) unless the result of such
extension would be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Revolving Credit Commitment Percentage of such
borrowing available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrowers a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted to
any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's Revolving Credit
Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon at the rate per annum applicable to ABR Loans hereunder,
on demand, from the Borrowers.
4.9 ILLEGALITY. Notwithstanding any other provision herein, if
the adoption after the date of this Agreement of or any change in any
Requirement of Law or in the interpretation or application thereof shall make it
unlawful for any Lender (or any affiliate of such Lender from which such Lender
customarily obtains funds) to make or maintain Eurodollar Loans as contemplated
by this Agreement, (a) the commitment of such Lender hereunder to make
Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to
Eurodollar Loans shall forthwith be cancelled and (b) such
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Lender's Revolving Credit Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to ABR Loans on the respective last days of the
then current Interest Periods with respect to such Revolving Credit 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 Borrowers shall pay to such Lender
such amounts, if any, as may be required pursuant to subsection 4.12.
4.10 REQUIREMENTS OF LAW. (a) If the adoption after the date
of this Agreement of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of
Credit, any Letter of Credit Application or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection
4.11 and changes in the rate of tax on the overall net income of such
Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender (or any
affiliate of such Lender from which such Lender customarily obtains
funds) which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Lender (or such affiliate)
any other condition;
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, the Borrowers shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption
after the date of this Agreement of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or application thereof or
compliance by such Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the date hereof shall
have the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder or under any
Letter of Credit to a level below that which such Lender or such
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43
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, the Borrowers shall promptly pay to such Lender such
additional amount or amounts as will compensate such Lender or such corporation
for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection, such Lender shall promptly notify the
Borrowers (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by such Lender to the Borrowers
(with a copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The agreements in this subsection shall survive the termination
of this Agreement and the payment of the Revolving Credit Loans and all other
amounts payable hereunder.
4.11 TAXES. (a) All payments made by the Borrowers under this
Agreement, any Revolving Credit Notes, any Letters of Credit or any Letter of
Credit Applications shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Revolving Credit Note). If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any
Revolving Credit Note, any Letters of Credit or any Letter of Credit
Applications, the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement, PROVIDED, HOWEVER, that the Borrowers 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 any Borrower, as promptly as possible
thereafter such Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by such Borrower showing payment
thereof. If any Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence after
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44
receiving appropriate notification of such tax liability from the affected
Lender(s), the Borrowers shall indemnify, jointly and severally, the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Revolving Credit 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) deliver to the Borrowers and the Administrative Agent
(A) two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224, or successor applicable form, as the case may be,
and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be;
(ii) deliver to the Borrowers and the Administrative
Agent two further copies of any such form or certification on or before
the date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested
by the Borrowers or the Administrative 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 Code, (i) represent to the
Borrowers (for the benefit of the Borrowers and the Administrative
Agent) that it is not a bank within the meaning of Section 881(c)(3)(A)
of the Code, (ii) agree to furnish to the Borrowers on or before the
date of any payment by the Borrowers, with a copy to the Administrative
Agent, (A) a certificate substantially in the form of Exhibit E (any
such certificate a "U.S. TAX COMPLIANCE CERTIFICATE") and (B) two
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 Code with respect to payments to be made under this
Agreement and any Revolving Credit Notes (and to deliver to the
Borrowers and the Administrative Agent two 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 Borrowers or the Administrative Agent for
filing and completing such forms), and (iii) agree, to the extent
legally entitled to do so, upon reasonable request by the Borrowers, to
provide to the Borrowers (for the benefit of the Borrowers and the
Administrative Agent) such other forms as may be reasonably required in
order to establish the
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45
legal entitlement of such Lender to an exemption from withholding with
respect to payments under this Agreement and any Revolving Credit
Notes, PROVIDED that in determining the reasonableness of a request
under this clause (iii) such Lender shall be entitled to consider the
cost (to the extent unreimbursed by the Borrowers) which would be
imposed on such Lender of complying with such request;
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 prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrowers and the Administrative Agent. Each Person that shall become a Lender
or a Participant pursuant to subsection 11.6 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 the obligations of such Participant pursuant to this paragraph
(b) shall be determined as if such Participant were a Lender except that such
Participant shall furnish all such required forms, certifications and statements
to the Lender from which the related participation shall have been purchased.
4.12 INDEMNITY. The Borrowers agree to indemnify, jointly and
severally, each Lender and to hold each Lender harmless from any loss or expense
which such Lender may sustain or incur as a consequence of (a) default by any
Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after such Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (b) default by any Borrower in making any
prepayment of Eurodollar Loans after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Revolving Credit Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Revolving Credit Loans
and all other amounts payable hereunder.
4.13 CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a)
Each Lender agrees that if it makes any demand for payment under subsection 4.10
or 4.11(a), or if any adoption or change of the type described in subsection 4.9
shall occur with respect to it, it shall use reasonable efforts (consistent with
its internal policy and legal
<PAGE> 51
46
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrowers to make payments under subsection 4.10 or
4.11(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.9.
(b) If at any time any Lender (i) makes any demand for payment
under subsection 4.10 or 4.11(a) as a result of any condition described in any
such subsection or (ii) becomes a Defaulting Lender, then the Borrowers may, if
such condition continues to exist after such Lender shall have used reasonable
efforts pursuant to paragraph (a) of this subsection 4.13 (in the circumstances
described in the preceding clause (i)) or such Lender continues to be a
Defaulting Lender (in the circumstances described in the preceding clause (ii))
and on ten Business Days' prior written notice to the Administrative Agent and
such Lender, replace such Lender by causing such Lender to (and such Lender
shall) assign pursuant to subsection 11.6(c) all of its rights and obligations
under this Agreement to another Lender or other bank or financial institution
selected by the Borrowers and acceptable to the Administrative Agent for a
purchase price equal to the outstanding principal amount of all Revolving Credit
Loans and all Reimbursement Obligations, accrued interest, fees and other
amounts owing to such Lender; PROVIDED that (i) the Borrowers shall have no
right to replace the Administrative Agent, (ii) neither the Administrative Agent
nor any Lender shall have any obligation to the Borrowers to find a replacement
Lender or other bank or financial institution, (iii) such replacement must take
place no later than 180 days after such Lender shall have made any such demand
for payment or shall have become a Defaulting Lender, as the case may be, (iv)
in no event shall any Lender hereby replaced be required to pay or surrender to
such replacement Lender or other bank or financial institution any of the fees
received by such Lender pursuant to this Agreement, (v) the Borrowers shall pay
such amounts demanded under subsection 4.10 or 4.11(a) to such Lender, together
with any amounts as may be required pursuant to subsection 4.12, prior to such
Lender being replaced and the payment of such amounts shall be a condition to
the replacement of such Lender and (vi) such Lender shall not be required to pay
any fees required by subsection 11.6(e) in connection with such replacement.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Revolving Credit Loans and issue or
participate in the Letters of Credit, each Borrower hereby represents and
warrants, on the Closing Date (after giving effect to the consummation of the
Transactions) and on any date thereafter on which any Revolving Credit Loan or
any other extension of credit is requested to be made by any Lender or on which
any Letter of Credit is requested to be issued by the Issuing Lender to the
Administrative Agent and each Lender that:
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5.1 FINANCIAL CONDITION. (a) The consolidated balance sheets
of CNG and its Subsidiaries as of January 29, 1994, January 28, 1995 and
February 3, 1996 and the related consolidated statements of income and of cash
flows for the fiscal years ended on such dates, reported on by Arthur Andersen
LLP, copies of which have heretofore been furnished to each Lender, are complete
and correct and present fairly the consolidated financial condition of CNG and
its Subsidiaries as at such dates, and the consolidated results of their
operations and their consolidated cash flows for the fiscal years then ended.
The unaudited consolidated balance sheet of CNG and its Subsidiaries as at
August 31, 1996 and the related unaudited consolidated statements of income and
of cash flows for the six-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition of CNG and its Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the six-month
period then ended (subject to normal year-end audit adjustments). The unaudited
consolidated balance sheet of CNG and its Subsidiaries as at September 30, 1996,
the related unaudited consolidated income statement for the one-month period
ended on such date and the related unaudited consolidated statement of cash
flows for the portion of the fiscal year through such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition of CNG and its Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the respective
periods covered by such statements then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Neither CNG
nor any of its Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or other material agreement or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
reflected in the foregoing statements or in the notes thereto. During the period
from February 3, 1996 to and including the Closing Date there has been no sale,
transfer or other disposition by CNG or any of its Subsidiaries of any material
part of its business or property and, except as contemplated by the
Transactions, no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
consolidated financial condition of CNG and its Subsidiaries at February 3,
1996.
(b) The consolidated balance sheets of Pearle and its
Subsidiaries as of September 30, 1994 and September 30, 1995 and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by KPMG Peat Marwick LLP, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of Pearle and its Subsidiaries as at
such date, and the consolidated results of their operations and
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48
their consolidated cash flows for the fiscal years then ended. The unaudited
consolidated balance sheet of Pearle and its Subsidiaries as at June 30, 1996
and the related unaudited consolidated statements of income and of cash flows
for the nine-month period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished to each Lender, are
complete and correct and present fairly the consolidated financial condition of
Pearle and its Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the nine-month period
then ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or responsible officer, as the
case may be, and as disclosed therein). Neither Pearle nor any of its
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation, contingent liability or liability for
taxes, or any long-term lease or other material agreement or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto. During the period from June 30,
1996 to and including the Closing Date, except as contemplated by the
Transactions, there has been no sale, transfer or other disposition by Pearle or
any of its Subsidiaries of any material part of its business or property and no
purchase or other acquisition of any business or property (including any capital
stock of any other Person) material in relation to the consolidated financial
condition of Pearle and its consolidated Subsidiaries at June 30, 1996.
(c) The PRO FORMA balance sheet of CNG and its Subsidiaries
(the "PRO FORMA BALANCE SHEET"), copies of which have heretofore been furnished
to each Lender, is the balance sheet of CNG and its Subsidiaries as of August 3,
1996 (the "PRO FORMA DATE"), adjusted to give effect (as if such events had
occurred on such date) to (i) the consummation of the Transactions, (ii) the
making of the Revolving Credit Loans and other extensions of credit hereunder to
be made on the Closing Date and the application of the proceeds thereof as
contemplated hereby and (iii) the payment of the fees and expenses paid in
connection with the consummation of the Transactions and the other transactions
contemplated by the Loan Documents and the Transaction Documents (which fees and
expenses shall not exceed $14,000,000).
5.2 NO CHANGE; SOLVENCY. Since February 3, 1996, there has
been no development or event which has had or could reasonably be expected to
have a Material Adverse Effect. As of the Closing Date, after giving effect to
the transactions contemplated by the Loan Documents and the Transaction
Documents, the Borrowers and their Subsidiaries are solvent, on a consolidated
basis and on an individual basis.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the
Borrowers and the other Loan Parties (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it
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operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Borrowers and the other Loan Parties has the corporate power and
authority, and the legal right, to execute, deliver and perform the Loan
Documents to which it is a party and the Transaction Documents to which it is a
party and, in the case of each Borrower, to borrow hereunder and each of the
Borrowers and the other Loan Parties has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and any
Revolving Credit Notes and to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and the Transaction 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 to be received, made, given or completed by any of the Loan Parties in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which any
Borrower or any of the other Loan Parties is a party or the Transaction
Documents to which any Borrower or any of the other Loan Parties is a party
other than filings and recordings to perfect the security interest of the
Lenders created by the Security Documents and other than those set forth on
Schedule 5.4. All of such consents, authorizations, filings, notices and other
acts set forth on Schedule 5.4 have been heretofore received, made, given or
completed except for such consents, authorizations, filings, notices and other
acts that a Borrower's or other Loan Party's failure to failure to receive,
make, give or complete could not reasonably be expected to have a Material
Adverse Effect. This Agreement has been duly executed and delivered by each
Borrower, and each of the other Loan Documents to which each Borrower or any of
the other Loan Parties is a party and each of the Transaction Documents to which
each Borrower or any of the other Loan Parties is a party will be duly executed
and delivered by such Borrower or such other Loan Party. This Agreement
constitutes a legal, valid and binding obligation of each Borrower, and each
other Loan Document to which each Borrower or any of the other Loan Parties is a
party and each of the Transaction Documents to which any Borrower or any of the
other Loan Parties is a party when executed and delivered by such Borrower or
such other Loan Party will constitute a legal, valid and binding obligation of
such Borrower or such other Loan Party, enforceable against such Borrower or
such other Loan Party in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
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5.5 NO LEGAL BAR. The execution, delivery and performance of
the Loan Documents to which any Borrower or any of the other Loan Parties is a
party or the Transaction Documents to which any Borrower or any of the other
Loan Parties is a party, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual Obligation of any
Borrower or of any of the other Loan Parties and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation (other than the Loan Documents). Schedule 5.5 constitutes a complete
list of all material Contractual Obligations to which any Loan Party is a party
and all orders and decrees of courts which are applicable to or binding on any
Loan Party or to which any Loan Party or any of its property is subject.
5.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of any Borrower, threatened by or against any Borrower or any
of the other Loan Parties or against any of its or their respective properties
or revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, (b) on the Closing Date, with
respect to any of the Transaction Documents or (c) which could reasonably be
expected to have a Material Adverse Effect.
5.7 NO DEFAULT. No Borrower nor any of the other Loan Parties
is in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrowers and
the other Loan Parties 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 as permitted by subsection 8.3.
Except as set forth on Schedule 5.8, the properties to be encumbered by the
Mortgages pursuant to subsection 7.10(a) constitute all of the material real
properties owned in fee by the Borrowers and the other Loan Parties.
5.9 INTELLECTUAL PROPERTY. Each Borrower and each of the other
Loan Parties owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"INTELLECTUAL PROPERTY"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, except for such
claims which, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, nor does any Borrower know of any valid basis for any
such claim. The use of such Intellectual Property by each Borrower and the other
Loan Parties does not infringe on the rights of any Person, except for such
infringements that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
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5.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or
Contractual Obligation of any Borrower or any of the other Loan Parties could
reasonably be expected to have a Material Adverse Effect.
5.11 TAXES. Each of the Borrowers and the other Loan Parties
has filed or caused to be filed all United States federal income tax returns and
all other material tax returns which, to the knowledge of the Borrowers, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any taxes, fees or other charges (i) with
respect to which the failure to pay, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect or (ii) the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the relevant Borrower or any of the other Loan Parties, as the case may
be); no tax Lien has been filed, and, to the knowledge of any Borrower, no claim
is being asserted, with respect to any such tax, fee or other charge.
5.12 FEDERAL RESERVE REGULATIONS. No part of the proceeds of
any Revolving Credit Loans or other extensions of credit hereunder have been or
will be used for any purpose which violates the provisions of the Regulations of
the Board of Governors of the Federal Reserve System, including, without
limitation, Regulation G or Regulation U thereunder. If requested by any Lender
or the Administrative Agent, each Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G or
Regulation U, as the case may be.
5.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of an insufficiently funded Single
Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has
arisen, during such five year period. The present value of all accrued benefits
under all Single Employer Plans taken as a whole does not exceed the value of
the assets of such Single Employer Plans by more than $75,000,000. Neither any
Borrower nor any Commonly Controlled Entity has incurred or is expected to incur
any liability for a complete or partial withdrawal from any Multiemployer Plan,
and neither any Borrower nor any Commonly Controlled Entity would become subject
to any liability under ERISA which could reasonably be expected to have a
Material Adverse Effect if such Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. As of the Closing Date, and to the knowledge of any Borrower on any
Borrowing Date thereafter, no such Multiemployer Plan is in Reorganization or
Insolvent.
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5.14 COLLATERAL. The provisions of each of the Security
Documents, when executed and delivered, will constitute in favor of the
Administrative Agent for the ratable benefit of the Lenders, a legal, valid and
enforceable security interest in all right, title, and interest of each Borrower
or any of the other Loan Parties which is a party to such Security Document, as
the case may be, in the Collateral described in such Security Document. As of
the Closing Date, all Equipment and Inventory (as each of such terms is defined
in the Guarantee and Collateral Agreement) of the Borrowers and each of its
Subsidiaries will be kept at, or will be in transit to, the locations listed on
Schedule 5.14, and when financing statements have been filed in the offices in
the jurisdictions listed in Schedule 3 to the Guarantee and Collateral
Agreement, when appropriate filings have been made in the U.S. Patent and
Trademark Office and the U.S. Copyright Office, and when such other actions as
are described in each of the Security Documents have been taken in accordance
with the Security Documents, the security interest created by each of the
Security Documents shall constitute a perfected security interest in all right,
title and interest of each Borrower or such other Loan Parties, as the case may
be, in the Collateral described therein, and except for Liens existing on the
Closing Date which are permitted by subsection 8.3 and whose priority cannot be
superseded by the provisions hereof or of any Security Document and the filings
hereunder or thereunder, a perfected first lien on, and security interest in,
all right, title and interest of such Borrower or such other Loan Parties, as
the case may be, in the Collateral described in each Security Document.
5.15 INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Borrower is
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No
Borrower is subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
5.16 SUBSIDIARIES AND JOINT VENTURES. Schedule 5.16 hereto
sets forth all of the Subsidiaries of each Borrower, and all of the joint
ventures in which each Borrower or any of its Subsidiaries has an interest, at
the Closing Date, after giving effect to the Transaction, the jurisdiction of
their incorporation and the direct or indirect ownership interest of each
Borrower therein.
5.17 PURPOSE OF REVOLVING CREDIT LOANS. The proceeds of the
Revolving Credit Loans shall be used for the general corporate purposes of the
Borrowers and their Subsidiaries in the ordinary course of business.
5.18 ENVIRONMENTAL MATTERS. Other than exceptions to any of
the following that would not, individually or in the aggregate, reasonably be
expected to give rise to a Material Adverse Effect:
(i) The Borrowers and the other Loan Parties: (A) are, and
within the period of all applicable statutes of limitation have been, in
compliance with all ap-
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plicable Environmental Laws; (B) hold all Environmental Permits (each of which
is in full force and effect) required for any of their current operations or for
any property owned, leased, or otherwise operated by any of them and have no
reason to believe that they will not be able to timely obtain without material
expense all such Environmental Permits required for planned operations; (C) are,
and within the period of all applicable statutes of limitation have been, in
compliance with all of their Environmental Permits; and (D) have no reason to
believe that: any of their Environmental Permits will not be, or will entail
material expense to be, timely renewed or complied with; any additional
Environmental Permits that may be required of any of them will not be, or will
entail material expense to be, timely granted or complied with; or that
compliance with any Environmental Law that is applicable to any of them will not
be, or will entail material expense to be, timely attained and maintained.
(ii) Materials of Environmental Concern have not been
generated, transported, disposed of, emitted, discharged, or otherwise released
or threatened to be released, to or at any real property presently or formerly
owned, leased or operated by any Borrower or any of the other Loan Parties or,
to the best knowledge of any Borrower, at any other location, which could
reasonably be expected to (A) give rise to liability of any Borrower or any of
the other Loan Parties under any applicable Environmental Law, or (B) interfere
with any Borrower's or any other Loan Party's planned or continued operations,
or (C) impair the fair saleable value of any real property owned or leased by
any Borrower or any other Loan Parties.
(iii) There is no judicial, administrative, or arbitral
proceeding (including any notice of violation or alleged violation) under any
Environmental Law to which any Borrower or any of the other Loan Parties is
named as a party that is pending or, to the knowledge of any Borrower,
threatened.
(iv) No Borrower nor any of the other Loan Parties has
received any written request for information, or been notified that it is a
potentially responsible party, under the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or
received any other written request for information with respect to any actual or
potential liability for, or violation caused by any, Materials of Environmental
Concern.
(v) No Borrower nor any of the other Loan Parties has entered
into or agreed to any consent decree, order, or settlement or other agreement,
nor is subject to any judgment, decree, or order or other agreement, in any
judicial, administrative, arbitral, or other forum, relating to compliance with
or liability under any Environmental Law, as to which any obligation has not
been fully and finally resolved.
(vi) No Borrower nor any of its Subsidiaries has assumed or
retained, by contract or, to the best knowledge of any Borrower, by operation of
law, any liabilities of any kind, fixed or contingent, known or unknown, under
any applicable Environmental Law or with respect to any Material of
Environmental Concern.
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5.19 REGULATION H. Except as otherwise disclosed in writing to
the Administrative Agent, no Mortgage to be delivered pursuant to subsection
7.10(a) encumbers improved real property which is located in an area that has
been identified by the Secretary of Housing and Urban Development as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968.
5.20 NO MATERIAL MISSTATEMENTS. The written information
(including, without limitation, the Confidential Information Memorandum dated
November 1996 relating to the Revolving Credit Facilities), reports, financial
statements, exhibits and schedules furnished by or on behalf of the Borrowers
and each other Loan Party to the Administrative Agent and the Lenders in
connection with the negotiation of any Loan Document or any Transaction Document
or included therein or delivered pursuant thereto do not contain, and will not
contain as of the Closing Date, any material misstatement of fact and do not,
taken as a whole, omit, and will not, taken as a whole, omit as of the Closing
Date, to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not materially
misleading. It is understood that no representation or warranty is made
concerning the forecasts, estimates, PRO FORMA information, projections and
statements as to anticipated future performance or conditions, and the
assumptions on which they were based, contained in any such information,
reports, financial statements, exhibits or schedules, except that as of the date
such forecasts, estimates, PRO FORMA information, projections and statements
were generated, (a) such forecasts, estimates, PRO FORMA information,
projections and statements were based on the good faith assumptions of the
management of the Borrowers and (b) such assumptions were believed by such
management to be reasonable.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO INITIAL EXTENSION OF CREDIT. The agreement
of each Lender to make the initial Revolving Credit Loans or other extensions of
credit requested to be made by it hereunder is subject to the satisfaction,
immediately prior to or concurrently with the making of such Revolving Credit
Loans or other extensions of credit on the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of each Borrower, with a counterpart for each
Lender, (ii) for the account of each of the Lenders which has requested
a Note pursuant to subsection 2.2, a Revolving Credit Note conforming
to the requirements hereof and executed and delivered by a duly
authorized officer of each Borrower, (iii) the Guarantee and Collateral
Agreement, executed and delivered by a duly authorized officer of each
party thereto, with a counterpart or a conformed copy for each Lender,
(iv) the Copyright, Patent and Trademark Security Agreement, executed
and delivered by
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a duly authorized officer of each Borrower, and the other signatories
thereto, with a counterpart or a conformed copy for each Lender, (v)
the CNG Guarantee and Cash Collateral Agreement, executed and delivered
by a duly authorized officer of CNG, with a counterpart or conformed
copy for each Lender and (vi) an agreement with CoreStates Bank N.A.
("CORESTATES") whereby CoreStates acknowledges the security interest of
the Administrative Agent in all amounts deposited in the operating
account maintained by CNG with CoreStates, in substantially the form of
Exhibit A to the CNG Guarantee and Cash Collateral Agreement or such
other form as is reasonably acceptable to the Administrative Agent.
(b) CONSUMMATION OF THE TRANSACTION. (i) The Acquisition shall
have been consummated for an aggregate purchase price not exceeding
$220,000,000 (subject to adjustment), (ii) CNC shall have received
approximately 96,477,350 Netherlands Guilders in cash and a promissory
note in the principal amount of 6,442,650 Netherlands Guilders from the
sale of the European Business, (iii) CNC shall have sold all of the
capital stock of Pearle and PSC to CNG (iv) and all other transactions
in connection with the Transaction shall have been consummated and the
Lenders shall be reasonably satisfied with the terms and conditions of
the Transaction Documents, including, without limitation, any amendment
or modification thereto (or any other change to the structure of the
Transaction from that set forth in the Commitment Letter), and the
Lenders shall be reasonably satisfied that such terms and conditions
shall have been complied with and satisfied in all material respects
and that the Transaction shall have been consummated in accordance with
such terms and conditions in all material respects.
(c) PROCEEDS OF ISSUANCE OF SENIOR SUBORDINATED NOTES. CNG
shall have received the net proceeds from the issuance of at least
$140,000,000 of principal amount of Senior Subordinated Notes and the
terms and conditions (including, without limitation, terms and
conditions relating to the interest rate, fees, amortization, maturity,
subordination, covenants, events of default and remedies) of the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture shall be
reasonably satisfactory in all material respects to the Lenders.
(d) TRANSACTION FEES. The aggregate amount of fees and
expenses to be incurred in connection with the Transaction and the
financing thereof shall not have been more than $14,000,000.
(e) TRANSACTION DOCUMENTS. The Administrative Agent shall have
received, with a copy for each Lender, a complete copy, certified as
true and correct by a Responsible Officer of the Borrowers, of each of
the executed Transaction Documents (including all exhibits, schedules
and disclosure letters referred to therein or delivered pursuant
thereto, if any) delivered on or prior to the Closing Date in
connection with the Transaction and the financing thereof and
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all amendments thereto, waivers relating thereto and other side letters
or agreements affecting the terms thereof in any material respect on or
prior to the Closing Date.
(f) TERMINATION OF THE EXISTING CREDIT AGREEMENT. (i) All
loans and other amounts outstanding under, and in respect of, the
Existing Credit Agreement shall have been repaid in full, (ii) the
commitments under the Existing Credit Agreement shall have been
permanently terminated and all obligations under the Existing Credit
Agreement and (iii) the Administrative Agent shall have received
satisfactory evidence of such repayment, termination and discharge.
(g) FINANCIAL INFORMATION. The Lenders shall have received
copies of and shall be reasonably satisfied, in form and substance,
with the financial statements referred to in subsection 5.1, including,
without limitation, the Pro Forma Balance Sheet. The Pro Forma Balance
Sheet shall not be materially inconsistent with the forecasts
previously provided to the Lenders.
(h) BUSINESS PLAN. The Administrative Agent shall have
received, with copies for each of the Lenders, a satisfactory business
plan for fiscal years 1997-2001 and a satisfactory written analysis of
the business and prospects of the Borrowers and their Subsidiaries for
the period from the Closing Date through the Revolving Credit
Termination Date.
(i) AGING OF ACCOUNTS RECEIVABLE. The Administrative Agent
shall have received, with copies for each Lender, an aging of the
accounts receivable of the Borrowers and their Subsidiaries as at
September 30, 1996, in a form acceptable to the Administrative Agent.
(j) CASH MANAGEMENT COLLECTION SYSTEM. The Borrowers shall
have established a system of cash management collection accounts
(including the operating account referred to in subsection 6.1(a)(vii))
satisfactory to the Administrative Agent (the "CASH MANAGEMENT
COLLECTION SYSTEM") with certain banks into which (i) all cash and
payments received by the Borrowers and their Subsidiaries are deposited
and (ii) the obligors on all Accounts owed to the Borrowers and their
Subsidiaries have been directed to make payments, and the
Administrative Agent shall have received evidence satisfactory to it as
to the existence of the Cash Management Collection System.
(k) GOVERNMENT AND THIRD PARTY CONSENTS. (i) All requisite
Governmental Authorities and third parties shall have approved or
consented to the Transaction, the financing therefor and the other
transactions contemplated by the Loan Documents and the Transaction
Documents to the extent required and (ii) all applicable waiting
periods shall have expired and there shall be no governmental or
judicial action, actual or threatened, that has or could have a
reasonable likelihood of restraining, preventing or imposing burdensome
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conditions on the Transaction or the other transactions contemplated
by the Transaction Documents and the Loan Documents.
(l) BORROWING CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the
Borrowers, dated the Closing Date, substantially in the form of Exhibit
C, with appropriate insertions and attachments, satisfactory in form
and substance to the Administrative Agent, executed by the President or
any Vice President and the Secretary or any Assistant Secretary of the
Borrowers.
(m) CORPORATE PROCEEDINGS OF THE LOAN PARTIES. The
Administrative Agent shall have received, with a counterpart for each
Lender, a copy of the resolutions, in form and substance satisfactory
to the Administrative Agent, of the Board of Directors of each of the
Loan Parties authorizing (i) the execution, delivery and performance of
this Agreement and the other Loan Documents to which it is a party,
(ii) in the case of the Borrowers, the borrowings contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to
the Security Documents, certified by the Secretary or an Assistant
Secretary of such Loan Party as of the Closing Date, which certificate
shall be in form and substance satisfactory to the Administrative Agent
and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(n) INCUMBENCY CERTIFICATE OF THE LOAN PARTIES. The
Administrative Agent shall have received, with a counterpart for each
Lender, a certificate of each of the Loan Parties, dated the Closing
Date, as to the incumbency and signature of the officers of such Loan
Party executing any Loan Document satisfactory in form and substance to
the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of such Loan
Party.
(o) CORPORATE DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies
of the certificate of incorporation and by-laws of each of the Loan
Parties, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of such Loan
Party.
(p) CONSENTS, LICENSES AND APPROVALS. The Administrative Agent
shall have received, with a counterpart for each Lender, a certificate
of a Responsible Officer of the Borrowers (i) attaching copies of all
consents, authorizations and filings set forth on Schedule 5.4, and
(ii) stating that such consents, licenses and filings are in full force
and effect, and each such consent, authorization and filing shall be in
form and substance satisfactory to the Administrative Agent.
(q) FEES. The Administrative Agent and the Lenders shall have
received the fees and expenses to be received on the Closing Date
referred to in subsection 2.4.
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(r) LEGAL OPINIONS. The Administrative Agent shall have
received, with a counterpart for each Lender, the following executed
legal opinions:
(i) the executed legal opinion of Jones, Day, Reavis &
Pogue, counsel to the Borrowers and the other Loan Parties,
substantially in the form of Exhibit D, with such changes
thereto as may be approved by the Administrative Agent; and
(ii) the executed legal opinion Amster, Rothstein &
Ebenstein, special copyright, patent and trademark counsel to
the Administrative Agent and the Lenders, in form and
substance reasonably satisfactory to the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require. In addition, the Administrative Agent shall
have received, with a copy for each Lender, the legal opinions referred
to in Sections 7.1 and 7.2 of the Stock Purchase Agreement and the
legal opinions delivered in connection with the issuance of the Senior
Subordinated Notes.
(s) PLEDGED STOCK; STOCK POWERS; PLEDGED NOTES. The
Administrative Agent shall have received the certificates representing
the shares pledged pursuant to the Guarantee and Collateral Agreement,
together with an undated stock power for each such certificate executed
in blank by a duly authorized officer of the pledgor thereof, and the
notes pledged pursuant to the Guarantee and Collateral Agreement, each
endorsed in blank by a duly authorized officer of the pledgor thereof.
(t) ACTIONS TO PERFECT LIENS. The Administrative Agent shall
have received evidence in form and substance satisfactory to it that
all filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements on
Form UCC-1, necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall
have been completed or that all such financing statements and other
documents with respect to such filings, recordings, registrations and
other actions shall have been delivered to the Administrative Agent.
(u) LIEN SEARCHES. The Administrative Agent shall have
received the results of a recent search by a Person satisfactory to the
Administrative Agent, of the Uniform Commercial Code, judgement and tax
lien filings which may have been filed with respect to personal
property of the Borrowers and their Subsidiaries, and the results of
such search shall be satisfactory to the Administrative Agent.
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(v) INSURANCE. The Administrative Agent shall have received
evidence in form and substance satisfactory to it that all of the
requirements of subsection 7.5 and Section 5.3 of the Guarantee and
Collateral Agreement have been met.
(w) ENVIRONMENTAL CERTIFICATION. The Administrative Agent
shall have received, with a copy for each Lender, a certification from
a Responsible Officer of the Borrowers with respect to the Borrowers'
potential environmental liabilities in form and substance satisfactory
to the Administrative Agent.
6.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of
each Lender to make any Revolving Credit Loan or any other extension of credit
requested to be made by it on any date (including, without limitation, its
initial extension of credit), and of the Issuing Lender to issue any Letter of
Credit requested to be issued by it on any date, is subject to the satisfaction
of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Borrowers and any other Loan
Party in or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of such date as if made on and as of
such date, except for representations and warranties stated to relate
to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects on and as
of such earlier date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) BORROWING BASE. The Administrative Agent shall have
received the most recent Borrowing Base Certificate required to be
delivered pursuant to subsection 7.2(e) and, after giving effect to the
Revolving Credit Loans and other extension of credit requested to be
made on such date and the Letters of Credit requested to be issued on
such date, no Borrowing Base Deficiency would exist.
(d) ADDITIONAL MATTERS. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
Each borrowing by and Letter of Credit issued on behalf of any Borrower
hereunder shall constitute a representation and warranty by the Borrowers as of
the date thereof that the conditions contained in this subsection have been
satisfied.
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SECTION 7. AFFIRMATIVE COVENANTS
Each Borrower hereby agrees that, on and after the Closing
Date and so long as the Revolving Credit Commitments remain in effect or any
Letter of Credit remains outstanding and unpaid or any amount is owing to any
Lender or the Administrative Agent hereunder or under any other Loan Document,
each Borrower shall and (except in the case of delivery of financial
information, reports and notices) shall cause each of its Subsidiaries to:
7.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrowers, a copy of the
Consolidated balance sheets of CNG and its consolidated Subsidiaries as
at the end of such year and the related Consolidated statements of
income and Consolidated statements of retained earnings and of cash
flows for such year and the Compliance Package, reported on, in the
case of such Consolidated financial statements, without a "going
concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Arthur Andersen LLP or other
independent certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event within 45 days
after the end of each of the first three quarterly periods of each
fiscal year of the Borrowers, the unaudited Consolidated balance sheets
of CNG and its consolidated Subsidiaries as at the end of such quarter,
the related unaudited Consolidated statement of income for such quarter
and the portion of the fiscal year through the end of such quarter and
the related unaudited Consolidated statement of cash flows for the
portion of the fiscal year through the end of such quarter and the
Compliance Package, in each case, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal
year-end audit adjustments); and
(c) as soon as available, but in any event not later than 30
days (or, in the event that such 30th day is not a Business Day, the
next succeeding Business Day) after the end of each fiscal month of
each fiscal year of the Borrowers (or, in the event that (i) such month
(x) is the first month of a fiscal year or (y) is the last month of one
of the first three fiscal quarters, not later than 45 days after the
end of such month or (ii) such month is the last month of a fiscal
year, not more than 60 days after the end of such month), the unaudited
Consolidated balance sheets of CNG and its consolidated Subsidiaries as
at the end of such month, the related unaudited Consolidated statement
of income for such month and the portion of the fiscal year through the
end of such month and the related unaudited Consolidated statement of
cash flows for the portion of the fiscal year through the end of such
month and the Compliance Package, in each case, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
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all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or Responsible Officer, as the
case may be, and disclosed therein).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in connection with their audit nothing has come to their
attention to cause them to believe that any Borrower or any of their
Subsidiaries failed to comply with the covenants contained in Section
8; PROVIDED, HOWEVER, that such audit shall not have been directed
primarily toward obtaining knowledge of such noncompliance, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer ("COMPLIANCE CERTIFICATE") stating that, to the
best of such Officer's knowledge, during such period (i) no Subsidiary
has been formed or acquired (or, if any such Subsidiary has been formed
or acquired, the relevant Borrower has complied with the requirements
of subsection 7.10 with respect thereto), (ii) neither any Borrower nor
any of their Subsidiaries has changed its name, its principal place of
business, its chief executive office or the location of any material
item of tangible Collateral without complying with the requirements of
this Agreement and the Security Documents with respect thereto, (iii)
each Borrower has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement
and the other Loan Documents to be observed, performed or satisfied by
it, and (iv) each Borrower has set forth in reasonable detail any and
all calculations necessary to show compliance with subsection 2.1(a)
and all of the financial condition covenants set forth in subsections
8.1 and 8.8, including, without limitation, calculations and
reconciliations, if any, necessary to show compliance with such
financial condition covenants on the basis of generally accepted
accounting principles in the United States of America consistent with
those utilized in preparing the audited financial statements referred
to in subsection 5.1, and that such Officer has obtained no knowledge
of any Default or Event of Default except as specified in such
certificate;
(c) not later than 45 days after the end of each fiscal year
of the Borrowers, a copy of the projections by CNG of the balance
sheet, statement of income and statement of cash flows on a
consolidated basis of CNG and its Subsidiaries for the next succeeding
fiscal year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice
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and that such Officer has no reason to believe they are incorrect or
misleading in any material respect;
(d) within ten days after the same are sent, copies of all
financial statements and reports which CNC sends to its stockholders,
and within ten days after the same are filed, copies of all financial
statements and reports which CNC may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority;
(e) within 21 days after the end of each calendar month, a
borrowing base certificate calculating the Borrowing Base as of the
last day in such calendar month, substantially in the form of Exhibit G
hereto (a "BORROWING BASE CERTIFICATE") executed by a Responsible
Officer of the Borrowers; and
(f) promptly, such additional financial and other information
as any Lender may from time to time reasonably request as coordinated
through the Administrative Agent.
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, including, without limitation,
taxes, except where (a) the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Borrowers
or their Subsidiaries, as the case may be, or (b) the failure to so pay,
discharge or otherwise satisfy such obligations could not, in the aggregate, be
reasonably be expected to have a Material Adverse Effect.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to subsection 8.5; comply with all Contractual Obligations
and Requirements of Law except to the extent that failure to comply therewith
could not, in the aggregate, be reasonably expected to have a Material Adverse
Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property
useful and necessary in its business in good working order and condition,
reasonable wear and tear excepted; maintain with financially sound and reputable
insurance companies insurance on all the Collateral in accordance with the
requirements of Section 5.3 of the Guarantee and Collateral Agreement, Section 5
of each of the Mortgages and on all its other property in at least such amounts
(including as to amounts of deductibles) and against at least such risks (but
including in any event commercial general liability, product liability and
business interruption) as are usually insured against in the same general area
by companies engaged in the same or a similar business; and furnish to
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each Lender, upon written request by the Administrative Agent, full information
as to the insurance carried.
7.6 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 business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records, including without
limitation, in connection with any collateral review or appraisal described in
paragraph (b) below, at any reasonable time and upon reasonable notice and as
often as may reasonably be desired (PROVIDED, however, that (i) the Lenders will
arrange and coordinate each such visit through and with the Administrative Agent
and (ii) so long as no Event of Default has occurred and is continuing, no more
than two such visits and inspections shall be made during any fiscal year) and
to discuss the business, operations, properties and financial and other
condition of the Borrowers and their Subsidiaries with officers and employees of
the Borrowers and their Subsidiaries and with its independent certified public
accountants (PROVIDED that any officers or employees of the Borrowers shall be
permitted to be present at any such discussions between representatives of any
Lender and the Borrowers' independent certified public accountants).
(b) At any time upon the request of the Administrative Agent,
permit the Administrative Agent or its professionals (including investment
bankers, consultants, accountants, lawyers and appraisers) retained by the
Administrative Agent to conduct evaluations and appraisals of (i) the Borrowers'
practices in the computation of the Borrowing Base, (ii) the assets included in
the Borrowing Base, (iii) systems and procedures relating to the Borrowing Base
items, and (iv) other related procedures deemed necessary by the Administrative
Agent and pay the reasonable fees and expenses in connection therewith
(including, without limitation, the fees and expenses associated with services
performed by the Administrative Agent's collateral monitoring department);
provided, however, that the Administrative Agent shall not be entitled to
conduct such evaluations and appraisals more frequently than twice per year
unless (x) an Event of Default has occurred and is continuing or (y) the
Administrative Agent reasonably determines in consultation with the Borrowers
that any material event or material change has occurred with respect to the Loan
Parties, their inventory practices or the performance of the Collateral and that
as a result of such event or change more frequent evaluations or appraisals are
required to effectively monitor the Borrowing Base, in which case the Borrowers
will permit the Administrative Agent to conduct such evaluations and appraisals
at such reasonable times and as often as may be reasonably requested, in each
case so long as any Revolving Credit Loans or Letters of Credit shall be
outstanding or shall have been requested by any Borrower hereunder.
(c) In connection with any evaluation and appraisal relating
to the computation of the Borrowing Base, agree to maintain such additional
reserves (for purposes of computing the Borrowing Base) in respect of Eligible
Inventory and make
<PAGE> 69
64
such other adjustments to its parameters for including Eligible Inventory in the
Borrowing Base as the Administrative Agent shall require based upon the results
of such evaluation and appraisal, provided that the Administrative Agent shall
specify to the Borrowers in writing the reasons for any such additional reserves
or adjustments.
7.7 NOTICES. Promptly give notice to the Administrative Agent
and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of any Borrower or any Subsidiary, including, without
limitation, under the Senior Subordinated Notes or (ii) litigation,
investigation or proceeding which may exist at any time between any
Borrower or any Subsidiary and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Borrower or any
Subsidiary (i) in which the amount involved is $5,000,000 or more and
not covered by insurance or (ii) in which injunctive or similar relief
is sought which could reasonably be expected to have a Material Adverse
Effect;
(d) the following events, as soon as possible and in any event
within 30 days after any Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or any Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of,
any Plan;
(e) any material adverse change in the business, operations,
property, condition (financial or otherwise) or prospects of any
Borrower and its Subsidiaries taken as a whole; and
(f) any (i) release or discharge by any Borrower or any of its
Subsidiaries of any Materials of Environmental Concern required to be
reported under applicable Environmental Laws to any Governmental
Authority, unless Borrowers reasonably determine that the total
Environmental Costs arising out of such release or discharge are
unlikely to exceed $5,000,000 or to have a Material Adverse Effect;
(ii) condition, circumstance, occurrence or event not previously
disclosed in writing to the Administrative Agent that could result in
liability under applicable Environmental Laws unless the Borrowers
reasonably determine that the total Environmental Costs arising out of
such condition, circumstance,
<PAGE> 70
65
occurrence or event are unlikely to exceed $5,000,000 or to have a
Material Adverse Effect, or could result in the imposition of any Lien
or other restriction on the title, ownership or transferability of any
facilities and properties owned, leased or operated by any Borrower or
any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect; and (iii) proposed action to be taken by any
Borrower or any of its Subsidiaries that would reasonably be expected
to subject such Borrower or any of its Subsidiaries to any material
additional or different requirements or liabilities under Environmental
Laws, unless the Borrowers determine that the total Environmental Costs
arising out of such proposed action are unlikely to exceed $5,000,000
or 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 Borrowers propose to take with respect thereto.
7.8 ENVIRONMENTAL LAWS. (a) (i) Comply substantially with, and
undertake all reasonable efforts to ensure substantial compliance by all
tenants, subtenants, and contractors with, all applicable Environmental Laws;
(ii) obtain, comply substantially with and maintain any and all Environmental
Permits necessary for its operations as conducted and as planned; and (iii)
undertake all reasonable efforts to ensure that all tenants, subtenants, and
contractors obtain, comply substantially with and maintain any and all
Environmental Permits necessary for their operations as conducted and as
planned, with respect to any property leased or subleased from, or operated by
any Borrower or its Subsidiaries. For purposes of this subsection 7.8(a), each
Borrower and its Subsidiaries shall be deemed to comply substantially, or
require substantial compliance, with an Environmental Law or an Environmental
Permit, PROVIDED that they comply with subsection 7.8(c) and that, upon learning
of any actual or suspected noncompliance, such Borrower and any such affected
Subsidiary shall promptly undertake all reasonable efforts, if any, to achieve
compliance, and PROVIDED, FURTHER that in any case such noncompliance would not
reasonably be expected to have a Material Adverse Effect.
(b) Promptly comply with all orders and directives of all
Governmental Authorities issued to any Borrower or any of its Subsidiaries
regarding Environmental Laws, other than any such order or directive as to which
an appeal or other appropriate contest is or has been timely and properly taken,
is being diligently pursued in good faith, and the pendency of such appeal or
other appropriate contest would not reasonably be expected to have a Material
Adverse Effect.
(c) Maintain, update as appropriate, and implement in all
material respects an environmental program reasonably designed to (i) ensure
that the Borrowers, their Subsidiaries, any of their respective operations
(including, without limitation, disposal), and any properties owned, leased or
operated by any of them, attain and remain in substantial compliance with all
applicable Environmental Laws and (ii)
<PAGE> 71
66
reasonably and prudently manage any liabilities or potential liabilities that
the Borrowers, any of the other Loan Parties, any of their respective operations
(including, without limitation, disposal), and any properties owned or leased by
any of them, may have under all applicable Environmental Laws.
7.9 FURTHER ASSURANCES. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or advisable to maintain in favor of the Administrative Agent, for
the benefit of the Lenders, Liens on the Collateral that are duly perfected in
accordance with all applicable Requirements of Law.
7.10 MORTGAGES; ADDITIONAL COLLATERAL. (a) Within 45 days
after the Closing Date, deliver to the Administrative Agent (i) each of the
Mortgages, each executed and delivered by a duly authorized officer of the party
thereto, with a counterpart or a conformed copy for each Lender, (ii) in respect
of each parcel covered by each Mortgage a mortgagee's title policy (or policies)
or marked up unconditional binder for such insurance dated the Closing Date (1)
in an amount reasonably satisfactory to the Administrative Agent, (2) issued at
ordinary rates, (3) insuring that the Mortgage insured thereby creates a valid
first Lien on such parcel free and clear of all defects and encumbrances, except
those permitted by subsection 8.3 and such as may be approved by the
Administrative Agent, (4) naming the Administrative Agent for the benefit of the
Lenders as the insured thereunder, (5) in the form of ALTA Loan Policy - 1992,
(6) containing such endorsements and affirmative coverage as the Administrative
Agent may request and (7) issued by title companies satisfactory to the
Administrative Agent (including any such title companies acting as co-insurers
or reinsurers, at the option of the Administrative Agent), (iii) evidence
satisfactory to the Administrative Agent that all premiums in respect of each
such policy, and all charges for mortgage recording tax, if any, have been paid,
(iv) if reasonably requested by the Administrative Agent, a policy of flood
insurance which (1) covers any parcel of improved real property located in an
area that has been identified by the Secretary of Housing and Urban Development
as an area having special flood hazards and in which flood insurance has been
made available under the Flood Insurance Act of 1968, which is encumbered by any
Mortgage, (2) is written in an amount not less than the outstanding principal
amount of the indebtedness secured by such Mortgage which is reasonably
allocable to such real property or the maximum limit of coverage made available
with respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (3) has a term ending not earlier
than the maturity of the indebtedness secured by such Mortgage and (v)
confirmation that the relevant Loan Party has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board of Governors of the
Federal Reserve System.
(b) With respect to any assets (or any interest therein)
acquired after the Closing Date by any Borrower or any Subsidiary that are
intended to be subject to the
<PAGE> 72
67
Lien created by any of the Security Documents but which are not so subject,
promptly (and in any event within 30 days after the acquisition thereof): (i)
execute and deliver to the Administrative Agent such amendments to the relevant
Security Documents or such other documents as the Administrative Agent shall
deem necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a Lien on such assets (or such interest therein), (ii)
take all actions necessary or advisable to cause such Lien to be duly perfected
in accordance with all applicable Requirements of Law, including, without
limitation, the filing of financing statements and the recording of Mortgages in
such jurisdictions as may be requested by the Administrative Agent, (iii) if
reasonably requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described in clauses (i) and (ii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent, and (iv) if
reasonably requested by the Administrative Agent, deliver to the Administrative
Agent surveys, title insurance and flood insurance as required by subsection
6.1.
(c) With respect to any Person that, subsequent to the Closing
Date, becomes a Subsidiary, promptly upon the request of the Administrative
Agent: (i) execute and deliver to the Administrative Agent, for the benefit of
the Lenders, a new pledge agreement or such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent shall deem necessary or
advisable to grant to the Administrative Agent, for the benefit of the Lenders,
a Lien on the Capital Stock of such Subsidiary which is owned by any Borrower or
any Subsidiary, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of such Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement or to a new security agreement,
in each case pursuant to an annex to the Guarantee and Collateral Agreement or
otherwise pursuant to documentation which is in form and substance satisfactory
to the Administrative Agent, and (B) to take all actions necessary or advisable
to cause the Lien created by the Guarantee and Collateral Agreement or such
security agreement to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be requested by the Administrative Agent
and (iv) if requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described in clauses (i), (ii) and
(iii) immediately preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Administrative Agent.
(d) Each of Borrowers and each Subsidiary shall use reasonable
efforts to obtain a Landlord Consent, at its own expense, with respect to each
parcel of real property subject to Liens described in clause (c)(i) of the
definition of "Eligible Inventory" leased by it existing on or after the Closing
Date within 120 days after the Closing Date or upon its entering into a lease
therefor.
<PAGE> 73
68
7.11 SEPTEMBER 30, 1996 FINANCIAL STATEMENTS OF PEARLE. As
soon as such statements are available but in no event later than December 15,
1996, the Borrowers shall deliver to the Lenders the audited Consolidated
balance sheet of Pearle and its Subsidiaries as at September 30, 1996 and the
related audited Consolidated statements of income and of cash flows for the
fiscal year ended on such date, reported on by KPMG Peat Marwick LLP.
SECTION 8. NEGATIVE COVENANTS
Each Borrower hereby agrees that on and after the Closing Date
and, so long as the Revolving Credit Commitments remain in effect or any Letter
of Credit remains outstanding and unpaid or any amount is owing to any Lender or
the Administrative Agent hereunder or under any other Loan Document, each
Borrower shall not, and (except with respect to subsection 8.1) shall not permit
any of its Subsidiaries to, directly or indirectly, and (with respect to
subsection 8.1) shall not permit CNG to:
8.1 FINANCIAL CONDITION COVENANTS.
(a) LEVERAGE RATIO. Permit the Leverage Ratio as of the end of
each fiscal quarter of CNG ending on or about any of the dates set
forth below to be greater than the ratio set forth opposite such date
below:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING LEVERAGE RATIO
--------------------- --------------
<S> <C>
January 31, 1997 3.85 to 1.00
April 30, 1997 3.75 to 1.00
July 31, 1997 3.60 to 1.00
October 31, 1997 3.45 to 1.00
January 31, 1998 3.25 to 1.00
April 30, 1998 3.10 to 1.00
July 31, 1998 2.95 to 1.00
October 31, 1998 2.80 to 1.00
January 31, 1999 2.70 to 1.00
April 30, 1999 2.60 to 1.00
July 31, 1999 2.50 to 1.00
October 31, 1999 2.40 to 1.00
January 31, 2000 2.30 to 1.00
Thereafter 2.20 to 1.00
</TABLE>
<PAGE> 74
69
(b) ADJUSTED INTEREST COVERAGE RATIO. Permit the Adjusted
Interest Coverage Ratio as of the end of each fiscal quarter of CNG
ending on or about any of the dates set forth below to be less than the
ratio set forth opposite such date below:
<TABLE>
<CAPTION>
Adjusted
Fiscal Quarter Ending Interest Coverage Ratio
--------------------- -----------------------
<S> <C>
January 31, 1997 1.40 to 1.00
April 30, 1997 1.50 to 1.00
July 31, 1997 1.55 to 1.00
October 31, 1997 1.60 to 1.00
January 31, 1998 1.65 to 1.00
April 30, 1998 1.70 to 1.00
July 31, 1998 1.75 to 1.00
October 31, 1998 1.80 to 1.00
January 31, 1999 1.85 to 1.00
April 30, 1999 1.85 to 1.00
July 31, 1999 1.90 to 1.00
October 31, 1999 1.90 to 1.00
January 31, 2000 1.95 to 1.00
Thereafter 2.00 to 1.00
</TABLE>
(c) MINIMUM CONSOLIDATED NET WORTH. Permit the Consolidated
Net Worth of CNG as of the end of each fiscal quarter of CNG ending on
or about any of the dates set forth below to be less than the amount
set forth opposite such date below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Consolidated Net Worth
--------------------- ----------------------
<S> <C>
January 31, 1997 $ 9,000,000
April 30, 1997 $ 9,000,000
July 31, 1997 $15,000,000
October 31, 1997 $18,000,000
January 31, 1998 $28,000,000
April 30, 1998 $30,000,000
July 31, 1998 $40,000,000
October 31, 1998 $50,000,000
January 31, 1999 $60,000,000
</TABLE>
<PAGE> 75
70
<TABLE>
<S> <C>
April 30, 1999 $ 67,000,000
July 31, 1999 $ 80,000,000
October 31, 1999 $ 90,000,000
January 31, 2000 $104,000,000
Thereafter $116,000,000
</TABLE>
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of the Borrowers under this Agreement and any
Revolving Credit Notes;
(b) Indebtedness of any Borrower to any Subsidiary and of any
Subsidiary to any Borrower or any other Subsidiary;
(c) Indebtedness of the Borrowers and their Subsidiaries under
Permitted Hedging Arrangements;
(d) Indebtedness outstanding on the Closing Date and listed on
Schedule 8.2(d) and any refinancings, refundings, renewals or
extensions thereof; PROVIDED that the amount of such Indebtedness is
not increased at the time of such refinancing, refunding, renewal or
extension;
(e) Indebtedness of a Person which becomes a Subsidiary after the
Closing Date; PROVIDED that (i) such Indebtedness existed at the time
such Person became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such Person by a Borrower no Default or Event of Default shall have
occurred and be continuing, and any refinancings, refundings, renewals
or extensions thereof; PROVIDED that the amount of such Indebtedness
is not increased at the time of such refinancing, refunding, renewal
or extension;
(f) Indebtedness of up to an aggregate outstanding face amount of
$10,000,000 of documentary letters of credit issued by CoreStates for
the account of any Borrower or any Subsidiary;
(g) Indebtedness consisting of Guarantee Obligations permitted
under subsection 8.4;
(h) Indebtedness of the Borrowers and their Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether
pursuant to a loan, a Financing Lease or otherwise) in an aggregate
principal amount not exceeding as to the Borrowers and their
Subsidiaries $15,000,000 at any time outstanding, PROVIDED that an
aggregate amount not to exceed $7,500,000 of such Indebtedness
<PAGE> 76
71
may be incurred only in connection with the financing of a new
warehouse facility relating to Cole Gift's business; and
(i) Indebtedness of the Borrowers and their Subsidiaries in an
aggregate principal amount not exceeding as to the Borrowers and their
Subsidiaries $10,000,000 at any time outstanding.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings; PROVIDED that adequate
reserves with respect thereto are maintained on the books of a Borrower
or a Subsidiary, as the case may be, in conformity with GAAP;
(b) carrier's, warehousemen's, mechanic's, landlord's,
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than 60
days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which do not
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of such
Borrower or such Subsidiary conducted at the property subject thereto;
(f) Liens on the property or assets of a Person which becomes
a Subsidiary after the Closing Date securing Indebtedness permitted by
subsection 8.2(e); PROVIDED that (i) such Liens existed at the time
such Person became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or
assets of such Person after the time such corporation becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased;
(g) Liens created pursuant to the Security Documents;
<PAGE> 77
72
(h) Liens in existence on the Closing Date listed on Schedule
8.3(h), securing Indebtedness permitted by subsection 8.2(d); PROVIDED
that no such Lien is spread to cover any additional property after the
Closing Date and that the amount of Indebtedness secured thereby is not
increased;
(i) Liens arising by reason of any judgment, decree or order
of any court or other Governmental Authority, if appropriate legal
proceedings are being diligently prosecuted and shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired, in an aggregate amount not to exceed
$5,000,000 at any time outstanding;
(j) leases and subleases of real property owned or leased by
any Borrower or any Subsidiary not interfering with the ordinary
conduct of the business of such Borrowers and their Subsidiaries;
(k) renewals, extensions and replacements of the Liens
permitted under clauses (f), (h) and (j) above; PROVIDED that no such
Lien shall as a result thereof cover any additional assets and the
principal amount of Indebtedness secured thereby is not increased; and
(l) Liens securing Indebtedness of the Borrowers and their
Subsidiaries permitted by subsection 8.2(h) incurred to finance the
acquisition of fixed or capital assets; PROVIDED that (i) such Liens
shall be created substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness and (iii) the principal amount of Indebtedness secured
thereby is not increased.
8.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume
or suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the Closing Date and
listed on Schedule 8.4(a), and any refinancing, refundings, renewals or
extensions thereof PROVIDED that the amount of such Guarantee
Obligation shall not be increased at the time of such refinancing,
refunding, extension or renewal;
(b) guarantees made in the ordinary course of its business by
any Borrower or any of its Subsidiaries of obligations of any of the
Subsidiaries, which obligations are otherwise permitted under this
Agreement;
(c) the Guarantee and Collateral Agreement and any of the
other Guarantees;
(d) Guarantee Obligations of a Person which becomes a
Subsidiary after the Closing Date; PROVIDED that (i) such Guarantee
Obligations existed at the time
<PAGE> 78
73
such Person became a Subsidiary and were not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such Person by a Borrower no Default or Event of Default shall have
occurred and be continuing, and any refinancings, refundings, renewals
or extensions thereof; PROVIDED that the amount of such Guarantee
Obligations is not increased at the time of such refinancing,
refunding, renewal or extension; and
(e) Guarantee Obligations of Pearle of Indebtedness of
franchisees of Pearle, PROVIDED that the aggregate amount of such
Guarantee Obligations outstanding at any time shall not exceed
$3,000,000.
8.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of any Borrower may be merged or
consolidated with or into any Borrower (PROVIDED that such Borrower
shall be the continuing or surviving corporation) or with or into any
one or more Wholly Owned Subsidiaries of any Borrower (PROVIDED that
the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or
surviving corporation);
(b) any Wholly Owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to any Borrower or any other Wholly Owned
Subsidiary of any Borrower; and
(c) sales and other dispositions of assets permitted by
subsection 8.6(b).
8.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than a
Borrower or any Wholly Owned Subsidiary, except:
(a) the sale or other disposition of any property in the
ordinary course of business;
(b) the sale or other disposition of any assets at fair market
value;
(c) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
(d) as permitted by subsection 8.5(b); and
<PAGE> 79
74
(e) dispositions resulting from any casualty or condemnation
of any property.
8.7 LIMITATION ON DIVIDENDS. Declare or pay any dividend on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of any Borrower or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of such Borrower or
any Subsidiary, except for:
(a) dividends, payments or distributions solely in common
stock of a Borrower;
(b) dividends to CNG in an amount sufficient to allow CNG to
pay interest on the Senior Subordinated Notes and the CNG Notes in
accordance with the terms of each thereof, PROVIDED that CNG actually
uses such dividends to make such payments of interest;
(c) so long as no Default or Event of Default shall have
occurred and be continuing or would occur after giving effect to such
dividend, dividends to CNG in an aggregate amount not to exceed
$20,000,000 solely to allow CNG to repurchase CNG Notes and/or Senior
Subordinated Notes without violating Section 9(m);
(d) so long as no Default or Event of Default shall have
occurred and be continuing or would occur after giving effect to such
dividend, dividends to CNG in an aggregate amount not to exceed
$4,000,000 solely to allow CNG or CNC to repurchase, redeem, or
otherwise acquire or retire for value, any Capital Stock of CNG or CNC
or any current or former Subsidiary of CNG held by any of CNG's (or any
of its Subsidiaries') current or former employees;
(e) payments or distributions in respect of taxes, as provided
in the Tax Sharing Agreement, to the extent actually used to pay taxes
to a taxing authority; and
(f) dividends to CNG in an aggregate amount not to exceed an
amount equal to .25% of the aggregate net sales of the Borrowers and
their Subsidiaries for any fiscal year solely for the purpose of
enabling CNC to pay the ordinary operating and administrative expenses
of CNC (including all reasonable professional fees and expenses) in
connection with complying with its reporting obligations and
obligations to prepare and distribute business records in the ordinary
course of business and CNC's costs and expenses relating to taxes
(which taxes are attributable to the operations of CNG and its
Subsidiaries or to CNC's ownership thereof) for such fiscal year; and
<PAGE> 80
75
(g) so long as no Default or Event of Default shall have
occurred and be continuing or would occur after giving effect to such
dividend, dividends to CNG other than dividends otherwise permitted
under any of the foregoing clauses (a) through (f) in an aggregate
amount not to exceed $8,000,000 in any fiscal year.
8.8 LIMITATION ON CAPITAL EXPENDITURES. Make any expenditure
in respect of the purchase or other acquisition of fixed or capital assets (a
"CAPITAL EXPENDITURE") except for expenditures in the ordinary course of
business not exceeding, in the aggregate for the Borrowers and their
Subsidiaries during any of the test periods set forth below, the amount set
forth opposite such test period set forth below:
<TABLE>
<CAPTION>
Test Period Amount
----------- ------
<C> <C>
February 2, 1997 - January 31, 1998 $35,000,000
February 1, 1998 - January 30, 1999 $40,000,000
January 31, 1999 - January 29, 2000 $45,000,000
January 30, 2000 - Revolving Credit Termination Date $45,000,000
</TABLE>
8.9 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment, in cash or by
transfer of assets or property, in, any Person (each, an "INVESTMENT"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of the Borrowers or their
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(d) Investments by a Borrower in its Subsidiaries and
Investments by such Subsidiaries in such Borrower and in other
Subsidiaries of such Borrower;
(e) so long as no Default or Event of Default has occurred and
is continuing or would occur after giving effect to such Investment,
Investments in franchises in a business related to the optical business
of Pearle and Cole Vision as conducted on the Closing Date in an
aggregate amount not to exceed $7,500,000 during any fiscal year; and
(f) Investments, other than the purchase of CNG Notes or the
Senior Subordinated Notes, in an aggregate amount not to exceed
$5,000,000.
<PAGE> 81
76
8.10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into
any transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of such Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to such Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate.
8.11 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal
year of the Borrowers to end on a day other than the Saturday closest to January
31 in any year.
8.12 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with
any Person any agreement, which prohibits or limits the ability of any Borrower
or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, other than (a) this Agreement, (b) agreements in effect on the Closing
Date, including, without limitation, the Senior Subordinated Notes Indenture, or
any refinancing, refunding, renewal or extension thereof which is permitted
hereunder, (c) customary non-assignment provisions under contracts to the extent
such provisions prohibit or limit the ability to grant a Lien on the rights
under such contracts, and (d) restrictions on granting Liens on assets under
agreements to sell or otherwise dispose of such assets.
8.13 LIMITATION ON LINES OF BUSINESS. Enter into any business,
either directly or through any Subsidiary or any joint venture, except for those
businesses in which the Borrowers and their Subsidiaries are engaged on the
Closing Date or which are related thereto.
8.14 LIMITATIONS ON CURRENCY AND COMMODITY HEDGING
TRANSACTIONS. Enter into, purchase or otherwise acquire agreements or
arrangements relating to currency, commodity or other hedging except, to the
extent and only to the extent that, such agreements or arrangements are entered
into, purchased or otherwise acquired in the ordinary course of business of any
Borrower or any Subsidiary with reputable financial institutions and not for
purposes of investment or speculation (any such agreement or arrangement
permitted by this subsection, a "PERMITTED HEDGING ARRANGEMENT").
8.15 LIMITATION ON SALE LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by any Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by such
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of such Borrower or such Subsidiary (such arrangement, a
"SALE-LEASEBACK") except for Sale-Leasebacks in the ordinary course of such
Borrower's or such Subsidiary's business, consistent with past practice and at
market rates ("PERMITTED SALE-LEASEBACKS"). For the
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avoidance of doubt, Sale-Leasebacks that result in a Financing Lease shall be
treated as Indebtedness for all purposes of this Agreement.
8.16 CHANGES TO CASH MANAGEMENT COLLECTION SYSTEM. Without the
prior written consent of the Administrative Agent, make any changes to the Cash
Management Collection System as in effect on the Closing Date that would
adversely affect the interests of the Administrative Agent and the Lenders.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any
Revolving Credit Loan or any Reimbursement Obligation when due in
accordance with the terms thereof or hereof; or any Borrower shall fail
to pay any interest on any Revolving Credit Loan, or any other amount
payable hereunder, within five days after any such interest or other
amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any certificate, document or financial or
other written statement furnished by it at any time under or in
connection with this Agreement or any such other Loan Document shall
prove to have been incorrect in any material respect on or as of the
date made or deemed made; or
(c) Any Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsection
7.7(a) or Section 8; or
(d) Any Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section 9), and such default shall
continue unremedied for a period of 30 days; or
(e) Any Borrower or any Subsidiary shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Revolving Credit Loans and the Reimbursement Obligations) in excess of
$5,000,000 or in the payment of any Guarantee Obligation in excess of
$5,000,000, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to
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cause, or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(f) (i) CNG, any Borrower or any Subsidiary shall commence any
case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or CNG, any
Borrower or any Subsidiary shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against CNG,
any Borrower or any Subsidiary any case, proceeding or other action of
a nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days;
or (iii) there shall be commenced against CNG, any Borrower or any
Subsidiary any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) CNG, any Borrower or any Subsidiary shall take
any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii),
or (iii) above; or (v) CNG, any Borrower or any Subsidiary shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of any Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Majority
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) any Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Majority
Lenders is likely to, incur any liability in connection with a
withdraw-
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al from, or the Insolvency or Reorganization of, a Multiemployer Plan
or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions,
if any, could reasonably be expected to have a Material Adverse Effect;
or
(h) One or more judgments or decrees shall be entered against
any Borrower or any Subsidiary involving in the aggregate a liability
(not paid or fully covered by insurance) of $5,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof;
or
(i) Except as, and to the extent, permitted by this Agreement,
(i) any of the Security Documents or any of the other Loan Documents
shall cease, for any reason, to be in full force and effect, or any
Borrower or any other Loan Party which is a party to any of the
Security Documents or any of the other Loan Documents shall so assert
or (ii) the Lien created by any of the Security Documents shall cease
to be enforceable and of the same effect and priority purported to be
created thereby; or
(j) The occurrence of any Change of Control; or
(k) The Senior Subordinated Notes, for any reason, shall not
be or shall cease to be validly subordinated, as provided therein and
in the Senior Subordinated Notes Indenture, to the obligations of the
Borrowers under this Agreement, any Revolving Credit Notes and the
other Loan Documents; or
(l) CNG shall engage in any business other than the owning of
the capital stock of the Borrowers and all actions incidental thereto
or in connection therewith, including, without limitation, entering
into the CNG Guarantee and Cash Collateral Agreement and the
maintenance of cash management arrangements for the Borrowers and their
Subsidiaries or CNG shall incur any material liabilities (other than
the Senior Subordinated Notes or the CNG Notes); or
(m) CNG shall (i) make any optional payment or prepayment on
or repurchase or redemption or purchase of the Senior Subordinated
Notes or the CNG Notes (including, without limitation, any payment on
account of, or for a sinking or other analogous fund for the
repurchase, redemption, defeasance or other acquisition thereof) other
than (so long as no Default or Event of Default has occurred and is
continuing or would occur as a result of such repurchase) repurchases
by CNG of such of the CNG Notes and/or Senior Subordinated Notes that
it is able to repurchase for an aggregate purchase price (including
fees and expenses incurred in connection with such repurchase) not to
exceed $20,000,000, (ii) amend, modify or change, or consent or agree
to any material
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amendment, modification or change to any of the terms of the Senior
Subordinated Notes or the CNG Notes (other than any such amendment,
modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon), (iii) amend,
modify or change or consent or agree to any amendment, modification or
change to the subordination provisions or to any of the other
provisions of the Senior Subordinated Notes Indenture, or (iv) amend,
modify or change or consent to or agree to any amendment, modification
or change to any of the provisions of the Transaction Documents (other
than the Senior Subordinated Notes Indenture) which would adversely
affect the Lenders; or
(n) CNC shall amend, modify or change or consent to or agree
to any amendment, modification or change to any of the provisions of
the Transaction Documents (other than the Senior Subordinated Notes
Indenture) which would adversely affect the Lenders;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to any
Borrower, automatically the Revolving Credit Commitments shall immediately
terminate and automatically the Revolving Credit Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Majority Lenders, the
Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrowers declare the Revolving
Credit Commitments to be terminated forthwith, whereupon the Revolving Credit
Commitments shall immediately terminate; and (ii) with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrowers,
declare the Revolving Credit Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) and the Revolving Credit Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrowers shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrowers hereby grant to the Administrative Agent, for the benefit of the
Issuing Lender and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrowers under
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81
this Agreement and the other Loan Documents. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the Borrowers hereunder and
under the Revolving Credit Notes. Within three days after all such Letters of
Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Borrowers
hereunder and under the Revolving Credit Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrowers. The Borrowers shall execute and deliver to the Administrative Agent,
for the account of the Issuing Lender and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of the within security interest in such cash
collateral account.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates
and appoints CIBC as the Administrative Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes CIBC as 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, nor 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 either the
Administrative Agent.
10.2 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such
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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 Borrower or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Loan Document or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure of
any Borrower to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrowers.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation reasonably believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by it. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be 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 Majority 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
Majority 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 Revolving Credit Loans.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or a Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof, reasonably promptly thereof to the Lenders. The
Administrative Agent shall take such action reasonably promptly with respect to
such Default or Event of Default as shall be reasonably directed by the Majority
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
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respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrowers or any other Loan Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of any Borrower and made its
own decision to make its Revolving Credit Loans hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of any
Borrower or any of the other Loan Parties and the other Loan Parties. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Borrower or any
of the other Loan Parties which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrowers or any of the other Loan Parties and without limiting the
obligation of the Borrowers or any of the other Loan Parties to do so), ratably
according to their respective Revolving Credit Commitment Percentages in effect
on the date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Revolving Credit Loans) be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of, the Revolving
Credit Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; PROVIDED
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct, as the case may
be. The agreements in this subsection shall survive the payment of the Revolving
Credit Loans and all other amounts payable hereunder.
10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers as if the
Administrative Agent was not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Revolving Credit Loans made by it and
with respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Majority 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 Borrowers), 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 such
successor agent, such former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Revolving Credit Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was an Administrative Agent under this Agreement and the
other Loan Documents.
10.10 ISSUING LENDER. The provisions of this Section 10 shall
apply to the Issuing Lender in its capacity as such to the same extent that such
provisions apply to the Administrative Agent.
10.11 RELEASES OF GUARANTEES AND COLLATERAL. In connection
with the sale or other disposition of all of the Capital Stock of any Guarantors
(other than CNG) permitted under subsection 8.6 or the sale or other disposition
of Collateral permitted under subsection 8.6, the Administrative Agent shall,
and is hereby authorized by the Lenders to, promptly, upon the request of the
Borrowers and at the sole expense of the Borrowers, take all actions reasonably
necessary to release such Guarantor from its guarantee contained in the
Guarantee and Collateral Agreement or its Guarantee or to release the Collateral
subject to such sale or other disposition, as the case may be, and shall take
any other actions reasonably requested by the Borrowers to effect the
transactions permitted under subsection 8.6.
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SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Majority Lenders may, or, with the written consent of the
Majority Lenders, the Administrative Agent may, from time to time, (a) enter
into with the Borrowers and the other Loan Parties written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of amending, supplementing or modifying any provisions of this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the Borrowers hereunder or thereunder or (b) waive, on such terms and
conditions as the Majority Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment,
supplement or modification shall:
(i) reduce the amount or extend the scheduled date of
maturity of any Revolving Credit Loan or any installment thereof or any
Reimbursement Obligation or reduce the stated rate of any interest or
fee payable hereunder or extend the scheduled date of any payment
thereof or increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitments, in each case without the consent
of each Lender affected thereby; or
(ii) amend, modify or waive any provision of this
subsection 11.1 or reduce the percentage specified in the definition of
Majority Lenders, or consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement and
the other Loan Documents or release all or substantially all of the
guarantee obligations contained in the Guarantee and Collateral
Agreement, the CNG Guarantee and Cash Collateral Agreement and the
other Guarantees or release all or substantially all of the Collateral
(other than in connection with any release permitted by subsection
10.11), in each case without the written consent of all the Lenders; or
(iii) amend, modify or waive any provision of Section 10
without the written consent of the then Administrative Agent; or
(iv) amend, modify or waive the provisions of any Letter
of Credit or any L/C Obligation without the written consent of the
Issuing Lender.
Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the Lenders, the Administrative Agent and all future holders
of the Revolving Credit Loans. In the case of any waiver, the Borrowers, the
Lenders and the Administrative Agent shall
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be restored to their former positions and rights hereunder and under the other
Loan Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by overnight courier, when delivered, (b) in the case of delivery by mail, three
days after being deposited in the mails, postage prepaid, or (c) in the case of
delivery by facsimile transmission, when sent and receipt has been confirmed,
addressed as follows in the case of the Borrowers and the Administrative Agent,
and as set forth in Schedule I in the case of the other parties hereto, or to
such other address as may be hereafter notified by the respective parties
hereto:
The Borrowers:
c/o Cole National Group, Inc.
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Joseph Gaglioti
Fax: (216) 461-3489
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
Fax: (216) 579-0212
The Administrative Agent:
Canadian Imperial Bank of Commerce
425 Lexington Avenue
7th Floor
New York, New York 10017
Attention: Melissa Roedel
Fax: (212) 856-3763
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.3, 2.5, 3.2, 4.2, 4.4 or 4.8 shall not
be effective until received.
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11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Loan Documents (or
in any amendment, modification or supplement hereto or thereto) and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
making of the Revolving Credit Loans hereunder.
11.5 PAYMENT OF EXPENSES AND TAXES. The Borrowers agree,
jointly and severally, (a) to pay or reimburse the Administrative Agent for all
its out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby (including
the syndication of the Revolving Credit Commitments (including the reasonable
expenses of the Administrative Agent's due diligence investigation)), including,
without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all their respective costs and expenses incurred in connection with
the enforcement of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and expenses of in-house
counsel) to the respective Lenders and the Administrative Agent, (c) to pay,
indemnify, and hold each Lender and the Administrative Agent harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender and the Administrative Agent and their respective directors, trustees,
officers, employees and agents harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents, the Transaction Documents or the use or
proposed use of the proceeds of the Revolving Credit Loans in connection with
the transactions contemplated hereby and thereby and
<PAGE> 93
88
any such other documents regardless of whether the Administrative Agent or any
Lender is a party to the litigation or other proceeding giving rise thereto,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of any Borrower, any of its Subsidiaries or any of the facilities
and properties owed, leased or operated by any Borrower or any of its
Subsidiaries (all the foregoing in this clause (d), collectively, the
"indemnified liabilities"), PROVIDED that the Borrowers shall have no obligation
hereunder to the Administrative Agent or any Lender or any other Person with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the party seeking indemnification. The agreements in this
subsection shall survive repayment of the Revolving Credit Loans and all other
amounts payable hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Administrative Agent and their respective successors
and assigns, except that no Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time sell to
one or more banks or other entities ("PARTICIPANTS") participating interests in
any Revolving Credit Loan owing to such Lender, any Revolving Credit Commitment
of such Lender or any other interest of such Lender hereunder and under the
other Loan Documents. Each Lender which sells a participating interest hereunder
shall notify the Borrowers of the identity of such Participant within a
reasonable time after such sale. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Revolving Credit Loan for all purposes under
this Agreement and the other Loan Documents, and the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such Participant's
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those matters specified in clauses (i) and (ii) of the
proviso to subsection 11.1. The Borrowers agree that if amounts outstanding
under this Agreement are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, PROVIDED that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 11.7(a) as fully as if it were a
Lender hereunder. The
<PAGE> 94
89
Borrowers also agree that each Participant shall be entitled to the benefits of
subsections 4.10, 4.11 and 4.12 with respect to its participation in the
Revolving Credit Commitments and the Revolving Credit Loans outstanding from
time to time as if it was a Lender; PROVIDED that, in the case of subsection
4.11, such Participant shall have complied with the requirements of said
subsection and PROVIDED, FURTHER that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time and
from time to time assign to any Lender or any branch or affiliate thereof or,
with the consent of the Borrowers and the Administrative Agent (which in each
case shall not be unreasonably withheld or delayed), to an additional bank or
financial institution (an "ASSIGNEE") all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit F, executed by
such Assignee and such assigning Lender (and, in the case of an Assignee that is
not then a Lender or a branch or an affiliate thereof, by the Borrowers and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, PROVIDED that, in the case of any such
assignment to an additional bank or financial institution, if such assignment is
of less than all of the rights and obligations of the assigning Lender, the sum
of the aggregate principal amount of the Revolving Credit Loans, the aggregate
amount of the L/C Obligations and the aggregate amount of the Available
Revolving Credit Commitment being assigned shall not be less than $5,000,000 (or
such lesser amount as may be agreed to by the Borrowers and the Administrative
Agent). Upon such execution, delivery, acceptance and recording, from and after
the effective date determined pursuant to such Assignment and Acceptance, (x)
the Assignee thereunder shall be a party hereto and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Revolving Credit Commitment as set forth therein, and (y) the
assigning Lender thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto but shall nonetheless continue to be
entitled to the benefits of subsections 4.10, 4.11, 4.12 and 11.5).
Notwithstanding any provision of this paragraph (c) and paragraph (e) of this
subsection, the consent of the Borrowers shall not be required, and, unless
requested by the Assignee and/or the assigning Lender, new Revolving Credit
Notes shall not be required to be executed and delivered by the Borrowers, for
any assignment which occurs at any time when any of the Events of Default
described in Section 9(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrowers,
shall maintain at the address of the Administrative Agent referred to in
subsection 11.2 a copy of each
<PAGE> 95
90
Assignment and Acceptance delivered to it and a register (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Revolving
Credit Commitments of, and principal amounts of the Revolving Credit Loans owing
to, and any Revolving Credit Notes evidencing the Revolving Credit Loans owned
by, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Revolving Credit Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement and
the other Loan Documents, notwithstanding any notice to the contrary. Any
assignment of any Revolving Credit Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrowers or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Borrowers and the
Administrative Agent) together with payment to the Administrative Agent of a
registration and processing fee of $3,500, the Administrative Agent shall
promptly accept such Assignment and Acceptance and record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrowers. Such Assignment and Acceptance and
the assignment evidenced thereby shall only be effective upon appropriate
entries with respect to the information contained therein being made in the
Register pursuant to subsection 11.6(d).
(f) The Borrowers authorize each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee,
subject to such Person agreeing to comply with the provisions of subsection
11.15, any and all financial and other information in such Lender's possession
concerning the Borrowers and their Affiliates which has been delivered to such
Lender by or on behalf of the Borrowers pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrowers in connection
with such Lender's credit evaluation of the Borrowers and their Affiliates prior
to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Revolving Credit Loans and Revolving Credit Notes relate only to absolute
assignments and that such provisions do not prohibit assignments creating
security interests, including, without limitation, any pledge or assignment by a
Lender of any Revolving Credit Loan or Revolving Credit Note to any Federal
Reserve Bank in accordance with applicable law.
11.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its Revolving
Credit Loans or the Reimbursement Obligations owing to it, or interest thereon,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or
<PAGE> 96
91
proceedings of the nature referred to in Section 9(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Revolving Credit Loans or the
Reimbursement Obligations owing to it, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
(or, at the option of such benefitted Lender, a direct interest) in such portion
of each such other Lender's Revolving Credit Loan or the Reimbursement
Obligations owing to it, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrowers, any such notice being expressly waived by the Borrowers to the extent
permitted by applicable law, upon any amount remaining unpaid (including,
without limitation, any amount owing to such Lender in respect of an undivided
interest purchased by such Lender in any draft paid by the Issuing Lender under
any Letter of Credit pursuant to subsection 3.4(a)) after it becomes due and
payable by the Borrowers hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any affiliate,
branch or agency thereof to or for the credit or the account of any Borrower.
Each Lender agrees promptly to notify the Borrowers and the Administrative Agent
after any such set-off and application made by such Lender, PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application.
11.8 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrowers and the Administrative Agent.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 INTEGRATION. This Agreement and the other Loan Documents
and the Fee Letter represent the agreement of the Borrowers, the Administrative
Agent and
<PAGE> 97
92
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents or the Fee Letter.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Borrower at its address set forth in subsection 11.2
or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any exemplary, punitive or consequential
damages.
11.13 ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
<PAGE> 98
93
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to such Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and such Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrowers and the
Lenders.
11.14 WAIVERS OF JURY TRIAL. EACH BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15 CONFIDENTIALITY. Each Lender agrees to keep confidential
any written information (a) provided to it by or on behalf of the Borrowers or
any of their Subsidiaries pursuant to or in connection with this Agreement or
(b) obtained by such Lender based on a review of the books and records of the
Borrowers or any of their Subsidiaries; PROVIDED that nothing herein shall
prevent any Lender from disclosing any such information (i) to the
Administrative Agent or any other Lender, (ii) to any Transferee or prospective
Transferee which agrees to comply with the provisions of this subsection, (iii)
to its employees, directors, agents, attorneys, accountants and other
professional advisors, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender or as shall be required pursuant
to any Requirement of Law, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with any litigation to which such Lender
is a party, (vii) which has been publicly disclosed other than in breach of this
Agreement, or (viii) to the extent reasonably necessary, in connection with the
exercise of any remedy hereunder; PROVIDED, however, that, if such Lender or any
Person to whom such Lender supplies any such information becomes legally
compelled to disclosed any such information or otherwise intends to disclose any
such information in any of the circumstances contemplated by clauses (iv), (v),
(vi) or (vii) above, such Lender agrees to provide the Borrowers as promptly as
practicable with prior written notice of such compelled or intended disclosure.
<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
COLE VISION CORPORATION
By: ______________________________
Title:
THINGS REMEMBERED, INC.
By: ______________________________
Title:
COLE GIFT CENTERS, INC.
By: ______________________________
Title:
PEARLE, INC.
By: ______________________________
Title:
PEARLE SERVICE CORPORATION
By: ______________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as Administrative Agent
By: ______________________________
Title:
<PAGE> 100
CIBC INC.
By: ______________________________
Title:
<PAGE> 101
CREDIT SUISSE
By: ______________________________
Title:
By: ______________________________
Title:
<PAGE> 102
NATIONSBANK, N.A.
By: ______________________________
Title:
<PAGE> 1
Exhibit 99.2
TRADEMARK ASSIGNMENT AGREEMENT
------------------------------
between the undersigned:
1. PEARLE, INC., a company established under the laws of Delaware, United
States, having its registered office at 2534 Royal Lane, Dallas, Texas
75229 (United States of America), hereinafter referred to as "Pearle",
represented in this matter by Jones, Day, Reavis & Pogue;
2. PEARLE VISION, INC., a company established under the laws of Delaware,
United States, having its registered office at 2534 Royal Lane, Dallas,
Texas 75229 (United States of America), hereinafter referred to as "PVI"
(Pearle and PVI hereinafter also collectively referred to as "Assignors"),
represented in this matter by Jones, Day, Reavis & Pogue;
3. PEARLE B.V., a company established under the laws of the Netherlands and an
indirect wholly owned subsidiary of PVI, represented in this matter by
Nauta Dutilh;
and
4. PEARLE TRUST B.V. I.O., a company to be established under the laws of the
Netherlands, having its registered office at Amersfoort, the Netherlands,
hereinafter referred to as "Assignee", represented in this matter by HAL
Investments B.V., established under the laws of the Netherlands, with its
registered office at Weena 674, Rotterdam, The Netherlands;
WHEREAS:
a. Cole National Corporation ("CNC") and HAL Investments B.V. ("HAL") have
entered into a purchase agreement on September 24, 1996 pursuant to which
all of the Shares and Other Assets have been sold to HAL; CNC, HAL and
Assignee have subsequently entered into an assignment dated on or around 14
November 1996 pursuant to which all rights and obligations of HAL under the
aforementioned purchase agreement have been transferred to Assignee; CNC,
Assignee and the Assignors have entered into an agreement dated on or
around 14 November 1996 pursuant to which among others, all rights and
obligations of CNC have been transferred to PVI and, in as far as the
European Intellectual Property Rights are concerned, to Pearle (these
documents together to be referred to as the "Purchase Agreement");
b. Pursuant to article 7.1.a. of the Purchase Agreement, CNC, PVI and Pearle
have undertaken to have executed and delivered to Assignee a Trademark
Assignment Agreement;
<PAGE> 2
c. Assignors are the proprietors of various trademarks and/or trademark
applications, including Community trademarks and/or trademark applications
(hereinafter referred to as "the Trademarks") in Buyer's Territory
(hereinafter referred to as "the Countries");
d. CNC and Assignors have undertaken to see to it that all the Trademarks in
the Countries are assigned from Assignors to Assignee. A list of the
Trademarks including registration numbers and classes, are attached to this
agreement as Annex A;
e. Assignors are furthermore the proprietors of other Intellectual Property
Rights than the Trademarks (hereinafter referred to as "Other Intellectual
Property Rights");
f. CNC and Assignors have undertaken to see to it that all the Other
Intellectual Property Rights related to the Countries are assigned from
Assignors to Assignee. If however certain Other Intellectual Property
Rights are necessary or helpful for the continuation of the present
business of Assignors, CNC and Assignors have undertaken to see to it that
instead of assignment thereof, a royalty free perpetual license will be
given to Assignee;
IT IS THEREFORE HEREBY AGREED AS FOLLOWS:
- -----------------------------------------
Article 1 - Transfer Of The Trademarks
- --------------------------------------
1.1 Each of the Assignors hereby assigns unto Assignee, who hereby accepts, all
the property, right, title and interest in its respective Trademarks in the
Countries, together with that part of the goodwill of the business
connected with the use of and symbolized, together with all rights to apply
for registrations and to renew and continue the Trademarks in the Countries
and all common law rights associated therewith, together with the right to
sue and recover damages for all past, present and future infringements
thereof.
1.2 Each of the Assignors hereby covenants, at any time and from time to time
after the date hereof, at Assignee's reasonable request and expense and
without further consideration, to execute and deliver such other
instruments of sale, transfer, conveyance, assignment, and delivery and
confirmation and take such action as Assignee may deem necessary or
desirable in order more effectively to transfer, convey and assign to
Assignee and to place Assignee in possession and control of, and to confirm
Assignee title to, the Trademarks in the Countries, and to assist Assignee
in exercising all rights and enjoying all benefits with respect thereto.
1.3 Each of the Assignors hereby appoints Assignee and/or assigns its lawful
attorneys in fact with full power of substitution, which power is
irrevocable and coupled with an interest, to take on its behalf proceedings
for purposes of making
2
<PAGE> 3
all filings and recordation necessary for absolutely vesting and perfect
Assignee's full right, title and interest in and to the Trademarks in the
Countries.
1.4 Assignee will take care of all necessary filings and recordations of this
assignment at its own expense.
Article 2 - Transfer Of The Other Intellectual Property Rights
- --------------------------------------------------------------
2.1 Each of the Assignors hereby assigns unto Assignee, who hereby accepts, all
its property, right, title and interest in the Other Intellectual Property
Rights related to the Countries, together with that part of the goodwill of
the business connected with the use of and symbolized, together with all
rights to apply for registrations to renew and continue the Other
Intellectual Property Rights in the Countries and all common law rights
associated therewith, together with the right to sue and recover damages
for all past, present and future infringements thereof.
2.2 Each of the Assignors hereby covenants, at any time and from time to time
after the date hereof, at Assignee's reasonable request and expense and
without further consideration, to execute and deliver such other
instruments of sale, transfer, conveyance, assignment, and delivery and
confirmation and take such action as Assignee may deem necessary or
desirable in order more effectively to transfer, convey and assign to
Assignee and to place Assignee in possession and control of, and to confirm
Assignee title to, the Other Intellectual Property Rights related to the
Countries, and to assist Assignee in exercising all rights and enjoying all
benefits with respect thereof.
2.3 Each of the Assignors hereby appoints Assignee and/or assigns its lawful
attorneys in fact with full power of substitution, which power is
irrevocable and coupled with an interest, to take on its behalf proceedings
for purposes of making all filings and recordation necessary for absolutely
vesting and perfect Assignee's full right, title and interest in and to the
Other Intellectual Property Rights related to the Countries.
2.4 Assignee will take care of all necessary filings and recordations of this
assignment at its own expense.
Article 3 - License Of The Other Intellectual Property Rights
- -------------------------------------------------------------
3.1 If certain Other Intellectual Property Rights related to the Countries are
necessary or helpful for the continuation of the present business of
Assignors and therefore cannot be assigned unto Assignee, Assignors hereby
grant to Assignee a perpetual royalty free license to use the Other
Intellectual Property Rights related to the Countries.
3.2 Assignee will take care of all necessary registrations of these licenses at
its own expense. Assignors will give full cooperation in this respect, thus
Assignors
3
<PAGE> 4
covenants to execute all such documents, forms and authorizations and
depots to or swear any declaration of oath as may be required by any
registrar for vetting this license of the Other Intellectual Property
Rights in favor of Assignee.
Article 4 - Price
- -----------------
In consideration of the present assignment and as consideration for the Purchase
Agreement, Assignee shall pay to Pearle an amount of NLG 19,500,000 and to PVI
an amount of NLG 19,500,000.
Article 5 - Assignment
- ----------------------
Assignee is entitled to assign its rights under this Trademark Assignment
Agreement or any part thereof to one of its Subsidiaries.
Article 6 - Effective Date
- --------------------------
This Agreement will be effective as from the Closing.
Article 7 - Cancellation Of Prior License
- -----------------------------------------
The parties to this agreement hereby agree to terminate the Master License
Agreement between Pearle and Pearle B.V. dated 1 November 1988, as amended.
Assignee and Pearle B.V. shall enter into a License Agreement in relation to the
Trademarks and Other Intellectual Property Rights.
Article 8 - General
- -------------------
a. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement.
b. If any provision of this agreement is declared by any tribunal of competent
jurisdiction to be invalid or void, the remaining portions or provisions of
the agreement nevertheless shall remain in full force and effect.
c. This agreement shall be governed by and shall be construed in accordance
with the laws of The Netherlands.
4
<PAGE> 5
d. All disputes arising in connection with this agreement, if not otherwise
resolved, shall be submitted in accordance with Section 9.11 of the
Purchase Agreement.
Pearle, Inc. Pearle Vision, Inc.
/S/ Joseph Gaglioti /S/ Joseph Gaglioti
- --------------------------- ------------------------------
By: Joseph Gaglioti By: Joseph Gaglioti
Title: Vice President and Treasurer Title: Vice President and Treasurer
Date: November 15, 1996 Date: November 15, 1996
Pearle Trust B.V. i.o. Pearle B.V.
/S/ Mel Groot /S/ Joop F.G. De Groot
- --------------------------- ------------------------------
By: Hal Investments B.V. By: Joop F.G. De Groot
------------------------ ---------------------------
Title: By Power of Attorney Title: Managing Director
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Date: November 15, 1996 Date: November 15, 1996
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5
<PAGE> 6
ANNEX A
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The following Trademarks in the now existing European Union
countries, the now existing European Free Trade Association countries, Albania,
Andorra, Belarus, Bulgaria, the Czech Republic, Cyprus, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Romania, Russia, Slovakia, Slovenia, Turkey,
Ukraine, the former Yugoslavia and any other territories that as of the date
hereof are usually referred to as being part of Europe:
TRADEMARK-/DESCRIPTION
----------------------
Brilmij - Word and Device
Brilmij - Word Mark
Brilmij Pearle Express - Word and Device
Brilmij Pearle Vision Center - Word and Device
Brilmij Pearle Vision Center - Word Mark
Brilmij Pearle Vision Center - Word and Device
Brilmij Pearle Vision Center - Word Mark
Carlo Sebastino - Word Mark
Optique Pearle - Word Mark
Pearle - Word Mark
Pearle Royale - Word Mark
Pearle Vision Center - Word Mark
Pearle Vision Center - Word Mark
Pearle Vision Center - Word and Device
Pearle Vision Center - Word and Device
Pearle Vision Center - Word Mark
Brilmij Pearle Vision Express - Word and Device
Kidsafe - Word Mark
Pearl Express - Word Mark
Pearle Opticiens - Word Mark
Pearle Vision Center - Word and Device
<PAGE> 1
Exhibit 99.3
CNG GUARANTEE AND CASH COLLATERAL AGREEMENT
GUARANTEE AND CASH COLLATERAL AGREEMENT, dated as of November
15, 1996, made by COLE NATIONAL GROUP, INC., a Delaware corporation (the
"GUARANTOR"), in favor of Canadian Imperial Bank of Commerce, as administrative
agent (in such capacity, the "ADMINISTRATIVE AGENT") for (i) the banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement, dated as of November 15, 1996 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among Cole Vision
Corporation, Things Remembered, Inc., Cole Gift Centers, Inc., Pearle, Inc. and
Pearle Service Corporation (collectively, the "BORROWERS"), the Lenders and the
Administrative Agent and (ii) the other Secured Parties (as defined below)
parties hereto.
W I T N E S S E T H:
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WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrowers upon the terms
and subject to the conditions set forth therein;
WHEREAS, the Borrowers are members of an affiliated group of
companies that includes the Guarantor;
WHEREAS, the proceeds of the extensions of credit will be used
in part to enable the Borrowers to make valuable transfers to the Guarantor in
connection with the operation of their respective businesses;
WHEREAS, the Guarantor will derive substantial direct and
indirect benefit from the making of the extensions of credit under the Credit
Agreement; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrowers under the
Credit Agreement that the Guarantor shall have executed and delivered this
Agreement to the Administrative Agent for the ratable benefit of the Secured
Parties;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, the Guarantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
<PAGE> 2
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1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
(b) The following terms shall have the following meanings:
"AGREEMENT": this CNG Guarantee and Cash Collateral Agreement, as the
same may be amended, supplemented or otherwise modified from time to time.
"BANK ACKNOWLEDGMENT LETTER": the Bank Acknowledgment Letter to be
executed and delivered by CoreStates Bank N.A., the Guarantor and the
Administrative Agent, substantially in the form of Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time.
"CASH COLLATERAL": the collective reference to:
(a) all cash, instruments, securities and funds deposited from time to
time in the Cash Collateral Account, including, without limitation, all
cash or other money proceeds of any collateral subject to a security
interest for the benefit of the Administrative Agent under any Loan
Document;
(b) all investments of funds in the Cash Collateral Account and all
instruments and securities evidencing such investments; and
(c) all interest, dividends, cash, instruments, securities and other
property received in respect of, or as proceeds of, or in substitution or
exchange for, any of the foregoing.
"CASH COLLATERAL ACCOUNT": account no. 141-387-1466 established at the
office of CoreStates Bank N.A. located at 1345 Chestnut St., P.O. Box 7618,
Philadelphia, Pennsylvania 19101-7618..
"CODE": the Uniform Commercial Code as from time to time in effect in
the State of New York.
"COLLATERAL": the collective reference to the Cash Collateral and the
Cash Collateral Account.
"GUARANTOR": as defined in the preamble hereto.
"HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps or
collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies, including, without limitation,
all Interest Rate Protection
<PAGE> 3
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Agreements and Permitted Hedging Arrangements with respect to currency
exchange rates.
"OBLIGATIONS": the collective reference to the unpaid principal of and
interest on the Revolving Credit Loans and Reimbursement Obligations and
all other obligations and liabilities of the Borrowers (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Revolving Credit Loans and
Reimbursement Obligations and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrowers, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) to the
Administrative Agent or any Lender (or, in the case of any Hedge Agreement
referred to below, any Affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, this Agreement, the other Loan Documents, any Letter
of Credit or any Hedge Agreement entered into by any Borrower with any
Lender (or, in the case of any Hedge Agreement, any Affiliate of any
Lender) or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to
the Administrative Agent or to the Lenders that are required to be paid by
any Borrower pursuant to the terms of any of the foregoing agreements).
"SECURED OBLIGATIONS": the collective reference to the Obligations and
all obligations and liabilities of the Guarantor which may arise under or
in connection with this Agreement or any other Loan Document to which the
Guarantor is a party, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by the Guarantor
pursuant to the terms of this Agreement or any other Loan Document to which
the Guarantor is a party).
"SECURED PARTIES": the collective reference to the Administrative
Agent, the Lenders (including, without limitation, the Issuing Lender) and
any Affiliate of any Lender which has entered into a Hedge Agreement with
any Borrower or any Subsidiary.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
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(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) The Guarantor hereby unconditionally and irrevocably
guarantees to the Administrative Agent, for the ratable benefit of the Secured
Parties and their respective successors, indorsees, transferees and assigns, the
prompt and complete payment and performance by the Borrowers when due (whether
at the stated maturity, by acceleration or otherwise) of the Secured
Obligations; PROVIDED that the Guarantor's liability hereunder at any time shall
be limited to amounts on deposit in the Cash Collateral Account.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of the Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by the Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(c) The Guarantor agrees that the Obligations may at any time and from time
to time exceed the amount of the liability of the Guarantor hereunder without
impairing the guarantee contained in this Section 2 or affecting the rights and
remedies of the Administrative Agent or any other Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full force
and effect until the first date on which all the Obligations and the obligations
of the Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrowers may be free from any Obligations.
(e) No payment made by any Borrower, the Guarantor, any other guarantor or
any other Person or received or collected by the Administrative Agent or any
other Secured Party from any Borrower, the Guarantor, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by the Guarantor
in respect of the Obligations or any payment received or collected from the
Guarantor in respect of the Obligations), remain liable for the Obligations up
to the maximum liability of the Guarantor hereunder until the first date on
which the Obligations are paid in full, no Letter of Credit shall be outstanding
and the Commitments are terminated.
<PAGE> 5
5
2.2 NO SUBROGATION. Notwithstanding any payment made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the
Administrative Agent or any other Secured Party, the Guarantor shall not be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against any Borrower or any collateral security or
guarantee or right of offset held by the Administrative Agent or any other
Secured Party for the payment of the Obligations, nor shall the Guarantor seek
or be entitled to seek any contribution or reimbursement from any Borrower in
respect of payments made by the Guarantor hereunder, until all amounts owing to
the Administrative Agent and the other Secured Parties by the Borrowers on
account of the Obligations are paid in full, no Letter of Credit shall be
outstanding and the Commitments are terminated. If any amount shall be paid to
the Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by the
Guarantor in trust for the Administrative Agent and the other Secured Parties,
segregated from other funds of the Guarantor, and shall, forthwith upon receipt
by the Guarantor, be turned over to the Administrative Agent in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Administrative
Agent, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
2.3 AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The Guarantor shall
remain obligated hereunder notwithstanding that, without any reservation of
rights against the Guarantor and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made by the
Administrative Agent or any other Secured Party may be rescinded by the
Administrative Agent or such other Secured Party and any of the Obligations
continued, and the Obligations, or the liability of any other Person upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any other Secured Party,
and the Credit Agreement and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent (or
the Majority Lenders, as the case may be) may deem advisable from time to time,
and any collateral security, guarantee or right of offset at any time held by
the Administrative Agent or any other Secured Party for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any other Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security
for the Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.4 GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent or any other
Secured Party upon the guarantee contained in this Section 2 or acceptance of
the guarantee contained
<PAGE> 6
6
in this Section 2; the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between any Borrower and the Guarantor, on the one hand, and
the Administrative Agent and the other Secured Parties, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrowers or the Guarantor with respect to the
Obligations. The Guarantor understands and agrees that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment. The Guarantor hereby waives, to the extent it may legally
do so, any and all defenses that it may have arising out of or in connection
with any and all of the following: (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or any
other Secured Party, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by any Borrower against the Administrative Agent or any other Secured
Party, (c) any change in the time, place, manner or place of payment, amendment,
or waiver or increase in the Obligations, (d) any exchange, taking, or release
of Collateral, (e) any change in the corporate structure or existence of any
Borrower, (f) any application of Collateral to Obligations or (g) any other
circumstance whatsoever (with or without notice to or knowledge of such Borrower
or the Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of any Borrower for the Obligations, or of the
Guarantor under the guarantee contained in this Section 2, in bankruptcy or in
any other instance. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against the Guarantor, the Administrative Agent or
any other Secured Party may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against
any Borrower or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any failure
by the Administrative Agent or any other Secured Party to make any such demand,
to pursue such other rights or remedies or to collect any payments from any
Borrower or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of any
Borrower or any other Person or any such collateral security, guarantee or right
of offset, shall not relieve the Guarantor of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the Administrative Agent or
any other Secured Party against the Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
2.5 REINSTATEMENT. The guarantee contained in this Section 2 shall continue
to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any other Secured Party upon
the insolvency,
<PAGE> 7
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bankruptcy, dissolution, liquidation or reorganization of any Borrower or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, any Borrower or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
2.6 PAYMENTS. The Guarantor hereby guarantees that payments hereunder will
be paid to the Administrative Agent without set-off or counterclaim in Dollars
at the office of the Administrative Agent located at 425 Lexington Avenue, 7th
Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
3.1 GRANT OF SECURITY INTEREST. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations, the Guarantor hereby
grants to the Administrative Agent, for the ratable benefit of the Lenders, a
security interest in the Collateral.
3.2 MAINTENANCE OF CASH COLLATERAL ACCOUNT. (a) The Cash Collateral Account
shall be maintained until the Secured Obligations have been paid and performed
in full.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrowers thereunder, the Guarantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. (a) The representations and
warranties set forth in Section 5 of the Credit Agreement as they relate to the
Guarantor or to the Loan Documents to which the Guarantor is a party or to the
Transaction Documents to which the Guarantor is a party, each of which is hereby
incorporated herein by reference, are true and correct, and the Administrative
Agent and each other Secured Party shall be entitled to rely on each of them as
if they were fully set forth herein; PROVIDED that each reference in each such
representation and warranty to any Borrower's knowledge shall, for the purposes
of this Section 4.1(a), be deemed to be a reference to the Guarantor's
knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest granted to the
Administrative Agent, for the ratable benefit of the Secured Parties, pursuant
to this Agreement, the Guarantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No financing statement or other public
notice with respect to
<PAGE> 8
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all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, pursuant to this Agreement or as are
permitted by the Credit Agreement or for which termination statements will be
delivered on the Closing Date.
4.3 PERFECTED FIRST PRIORITY LIENS. The security interests granted pursuant
to this Agreement (a) upon completion of the filings and other actions specified
on SCHEDULE 1 (which, in the case of all filings and other documents referred to
on said Schedule, have been delivered to the Administrative Agent in completed
and duly executed form) and upon the execution and delivery of the Bank
Acknowledgement Letter by the parties thereto, will constitute valid perfected
security interests in all of the Collateral in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, as collateral security
for the Secured Obligations of the Guarantor, enforceable in accordance with the
terms hereof against all creditors of the Guarantor and (b) are prior to all
other Liens on the Collateral in existence on the date hereof.
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, the Guarantor's
jurisdiction of organization is Delaware and the location of the Guarantor's
chief executive office is 5915 Landerbrook Drive, Mayfield Heights, Ohio 44124.
SECTION 5. COVENANTS
The Guarantor covenants and agrees with the Administrative Agent and the
other Secured Parties that, from and after the date of this Agreement until the
Secured Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 COVENANTS IN CREDIT AGREEMENT. The Guarantor shall take, or shall
refrain from taking, as the case may be, each action that is necessary to be
taken or not taken, as the case may be, so that no Default or Event of Default
is caused by the failure to take such action or to refrain from taking such
action by the Guarantor or any of its Subsidiaries.
5.2 PAYMENT OF OBLIGATIONS. The Guarantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of the Guarantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
<PAGE> 9
9
5.3 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION. (a)
The Guarantor shall maintain the security interest created by this Agreement as
a perfected security interest having at least the priority described in Section
4.3 and shall defend such security interest against the claims and demands of
all Persons whomsoever.
(b) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Guarantor, the Guarantor
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
5.4 CHANGES IN LOCATIONS, NAME, ETC. The Guarantor will not, except upon 30
days' prior written notice to the Administrative Agent and delivery to the
Administrative Agent of all additional executed financing statements and other
documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein:
(i) change the location of its chief executive office from that
referred to in Section 4.4; or
(ii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.5 NOTICES. The Guarantor will advise the Administrative Agent promptly,
in reasonable detail, of any Lien of which the Guarantor obtains actual
knowledge (other than security interests created hereby or Liens permitted under
the Credit Agreement) on any of the Collateral which would adversely affect the
ability of the Administrative Agent to exercise any of its remedies hereunder;
and of the occurrence of any other event which could reasonably be expected to
have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby.
SECTION 6. REMEDIAL PROVISIONS
6.1 CODE AND OTHER REMEDIES. At any time and from time to time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may, without notice of any kind, except for notices required by law which
may not be waived, apply the Collateral, after deducting all reasonable costs
and expenses of every kind incurred in respect thereof or incidental to the care
or safekeeping of any of the Collateral or in any way relating to the Collateral
or the rights of the Administrative
<PAGE> 10
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Agent and the Secured Parties hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the Administrative
Agent, to the payment in whole or in part of the Secured Obligations, in such
order as the Administrative Agent in its sole discretion may elect, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Administrative Agent account for the
surplus, if any, to the Guarantor. In addition to the rights, powers and
remedies granted to it under this Agreement and in any other agreement securing,
evidencing or relating to the Secured Obligations, the Administrative Agent
shall have all the rights, powers and remedies available at law, including,
without limitation, the rights and remedies of a secured party under the Code.
To the extent permitted by law, the Guarantor waives presentment, demand,
protest and all notices of any kind and all claims, damages and demands it may
acquire against the Administrative Agent or any Secured Party arising out of the
exercise by them of any rights hereunder.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a) The
Guarantor hereby irrevocably constitutes and appoints the Administrative Agent
and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Guarantor and in the name of
the Guarantor or in the Administrative Agent's own name, from time to time in
the Administrative Agent's discretion, for the purpose of carrying out the terms
of this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer. Anything
in this Section 7.1(a) to the contrary notwithstanding, the Administrative Agent
agrees that it will not exercise any rights under the power of attorney provided
for in this Section 7.1(a) unless an Event of Default shall have occurred and be
continuing.
(b) The expenses of the Administrative Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by the relevant
Guarantor, shall be payable by the Guarantor to the Administrative Agent on
demand.
(c) The Guarantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
7.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its
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possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar property
for its own account. Neither the Administrative Agent, any other Secured Party
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Guarantor or any other Person
or to take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Administrative Agent and the other Secured
Parties hereunder are solely to protect the Administrative Agent's and the other
Secured Parties' interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any other Secured Party to exercise any such powers.
The Administrative Agent and the other Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to the Guarantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
Code and any other applicable law, the Guarantor authorizes the Administrative
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
the Guarantor in such form and in such offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 AUTHORITY OF ADMINISTRATIVE AGENT. The Guarantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement or any amendment, supplement or other modification of this
Agreement shall, as between the Administrative Agent and the Secured Parties, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Guarantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
<PAGE> 12
12
written instrument executed by the Guarantor and the Administrative Agent,
PROVIDED that any provision of this Agreement imposing obligations on the
Guarantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
8.2 NOTICES. All notices, requests and demands to or upon the
Administrative Agent or the Guarantor hereunder shall be effected in the manner
provided for in subsection 11.2 of the Credit Agreement; PROVIDED that any such
notice, request or demand to or upon the Guarantor shall be addressed to the
Guarantor at:
5915 Landerbrook Drive
Mayfield Heights, Ohio 44124
Attention: Joseph Gaglioti
Fax: (216) 461-3489.
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
Fax: (216) 579-0212
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither the
Administrative Agent nor any other Secured Party shall by any act (except by a
written instrument pursuant to Section 8.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Administrative Agent or any other
Secured Party, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any other Secured Party of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Administrative
Agent or such other Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) The Guarantor agrees to pay
or reimburse each Secured Party and the Administrative Agent for all their
respective costs and expenses incurred in collecting against the Guarantor under
the guarantee contained in Section 2 or otherwise enforcing any rights under
this Agreement and the other Loan Documents to which the Guarantor is a party,
including, without limitation, the fees and disbursements of counsel (including
the allocated fees and
<PAGE> 13
13
expenses of in-house counsel) to each Secured Party and of counsel to the
Administrative Agent.
(b) The Guarantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) The Guarantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement (collectively, the
"INDEMNIFIED LIABILITIES") to the extent the Borrowers would be required to do
so pursuant to Section 11.5 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Secured Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Guarantor and shall inure to the benefit of the
Administrative Agent and the Secured Parties and their successors and assigns;
PROVIDED that no Guarantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 SET-OFF. The Guarantor hereby irrevocably authorizes the Administrative
Agent and each other Secured Party at any time and from time to time without
notice to the Guarantor or any Borrower, any such notice being expressly waived
by the Guarantor and by the Borrowers, upon any amount remaining unpaid after it
becomes due and payable by the Guarantor hereunder to set-off and appropriate
and apply against any such amount any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such other Secured Party to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
the Administrative Agent or such other Secured Party may elect. The
Administrative Agent and each other Secured Party shall notify the Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such other Secured Party of the proceeds thereof; PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each other Secured Party
under this Section 8.6 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent or
such other Secured Party may have.
<PAGE> 14
14
8.7 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
8.10 INTEGRATION. This Agreement and the other Loan Documents represent the
agreement of the Guarantor, the Administrative Agent and the other Secured
Parties with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
other Secured Party relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. The Guarantor hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Guarantor at its address referred to in Section 8.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto;
<PAGE> 15
15
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any exemplary, punitive or consequential damages.
8.13 ACKNOWLEDGEMENTS. The Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any other Secured Party has
any fiduciary relationship with or duty to the Guarantor arising out of or
in connection with this Agreement or any of the other Loan Documents, and
the relationship between the Guarantor, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Secured Parties or among the Guarantor and the Secured Parties.
8.14 WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 RELEASES. At such time as the Revolving Credit Loans, the
Reimbursement Obligations and the other Secured Obligations shall have been paid
in full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and the Guarantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Guarantor. At
the request and sole expense of the Guarantor following any such termination,
the Administrative Agent shall deliver to the Guarantor any Collateral held by
the Administrative Agent hereunder, and execute and deliver to the Guarantor
such documents as the Guarantor shall reasonably request to evidence such
termination.
<PAGE> 16
16
IN WITNESS WHEREOF, the undersigned has caused this CNG Guarantee and Cash
Collateral Agreement to be duly executed and delivered as of the date first
above written.
COLE NATIONAL GROUP, INC.
By: _______________________________
Title:
<PAGE> 17
EXHIBIT A
---------
FORM OF BANK ACKNOWLEDGEMENT LETTER
November _, 1996
CoreStates Bank N.A.
[address]
Attention:
Re: Cole National Group, Inc. (hereinafter "CNG")
Account Number [_________________] (hereinafter the "CASH COLLATERAL
ACCOUNT")
Ladies and Gentlemen:
Please be advised that we have entered into the CNG Guarantee
and Cash Collateral Agreement, dated as of November __, 1996 (the "CNG GUARANTEE
AND CASH COLLATERAL AGREEMENT"), made by CNG in favor Canadian Imperial Bank of
Commerce, New York Agency, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT"), pursuant which we have been granted a security interest
in the Cash Collateral Account and all cash, instruments, securities and funds
deposited from time to time in the Cash Collateral Account, all investments of
funds in the Cash Collateral Account and all instruments and securities
evidencing such investments and all interest, dividends, cash, instruments,
securities and other property received in respect of, or as proceeds of, or in
substitution or exchange for, any of the foregoing.
CNG hereby agrees that it will not permit the Cash Collateral
Account to become subject to any other pledge, assignment, lien, charge or
encumbrance of any kind, nature or description. CoreStates Bank, N.A. (the
"BANK") hereby agrees that it will maintain the Cash Collateral Account and hold
any checks, drafts, notes, money and acceptances, cash and other evidences of
indebtedness ("REMITTANCES") included therein, as custodian for the
Administrative Agent in accordance with the terms of this agreement. The Bank
will provide copies of the monthly bank statement with respect to the Cash
Collateral Account to the Administrative Agent at the address listed below.
Upon notification from the Administrative Agent that an Event
of Default has occurred under the Credit Agreement, dated as of November __,
1996, among Cole Vision Corporation, Things Remembered, Inc., Cole Gift Centers,
Inc., Pearle, Inc., Pearle Service Corporation, the Lenders parties thereto and
the Administrative Agent (the "CREDIT AGREEMENT"), the Bank hereby agrees that
it will not permit CNG to withdraw monies from the Cash Collateral Account and,
at the direction of the Administrative Agent from time to time, the Bank will
transfer all collected and available funds in the account at such time via
federal funds wire to the Administrative Agent at:
<PAGE> 18
2
Canadian Imperial Bank of Commerce, New York Agency,
as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Attention: [_______________]
Account No. [________________]
The Bank shall be fully protected in acting on any order or
direction by the Administrative Agent respecting the Cash Collateral Account and
disposition of Remittances without making any inquiry whatsoever as to the
Administrative Agent's right or authority to give such order or direction or as
to the application or any payment made pursuant thereto. In the event that the
Bank is uncertain as to what action it should with respect to any instructions
relating to the Cash Collateral Account, the Bank may request instructions from
the Administrative Agent and shall be absolutely protected in following such
instructions.
The Bank agrees that it shall not set-off, deduct, or claim
against the Cash Collateral Account or the Remittances unless, and until, all of
CNG's Obligations (as defined in the CNG Guarantee and Cash Collateral
Agreement) to the Administrative Agent have been paid in full, PROVIDED,
HOWEVER, that notwithstanding the foregoing, the Bank may charge the Cash
Collateral Account for all service charges, returned items and any other charges
to which it may be entitled for maintaining the Cash Collateral Account.
Neither the Bank nor CNG will close the Cash Collateral
Account without giving the Administrative Agent at least thirty (30) days prior
written notice thereof.
No modifications or changes in any form may be made to this
agreement without the prior written consent of the Administrative Agent.
This letter agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
<PAGE> 19
3
If the foregoing conforms with your understanding, please sign
and return the duplicate enclosed copies of this letter, whereupon this letter,
when signed by all requisite parties hereto, shall be binding on all parties.
Very truly yours,
CANADIAN IMPERIAL BANK OF
COMMERCE, as Administrative Agent
By: ____________________________
Name:
Title:
Accepted and agreed to as of the date first written above by:
CORESTATES BANK N.A.
By: _______________________________
Name:
Title:
COLE NATIONAL GROUP, INC.
By: _______________________________
Title:
<PAGE> 1
Exhibit 99.4
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
COLE VISION CORPORATION,
THINGS REMEMBERED, INC.,
COLE GIFT CENTERS, INC.,
PEARLE, INC.,
and
PEARLE SERVICE CORPORATION,
and certain of their Subsidiaries
in favor of
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
Dated as of November 15, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINED TERMS.................................................................. 1
1.1 DEFINITIONS.................................................................. 1
1.2 OTHER DEFINITIONAL PROVISIONS................................................ 5
SECTION 2. GUARANTEE...................................................................... 5
2.1 GUARANTEE.................................................................... 5
2.2 RIGHT OF CONTRIBUTION........................................................ 6
2.3 NO SUBROGATION............................................................... 6
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS.................... 7
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL......................................... 7
2.6 REINSTATEMENT................................................................ 8
2.7 PAYMENTS..................................................................... 8
SECTION 3. GRANT OF SECURITY INTEREST..................................................... 8
SECTION 4. REPRESENTATIONS AND WARRANTIES................................................. 10
4.1 REPRESENTATIONS IN CREDIT AGREEMENT.......................................... 10
4.2 TITLE; NO OTHER LIENS........................................................ 10
4.3 PERFECTED FIRST PRIORITY LIENS............................................... 10
4.4 CHIEF EXECUTIVE OFFICE....................................................... 11
4.5 INVENTORY AND EQUIPMENT...................................................... 11
4.6 FARM PRODUCTS................................................................ 11
4.7 PLEDGED SECURITIES........................................................... 11
4.8 ACCOUNTS..................................................................... 11
4.9 INTELLECTUAL PROPERTY........................................................ 11
SECTION 5. COVENANTS...................................................................... 12
5.1 COVENANTS IN CREDIT AGREEMENT................................................ 12
5.2 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER.................................... 12
5.3 MAINTENANCE OF INSURANCE..................................................... 12
5.4 PAYMENT OF OBLIGATIONS....................................................... 13
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION............ 13
5.7 NOTICES...................................................................... 14
5.8 PLEDGED SECURITIES........................................................... 14
5.9 ACCOUNTS..................................................................... 15
5.10 INTELLECTUAL PROPERTY....................................................... 15
SECTION 6. REMEDIAL PROVISIONS............................................................ 17
6.1 CERTAIN MATTERS RELATING TO ACCOUNTS......................................... 17
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE......................... 18
6.3 PLEDGED STOCK................................................................ 18
6.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT........................... 19
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.5 APPLICATION OF PROCEEDS........................................................ 20
6.6 CODE AND OTHER REMEDIES........................................................ 20
6.7 REGISTRATION RIGHTS............................................................ 21
6.8 DEFICIENCY..................................................................... 22
SECTION 7. THE ADMINISTRATIVE AGENT......................................................... 22
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC.................... 22
7.2 DUTY OF ADMINISTRATIVE AGENT................................................... 24
7.3 EXECUTION OF FINANCING STATEMENTS.............................................. 24
7.4 AUTHORITY OF ADMINISTRATIVE AGENT.............................................. 24
SECTION 8. MISCELLANEOUS.................................................................... 25
8.1 AMENDMENTS IN WRITING.......................................................... 25
8.2 NOTICES........................................................................ 25
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES............................ 25
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION.......................................... 25
8.5 SUCCESSORS AND ASSIGNS......................................................... 26
8.6 SET-OFF........................................................................ 26
8.7 COUNTERPARTS................................................................... 26
8.8 SEVERABILITY................................................................... 26
8.9 SECTION HEADINGS............................................................... 26
8.10 INTEGRATION................................................................... 27
8.11 GOVERNING LAW................................................................. 27
8.12 SUBMISSION TO JURISDICTION; WAIVERS........................................... 27
8.13 ACKNOWLEDGEMENTS.............................................................. 27
8.14 WAIVER OF JURY TRIAL.......................................................... 28
8.15 ADDITIONAL GRANTORS........................................................... 28
8.16 RELEASES...................................................................... 28
</TABLE>
ii
<PAGE> 4
SCHEDULES
1 Notice Addresses of Guarantors
2 Description of Pledged Securities
3 Filings and Other Actions Required to Perfect Security Interests
4 Location of Jurisdiction of Organization and Chief Executive Office or
Sole Place of Business
5 Location of Inventory and Equipment
6 Copyrights and Copyright Licenses; Patents and Patent Licenses;
Trademarks and Trademark Licenses
ANNEXES
1 Assumption Agreement
iii
<PAGE> 5
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 15, 1996, made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the "GRANTORS"), in favor of Canadian Imperial
Bank of Commerce, as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT") for the banks and other financial institutions (collectively, the
"LENDERS") from time to time parties to the Credit Agreement, dated as of
November 15, 1996 (as amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), among Cole Vision Corporation, Things Remembered,
Inc., Cole Gift Centers, Inc., Pearle, Inc. and Pearle Service Corporation
(collectively, the "BORROWERS"), the Lenders and the Administrative Agent, and
the other Secured Parties (as defined below) parties hereto.
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrowers, jointly and severally,
upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrowers are members of an affiliated group of companies that
includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit will be used in part to
enable the Borrowers to make valuable transfers to one or more of the other
Grantors in connection with the operation of their respective businesses;
WHEREAS, the Borrowers and the other Grantors are engaged in related
businesses, and each such Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Secured Parties;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, each Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit
<PAGE> 6
2
Agreement, and the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products,
Instruments and Inventory.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"BORROWER OBLIGATIONS": the collective reference to the unpaid
principal of and interest on the Revolving Credit Loans and Reimbursement
Obligations and all other obligations and liabilities of the Borrowers
(including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Revolving
Credit Loans and Reimbursement Obligations and interest accruing at the
then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrowers, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) to the Administrative Agent or any Lender (or, in the case of
any Hedge Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan
Documents, any Letter of Credit or any Hedge Agreement entered into by any
Borrower with any Lender (or, in the case of any Hedge Agreement, any
Affiliate of any Lender) or any other document made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by any Borrower pursuant to the terms of any of the foregoing
agreements).
"CODE": the Uniform Commercial Code as from time to time in effect in
the State of New York.
"COLLATERAL": as defined in Section 3.
"COLLATERAL ACCOUNT": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
"CONTRACTS" with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same
<PAGE> 7
3
may from time to time be amended, supplemented or otherwise modified,
including, without limitation, (i) all rights of such Grantor to receive
moneys due and to become due to it thereunder or in connection therewith,
(ii) all rights of such Grantor to damages arising thereunder and (iii) all
rights of such Grantor to perform and to exercise all remedies thereunder.
"COPYRIGHTS": (i) all United States copyrights, whether published or
unpublished (including, without limitation, those listed in SCHEDULE 6),
all United States registrations and recordings thereof, and all
applications in connection therewith, including, without limitation, all
registrations, recordings and applications in the United States Copyright
Office, and (ii) all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
SCHEDULE 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.
"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof.
"GUARANTOR OBLIGATIONS": with respect to any Guarantor, the collective
reference to (i) the Borrower Obligations and (ii) all obligations and
liabilities of such Guarantor which may arise under or in connection with
this Agreement or any other Loan Document to which such Guarantor is a
party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to
the Administrative Agent or to the Lenders that are required to be paid by
such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).
"GUARANTORS": the collective reference to each Grantor other than the
Borrowers.
"HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps or
collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies, including, without limitation,
all Interest Rate Protection Agreements and Permitted Hedging Arrangements
with respect to currency exchange rates.
<PAGE> 8
4
"INTELLECTUAL PROPERTY": the collective reference to the Copyrights,
the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks
and the Trademark Licenses.
"INTERCOMPANY NOTE": any promissory note evidencing loans made by any
Grantor to any Borrower or any Subsidiary.
"ISSUERS": the collective reference to the Persons identified on
SCHEDULE 2 as the issuers of the Pledged Stock.
"MAKERS": the collective reference to the Persons identified on
SCHEDULE 2 as the makers of the Pledged Notes.
"OBLIGATIONS": (i) in the case of each Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"PATENTS": (i) all letters patent of the United States, all reissues
and extensions thereof, including, without limitation, any of the foregoing
referred to in SCHEDULE 6, and (ii) all applications for letters patent of
the United States and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any of the
foregoing referred to in SCHEDULE 6.
"PATENT LICENSE": all agreements providing for the grant by or to any
Grantor of any right to manufacture, use or sell any invention covered by a
Patent, including, without limitation, any of the foregoing referred to in
SCHEDULE 6.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, all
Intercompany Notes at any time issued to any Pledgor and all other
promissory notes issued to or held by any Grantor (other than promissory
notes issued in connection with extensions of trade credit by any Grantor
in the ordinary course of business).
"PLEDGED SECURITIES": the collective reference to the Pledged Notes
and the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever in respect of the Capital Stock of any Issuer that
may be issued or granted to, or held by, any Grantor while this Agreement
is in effect (PROVIDED that in no event shall any Grantor be required to
pledge more than 65% of the Capital Stock of any foreign issuer pursuant to
this Agreement).
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the
date
<PAGE> 9
5
hereof and, in any event, shall include, without limitation, all dividends
or other income from the Pledged Securities, collections thereon or
distributions or payments with respect thereto.
"SECURED PARTIES": the collective reference to the Administrative
Agent, the Lenders (including, without limitation, the Issuing Lender) and
any Affiliate of any Lender which has entered into a Hedge Agreement with
any Borrower or any Subsidiary.
"SECURITIES ACT": the Securities Act of 1933, as amended from time to
time.
"TRADEMARKS": (i) all United States trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers, and
all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any political subdivision thereof, or otherwise, including,
without limitation, any of the foregoing referred to in SCHEDULE 6, and
(ii) all renewals thereof.
"TRADEMARK LICENSE": any agreement providing for the grant by or to
any Grantor of any right to use any Trademark, including, without
limitation, any of the foregoing referred to in SCHEDULE 6.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Annex references are to this Agreement
unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the
ratable benefit of the Secured Parties and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrowers when due
<PAGE> 10
6
(whether at the stated maturity, by acceleration or otherwise) of the Borrower
Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any other Secured Party
hereunder.
(d) The guarantee contained in this Section 2 shall remain in full force
and effect until the earlier to occur of (i) the first date on which all the
Borrower Obligations and the obligations of each Guarantor under the guarantee
contained in this Section 2 shall have been satisfied by payment in full, no
Letter of Credit shall be outstanding and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrowers may be free from any Borrower Obligations or (ii) as to any
Guarantor, the sale or other disposition of all of the Capital Stock of such
Guarantor permitted under subsection 8.6 of the Credit Agreement and the release
of such Guarantor from its Guarantee in accordance with subsection 10.11 of the
Credit Agreement.
(e) No payment made by any Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any other Secured Party from any Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Borrower Obligations or any payment
received or collected from such Guarantor in respect of the Borrower
Obligations), remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the earlier to occur of (i) the
first date on which the Borrower Obligations are paid in full, no Letter of
Credit shall be outstanding and the Commitments are terminated or (ii) the sale
or other disposition of all of the Capital Stock of such Guarantor permitted
under subsection 8.6 of the Credit Agreement and the release of such Guarantor
from its Guarantee in accordance with subsection 10.11 of the Credit Agreement.
2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the extent
that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
<PAGE> 11
7
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the other Secured Parties, and
each Guarantor shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
2.3 NO SUBROGATION. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any other Secured Party, no Guarantor shall be entitled
to be subrogated to any of the rights of the Administrative Agent or any other
Secured Party against any Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by the Administrative Agent or any
other Secured Party for the payment of the Borrower Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from any
Borrower or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent and the other
Secured Parties by the Borrowers on account of the Borrower Obligations are paid
in full, no Letter of Credit shall be outstanding and the Commitments are
terminated. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Borrower Obligations shall not
have been paid in full, such amount shall be held by such Guarantor in trust for
the Administrative Agent and the other Secured Parties, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Administrative Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if
required), to be applied against the Borrower Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any other Secured Party may be
rescinded by the Administrative Agent or such other Secured Party and any of the
Borrower Obligations continued, and the Borrower Obligations, or the liability
of any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
other Secured Party, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Majority Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any other Secured Party
for the payment
<PAGE> 12
8
of the Borrower Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any other Secured Party shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Borrower Obligations or for the guarantee
contained in this Section 2 or any property subject thereto.
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any other Secured Party upon the guarantee contained in this Section 2 or
acceptance of the guarantee contained in this Section 2; the Borrower
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon the guarantee contained in this Section 2; and all dealings between any
Borrower and any of the Guarantors, on the one hand, and the Administrative
Agent and the other Secured Parties, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 2. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrowers or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment. Each Guarantor hereby waives, to the extent it may legally
do so, any and all defenses that it may have arising out of or in connection
with any and all of the following: (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Administrative
Agent or any other Secured Party, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by any Borrower against the Administrative Agent or
any other Secured Party, (c) any change in the time, place, manner or place of
payment, amendment, or waiver or increase in the Obligations, (d) any exchange,
taking, or release of Collateral, (e) any change in the corporate structure or
existence of any Borrower, (f) any application of Collateral to Obligations or
(g) any other circumstance whatsoever (with or without notice to or knowledge of
such Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of any Borrower for the Borrower
Obligations, or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance. When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any other Secured Party may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against any Borrower, any other Guarantor or any other
Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from any
Borrower, any other Guarantor or any other Person or to
<PAGE> 13
9
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of any Borrower, any other Guarantor or any
other Person or any such collateral security, guarantee or right of offset,
shall not relieve any Guarantor of any obligation or liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent or any other Secured
Party against any Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
2.6 REINSTATEMENT. The guarantee contained in this Section 2 shall continue
to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Borrower Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any other
Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, any Borrower or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
2.7 PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 425
Lexington Avenue, 7th Floor, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent, and
hereby grants to the Administrative Agent, for the ratable benefit of the
Secured Parties, a security interest in, all of the following property now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest
(collectively, the "COLLATERAL"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations of such Grantor:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
<PAGE> 14
10
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all books and records pertaining to any of the foregoing; and
(l) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing;
PROVIDED, HOWEVER that to the extent that the grant by such Grantor of a
security interest pursuant to this Agreement in its right, title and interest in
any Contracts or any General Intangibles or Copyright Licenses, Patent Licenses
or Trademark Licenses arising under such Contracts is prohibited by such
Contracts without the consent of any other party thereto, would give any other
party to such Contracts the right to terminate its obligations thereunder, or is
permitted with consent if all necessary consents to such grant of a security
interest have not been obtained from the other parties thereto (it being
understood that the foregoing shall not be deemed to obligate such Grantor to
obtain such consents), then a security interest in such right, title and
interest shall not be granted pursuant to this Agreement; PROVIDED, FURTHER that
the foregoing limitation shall not affect, limit, restrict or impair the grant
by such Grantor of a security interest pursuant to this Agreement in any Account
or any money or other amounts due or to become due under any such Contracts.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrowers thereunder, each Grantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. (a) In the case of each Guarantor,
the representations and warranties set forth in Section 5 of the Credit
Agreement as they relate to such Guarantor or to the Loan Documents to which
such Guarantor is a party or to the Transaction Documents to which such
Guarantor is a party, each of which is hereby incorporated herein by reference,
are true and correct, and the Administrative Agent and each other Secured Party
shall be entitled to rely on each of them as if they were fully set forth
herein; PROVIDED that each reference in each
<PAGE> 15
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such representation and warranty to any Borrower's knowledge shall, for the
purposes of this Section 4.1(a), be deemed to be a reference to such Guarantor's
knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest granted to the
Administrative Agent, for the ratable benefit of the Secured Parties, pursuant
to this Agreement and the other Liens permitted to exist on the Collateral by
the Credit Agreement, such Grantor owns each item of the Collateral free and
clear of any and all Liens or claims of others. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of
record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, pursuant
to this Agreement or as are permitted by the Credit Agreement or for which
termination statements will be delivered on the Closing Date.
4.3 PERFECTED FIRST PRIORITY LIENS. Except with respect to (x) security
interests in any Intellectual Property, to the extent that such security
interests cannot be perfected by the filing of financing statements under the
Uniform Commercial Code or by the filing and acceptance thereof in the United
States Patent and Trademark Office or the United States Copyright Office or (y)
security interests in any Intellectual Property in respect of which an interest
has been acquired after the date hereof, to the extent that the filings and
other actions specified in SCHEDULE 3 have not been completed (this clause not
being deemed to constitute a waiver of the Grantor's obligations hereunder to
complete such actions), the security interests granted pursuant to this
Agreement (a) upon completion of the filings and other actions specified on
SCHEDULE 3 (which, in the case of all filings and other documents referred to on
said Schedule, have been delivered to the Administrative Agent in completed and
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Administrative Agent, for the ratable benefit of
the Secured Parties, as collateral security for the Obligations of such Grantor,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor
and (b) are prior to all other Liens on the Collateral in existence on the date
hereof except for (i) unrecorded Liens permitted by the Credit Agreement which
have priority over the Liens on the Collateral by operation of law and (ii)
Liens described on SCHEDULE 8.3(h) TO THE CREDIT AGREEMENT.
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's jurisdiction
of organization and the location of such Grantor's chief executive office or
sole place of business are specified on SCHEDULE 4.
4.5 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on SCHEDULE
5.
4.6 FARM PRODUCTS. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
<PAGE> 16
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4.7 PLEDGED SECURITIES. (a) The shares of Pledged Stock pledged by such
Grantor hereunder constitute (i) in the case of each domestic Issuer, all the
issued and outstanding shares of all classes of the Capital Stock of each such
domestic Issuer owned by such Grantor and (ii) in the case of each foreign
Issuer, such percentage (not more than 65%) as is specified on SCHEDULE 2 of all
the issued and outstanding shares of all classes of the Capital Stock of each
such foreign Issuer.
(b) All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Securities pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.
4.8 ACCOUNTS. (a) No amount payable to such Grantor under or in connection
with any Account is evidenced by any Instrument or Chattel Paper which has not
been delivered to the Administrative Agent.
(b) None of the obligors on any Accounts is a Governmental Authority.
(c) The amounts represented by such Grantor to the Lenders from time to
time as owing to such Grantor in respect of the Accounts will at such times be
accurate.
4.9 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all material Intellectual
Property owned by such Grantor in its own name on the date hereof.
(b) Except as set forth in SCHEDULE 6, to the best of such Grantor's
knowledge, each Copyright, Patent and Trademark is on the date hereof valid,
subsisting, unexpired, enforceable and has not been abandoned.
(c) Except as set forth in SCHEDULE 6, none of the Copyrights, Patents or
Trademarks is on the date hereof the subject of any licensing or franchise
agreement.
(d) To the best of such Grantor's knowledge, no holding, decision or
judgment has been rendered by any Governmental Authority which would limit,
cancel or question the validity of any Copyright, Patent or Trademark in any
respect that could reasonably be expected to have a Material Adverse Effect.
<PAGE> 17
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(e) No action or proceeding is pending on the date hereof (i) seeking to
limit, cancel or question the validity of any Copyright, Patent or Trademark, or
(ii) which, if adversely determined, would have a material adverse effect on the
value of any Copyright, Patent or Trademark, or the Grantor's ownership thereof.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and the
other Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have terminated:
5.1 COVENANTS IN CREDIT AGREEMENT. In the case of each Guarantor, such
Guarantor shall take, or shall refrain from taking, as the case may be, each
action that is necessary to be taken or not taken, as the case may be, so that
no Default or Event of Default is caused by the failure to take such action or
to refrain from taking such action by such Guarantor or any of its Subsidiaries.
5.2 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, such Instrument or Chattel Paper shall be promptly
delivered to the Administrative Agent, duly indorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement.
5.3 MAINTENANCE OF INSURANCE. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as are usually insured against in the same general area by companies
engaged in the same or similar business and (ii) insuring such Grantor, the
Administrative Agent and the other Secured Parties against liability for
personal injury and property damage relating to such Inventory and Equipment,
such policies to be in such form and amounts and having such coverage as are
usually insured against in the same general area by companies engaged in the
same or similar business.
(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof, (ii) name the Administrative Agent as an additional insured
party or loss payee, (iii) include deductibles consistent with past practice and
(iv) be reasonably satisfactory in all other respects to the Administrative
Agent.
(c) The Borrowers shall deliver to the Administrative Agent reports of one
or more reputable insurance brokers of the individual insurance companies with
respect to such insurance during the month of March in each calendar year and
such
<PAGE> 18
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supplemental reports with respect thereto as the Administrative Agent may from
time to time reasonably request.
5.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION. (a)
Such Grantor shall maintain the security interest created by this Agreement as a
perfected security interest having at least the priority described in Section
4.3 and shall defend such security interest against the claims and demands of
all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the other
Secured Parties from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby.
5.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except upon 30
days' prior written notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to SCHEDULE 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5;
<PAGE> 19
15
(ii) change the location of its chief executive office or sole place
of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.7 NOTICES. Such Grantor will advise the Administrative Agent promptly, in
reasonable detail, of:
(a) any Lien of which such Grantor obtains actual knowledge (other than
security interests created hereby or Liens permitted under the Credit Agreement)
on any of the Collateral which would adversely affect the ability of the
Administrative Agent to exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be expected
to have a material adverse effect on the aggregate value of the Collateral or on
the security interests created hereby.
5.8 PLEDGED SECURITIES. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the other Secured Parties, hold the same in trust
for the Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (PROVIDED that in no event shall such Grantor be
required to pledge more than 65% of the Capital Stock of any foreign issuer
pursuant to this Agreement). Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer or Maker shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall,
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until such money or property is paid or delivered to the Administrative Agent,
hold such money or property in trust for the Secured Parties, segregated from
other funds of such Grantor, as additional collateral security for the
Obligations.
(b) Without the prior written consent of the Administrative Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Pledged
Stock issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Stock issued by it and (iii) the terms of Sections 6.3(c)
and 6.7 shall apply to it, MUTATIS MUTANDIS, with respect to all actions that
may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Pledged Stock issued by it.
5.9 ACCOUNTS. (a) Other than in the ordinary course of business, such
Grantor will not (i) grant any extension of the time of payment of any Account,
(ii) compromise or settle any Account for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Account, (iv) allow any credit or discount whatsoever on any Account or (v)
amend, supplement or modify any Account in any manner that could adversely
affect the value thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 10% of the aggregate amount of
the then outstanding Accounts.
5.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or through
licensees) will (i) use each material Trademark on each and every trademark
class of goods applicable to its then current line as reflected in its then
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) employ such Trademark with the
<PAGE> 21
17
appropriate notice of registration, if applicable, (iv) not adopt or use any
mark which is confusingly similar or a colorable imitation of any such Trademark
unless the Administrative Agent, for the ratable benefit of the Secured Parties,
shall obtain a perfected security interest in such mark pursuant to this
Agreement, and (v) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby any such Trademark may become
invalidated where such act or failure to act could reasonably be expected to
have a Material Adverse Effect.
(b) Such Grantor will not do any act, or omit to do any act, whereby any
Patent may become abandoned or dedicated where such abandonment or dedication
could reasonably be expected to have a Material Adverse Effect.
(c) Such Grantor (either itself or through licensees) (i) will employ each
material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the material Copyrights may become invalidated. Such Grantor
will not (either itself or through licensees) do any act whereby any material
portion of the material Copyrights may become injected into the public domain.
(d) Such Grantor will notify the Administrative Agent immediately if it
knows, or has reason to know, that any application or registration relating to
any material Patent or material Trademark may become abandoned or dedicated, or
of any adverse determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or any court or tribunal in the
United States) regarding such Grantor's ownership of any material Patent or
material Trademark or its right to register the same or to keep and maintain the
same.
(e) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Patent or Trademark with the United States Patent and Trademark Office, such
Grantor shall report such filing to the Administrative Agent within 45 days
after the last day of the fiscal quarter in which such filing occurs. Upon the
request of the Administrative Agent, such Grantor shall execute and deliver any
and all agreements, instruments, documents, and papers as the Administrative
Agent may request to evidence the Administrative Agent's and the Secured
Parties' security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
(f) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Copyright with the United States Copyright Office, such Grantor shall report
such filing to the Administrative Agent within 45 days after the last day of the
fiscal quarter in which such filing occurs. Upon the request of the
Administrative Agent, such Grantor shall execute and deliver any and all
agreements, instruments, documents, and papers as
<PAGE> 22
18
the Administrative Agent may request to evidence the Administrative Agent's and
the Secured Parties' security interest in any Copyright, Patent or Trademark and
the goodwill and general intangibles of such Grantor relating thereto or
represented thereby.
(g) Such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) and to maintain each
registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability where the failure to do so would result in a Material
Adverse Effect.
(h) In the event that any material Copyright, Patent or Trademark is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Copyright, Patent or Trademark and (ii) if such
Copyright, Patent or Trademark is of material economic value, promptly notify
the Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 CERTAIN MATTERS RELATING TO ACCOUNTS. (a) At any time and from time to
time after the occurrence and during the continuance of an Event of Default, the
Administrative Agent shall have the right to make test verifications of the
Accounts in any manner and through any medium that it reasonably considers
advisable, and each Grantor shall furnish all such assistance and information as
the Administrative Agent may require in connection with such test verifications.
At any time and from time to time after the occurrence and during the
continuance of an Event of Default, upon the Administrative Agent's request and
at the expense of the relevant Grantor, such Grantor shall cause independent
public accountants or others satisfactory to the Administrative Agent to furnish
to the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts.
(b) The Administrative Agent hereby authorizes each Grantor to collect such
Grantor's Accounts and the Administrative Agent may curtail or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Accounts, when collected by any Grantor, (i) shall be forthwith (and, in any
event, within three Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained
<PAGE> 23
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under the sole dominion and control of the Administrative Agent, subject to
withdrawal by the Administrative Agent for the account of the Secured Parties
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Administrative Agent and the other Secured
Parties, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Accounts shall be accompanied by a report identifying in reasonable
detail the nature and source of the payments included in the deposit.
(c) At any time and from time to time after the occurrence and during the
continuance of an Event of Default, at the Administrative Agent's request, each
Grantor shall deliver to the Administrative Agent all original and other
documents evidencing, and relating to, the agreements and transactions which
gave rise to the Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Administrative Agent in its own name or in the name of others may at any time
and from time to time after the occurrence and during the continuance of an
Event of Default communicate with obligors under the Accounts and parties to the
Contracts (in each case, to the extent constituting Collateral) to verify with
them to the Administrative Agent's satisfaction the existence, amount and terms
of any Receivables or Contracts.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Accounts and parties to the Contracts (in each case, to
the extent constituting Collateral) that such Accounts and the Contracts have
been assigned to the Administrative Agent, for the ratable benefit of the
Secured Parties, and that payments in respect thereof shall be made directly to
the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Administrative Agent or any other
Secured Party of any payment relating thereto, nor shall the Administrative
Agent or any other Secured Party be obligated in any manner to perform any of
the obligations of any Grantor under or pursuant to any Account (or any
agreement giving rise thereto) to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
6.3 PLEDGED STOCK. (a) Unless an Event of Default shall have occurred and
be continuing and the Administrative Agent shall have given notice to the
relevant
<PAGE> 24
20
Grantor of the Administrative Agent's intent to exercise its corresponding
rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive
all cash dividends paid in respect of the Pledged Stock and all payments made in
respect of the Pledged Notes, in each case paid in the normal course of business
of the relevant Issuer or Maker and consistent with past practice, to the extent
permitted in the Credit Agreement, and to exercise all voting and corporate
rights with respect to the Pledged Stock; PROVIDED, HOWEVER, that no vote shall
be cast or corporate right exercised or other action taken which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Stock and make application thereof to the Obligations in
such order as the Administrative Agent may determine, and (ii) any or all of the
Pledged Stock shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x)
all voting, corporate and other rights pertaining to such Pledged Stock at any
meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y)
any and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by any Grantor or the
Administrative Agent of any right, privilege or option pertaining to such
Pledged Stock, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Stock with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine), all without liability except to account for
property actually received by it, but the Administrative Agent shall have no
duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer or Maker of
any Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that (x)
states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
or Maker shall be fully protected in so complying, and (ii) unless otherwise
expressly permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.
6.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In addition to the
rights of the Administrative Agent and the other Secured Parties specified in
Section
<PAGE> 25
21
6.1 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, and the Administrative Agent shall have instructed any Grantor to
do so, all Proceeds received by such Grantor consisting of cash, checks and
other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the other Secured Parties, segregated from other funds
of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned
over to the Administrative Agent in the exact form received by such Grantor
(duly indorsed by such Grantor to the Administrative Agent, if required). All
Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral
Account (or by such Grantor in trust for the Administrative Agent and the other
Secured Parties) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.
6.5 APPLICATION OF PROCEEDS. At such intervals as may be agreed upon by the
Borrowers and the Administrative Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Administrative Agent's election,
the Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same.
6.6 CODE AND OTHER REMEDIES. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code or any other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Administrative Agent or any other
Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative Agent
or any other Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in any Grantor, which right or equity is hereby waived
or released.
<PAGE> 26
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Each Grantor further agrees, at the Administrative Agent's request, to assemble
the Collateral and make it available to the Administrative Agent at places which
the Administrative Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
other Secured Parties hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent may elect, and only after
such application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to any Grantor. To the extent permitted by applicable law, each Grantor
waives all claims, damages and demands it may acquire against the Administrative
Agent or any other Secured Party arising out of the exercise by them of any
rights hereunder, except to the extent arising as a result of the gross
negligence or willful misconduct of the Administrative Agent or such other
Secured Party. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other disposition.
6.7 REGISTRATION RIGHTS. (a) If the Administrative Agent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section
6.6, and if in the opinion of the Administrative Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the relevant Grantor will
cause the Issuer thereof to (i) execute and deliver, and use its best efforts to
cause the directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions
<PAGE> 27
23
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay a sale of any of the Pledged Stock for the period
of time necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and
in compliance with any and all other applicable Requirements of Law. Each
Grantor further agrees that a breach of any of the covenants contained in this
Section 6.7 will cause irreparable injury to the Administrative Agent and the
Lenders, that the Administrative Agent and the Lenders have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 6.7 shall be specifically enforceable against
such Grantor, and such Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred under the Credit Agreement.
6.8 DEFICIENCY. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any other Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a) Each
Grantor hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:
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(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or with respect to
any other Collateral whenever payable;
(ii) in the case of any Copyright, Patent or Trademark, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent's and
the Lenders' security interest in such Copyright, Patent or Trademark and
the goodwill and general intangibles of such Grantor relating thereto or
represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (iii) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (vi) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Administrative Agent
may deem appropriate; (vii) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright,
Patent or Trademark pertains), throughout the world for such term or terms,
on such conditions, and in such manner, as the Administrative Agent shall
in its sole discretion determine; and (viii) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though the Administrative Agent
were the absolute owner thereof for all purposes, and do, at the
Administrative Agent's option and such Grantor's
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expense, at any time, or from time to time, all acts and things which
the Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Administrative Agent's and the
other Secured Parties' security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor
might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
7.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with similar
property for its own account. Neither the Administrative Agent, any other
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the other Secured Parties hereunder are solely to protect the Administrative
Agent's and the other Secured Parties' interests in the Collateral and shall not
impose any duty upon the Administrative Agent or any other Secured Party to
exercise any such powers. The Administrative Agent and the other Secured Parties
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
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7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
Code and any other applicable law, each Grantor authorizes the Administrative
Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
7.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement or any amendment, supplement or other modification of this
Agreement shall, as between the Administrative Agent and the Secured Parties, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Administrative
Agent, PROVIDED that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
8.2 NOTICES. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 11.2 of the Credit Agreement; PROVIDED that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on SCHEDULE 1.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES.
Neither the Administrative Agent nor any other Secured Party shall by any act
(except by a written instrument pursuant to Section 8.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
other Secured Party, any right, power or privilege hereunder
<PAGE> 31
27
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any other Secured Party of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy which
the Administrative Agent or such other Secured Party would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) Each Guarantor agrees to pay
or reimburse each Secured Party and the Administrative Agent for all their
respective costs and expenses incurred in collecting against such Guarantor
under the guarantee contained in Section 2 or otherwise enforcing any rights
under this Agreement and the other Loan Documents to which such Guarantor is a
party, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Secured
Party and of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Guarantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement (collectively, the
"INDEMNIFIED LIABILITIES") to the extent the Borrowers would be required to do
so pursuant to Section 11.5 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Secured Parties and their successors and assigns;
PROVIDED that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
8.6 SET-OFF. Each Guarantor hereby irrevocably authorizes the
Administrative Agent and each other Secured Party at any time and from time to
time without notice to such Guarantor, any other Guarantor or any Borrower, any
such notice
<PAGE> 32
28
being expressly waived by each Guarantor and by the Borrowers, upon any amount
remaining unpaid after it becomes due and payable by such Guarantor hereunder to
set-off and appropriate and apply against any such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Administrative Agent or such other Secured Party to or for
the credit or the account of such Guarantor, or any part thereof in such amounts
as the Administrative Agent or such other Secured Party may elect. The
Administrative Agent and each other Secured Party shall notify such Guarantor
promptly of any such set-off and the application made by the Administrative
Agent or such other Secured Party of the proceeds thereof; PROVIDED that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent and each other Secured Party
under this Section 8.6 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Administrative Agent or
such other Secured Party may have.
8.7 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
8.10 INTEGRATION. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Administrative Agent and the other Secured
Parties with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
other Secured Party relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor hereby irrevocably
and unconditionally:
<PAGE> 33
29
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Guarantor at its address referred to in Section 8.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any exemplary, punitive or consequential damages.
8.13 ACKNOWLEDGEMENTS. Each Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any other Secured Party has
any fiduciary relationship with or duty to any Guarantor arising out of or
in connection with this Agreement or any of the other Loan Documents, and
the relationship between the Guarantors, on the one hand, and the
Administrative Agent and the Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Secured Parties or among the Guarantors and the Secured Parties.
8.14 WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
<PAGE> 34
30
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
8.15 ADDITIONAL GRANTORS. Each new domestic Subsidiary of any Borrower that
is required to become a party to this Agreement pursuant to Section 7 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.16 RELEASES. (a) At such time as the Revolving Credit Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) In connection with the sale or other disposition of all of the Capital
Stock of any Guarantor or the sale or other disposition of Collateral permitted
under subsection 8.6 of the Credit Agreement and the release of such Guarantor
from its Guarantee or the release of the Collateral subject to such sale or
other disposition, the relevant Borrower shall deliver to the Administrative
Agent, at least ten Business Days prior to the date of the proposed release, a
written request for release identifying such Guarantor or the relevant
Collateral and the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith, together
with a certification by such Borrower stating that such transaction is in
compliance with the Credit Agreement and the other Loan Documents.
<PAGE> 35
31
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.
COLE VISION CORPORATION
By: _______________________________
Title:
THINGS REMEMBERED, INC.
By: _______________________________
Title:
COLE GIFT CENTERS, INC.
By: _______________________________
Title:
PEARLE, INC.
By: _______________________________
Title:
PEARLE SERVICE CORPORATION
By: _______________________________
Title:
BAY CITIES OPTICAL COMPANY
By: _______________________________
Title:
WESTERN STATES OPTICAL, INC.
By: ________________________________
Title:
<PAGE> 36
33
COLE VISION SERVICES, INC.
By: ________________________________
Title:
COLE MANAGEMENT SERVICES, INC.
By: _______________________________
Title:
COLE LENS SUPPLY, INC.
By: ________________________________
Title:
PEARLE VISIONCARE, INC.
By: ________________________________
Title:
PEARLE VISION MANAGED CARE - HMO
OF TEXAS, INC.
By: ________________________________
Title:
<PAGE> 37
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the "ADDITIONAL
GRANTOR"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative
agent (in such capacity, the "ADMINISTRATIVE AGENT") for the banks and other
financial institutions (the "LENDERS") from time to time parties to the Credit
Agreement referred to below and the other Secured Parties hereto (as defined
below). All capitalized terms not defined herein shall have the meaning ascribed
to them in such Credit Agreement.
W I T N E S S E T H :
---------------------
WHEREAS, Cole Vision Corporation, Things Remembered, Inc., Cole Gift
Centers, Inc., Pearle, Inc. and Pearle Service Corporation (collectively, the
"BORROWERS"), the Lenders and the Administrative Agent, have entered into a
Credit Agreement, dated as of November __, 1996 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, in connection with the Credit Agreement, the Borrowers and certain
of their Affiliates (other than the Additional Grantor) have entered into the
Guarantee and Collateral Agreement, dated as of November __, 1996 (as amended,
supplemented or otherwise modified from time to time, the "GUARANTEE AND
COLLATERAL AGREEMENT") in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties (as defined in the Guarantee and Collateral
Agreement);
WHEREAS, the Credit Agreement requires the Additional Grantor to become a
party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. GUARANTEE AND COLLATERAL AGREEMENT. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.15 of the
Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and
Collateral Agreement as a Grantor thereunder with the same force and effect as
if originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedules ____________ to the Guarantee
and Collateral Agreement. The Additional Grantor hereby represents and warrants
that each of the representations and warranties contained in Section 4 of the
Guarantee and Collateral
<PAGE> 38
2
Agreement is true and correct on and as the date hereof (after giving effect to
this Assumption Agreement) as if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By: ______________________________
Title:
