SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 21, 1999
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(Date of Report)
December 11, 1998
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(Date of earliest event reported)
POLAROID CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-4085
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(Commission File Number)
04-1734655
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(IRS Employer Identification No.)
784 Memorial Drive, Cambridge, Massachusetts 02139
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(Address of principal executive offices) (Zip Code)
(781) 386-2000
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
On December 11, 1998, Polaroid Corporation entered into a $350,000,000 Amended
and Restated Credit Agreement among the lenders who were a party to the Credit
Agreement dated as of March 19, 1997.
On January 21, 1999, Polaroid Corporation issued a press release which announced
the 1998 fourth quarter and full year results. A copy of the press release is
attached hereto as exhibit 99.
Item 7. Exhibits
Exhibit 10.1 $350,000,000 Amended and Restated Credit
Agreement dated as of December 11, 1998
among Polaroid Corporation and
Morgan Guaranty Trust Company of New York,
as Agent, and the other lenders Party thereto.
Exhibit 99.1 Press Release dated January 21, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POLAROID CORPORATION
By /s/JUDITH G. BOYNTON
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Name JUDITH G. BOYNTON
Title: Executive Vice President
and Chief Financial Officer
Dated: January 21, 1999
Exhibit 10.1
[EXECUTION COPY]
$350,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
December 11, 1998
among
Polaroid Corporation
The Lenders Party Hereto
Morgan Guaranty Trust Company of New York,
as Administrative Agent and Collateral Agent
and
BankBoston, N.A.
as Co-Agent
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Arranged by
J.P. Morgan Securities Inc.
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.......................................................................1
SECTION 1.02. Accounting Terms and Determinations..............................................18
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend..............................................................18
SECTION 2.02. Method of Borrowing..............................................................18
SECTION 2.03. Interest Rate Elections..........................................................20
SECTION 2.04. Interest Rates...................................................................21
SECTION 2.05. Fees.............................................................................22
SECTION 2.06. Optional Termination or Reduction of Commitments.................................23
SECTION 2.07. Mandatory Termination of Commitments; Maturity of Loans..........................23
SECTION 2.08. Optional Prepayments.............................................................23
SECTION 2.09. General Provisions as to Payments................................................24
SECTION 2.10. Funding Losses...................................................................25
SECTION 2.11. Computation of Interest and Fees.................................................25
SECTION 2.12. Notes............................................................................25
SECTION 2.13. Withholding Tax Exemption........................................................26
SECTION 2.14. Judgment Currency................................................................26
SECTION 2.15. Regulation D Compensation........................................................27
SECTION 2.16. Additional Guaranteed Obligations and Additional Secured Obligations.............27
SECTION 2.17. Release of Security Interests....................................................29
SECTION 2.18. Release of Subsidiary Guarantees.................................................30
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness....................................................................32
SECTION 3.02. Consequences of Effectiveness....................................................34
SECTION 3.03. Borrowings.......................................................................34
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power....................................................34
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.......................35
SECTION 4.03. Binding Effect...................................................................35
SECTION 4.04. Security Interests...............................................................35
SECTION 4.05. Financial Information; No Material Adverse Change................................35
SECTION 4.06. Litigation.......................................................................36
SECTION 4.07. Compliance with ERISA............................................................36
SECTION 4.08. Taxes............................................................................37
SECTION 4.09. Subsidiaries.....................................................................37
SECTION 4.10. No Regulatory Restrictions on Borrowing..........................................37
SECTION 4.11. Compliance with Laws.............................................................37
SECTION 4.12. No Defaults......................................................................38
SECTION 4.13. Possession of Franchises, Licenses, etc..........................................38
SECTION 4.14. Full Disclosure..................................................................38
SECTION 4.15. Year 2000 Compliance.............................................................38
SECTION 4.16. Environmental Matters............................................................39
SECTION 4.17. Representations in Collateral Documents..........................................39
ARTICLE 5
COVENANTS
SECTION 5.01. Information......................................................................39
SECTION 5.02. Payment of Obligations...........................................................42
SECTION 5.03. Maintenance of Property; Insurance...............................................42
SECTION 5.04. Conduct of Business and Maintenance of Existence.................................43
SECTION 5.05. Compliance with Laws.............................................................43
SECTION 5.06. Inspection of Property, Books and Records........................................43
SECTION 5.07. Interest Coverage Ratio..........................................................44
SECTION 5.08. Debt/EBITDA Ratio; Maximum Debt..................................................44
SECTION 5.09. Consolidated Capital Expenditures................................................45
SECTION 5.10. Restricted Payments..............................................................45
SECTION 5.11. Limitation on Debt...............................................................46
SECTION 5.12. Negative Pledge..................................................................47
SECTION 5.13. Investments......................................................................48
SECTION 5.14. Sale-Leaseback Transactions......................................................49
SECTION 5.15. Mergers and Sales of Assets......................................................49
SECTION 5.16. Guarantees by Future Material Domestic Subsidiaries..............................50
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SECTION 5.17. Future Assets to Be Added to Collateral..........................................50
SECTION 5.18. Further Assurances...............................................................51
SECTION 5.19. Fiscal Year......................................................................51
SECTION 5.20. Use of Proceeds..................................................................51
SECTION 5.21. Incorporation of Any More Favorable Covenants....................................51
SECTION 5.22. Limitation on Hedging Agreements.................................................52
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default................................................................52
SECTION 6.02. Notice of Default................................................................55
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization....................................................55
SECTION 7.02. Agents and Affiliates............................................................55
SECTION 7.03. Action by Administrative Agent...................................................56
SECTION 7.04. Consultation with Experts........................................................56
SECTION 7.05. Liability of Agents..............................................................56
SECTION 7.06. Indemnification..................................................................56
SECTION 7.07. Credit Decision..................................................................57
SECTION 7.08. Resignation of Administrative Agent..............................................57
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.........................58
SECTION 8.02. Illegality.......................................................................58
SECTION 8.03. Increased Cost and Reduced Return................................................59
SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans.......................61
SECTION 8.05. Substitution of Lender...........................................................61
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices..........................................................................62
SECTION 9.02. No Waivers.......................................................................62
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.....................................62
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SECTION 9.04. Sharing of Set-offs..............................................................63
SECTION 9.05. Amendments and Waivers...........................................................63
SECTION 9.06. Successors and Assigns...........................................................65
SECTION 9.07. No Reliance on Margin Stock......................................................66
SECTION 9.08. WAIVER OF TRIAL BY JURY..........................................................67
SECTION 9.09. Submission to Jurisdiction.......................................................67
SECTION 9.10. New York Law.....................................................................67
SECTION 9.11. Confidentiality..................................................................67
SECTION 9.12. Counterparts.....................................................................67
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COMMITMENT SCHEDULE
PRICING SCHEDULE
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EXHIBIT A -- NOTE
EXHIBIT B -- OPINION OF SIMPSON THACHER & BARTLETT, SPECIAL
COUNSEL FOR THE COMPANY
EXHIBIT C -- OPINION OF THOMAS M. LEMBERG, GENERAL COUNSEL OF
THE COMPANY
EXHIBIT D -- OPINION OF BINGHAM DANA, LLP, SPECIAL MASSACHUSETTS
COUNSEL FOR THE COMPANY
EXHIBIT E -- OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
EXHIBIT F -- ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT G -- SUBSIDIARY GUARANTY AGREEMENT
EXHIBIT H -- INITIAL SUBSIDIARY GUARANTORS
EXHIBIT I -- SECURITY AGREEMENT
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CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 11, 1998
among POLAROID CORPORATION, the LENDERS party hereto, MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Administrative Agent and Collateral Agent, and
BANKBOSTON, N.A., as Co-Agent.
W I T N E S S E T H :
WHEREAS, the Company, the Banks referred to therein, Morgan Guaranty
Trust Company of New York, as Agent, and BankBoston, N.A. (f/k/a The First
National Bank of Boston), as Co-Agent, are parties to a Credit Agreement dated
as of March 19, 1997, as heretofore amended;
WHEREAS, the parties hereto desire to amend and restate said Credit
Agreement as provided in this Agreement and, upon satisfaction of the conditions
specified in Section 3.01, said Credit Agreement will be so amended and
restated;
WHEREAS, the parties hereto wish to cause the Company's obligations
under this Agreement to be guaranteed by its Material Domestic Subsidiaries;
WHEREAS, the parties hereto wish (i) to cause the Company's
obligations under this Agreement to be secured by the Company's receivables, its
domestic inventory and certain related assets and rights and (ii) to cause the
guaranties of such obligations by its Material Domestic Subsidiaries to be
secured by their respective receivables, domestic inventories and certain
related assets and rights, all as provided in the Collateral Documents referred
to below; and
WHEREAS, the Company may wish to cause certain other obligations of
the Company to be guaranteed and secured in the same manner as its obligations
hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Additional Loans" has the meaning set forth in Section 2.16(a).
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"Administrative Agent" means Morgan Guaranty Trust Company of New
York, in its capacity as administrative agent for the Lenders hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each Lender,
an administrative questionnaire in the form submitted to such Lender by the
Administrative Agent, completed by such Lender and submitted to the
Administrative Agent (with a copy to the Company).
"Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling, controlled by or under common control with the Company.
As used in this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agents" means the Administrative Agent and the Collateral Agent.
"Agreement", when used with reference to this Agreement, means this
Amended and Restated Credit Agreement dated as of December 11, 1998, as it may
be amended from time to time.
"Applicable Lending Office" means, with respect to any Lender, (i)
in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Arranger" means J.P. Morgan Securities Inc.
"Assignee" has the meaning set forth in Section 9.06(c).
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means at any time a Loan outstanding hereunder that
bears interest at such time at the Base Rate pursuant to a Notice of Borrowing
or Notice of Interest Rate Election or pursuant to Section 2.03(d) or Article 8.
"Base Rate Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Borrowing" means (i) the aggregation of Loans made or to be made to
the Company pursuant to Article 2 on the same day, all of which Loans are of the
same
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Type (subject to Article 8) and, in the case of Euro-Dollar Loans, have the same
initial Interest Period or (ii) if the context so requires, the borrowing of
such Loans. A Borrowing is a Base Rate Borrowing if such Loans are Base Rate
Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans.
"Change in Control" means:
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 35% or more of the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors, but excluding, for this
purpose, any such acquisition by (i) the Company or any of its
subsidiaries, (ii) any other Person of voting power pursuant to a
revocable proxy, or (iii) any corporation with respect to which,
following such acquisition, more than 65% of the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by individuals and
entities who were the beneficial owners of voting securities of the
Company immediately prior to such acquisition, in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors; or
(b) individuals who, as of November 30, 1998, constituted the
Board of Directors of the Company (as of November 30, 1998, the
"Incumbent Board") cease for any reason to constitute at least a
majority of such Board; provided that any individual becoming a
director subsequent to November 30, 1998, whose election, or
nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act); or
(c) approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect
to which all or substantially all the individuals and entities who
were the respective beneficial owners of the voting securities of
the Company immediately prior to such reorganization, merger or
consolidation do not, following such
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reorganization, merger or consolidation, beneficially own, directly
or indirectly, more than 65% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such
reorganization, merger or consolidation; or
(d) the sale or other disposition of all or substantially all the
assets of the Company in one transaction or series of related
transactions.
"Closing Date" has the meaning specified in Section 3.01.
"Co-Agent" means BankBoston, N.A., in its capacity as Co-Agent
hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Collateral" has the meaning set forth in Section 1 of the Security
Agreement.
"Collateral Agent" means Morgan Guaranty Trust Company of New York,
in its capacity as Collateral Agent for the holders of the Secured Obligations
under the Collateral Documents, and its successors in such capacity.
"Collateral Documents" means the Security Agreement, the Security
Agreement Supplements and all other supplemental or additional security
agreements or similar instruments delivered pursuant hereto or thereto, in each
case as amended from time to time.
"Commitment" means (i) with respect to each Lender listed on the
Commitment Schedule, the amount set forth opposite such Lender's name on the
Commitment Schedule, (ii) with respect to any Substitute Lender, the amount of
the Commitment assumed by it pursuant to Section 8.05 and (iii) with respect to
any Assignee, the amount of the transferor Lender's Commitment assigned to it
pursuant to Section 9.06(c), in each case as such amount may be changed from
time to time pursuant to Section 2.06, 8.05 or 9.06(c).
"Commitment Schedule" means the Commitment Schedule attached
hereto.
"Company" means Polaroid Corporation, a Delaware corporation, and
its successors.
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"Company's 1997 Form 10-K" means the Company's annual report on Form
10-K for 1997, as filed with the SEC pursuant to the Exchange Act.
"Company's Third Quarter 1998 Form 10-Q" means the Company's
quarterly report on Form 10-Q for the Fiscal Quarter ended September 30, 1998,
as filed with the SEC pursuant to the Exchange Act.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures of the
Company and its Consolidated Subsidiaries for such period, as the same are or
would be set forth in a consolidated statement of cash flows of the Company and
its Consolidated Subsidiaries for such period.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of
(i) Consolidated Interest Expense;
(ii) income tax expense;
(iii) depreciation and amortization;
(iv) write-downs of Russian and other assets in 1998,
provided that the aggregate amount added to Consolidated EBITDA
pursuant to this clause (iv) shall not exceed $50,000,000; and
(v) any creation of reserves and write-downs of assets
related to a plan to restructure certain business operations adopted
at one time during the fourth Fiscal Quarter of 1998 or any Fiscal
Quarter of 1999, provided that the aggregate amount added to
Consolidated EBITDA pursuant to this clause (v) shall not exceed
$50,000,000.
For the purpose of determining Consolidated EBITDA, if any real estate gains are
reflected in Consolidated Net Income for the fourth Fiscal Quarter of 1998, such
real estate gains (up to $25,000,000 pre-tax) and the related tax effects will
be treated instead as if they were recognized in the first Fiscal Quarter of
1999 (this adjustment in timing being intended to conform to certain projections
heretofore delivered to the Lenders).
"Consolidated Interest Expense" means, for any period, the
consolidated interest expense of the Company and its Consolidated Subsidiaries
for such period.
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"Consolidated Net Debt" means, at any date, (i) all Debt of the
Company and its Consolidated Subsidiaries, determined on a consolidated basis as
of such date, less (ii) the aggregate amount of all cash and Temporary Cash
Investments of the Company and its Subsidiaries at such date (excluding any cash
and Temporary Cash Investments that have been allocated by the Company to pay
deferred compensation, or are otherwise blocked or restricted so that they may
not be used for general corporate purposes at such date).
"Consolidated Net Income" means, for any period, the consolidated
net income of the Company and its Consolidated Subsidiaries for such period.
"Consolidated Subsidiary" means, at any date, any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Company in its consolidated financial statements if such statements were
prepared as of such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations of such Person to
reimburse or repay any bank or other Person in respect of amounts paid under a
letter of credit, banker's acceptance or similar instrument (excluding any such
obligations which do not arise from a repayment of Debt and are repaid within
three Euro-Dollar Business Days after the date incurred), (vi) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person (but excluding any such Debt in excess of the book
value of such asset, unless such Debt is assumed by such Person) and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the amount of such other Person's Debt
Guaranteed thereby).
"Debt/EBITDA Ratio" means, at any time, the ratio of (i)
Consolidated Net Debt at such time to (ii) Consolidated EBITDA for the period of
four consecutive full Fiscal Quarters then most recently ended.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
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"Designated Business" means an operating division or similar
operating unit of the Company designated as a "Designated Business" in a letter
from the Company to the Administrative Agent dated December 8, 1998.
"Designated Subsidiary" means a Subsidiary designated as a
"Designated Subsidiary" for purposes of this Agreement in a letter from the
Company to the Administrative Agent dated December 8, 1998.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"Domestic Lending Office" means, as to each Lender, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Lender may hereafter designate as its Domestic
Lending Office by notice to the Company and the Administrative Agent.
"Domestic Subsidiary" means any Subsidiary that is not a Foreign
Subsidiary.
"Ebitda", when used in Section 2.18(d) with respect to any
Subsidiary Guarantor, means, for any period, the consolidated net income of such
Subsidiary Guarantor and its consolidated subsidiaries for such period plus, to
the extent deducted in determining such consolidated net income for such period,
the aggregate amount of (i) consolidated interest expense, (ii) income tax
expense and (iii) depreciation and amortization.
"Employee Stock Proceeds" means, for any period, the sum of
(i) all cash received by the Company during such period
as a result of the exercise of options to acquire the Company's
common stock granted to employees under its stock option plans; and
(ii) the lesser of (x) 6% of the U.S. domestic payroll
of the Company and its Subsidiaries for such period and (y) the fair
market value (on the date of transfer) of all common stock of the
Company transferred to employees in lieu of cash compensation for
such period pursuant to the Company's employee stock ownership
plans.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees or permits relating to the environment or to
emissions, discharges or
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releases of pollutants, contaminants, hazardous substances, materials or wastes
into the environment or otherwise relating to the treatment, storage or disposal
of hazardous substances, materials or wastes or to the remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414(b), (c) or (m) of
the Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Administrative Agent.
"Euro-Dollar Loan" means at any time a Loan outstanding hereunder
that bears interest at such time at a rate based on the London Interbank Offered
Rate pursuant to a Notice of Borrowing or Notice of Interest Rate Election.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Euro-Dollar Reserve Percentage" means, with respect to any Lender,
for any day that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement for such Lender
in respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Lender to
United States residents).
"Events of Default" has the meaning set forth in Section 6.01.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Credit Agreement" means the Credit Agreement dated as of
March 19, 1997 among the Company, the banks party thereto, Morgan Guaranty Trust
Company of New York, as Agent, and BankBoston, N.A. (f/k/a The First National
Bank of Boston), as Co-Agent, as in effect from time to time before the Closing
Date.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Administrative Agent (for its own
account) on such day on such transactions as reasonably determined by the
Administrative Agent.
"Financing Documents" means this Agreement (including the Schedules
and Exhibits hereto), the Notes, the Subsidiary Guaranty Agreements and the
Collateral Documents.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means a fiscal year of the Company.
"Foreign Subsidiary" means any Subsidiary that is organized under
the laws of a jurisdiction other than the United States or any State thereof and
no more than 20% of the sales, earnings or assets (determined on a consolidated
basis) of which are located or derived from operations in the United States.
"Funding Date" means, with respect to any Borrowing, the date on
which the Loans comprising such Borrowing are to be made, as specified in the
related Notice of Borrowing.
"GAAP" means generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes concurred
in by the Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Consolidated
Subsidiaries delivered to the Lenders.
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"Group of Loans" means, at any time, a group of Loans consisting of
(i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar
Loans having the same Interest Period at such time, provided that, if a Loan of
any particular Lender is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or Groups of Loans from
time to time as it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Obligations" means (i) all principal of all Loans
outstanding from time to time, all interest (including without limitation
Post-Petition Interest) on the Loans and all other amounts (including fees and
disbursements of counsel) now or hereafter payable by the Company pursuant to
any Financing Document, (ii) if the Company designates loans from banks or other
financial institutions as additional Guaranteed Obligations, as permitted by
Section 2.16(a), all principal of such loans, all interest (including without
limitation Post-Petition Interest) on such loans and all other amounts
(including fees and disbursements of counsel) now or hereafter payable by the
Company with respect thereto, (iii) any other obligations designated by the
Company as additional Guaranteed Obligations pursuant to Section 2.16
"Hedging Agreements" has the meaning set forth in Section 2.16(c).
"Immaterial Subsidiary" means at any time a Subsidiary that at such
time (i) does not, together with its subsidiaries (if any), have assets
(including capital stock) with an aggregate fair market value exceeding
$1,000,000 and (ii) is not performing any activity significant to the business
of the Company and its Subsidiaries, taken as a whole; provided that Polaroid
Foundation, Inc. shall be an Immaterial Subsidiary so long as substantially all
of its assets are held in trust for charitable purposes.
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"Initial Subsidiary Guarantors" means the Domestic Subsidiaries
listed on Exhibit H hereto.
"Interest Period" means, with respect to each Euro-Dollar Borrowing,
the period commencing on the date specified in the applicable Notice of
Borrowing or Notice of Interest Rate Election and ending one, two, three or six
months thereafter (or, if all Lenders agree, nine or twelve months thereafter),
as specified in such Notice; provided that:
(a) any Interest Period which would otherwise end on a
day which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last
Euro-Dollar 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, subject to clause (c) below,
end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after
the Termination Date shall end on the Termination Date.
"Investment" means (i) any investment in any Person, whether by
means of share purchase, capital contribution, loan, time deposit or otherwise,
or (ii) any acquisition of all or substantially all the assets of a going
concern business (or a portion of a going concern business); provided that the
term "Investment" shall not include any securities of or claims with respect to
any account debtor received in any compromise or settlement of any account
receivable.
"Lenders" means (i) each bank or financial institution listed on the
Commitment Schedule, (ii) each Assignee which becomes a Lender pursuant to
Section 9.06(c), (iii) each Substitute Lender which becomes a Lender pursuant to
Section 8.05 and (iv) their respective successors.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
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"Lien Grantor" has the meaning set forth in Section 1 of the
Security Agreement.
"Loan" means a loan made by a Lender pursuant to Section 2.01 of
either this Agreement or the Existing Agreement; provided that, if such loan or
loans (or portions thereof) are combined or subdivided pursuant to a Notice of
Interest Rate Election, the term "Loan" shall refer to the combined principal
amount resulting from such combination or to each of the separate principal
amounts resulting from such subdivision, as the case may be.
"London Interbank Offered Rate" means, with respect to any Interest
Period, the average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which deposits in dollars are offered
to each of the Reference Banks in the London interbank market at approximately
11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
"Long-Term Debt Rating" means at any time (i) with respect to
Moody's, its company rating of the Company at such time or, if Moody's does not
maintain a company rating of the Company at such time, the rating assigned by
Moody's at such time to the senior unsecured long-term debt securities of the
Company without third-party credit enhancement and (ii) with respect to S&P, its
corporate credit rating of the Company at such time or, if S&P does not maintain
a corporate credit rating of the Company at such time, the rating assigned by
S&P at such time to the senior unsecured long-term debt securities of the
Company without third-party credit enhancement.
"Material Adverse Effect" means (i) any material adverse effect on
the business, financial position or results of operations of the Company and its
Consolidated Subsidiaries, considered as a whole, (ii) any material adverse
effect on the validity, binding effect or enforceability of any Financing
Document or (iii) any material adverse effect on the validity, perfection or
priority of any Lien on any of the Collateral created or purportedly created
under the Collateral Documents.
"Material Domestic Subsidiary" means a Domestic Subsidiary that is
not an Immaterial Subsidiary.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
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"Moody's" means Moody's Investors Service, Inc. and its successors.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Cash Proceeds" means, with respect to any transaction
(including without limitation any Sale-Leaseback Transaction), an amount equal
to the cash received by the Company and its Subsidiaries in connection with such
transaction (including any cash proceeds of any non-cash consideration received
in such transaction) less (i) all expenses reasonably incurred by the Company
and its Subsidiaries in respect of such transaction; (ii) any capital gains
taxes payable by the Company and its Subsidiaries by reason of such transaction,
as estimated in good faith by the Company's chief financial officer or chief
accounting officer, and (iii) the principal amount of any Debt secured by the
property sold in such transaction, if and to the extent required (by a document
other than this Agreement) to be repaid by the Company or any of its
Subsidiaries in connection with such transaction.
"Notes" means promissory notes of the Company, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Company to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.03.
"Organizational Documents" means (i) with respect to any
corporation, its certificate or articles of incorporation, by-laws and other
constitutional documents, including the certificate of designation for any
series of its preferred stock, (ii) with respect to any limited liability
company, its articles of organization and operating agreement, or other
comparable documents however named, and (iii) with respect to any partnership,
its partnership agreement.
"Parent" means, with respect to any Lender, any Person controlling
such Lender.
"Participant" has the meaning set forth in Section 9.06(b).
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Subordinated Debt" means unsecured debt of the Company
(i) no part of the principal of which is required to be paid (by mandatory
sinking fund, mandatory redemption, mandatory prepayment or otherwise) before
December 31, 2002, (ii) the payment of the principal of and interest on which
and other payment obligations of the Company in respect of which are
subordinated to the prior payment in full in cash of the principal of and
interest (including Post- Petition Interest) on the Loans and all other
obligations of the Company under the Financing Documents on terms and conditions
reasonably satisfactory in form and substance to the Required Lenders and (iii)
as to which all applicable covenants (unless incorporated herein pursuant to
Section 5.21), events of default, remedies and other provisions dealing with the
relationship of such subordinated debt (and/or the holders thereof) and the debt
to which it is subordinated (and/or the holders thereof) shall be reasonably
satisfactory in form and substance to the Required Lenders.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Polaroid Obligors" means the Company and the Subsidiary Guarantors.
"Post-Petition Interest" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
reorganization or insolvency of the Company (or would accrue but for the
operation of applicable bankruptcy, reorganization or insolvency laws), whether
or not such interest is allowed or allowable as a claim in any such case,
proceeding or other action.
"Pricing Schedule" means the Pricing Schedule attached hereto.
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"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Reference Banks" means the principal London offices of ABN AMRO
Bank N.V., Morgan Guaranty Trust Company of New York and the First National Bank
of Chicago, and "Reference Bank" means any one of such Reference Banks.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having at least 51% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Company's capital stock (except dividends payable solely in
shares of its capital stock other than mandatorily redeemable preferred stock)
or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the Company's capital stock or (b) any option,
warrant or other right to acquire shares of the Company's capital stock (but not
including payments of principal, premium (if any) or interest made pursuant to
the terms of convertible debt securities prior to conversion).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of any property that
(or of any property similar to and used for substantially the same purpose as
any other property that) has been or is to be sold, assigned, transferred or
otherwise disposed of by the Company or any of its Subsidiaries to such Person
with the intention of entering into such a lease.
"SEC" means the Securities and Exchange Commission.
"Secured Obligations" has the meaning set forth in Section 1 of the
Security Agreement.
"Secured Parties" has the meaning set forth in Section 1 of the
Security Agreement.
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"Security Agreement" means a security agreement, substantially in
the form of Exhibit I hereto, between the Company, certain Subsidiary Guarantors
and the Collateral Agent, as amended and supplemented from time to time.
"Security Agreement Supplement" has the meaning set forth in Section
1 of the Security Agreement.
"Security Interests" has the meaning set forth in Section 1 of the
Security Agreement.
"Security Release Date" has the meaning set forth in Section 1 of
the Security Agreement.
"Subsidiary" means any corporation or other entity (except an
Unconsolidated Joint Venture) of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by the Company.
"Subsidiary Guarantors" means (i) the Initial Subsidiary Guarantors
and (ii) each Subsidiary that shall, at any time after the Closing Date, execute
a Subsidiary Guaranty Agreement.
"Subsidiary Guaranty" means, with respect to any Subsidiary
Guarantor, its obligations under its Subsidiary Guaranty Agreement.
"Subsidiary Guaranty Agreement" means a Subsidiary Guaranty
Agreement substantially in the form of Exhibit G hereto.
"Substitute Lender" has the meaning set forth in Section 8.05.
"Super-Majority Lenders" means at any time Lenders having at least
90% of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 90% of the aggregate unpaid
principal amount of the Loans.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated A1 or higher by S&P and P1 or higher by Moody's, (iii) demand or time
deposits with, including certificates of deposit and bankers' acceptances issued
by, any Qualifying Bank (as defined below), (iv) repurchase agreements with
respect to securities described in clause (i) above entered into with any
Qualifying Bank (or,
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to the extent that the party making such Investment has a perfected security
interest in the securities subject to such repurchase agreements, with
securities broker-dealers of nationally recognized standing), (v) debt
securities rated in one of the two highest categories by a nationally recognized
credit rating agency and (vi) in the case of Investments made by any Foreign
Subsidiary, obligations, deposits and repurchase agreements comparable to those
specified in clauses (i), (iii) and (iv) above (except that such obligations may
be issued or guaranteed by the country in which such Foreign Subsidiary is
located and such deposits and repurchase agreements may be made with comparable
banks and trust companies located in such countries), provided in each case that
such Investment matures (or permits the holder thereof at its option to require
repayment or repurchase thereof) within two years from the date of acquisition
thereof by the Company or a Subsidiary. As used in this definition, "Qualifying
Bank" means (i) any office located in the United States of any Lender that is a
bank or trust company or (ii) any office located in the United States of any
other bank or trust company (A) whose long-term debt securities are rated in one
of the three highest categories by a nationally recognized credit rating agency
or (B) which is organized under the laws of the United States or any state
thereof and has capital, surplus and undivided profits aggregating at least
$500,000,000.
"Termination Date" means December 31, 2001 or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Type" refers to whether a Loan is a Base Rate Loan or a Euro-Dollar
Loan.
"Unconsolidated Joint Venture" means at any time any Person in which
the Company or one or more of its Consolidated Subsidiaries has an equity
investment which, if material, would be accounted for under the equity
accounting method on the financial statements of the Company and its
Consolidated Subsidiaries, if such statements were prepared as of such time.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefit liabilities
under such Plan based on the assumptions used for purposes of determining
required contributions to the Plan, as determined in the Plan's most recent
actuarial valuation, exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, as determined as of the then most recent valuation
date for such Plan.
"United States" means the United States of America, its territories
and possessions and the Commonwealth of Puerto Rico.
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"Wholly-Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except qualifying shares)
are at the time directly or indirectly owned by the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Company notifies the Administrative Agent that the Company
wishes to amend any provision hereof to eliminate the effect of any change in
GAAP on the operation of such provision (or if the Administrative Agent notifies
the Company that the Required Lenders wish to amend any provision hereof for
such purpose), then such provision shall be applied on the basis of GAAP in
effect immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or such provision is amended in a manner
satisfactory to the Company and the Required Lenders.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make loans to the
Company from time to time prior to the Termination Date; provided that,
immediately after each such loan is made, the aggregate outstanding principal
amount of such Lender's Loans shall not exceed the amount of its Commitment.
Each Borrowing under this Section shall be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing
may be in an aggregate amount equal to the aggregate unused amount of the
Commitments) and shall be made from the several Lenders ratably in proportion to
their respective Commitments. Within the foregoing limits, the Company may
borrow, prepay (to the extent permitted by Section 2.08) and reborrow Loans at
any time prior to the Termination Date.
SECTION 2.02. Method of Borrowing. (a) The Company shall give the
Administrative Agent notice (a "Notice of Borrowing") not later than 10:00 A.M.
(New York City time) on (x) the Funding Date for each Base Rate Borrowing and
(y) the third Euro-Dollar Business Day before the Funding Date for each
Euro-Dollar Borrowing, specifying:
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(i) the Funding Date for such Borrowing, which shall be
a Domestic Business Day in the case of a Base Rate Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) whether the Loans comprising such Borrowing are to
be Base Rate Loans or Euro-Dollar Loans,
(iii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger multiple of $1,000,000 (except that
any such Borrowing may be in an aggregate amount equal to the
aggregate unused amount of the Commitments); and
(iv) in the case of a Euro-Dollar Borrowing, the
duration of the initial Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Lender of the contents thereof and of such Lender's
ratable share of the Loans to be made on the Funding Date for such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Company.
(c) Not later than 12:00 noon (New York City time) on the Funding
Date for each Borrowing, each Lender shall make available its ratable share of
the Loans comprising such Borrowing, in Federal or other funds immediately
available in New York City, to the Administrative Agent at its address specified
in or pursuant to Section 9.01. Unless the Administrative Agent determines that
any applicable condition specified in Article 3 has not been satisfied, the
Administrative Agent will make the funds so received from the Lenders available
to the Company at the Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received notice from
a Lender prior to the Funding Date for any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of the Loans
comprising such Borrowing, the Administrative Agent may assume that such Lender
has made such share available to the Administrative Agent on such Funding Date
in accordance with Section 2.02(c) and the Administrative Agent may, in reliance
upon such assumption, make available to the Company on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such share
available to the Administrative Agent, the Administrative Agent shall be
entitled to recover from either such Lender or the Company (each of which agrees
to pay such amount forthwith on demand) such corresponding amount together with
interest thereon, for each day (if any) from the date such amount is made
available to the Company until the date such amount is repaid to
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the Administrative Agent, at (i) in the case of the Company, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate applicable
to such Borrowing pursuant to Section 2.04 or (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Loan included in such Borrowing for purposes of this Agreement. Any payment by
the Company to the Administrative Agent pursuant to this Section 2.02(d) shall
not relieve a defaulting Lender from any liability that such Lender may
otherwise have to the Company with respect to its failure to fund.
SECTION 2.03. Interest Rate Elections. (a) The initial Type of Loans
comprising each Borrowing, and the duration of the initial Interest Period
applicable thereto if they are initially Euro-Dollar Loans, shall be as
specified in the applicable Notice of Borrowing. Thereafter, the Company may
from time to time elect to change or continue (x) the Type of, or (y) in the
case of Euro-Dollar Loans, the duration of the Interest Period applicable to,
the Loans included in any Group of Loans (excluding overdue Loans and subject in
each case to the provisions of the definition of Interest Period and Article 8),
as follows:
(i) if such Loans are Base Rate Loans, the Company may
elect to designate such Loans as Euro-Dollar Loans, or may elect to
designate such Loans as any combination of Base Rate Loans and
Euro-Dollar Loans; and
(ii) if such Loans are Euro-Dollar Loans, the Company
may elect to designate such Loans as Base Rate Loans, may elect to
continue such Loans as Euro-Dollar Loans for an additional or
different Interest Period, or may elect to designate such Loans as
any combination of Base Rate Loans and Euro-Dollar Loans.
Notwithstanding the foregoing, the Company may not elect an Interest Period for
Euro-Dollar Loans unless the aggregate outstanding principal amount of such
Loans (including any such Loans made pursuant to Section 2.01 on the date that
such Interest Period is to begin) to which such Interest Period will apply is at
least $10,000,000.
(b) Any election permitted by Section 2.03(a) may become effective
on any Euro-Dollar Business Day specified by the Company (the "Election Date").
Each such election shall be made by the Company by delivering a notice (a
"Notice of Interest Rate Election") to the Administrative Agent not later than
11:00 A.M. (New York City time) on (x) the Election Date, if all the resulting
Loans will be Base Rate Loans, or (y) the third Euro-Dollar Business Day before
the Election Date, if the resulting Loans will include Euro-Dollar Loans. Each
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Notice of Interest Rate Election shall specify with respect to the outstanding
Loans to which such notice applies:
(i) the Election Date;
(ii) if the Type of Loan is to be changed, the new Type
of Loan and, if such new Type is a Euro-Dollar Loan, the duration of
the first Interest Period applicable thereto;
(iii) if such Loans are Euro-Dollar Loans that are to be
continued for an additional or different Interest Period, the
duration of such additional or different Interest Period; and
(iv) if such Loans are to be designated as a combination
of Base Rate Loans and Euro-Dollar Loans, the information specified
in clauses (i) through (iii) above as to each resulting Group of
Loans and the aggregate amount of each such Group of Loans.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period and the last
sentence of Section 2.03(a).
(c) Upon receipt of a Notice of Interest Rate Election, the
Administrative Agent shall promptly notify each Lender of the contents thereof
and such notice shall not thereafter be revocable by the Company.
(d) If the Company (i) fails to deliver a timely Notice of Interest
Rate Election to the Administrative Agent electing to continue or change the
Type of, or the duration of the next Interest Period applicable to, any Group of
Euro-Dollar Loans and (ii) has not theretofore delivered a notice of prepayment
relating to such Loans, then the Company shall be deemed to have given the
Administrative Agent a Notice of Interest Rate Election electing to convert such
Loans to Base Rate Loans on the last day of the then current Interest Period
applicable thereto.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made (or is converted to a Base Rate Loan) until it becomes due (or
is converted to a Euro-Dollar Loan), at a rate per annum equal to the sum of the
Base Rate for such day plus the Base Rate Margin (if any) for such day. Such
interest shall be payable (i) quarterly on each March 31, June 30, September 30
and December 31 and (ii) upon any termination of the Commitments in their
entirety.
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(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof; provided that, if the Company elects to
change the Type of, or the duration of an Interest Period applicable to, any
Group of Euro-Dollar Loans on any day other than the last day of an Interest
Period applicable thereto, the Company shall pay, on the effective date of such
change, the interest accrued on such Euro-Dollar Loans to such effective date
(and shall reimburse each Lender for any loss or expense resulting from such
change as provided in Section 2.10).
(c) Any overdue principal of and interest on any Loan shall bear
interest, payable on demand, for each day from and including the date payment
thereof was due to but excluding the date of actual payment, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day.
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Company and the Lenders by telex or facsimile of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated hereby. If any Reference
Bank does not furnish a timely quotation, the Administrative Agent shall
determine the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 8.01 shall
apply.
SECTION 2.05. Fees. (a) Commitment Fees. The Company shall pay to
the Administrative Agent, for the account of the Lenders ratably in accordance
with their Commitments, a commitment fee at the Commitment Fee Rate, determined
for each day in accordance with the Pricing Schedule, on the amount by which the
aggregate amount of the Commitments at the close of business on such day exceeds
the aggregate principal amount of the Loans outstanding at the close of business
on such day. Such commitment fees shall accrue from and including the Closing
Date to but excluding the Termination Date (or any earlier date on which the
Commitments terminate in their entirety), and shall be payable quarterly on each
March 31, June 30, September 30 and December 31 and upon any termination of the
Commitments in their entirety.
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(b) Facility Fees. The Company shall pay to the Administrative
Agent, for the account of the Lenders ratably in accordance with their
Commitments, a facility fee at the Facility Fee Rate, determined for each day in
accordance with the Pricing Schedule. Such facility fees shall accrue (i) for
each day from and including the Closing Date to but excluding the Termination
Date (or any earlier date on which the Commitments terminate in their entirety)
on the aggregate amount of the Commitments (whether used or unused) at the close
of business on such day and (ii) for each day from and including the Termination
Date (or any earlier date on which the Commitments terminate in their entirety)
to but excluding the date the Loans shall be repaid in their entirety, on the
aggregate principal amount of the Loans outstanding on the close of business on
such day. Such facility fees shall be payable (i) quarterly on each March 31,
June 30, September 30 and December 31, (ii) upon any termination of the
Commitments in their entirety and (iii) if later, the date on which the Loans
shall be repaid in their entirety.
(c) Administrative Agent's Fee. The Company shall pay to the
Administrative Agent for its own account fees in the amounts and at the times
previously agreed upon between the Company and the Administrative Agent.
(d) Upfront Fees. On the Closing Date, the Company shall pay to the
Administrative Agent, for the account of each Lender that shall have signed this
Agreement on or before December 10, 1998, a fee equal to 0.20% of the amount of
such Lender's Commitment on the Closing Date.
SECTION 2.06. Optional Termination or Reduction of Commitments. The
Company may, upon at least three Domestic Business Days' notice to the
Administrative Agent, (i) terminate the Commitments at any time, if no Loans are
outstanding at such time or (ii) proportionately reduce from time to time, by an
aggregate amount of at least $10,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Loans.
SECTION 2.07. Mandatory Termination of Commitments; Maturity of
Loans. The Commitments shall terminate on the Termination Date, and any Loans
then outstanding (together with accrued interest thereon) shall be due and
payable on such date.
SECTION 2.08. Optional Prepayments. (a) The Company may, upon notice
to the Administrative Agent given not later than 11:00 A.M. (New York City time)
on (i) the date of prepayment of any Base Rate Loans and (ii) the third
Euro-Dollar Business Day prior to the date of prepayment of any Euro-Dollar
Loans, prepay the Base Rate Loans or, subject to Section 2.10, any Group of
Euro-Dollars Loans in
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whole at any time, or from time to time in part in amounts aggregating
$10,000,000 or a larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with accrued interest thereon to the date of prepayment.
Each such notice of prepayment shall specify which outstanding Group of Loans is
to be prepaid in connection therewith. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Lenders included in such
Group of Loans.
(b) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Lender of the contents
thereof and of such Lender's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Company.
SECTION 2.09. General Provisions as to Payments. (a) The Company
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.01 and without
reduction by reason of any set-off or counterclaim. The Administrative Agent
will promptly distribute to each Lender its ratable share of each such payment
received by the Administrative Agent for the account of the Lenders. Whenever
any payment of principal of, or interest on, the Base Rate Loans or of fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day. If the
date for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Company prior to the date on which any payment is due from the Company to
the Lenders hereunder that the Company will not make such payment in full, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Company shall not have so made such payment, each Lender shall
repay to the Administrative Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day (if any) from the date
such
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amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.10. Funding Losses. If (i) the Company makes any payment
of principal with respect to any Euro-Dollar Loan (pursuant to Article 2, 6 or 8
or otherwise) on any day other than the last day of an Interest Period
applicable thereto, (ii) any Euro-Dollar Loan is converted to a Base Rate Loan
or the Interest Period applicable to any Euro-Dollar Loan is changed pursuant to
Section 2.03 or Article 8, on any day other than the last day of an Interest
Period applicable to such Loan, (iii) the Company fails to borrow any
Euro-Dollar Loan after notice of such borrowing has been given to any Lender in
accordance with Section 2.02(b), (iv) the Company prepays any Loan after a
Notice of Interest Rate Election electing to continue such Loan as, or to change
it to, a Euro-Dollar Loan has been given to any Lender in accordance with
Section 2.03 but before the Interest Period specified therein begins, or (v) the
Company requires a Lender to assign its rights with respect to any Euro-Dollar
Loan to a Substitute Lender pursuant to Section 8.05 on any day other than the
last day of an Interest Period applicable to such Loan, the Company shall
reimburse each Lender within 15 days after demand for any resulting loss or
expense incurred by it (or by any existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment, change, failure to borrow or
assignment, provided that such Lender shall have delivered to the Company a
certificate as to the amount of such loss or expense, showing its calculation
thereof in reasonable detail, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.11. Computation of Interest and Fees. Interest and fees
shall be computed on the basis of a year of 360 days (except that interest on
any Loan which bears interest during any period at the Prime Rate shall be
computed on the basis of a year of 365 or 366 days, as the case may be) and paid
for the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.12. Notes. (a) The Loans of each Lender shall be evidenced
by a single Note payable to the order of such Lender for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Lender's Loans.
(b) Each Lender may, by notice to the Company and the Administrative
Agent, direct that its Loans of a particular Type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such Loans.
Each such Note shall be substantially in the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant Type.
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Each reference in this Agreement to the "Note" of such Lender shall be deemed to
refer to and include any or all of such Notes, as the context may require.
(c) Upon receipt of each Lender's Note pursuant to Section 3.01(b),
the Administrative Agent shall send such Note to such Lender. Each Lender shall
record the date and amount of each Loan made by it and the date and amount of
each payment of principal made with respect thereto, and prior to any transfer
of its Note shall endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each Loan made
by it then outstanding; provided that any failure by any Lender to make (or any
error in making) any such recordation or endorsement shall not affect the
obligations of the Company hereunder or under the Notes. Each Lender is hereby
irrevocably authorized by the Company so to endorse its Note and to attach to
and make a part of its Note a continuation of such schedule as and when
required.
SECTION 2.13. Withholding Tax Exemption. Each Lender that is not
incorporated under the laws of the United States or a State thereof agrees that
it will deliver to each of the Company and the Administrative Agent, at least
one Domestic Business Day before interest or fees first become payable hereunder
for the account of such Lender, two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, in either case certifying that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to
each of the Company and the Administrative Agent two additional copies of such
form (or a successor form) on or before the date that such form expires or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Company or the
Administrative Agent, in each case certifying that such Lender is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Company and the Administrative Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.
SECTION 2.14. Judgment Currency. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from any Polaroid
Obligor under any Financing Document in United States dollars ("dollars") into
another currency, the parties hereto agree, to the fullest extent that they may
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effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase dollars with such other currency at the Administrative Agent's New York
office on the Domestic Business Day preceding that on which final judgment is
given. The obligations of such Polaroid Obligor in respect of any sum due to any
Lender or the Administrative Agent under any Financing Document shall,
notwithstanding any judgment in a currency other than dollars, be discharged
only to the extent that, on the Domestic Business Day following receipt by such
Lender or the Administrative Agent (as the case may be) of any sum adjudged to
be so due in such other currency, such Lender or the Administrative Agent (as
the case may be) may in accordance with normal banking procedures purchase
dollars with such other currency. If the amount of dollars so purchased is less
than the sum originally due to such Lender or the Administrative Agent, as the
case may be, in dollars, the Company agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify such Lender or the Administrative Agent, as the case may
be, against such loss, and if the amount of dollars so purchased exceeds (a) the
sum originally due to any Lender or the Administrative Agent, as the case may
be, and (b) any amounts shared with other Lenders as a result of allocations of
such excess as a disproportionate payment to such Lender under Section 9.04,
such Lender or the Administrative Agent, as the case may be, agrees to remit
such excess to the appropriate Polaroid Obligor.
SECTION 2.15. Regulation D Compensation. Each Lender may require the
Company to pay, contemporaneously with each payment of interest on the Euro-
Dollar Loans, additional interest on the related Euro-Dollar Loan of such Lender
at a rate per annum determined by such Lender up to but not exceeding the excess
of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus
the Euro-Dollar Reserve Percentage applicable to such Lender over (ii) the
applicable London Interbank Offered Rate. Any Lender wishing to require payment
of such additional interest (x) shall so notify the Company and the
Administrative Agent, in which case such additional interest on the Euro-Dollar
Loans of such Lender shall be payable to such Lender at the place indicated in
such notice with respect to each Interest Period commencing at least three
Euro-Dollar Business Days after such Lender gives such notice and (y) shall
notify the Company at least five Euro-Dollar Business Days before each date on
which interest is payable on the Euro-Dollar Loans of the amount then due to
such Lender under this Section.
SECTION 2.16. Additional Guaranteed Obligations and Additional
Secured Obligations. (a) In addition to Loans made pursuant to this Article 2,
the Company may designate its obligations to banks or other financial
institutions (which may include one or more of the Lenders) in respect of loans
in an aggregate principal amount not to exceed $200,000,000 ("Additional Loans")
as additional
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Guaranteed Obligations and additional Secured Obligations for purposes of the
Financing Documents by delivering to the Administrative Agent and the Collateral
Agent a certificate signed by an executive officer of the Company stating that
such Additional Loans are designated as Guaranteed Obligations and Secured
Obligations for purposes of the Financing Documents; provided that such
designation shall not become effective unless the Required Lenders shall have
confirmed in writing to the Administrative Agent that, in their reasonable
opinion, the Collateral (including any additional Collateral added at the time
of such designation) is sufficient to adequately secure the Secured Obligations
(including, without limitation, such Additional Loans, the Loans then
outstanding and any Loans that might thereafter be made pursuant to the
Commitments then in effect).
(b) If any Additional Loans are secured pursuant to subsection (a)
of this Section and the fees (other than upfront fees and commitment fees)
and/or interest rate margins payable by the Company in connection with such
Additional Loans are (or might at any pricing level be) higher than the fees and
interest rate margins specified in the Pricing Schedule, the fees and interest
rate margins payable by the Company hereunder shall be increased (as of the date
such Additional Loans are first made) to be no less than the fees and interest
rate margins applicable to such Additional Loans at any pricing level, and the
Pricing Schedule shall forthwith be amended by the Company and the
Administrative Agent to reflect such higher pricing.
(c) The Company may from time to time designate its obligations with
respect to (x) any letter of credit, (y) any interest rate swap agreement or
other interest rate hedging agreement or (z) any currency swap agreement or
other currency hedging agreement (the agreements referred to in the foregoing
clauses (y) and (z) being herein called "Hedging Agreements") as an additional
Guaranteed Obligation and/or an additional Secured Obligation for purposes of
the Financing Documents; provided that
(i) with respect to letters of credit, the aggregate
outstanding amount of the Company's actual and contingent
obligations so secured shall not at any time exceed $3,000,000 and
(ii) with respect to Hedging Agreements, (A) the
maturity thereof shall not in any case exceed three months and (B)
the aggregate outstanding notional amount thereof shall not at any
time exceed $50,000,000.
Each such designation shall be made by delivering to the Administrative Agent
and the Collateral Agent a certificate signed by an executive officer of the
Company (1) identifying such letter of credit or Hedging Agreement, (2) stating
that the
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Company's obligations with respect thereto are designated as an additional
Guaranteed Obligation and/or Secured Obligation, as the case may be, for
purposes of the Financing Documents, (3) specifying the face amount or notional
amount thereof and (4) specifying the name and address of the counterparty to
such interest rate agreement or the issuer of such letter of credit.
(d) The Company may from time to time, with the prior written
consent of the Administrative Agent and Collateral Agent (which in each case
shall not be unreasonably withheld) and the Super-Majority Lenders (which
consent shall be in their sole discretion), designate any other obligation of
the Company (including without limitation its obligations with respect to any
letter of credit or Hedging Agreement not covered by subsection (c) above) as an
additional Guaranteed Obligation and/or Secured Obligation for purposes of the
Financing Documents by delivering to the Administrative Agent and the Collateral
Agent a certificate signed by an executive officer of the Company (i)
identifying the obligation so designated, (ii) stating that such obligation is
designated as an additional Guaranteed Obligation and/or Secured Obligation for
purposes of the Financing Documents and (iii) specifying the name and address of
the holder of such obligation or of a trustee, agent or similar representative
designated to supply information with respect to such obligation to the
Administrative Agent pursuant to the relevant Subsidiary Guaranty Agreement
and/or to the Collateral Agent as contemplated by Section 11(f) of the Security
Agreement.
SECTION 2.17. Release of Security Interests. (a) At any time on or
after the Security Release Date, the Company may request the Administrative
Agent to instruct the Collateral Agent to release all the Collateral from the
Security Interests.
(b) At any time before the Security Release Date:
(i) the Super-Majority Lenders may, at the Company's
request, instruct the Administrative Agent to instruct the
Collateral Agent to release any or all of the Collateral from the
Security Interests on such conditions (if any) as the Super-Majority
Lenders may specify;
(ii) the Company may request the Administrative Agent to
instruct the Collateral Agent to release any portion of the
Collateral from the Security Interests; provided that, concurrently
with each such release, (x) the Commitments shall be proportionately
reduced by an aggregate amount equal to the book value of the
Collateral being released and (y) the Company shall prepay Loans to
the extent (if any) required so that the aggregate outstanding
principal amount of the Loans does not exceed the aggregate amount
of the Commitments as so reduced; and
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(iii) the Company may request the Administrative Agent
to instruct the Collateral Agent to release Collateral owned by a
Designated Subsidiary or used in a Designated Business from the
Security Interests without any corresponding reduction of the
Commitments; provided that the aggregate book value of all
Collateral released pursuant to this clause (iii) shall not exceed
$60,000,000.
For purposes of any release pursuant to clause (ii) or (iii) above, the book
value of the Collateral being released shall be determined as of a date to be
selected by the Company and the Administrative Agent which shall not be earlier
than the end of the month preceding the month in which such release occurs.
(c) The Company shall not be entitled to any release of Collateral
pursuant to this Section unless:
(i) the applicable conditions to such release specified
in subsection (a) or (b) above have been met, or will be met
substantially concurrently with such release; and
(ii) immediately after such release, no Default will
have occurred and be continuing.
In connection with any request for a release of Collateral, the Company shall
deliver to the Administrative Agent such officer's certificate and/or other
evidence as the Administrative Agent may reasonably request to establish that
such release complies with the foregoing clauses (i) and (ii). Promptly upon
receiving any such request and evidence of compliance reasonably satisfactory to
it, the Administrative Agent shall, unless it determines that the Company is not
entitled to such release, instruct the Collateral Agent to release Collateral as
requested by the Company.
SECTION 2.18. Release of Subsidiary Guarantees. (a) At any time the
Super-Majority Lenders may, at the Company's request, release any Subsidiary
Guarantor from its obligations under its Subsidiary Guaranty Agreement on such
conditions (if any) as the Super-Majority Lenders may specify.
(b) If a Designated Subsidiary is sold or otherwise transferred to a
Person other than the Company or any of its Subsidiaries, the Subsidiary
Guaranty of such Designated Subsidiary shall be automatically released
concurrently with such sale or transfer; provided that:
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(i) all Collateral (if any) securing its Subsidiary
Guaranty is concurrently released in compliance with Section 2.17;
and
(ii) immediately after such release, no Default will
have occurred and be continuing.
(c) If any Subsidiary Guarantor (other than a Designated Subsidiary)
is sold or otherwise transferred to a Person other than the Company or any of
its Subsidiaries, the Subsidiary Guaranty of such Subsidiary Guarantor shall, at
the Company's request, be released concurrently with such sale or transfer;
provided that:
(i) all Collateral (if any) securing its Subsidiary
Guaranty is concurrently released in compliance with Section 2.17;
(ii) immediately after such release, no Default will
have occurred and be continuing; and
(iii) the aggregate consideration received by the
Company and its Subsidiaries for all sales or other transfers in
connection with which Subsidiary Guaranties are released pursuant to
this subsection (c) shall not exceed $10,000,000.
(d) If any Subsidiary Guarantor is sold or otherwise transferred to
a Person other than the Company or any of its Subsidiaries in a transaction that
is not permitted by any of the foregoing subsections of this Section, the
Subsidiary Guaranty of the Subsidiary Guarantor so transferred shall
nonetheless, at the Company's request, be released concurrently with such sale
or other transfer; provided that, concurrently with such release (but after
giving effect thereto):
(i) the Commitments shall be proportionately reduced by
an aggregate amount equal to the lesser of (x) the aggregate
consideration received by the Company and/or its Subsidiaries for
such sale or other transfer or (y) 330% of such Subsidiary
Guarantor's Ebitda for the period of four consecutive Fiscal
Quarters then most recently ended;
(ii) all Collateral (if any) securing its Subsidiary
Guaranty is concurrently released in compliance with Section 2.17;
and
(iii) immediately after such release, no Default will
have occurred and be continuing.
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If any sale or transfer described in this subsection (d) is consummated at a
time when the $10,000,000 basket provided in subsection (c) has not been fully
utilized, such sale or transfer shall be treated as being (A) subject to
subsection (c) to the extent that the aggregate consideration received by the
Company and its Subsidiaries for such sale or transfer (the "Aggregate
Consideration") does not exceed the unutilized portion of the $10,000,000 basket
provided in subsection (c) (the "Unutilized Basket") and (B) subject to this
subsection (d) to the extent that the Aggregate Consideration exceeds the
Unutilized Basket (such excess being the "Excess Consideration"). For purposes
of subsection (c), such sale or transfer shall be deemed to utilize the
Unutilized Basket. For purposes of this subsection (d), (A) the consideration
referred to in clause (i)(x) shall be deemed to be the Excess Consideration and
(B) the Ebitda referred to in clause (i)(y) shall be deemed to be an amount
determined by multiplying such Subsidiary Guarantor's Ebitda for the relevant
period by a fraction, of which the numerator is the Excess Consideration and the
denominator is the Aggregate Consideration.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective
on the date (the "Closing Date") on which all the following conditions shall
have been satisfied (or waived in accordance with Section 9.05):
(a) the Administrative Agent shall have received from each of the
Company, the Required Lenders and the Agents a counterpart hereof signed by such
party or telex, facsimile or other written confirmation satisfactory to the
Administrative Agent that such party has signed a counterpart hereof;
(b) the Administrative Agent shall have received for the account of
each Lender a duly executed Note, dated on or before the Closing Date, complying
with the provisions of Section 2.12;
(c) the Administrative Agent shall have received a counterpart of a
Subsidiary Guaranty Agreement signed by each Initial Subsidiary Guarantor;
(d) the Administrative Agent shall have received a counterpart of
the Security Agreement, signed by the Collateral Agent, the Company and each
Initial Subsidiary Guarantor that is identified as an initial Lien Grantor on
Exhibit H hereto;
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(e) the Collateral Agent shall have received all signed UCC
financing statements reasonably requested by the Collateral Agent to perfect the
Security Interests in the Collateral;
(f) the Administrative Agent shall have received (i) for the account
of each Lender that has signed this Agreement on or before December 10, 1998, an
up-front fee equal to .20% of such Lender's Commitment and (ii) evidence
satisfactory to the Administrative Agent that the Company has paid all fees and
expenses then due and payable by it to the Arranger, the Agents and/or any of
the Lenders;
(g) the Administrative Agent shall have received opinions of Simpson
Thacher & Bartlett, special counsel for the Company, Thomas M. Lemberg, Senior
Vice President and General Counsel of the Company, and Bingham Dana LLP, special
Massachusetts counsel for the Company, substantially in the form of Exhibits B,
C and D hereto, respectively, and covering such additional matters relating to
the transactions contemplated hereby as the Required Lenders may reasonably
request;
(h) the Administrative Agent shall have received an opinion of Davis
Polk & Wardwell, special counsel for the Agents, substantially in the form of
Exhibit E hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Lenders may reasonably request;
(i) the Administrative Agent shall have received a certificate
signed by the Vice President and Treasurer and the Senior Vice President and
General Counsel of the Company to the effect set forth in clauses (c) and (d) of
Section 3.03; and
(j) the Administrative Agent shall have received all documents it
may reasonably request relating to the existence of the Polaroid Obligors, the
corporate authority for and the validity of the Financing Documents, and any
other matters relevant hereto, all in form and substance reasonably satisfactory
to the Administrative Agent.
The opinions and certificates referred to in this Section shall be dated the
Closing Date. The Company instructs each of the counsel referred to in clause
(g) of this Section to prepare the opinions referred to in clause (g) and
deliver them to the Administrative Agent for the benefit of the Agents and the
Lenders. The Administrative Agent shall promptly notify the other parties hereto
of the Closing Date, and such notice shall be conclusive and binding on all
parties hereto.
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SECTION 3.02. Consequences of Effectiveness. (a) On the Closing
Date, without further action by any of the parties thereto, the Existing Credit
Agreement will be automatically amended and restated to read as this Agreement
reads.
(b) On and after the Closing Date, the rights and obligations of the
parties hereto shall be governed by the provisions of this Agreement and the
other Financing Documents. The rights and obligations of the parties with
respect to the period before the Closing Date shall continue to be governed by
the provisions of the Existing Credit Agreement as in effect before the Closing
Date.
SECTION 3.03. Borrowings. The obligation of any Lender to make a
Loan on the Funding Date for any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Closing Date shall have occurred on or before
December 14, 1998;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02;
(c) the fact that, immediately after such Borrowing, no Default
shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company
and its Subsidiaries contained in the Financing Documents shall be true in all
material respects on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company on the date of such Borrowing as to the facts specified in clauses
(c) and (d) of this Section, except as otherwise disclosed in writing by the
Company to the Lenders prior to such Borrowing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
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governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Polaroid Obligor
of the Financing Documents to which it is a party (i) are within its corporate
or other powers and have been duly authorized by all necessary corporate or
other action, (ii) require no action by or in respect of, or filing with, any
governmental body, agency or official (except filings of financing statements to
perfect the Security Interests), and (iii) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
Organizational Documents or of any agreement, judgment, injunction, order,
decree or other instrument binding upon it or result in the creation or
imposition of any Lien (other than Liens created by the Collateral Documents) on
any of its assets.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Company, the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company and each other Financing Document, when executed and delivered by
any Polaroid Obligor, will constitute a valid and binding obligation of such
Polaroid Obligor, in each case enforceable in accordance with its terms, subject
to (i) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and (iii) any implied covenant
of good faith and fair dealing.
SECTION 4.04. Security Interests. At all times from the Closing Date
to the Security Release Date, the Collateral Documents will create valid
Security Interests in the Collateral from time to time covered or purportedly
covered thereby. Such Security Interests will be perfected and/or recorded as to
each item of Collateral when or promptly after it is included in the Collateral,
and will be prior to all other Liens (except Liens permitted by Section 5.12) on
such item of Collateral until the applicable Security Interest is released
pursuant to Section 14 of the Security Agreement.
SECTION 4.05. Financial Information; No Material Adverse Change. (a)
The consolidated balance sheet of the Company and its Consolidated Subsidiaries
as of December 31, 1997 and the related consolidated statements of earnings,
cash flows and changes in common stockholders' equity for the Fiscal Year then
ended, reported on by KPMG Peat Marwick LLP and set forth in the Company's 1997
Form 10-K, a copy of which has been delivered to each of the Lenders, fairly
present, in conformity with GAAP, the consolidated financial position of the
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Company and its Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 1998 and the related unaudited
consolidated statements of earnings, cash flows and changes in common
stockholders' equity for the nine months then ended, set forth in the Company's
Third Quarter 1998 Form 10-Q, a copy of which has been delivered to each of the
Lenders, fairly present, in conformity with GAAP applied on a basis consistent
with the financial statements referred to in Section 4.05(a), the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such
nine-month period (subject to normal year-end adjustments).
(c) Since September 30, 1998, there has been no material adverse
change in the business, financial position or results of operations of the
Company and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.06. Litigation. (a) Except as disclosed in the Company's
1997 Form 10-K and the Company's Third Quarter 1998 Form 10-Q, there is no (i)
injunction, stay, decree or order issued by any court or arbitrator or any
governmental body, agency or official or (ii) action, suit or proceeding pending
against, or to the knowledge of the Company threatened against or affecting, the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision, in either case which (x) could have a Material Adverse
Effect or (y) in any manner draws into question the validity or enforceability
of any Financing Document.
SECTION 4.07. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Code in respect of any Plan, (ii)
failed to make any contribution or payment to any Plan or Multiemployer Plan, or
made any amendment to any Plan, which has resulted or could result in the
imposition of a Lien under Section 412(n) of the Code or the posting of a bond
or other security under Section 401(a)(29) of the Code (including, in the case
of both Section 412(n) and 401(a)(29) of the Code, the similar subsections of
Section 302 and 307 of ERISA) or (iii) incurred any liability under Title IV of
ERISA (other than a liability to the PBGC for premiums under Section 4007 of
ERISA) that has not been paid or satisfied prior to the date of this Agreement.
36
<PAGE>
SECTION 4.08. Taxes. United States Federal income tax returns of the
Company and its Subsidiaries (other than Foreign Subsidiaries) have been
examined and closed through the Fiscal Year ended December 31, 1993, subject to
the processing of certain "competent authority" requests for relief, pursuant to
international tax treaties, for the years 1990 through 1993. The Company and its
Subsidiaries have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
the Company or any Subsidiary, except to the extent that such assessment is
being contested by the Company or such Subsidiary in good faith by appropriate
proceedings. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Company, adequate.
SECTION 4.09. Subsidiaries. (a) Each of the Company's Subsidiaries
is a corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all corporate or other
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except to the
extent that failures to have the same, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(b) Exhibit H hereto (i) is a complete and correct list of the
Company's Material Domestic Subsidiaries as of the Closing Date and (ii)
identifies as an initial Lien Grantor each such Material Domestic Subsidiary
that owns any inventory located in the United States and/or any receivables on
the Closing Date.
SECTION 4.10. No Regulatory Restrictions on Borrowing. The Company
is not (i) an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, (ii) a "holding company" or a subsidiary of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) otherwise subject to any regulatory scheme which restricts
its ability to incur debt.
SECTION 4.11. Compliance with Laws. The Company and each of its
Subsidiaries is in compliance in all material respects with all applicable laws,
rules and regulations, other than laws, rules or regulations (i) the validity or
applicability of which the Company or such Subsidiary is contesting in good
faith or (ii) failures to comply with which, in the aggregate, cannot reasonably
be expected to have a Material Adverse Effect.
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<PAGE>
SECTION 4.12. No Defaults. Neither the Company nor any of its
Subsidiaries is in violation of, or in default under, any term or provision of
any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ or injunction applicable to it, except
for violations and defaults that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.13. Possession of Franchises, Licenses, etc. The Company
and its Subsidiaries own or possess all franchises, patents, trademarks, service
marks, trade names, copyrights, licenses and other rights that are necessary in
any material respect for the ownership and operation of their respective
properties and businesses, and neither the Company nor any of its Subsidiaries
is in violation of any provision thereof in any respect, except for violations
that, in the aggregate, could not reasonably be expected to have a Materially
Adverse Effect.
SECTION 4.14. Full Disclosure. All information (other than
projections) heretofore furnished by the Company or any Subsidiary to the
Administrative Agent or any Lender (or to the Arranger for distribution to the
Lenders) for purposes of or in connection with this Agreement or any transaction
contemplated hereby, when taken as a whole, was, and all such information
hereafter furnished by the Company or any Subsidiary to the Administrative Agent
or any Lender (or to the Arranger for distribution to the Lenders) will be, true
and accurate in all material respects or based on reasonable estimates on the
date as of which such information is stated or certified. The Company has
disclosed to the Lenders in writing any and all facts known to any officer of
the Company which have had or may (to the extent the Company can now reasonably
foresee) have a Material Adverse Effect.
SECTION 4.15. Year 2000 Compliance. As described in the Company's
Third Quarter 1998 Form 10-Q, the Company has (i) initiated a review and
assessment of all areas within the business and operations of the Company and
each of its Subsidiaries (including those areas affected by suppliers and
vendors) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by it or any of its Subsidiaries (or
their respective suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) is developing a plan and timeline for addressing
the Year 2000 Problem on a timely basis and (iii) is implementing such plan. The
Company reasonably believes that all computer applications that are material to
the business or operations of the Company or any of its Subsidiaries will on a
timely basis be able to perform properly date-sensitive functions for all dates
before and from and after January 1, 2000 (that is, be "Year 2000 Compliant"),
except to the extent that
38
<PAGE>
failures to do so could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 4.16. Environmental Matters. Except with respect to any
matter disclosed under the heading "Environmental Compliance" in the Company's
1997 Form 10-K, the Company reasonably believes the costs of compliance with
Environmental Laws, and associated liabilities, are unlikely to have a Material
Adverse Effect, provided that the inclusion of such exception does not indicate
that any such matter will have a Material Adverse Effect.
SECTION 4.17. Representations in Collateral Documents. Each of the
representations and warranties of any of the Polaroid Obligors contained in the
Collateral Documents is true and correct in all material respects.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Financing Document remains unpaid:
SECTION 5.01. Information. The Company will deliver to each of the
Lenders:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, a consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of earnings, cash flows and changes in common
stockholders' equity for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all in reasonable
detail and reported on (in a manner acceptable to the SEC for use in filings
under the Exchange Act) by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the end of such Fiscal Quarter and the related consolidated statements of
earnings, cash flows and changes in common stockholders' equity for such Fiscal
Quarter and for the portion of such Fiscal Year ended at the end of such Fiscal
Quarter, setting forth in each case in comparative form the figures for the
corresponding Fiscal Quarter
39
<PAGE>
in, and the corresponding portion of, the previous Fiscal Year, all certified
(subject to normal year-end adjustments) as to fairness of presentation and
consistency by the chief financial officer or the chief accounting officer of
the Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 5.01(a) and 5.01(b), a certificate of the
chief financial officer or the chief accounting officer of the Company:
(i) setting forth in reasonable detail such calculations
as are required to establish whether the Company was in compliance
with the requirements of Sections 5.07 through 5.14, inclusive, on
the date of such financial statements,
(ii) stating whether, to the knowledge of such officer,
any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the
action that the Company is taking or proposes to take with respect
thereto,
(iii) stating whether, to the knowledge of such officer,
since the date of the most recent previous delivery of financial
statements pursuant to Section 5.01(a) or 5.01(b), there has been
any material adverse change in the business, financial position or
results of operations of the Company and its Consolidated
Subsidiaries, taken as a whole, and, if so, the nature of such
material adverse change,
(iv) stating whether, since the date of the most recent
financial statements previously delivered pursuant to Section
5.01(a) or 5.01(b), there has been a material change in the GAAP
applied in preparing the financial statements being delivered and,
if so, describing such change and the effect thereof, and
(v) setting forth information with respect to the
receivables and domestic inventories included in the Collateral at
the date of such financial statements, in substantially the same
detail as the information provided to the Lenders prior to the date
of this Agreement with respect to the receivables and domestic
inventories to be included therein;
(d) simultaneously with the delivery of each set of financial
statements referred to in Section 5.01(a), a statement of the firm of
independent public accountants which reported on such statements (i)
40
<PAGE>
stating that its audit examination has included a review of the terms of this
Agreement as they relate to financial or accounting matters, (ii) stating
whether anything has come to its attention to cause it to believe that any
Default existed on the date of such statements and (iii) confirming the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to Section 5.01(c);
(e) within five days after any executive officer of the Company
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer of
the Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
(f) promptly upon any change in the Company's Long-Term Debt Rating
by S&P or Moody's, a certificate of the chief financial officer, chief
accounting officer or treasurer of the Company reporting such change and stating
the date on which such change was publicly announced by the relevant rating
agency;
(g) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company shall have filed with the SEC;
(i) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event that was given
or that should have been given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been terminated, a
copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA
of an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer any
Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Code, a copy of such application; (v) gives
notice of intent to terminate
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<PAGE>
any Plan under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; (vii) fails to make
any payment or contribution to any Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Company setting forth
details as to such occurrence and the action, if any, which the Company or
applicable member of the ERISA Group is required or proposes to take or (viii)
receives a completed actuarial valuation report relating to any Plan or Plans a
copy of such report (but only if and to the extent that delivery of copies
thereof is requested by the Administrative Agent); and
(j) from time to time such additional information regarding the
business, financial position or results of operations of the Company or any of
its Subsidiaries, or their compliance with the provisions of the Financing
Documents, as the Administrative Agent, at the request of any Lender, may
reasonably request.
SECTION 5.02. Payment of Obligations. The Company will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the
accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Company
will keep, and will cause each Subsidiary to keep, all material property
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Company will maintain, and will cause each Subsidiary to
maintain, (i) physical damage insurance on all real and personal property
covering the repair and replacement cost of all such property and consequential
loss coverage for business interruption and extra expense, (ii) public liability
insurance (including products/completed operations liability coverage) in an
amount not less than $80,000,000, and (iii) such other insurance coverage in
such amounts and with respect to such risks as the Required Lenders may
reasonably request; provided that the Company shall not be required to maintain
insurance specified in this subsection (A) if an independent insurance broker,
agent or other representative reasonably satisfactory to the Required Lenders
shall certify to the
42
<PAGE>
Lenders that such requirement with respect to such insurance cannot be complied
with in a recognized insurance market of the United States or of any other
country by reason of (x) the unavailability to companies of established repute
engaged in the same or a similar business of insurance with respect to one or
more risks so required to be insured against or (y) the amount of insurance so
required to be maintained, or (B) with respect to any assets sold by the
Company, for events occurring after the sale of such assets. All such insurance
shall be provided by insurers having an A.M. Best policyholders rating of not
less than B+ or such other insurers as the Required Lenders may approve in
writing. The Company will deliver to the Lenders upon request of any Lender
through the Administrative Agent from time to time full information as to the
insurance carried.
(c) Within 45 days after the Closing Date, and at all times
thereafter until the Security Release Date, the Company will cause each
insurance policy applicable to inventory included in the Collateral to name the
Collateral Agent as the loss payee thereunder.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Company will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Company and its
Subsidiaries, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect,
their respective corporate existences (except as permitted under Section 5.15
and except for the liquidation of any Subsidiary) and their respective material
rights, privileges and franchises necessary in the normal conduct of business.
SECTION 5.05. Compliance with Laws. The Company will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except (i) where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or (ii) where
noncompliance would not have a Material Adverse Effect.
SECTION 5.06. Inspection of Property, Books and Records. The Company
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions relating to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Lender at such
Lender's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees
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<PAGE>
and independent public accountants, all at such reasonable times and as often as
may reasonably be desired.
SECTION 5.07. Interest Coverage Ratio. At the end of each Fiscal
Quarter, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense, in each case for the period of four consecutive Fiscal Quarters then
ended, will not be less than the ratio specified for such Fiscal Quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- -----
<S> <C>
Fourth Fiscal Quarter of 1998 2.50 to 1
First Fiscal Quarter of 1999 2.75 to 1
Second Fiscal Quarter of 1999 2.75 to 1
Third Fiscal Quarter of 1999 2.85 to 1
Fourth Fiscal Quarter of 1999 and each
Fiscal Quarter thereafter 3.00 to 1
</TABLE>
SECTION 5.08. Debt/EBITDA Ratio; Maximum Debt. (a) At no time during
any Fiscal Quarter will the Debt/EBITDA Ratio be higher than the ratio specified
for such Fiscal Quarter below:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- -----
<S> <C>
Fourth Fiscal Quarter of 1998 5.00 to 1
First Fiscal Quarter of 1999 4.75 to 1
Second Fiscal Quarter of 1999 5.00 to 1
Third Fiscal Quarter of 1999 4.50 to 1
Fourth Fiscal Quarter of 1999
and each Fiscal Quarter thereafter 3.30 to 1
</TABLE>
It is understood that the Debt/EBITDA Ratio at the end of any Fiscal Quarter
will also be the Debt/EBITDA Ratio at the beginning of the next Fiscal Quarter
and must therefore not be higher than the ratio specified above for such next
Fiscal Quarter.
(b) At no time during any Fiscal Quarter listed below will
Consolidated Net Debt be higher than the amount specified for such Fiscal
Quarter below:
44
<PAGE>
<TABLE>
<CAPTION>
Fiscal Quarter Amount
-------------- ------
<S> <C>
Fourth Fiscal Quarter of 1998 $ 925,000,000
First Fiscal Quarter of 1999 $1,000,000,000
Second Fiscal Quarter of 1999 $1,000,000,000
Third Fiscal Quarter of 1999 $1,000,000,000
Fourth Fiscal Quarter of 1999 $1,000,000,000
</TABLE>
SECTION 5.09. Consolidated Capital Expenditures. Consolidated
Capital Expenditures will not, for any Fiscal Year listed below, exceed the
amount specified for such Fiscal Year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1999 $180,000,000
2000 $150,000,000
2001 $150,000,000
</TABLE>
If Consolidated Capital Expenditures for any Fiscal Year listed above are less
than the applicable amount specified in the table, the difference may be carried
forward to the next Fiscal Year; provided that Consolidated Capital Expenditures
for such next Fiscal Year shall be deemed to utilize the amount specified in the
table for such next Fiscal Year until such amount is fully utilized, and only
thereafter to utilize the amount carried forward from the preceding Fiscal Year
(which, if not utilized in such next Fiscal Year, may not be carried forward to
any other Fiscal Year).
SECTION 5.10. Restricted Payments. (a) The aggregate amount of all
Restricted Payments declared or made by the Company and its Subsidiaries during
the fourth Fiscal Quarter of 1998, less the aggregate amount of Employee Stock
Proceeds for such Fiscal Quarter, will not exceed $8,000,000.
(b) Neither the Company nor any Subsidiary will declare or make any
Restricted Payment after December 31, 1998 unless, immediately after giving
effect thereto, the aggregate amount of all Restricted Payments declared or made
after December 31, 1998 does not exceed the sum of:
(i) $3,750,000 for the then current Fiscal Quarter;
(ii) $3,750,000 for each prior full Fiscal Quarter
ending after December 31, 1998;
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<PAGE>
(iii) the amount of Employee Stock Proceeds (not to
exceed $3,750,000) that the Company and its Subsidiaries reasonably
expect to realize for the then current Fiscal Quarter; and
(iv) the aggregate amount of Employee Stock Proceeds
actually realized by the Company and its Subsidiaries for each prior
full Fiscal Quarter ending after December 31, 1998.
SECTION 5.11. Limitation on Debt. (a) The Company will not, and will
not permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except:
(i) Debt outstanding under this Agreement and the Notes;
(ii) Debt owing to the Company or to a Subsidiary;
(iii) Guarantees of Debt permitted by any other clause
of this Section; provided that no Domestic Subsidiary shall
Guarantee Debt of a Foreign Subsidiary;
(iv) medium term notes of the Company outstanding on the
date of this Agreement in the aggregate principal amount of
$500,000,000;
(v) Debt of the Company and/or Foreign Subsidiaries
incurred after the date of this Agreement in an aggregate principal
amount not exceeding $350,000,000 which (x) if consisting of loans
from banks or other financial institutions, will mature on or after
the Termination Date or (y) if consisting of any other Debt, will
have no required repayments of principal (by mandatory sinking fund,
mandatory redemption, mandatory prepayment or otherwise) before
December 31, 2002, and in either case will be used, to the extent
required, to refinance $200,000,000 aggregate principal amount of
the medium term notes referred to in clause (iv) that mature on
March 15, 1999;
(vi) Permitted Subordinated Debt; and
(vii) Debt of the Company and/or Foreign Subsidiaries,
not otherwise permitted under this Section, in an aggregate
principal or face amount outstanding at any time not exceeding the
sum of (x) the aggregate unused amount of the Commitments at such
time plus (y) $150,000,000.
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<PAGE>
(b) The Company will not permit any of its Subsidiaries to issue or
permit to be outstanding any preferred stock of such Subsidiary other than
preferred stock owned by the Company or by a Wholly-Owned Subsidiary.
SECTION 5.12. Negative Pledge. Neither the Company nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it (other than treasury stock of the Company),
except:
(a) Liens on assets of Foreign Subsidiaries securing (i) a
90,000,000 Deutschmark credit facility under which the Company and certain
Foreign Subsidiaries are jointly and severally liable on the date of this
Agreement, as such credit facility may be amended (but not increased) from time
to time, or (ii) any other Debt of Foreign Subsidiaries or Guarantees thereof;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred or assumed solely
for the purpose of financing all or any part of the cost of acquiring or
improving such asset (including any Lien on any asset deemed to exist by reason
of the second sentence of the definition of Lien); provided that such Lien
attaches (or is so deemed to attach) to such asset concurrently with or within
90 days after the acquisition or completion of the improvement thereof;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens for taxes not delinquent or Liens being contested in good
faith and by appropriate proceedings; provided that enforcement of any such
contested Lien is effectively stayed;
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<PAGE>
(h) deposits or pledges to secure obligations under workers'
compensation, social security or similar laws, or under unemployment insurance;
(i) mechanics', workers', materialmen's or other like Liens arising
in the ordinary course of business with respect to obligations which are not due
or which are being contested in good faith;
(j) Liens arising in the ordinary course of its business which (i)
do not secure Debt, (ii) do not secure any monetary obligation in an amount
exceeding $50,000,000 and (iii) do not in the aggregate materially detract from
the value of its assets or materially impair the use thereof in the operation of
its business;
(k) Liens created by the Collateral Documents, including Liens
securing any Additional Loans designated as additional Secured Obligations
pursuant to Section 2.16(a); and
(l) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time outstanding
not to exceed $30,000,000.
Notwithstanding the foregoing, no Polaroid Obligor will create or assume or
suffer to exist any Lien on any Collateral other than (1) the Security
Interests, (2) Liens described in clause (b), (d) or (e) above, (3) Liens
described in clause (f) above, but only if the Debt refinanced, extended,
renewed or refunded was secured by a Lien permitted by a clause (b), (d) or (e)
above, and (4) Liens described in clause (g), (h), (i) or (j) above which arise
and attach by operation of law (other than any Lien filed pursuant to Section
4068 of ERISA or Section 6323 of the Code).
SECTION 5.13. Investments. Neither the Company nor any Subsidiary
will hold, make or acquire any Investment in any Person after the date of this
Agreement, other than:
(a) Investments in Persons which are Subsidiaries on the date of
this Agreement;
(b) Temporary Cash Investments; and
(c) any Investment made after December 31, 1998 and not otherwise
permitted by the foregoing clauses of this Section; provided that, immediately
after such Investment is made or acquired, the aggregate
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<PAGE>
unrecovered cost of all such Investments made or acquired after December 31,
1998 (excluding any portion thereof for which the consideration consists of
capital stock of the Company) does not exceed the cumulative limit set forth
opposite the then current Fiscal Year below:
<TABLE>
<CAPTION>
Fiscal Year Cumulative Limit
----------- ----------------
<S> <C>
1999 $ 5,000,000
2000 $15,000,000
2001 $25,000,000
</TABLE>
For purposes of this clause (c), the unrecovered cost of an Investment means its
historical cost (including the principal amount of any Debt of an acquired
Person or business assumed or Guaranteed by the Company or any of its
Subsidiaries in connection with the acquisition of such Person or business) less
returns of capital from such Investment, proceeds of sale of such Investment and
repayments by an acquired Person of the principal amount of any of its Debt so
assumed or Guaranteed.
SECTION 5.14. Sale-Leaseback Transactions. If the Company and/or its
Subsidiaries engage in one or more Sale-Leaseback Transactions after the date of
this Agreement and the cumulative Net Cash Proceeds thereof exceed the sum of
$25,000,000 plus all Net Cash Proceeds theretofore received from the sale of the
warehouse currently being constructed by the Company in Norton, Massachusetts
(the amount of such excess being "Excess Net Cash Proceeds"), the Company will
apply an amount equal to such Excess Net Cash Proceeds to repay its medium term
notes maturing March 15, 1999 and/or any Additional Loans. Any such repayment of
Additional Loans shall be made within five Domestic Business Days after such
Excess Net Cash Proceeds are received.
SECTION 5.15. Mergers and Sales of Assets. (a) The Company will not
(i) consolidate or merge with any other Person or (ii) sell, lease or otherwise
transfer, directly or indirectly, all or substantially all of its assets to any
other Person; provided that the Company may merge with another Person if (x) the
Company is the corporation surviving such merger and (y) immediately after
giving effect to such merger, no Default shall have occurred and be continuing.
(b) No Subsidiary (except an Immaterial Subsidiary or a Designated
Subsidiary) will (x) consolidate or merge with any other Person or (y) sell,
lease or otherwise transfer, directly or indirectly, all or substantially all of
its assets to any other Person; provided that:
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<PAGE>
(i) any Subsidiary Guarantor or any subsidiary of a
Subsidiary Guarantor may consolidate or merge with, or transfer its
assets to, any other Subsidiary Guarantor or any Subsidiary that is
wholly-owned, directly or indirectly, by one or more Subsidiary
Guarantors; and
(ii) any Subsidiary that is not a Subsidiary Guarantor
or a subsidiary of a Subsidiary Guarantor may consolidate or merge
with, or transfer its assets to, the Company or any other
Subsidiary,
in each case if, immediately after giving effect to such transaction, no Default
shall have occurred and be continuing.
SECTION 5.16. Guarantees by Future Material Domestic Subsidiaries.
If any Person becomes a Material Domestic Subsidiary after the Closing Date, the
Company will, within 30 Domestic Business Days after such Person becomes a
Material Domestic Subsidiary, (i) cause such Material Domestic Subsidiary to
guarantee the Company's obligations hereunder pursuant to a Subsidiary Guaranty
Agreement and (ii) deliver to the Administrative Agent such legal opinions and
other documents as the Administrative Agent may reasonably request relating to
the existence of such Material Domestic Subsidiary, the corporate or other
authority for and validity of its Subsidiary Guaranty Agreement and any other
matters relevant thereto, all in form and substance reasonably satisfactory to
the Administrative Agent.
SECTION 5.17. Future Assets to Be Added to Collateral. (a) Unless
the Security Release Date shall have occurred, the Company shall, within 30
Domestic Business Days after (x) any Person becomes a Material Domestic
Subsidiary or (y) any Material Domestic Subsidiary that is not a Lien Grantor
becomes the owner of inventory located in the United States and/or receivables
with an aggregate book value exceeding $1,000,000:
(i) cause such Material Domestic Subsidiary to sign and
deliver a Security Agreement Supplement granting a Lien or Liens on
its inventory located in the United States and its receivables (with
the exceptions set forth in the proviso at the end of Section 2(a)
of the Security Agreement and such other exceptions as the Required
Lenders shall have approved in writing) to the Collateral Agent to
secure its obligations under its Subsidiary Guaranty Agreement; and
(ii) cause such Material Domestic Subsidiary to comply
with all applicable provisions of the Security Agreement.
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(b) Whenever any assets with an aggregate book value in excess of
$1,000,000 are added to the Collateral pursuant to this Section, the Company
shall deliver to the Administrative Agent such legal opinions and other
documents as the Administrative Agent may reasonably request relating to the
existence of the relevant Lien Grantor, the corporate or other authority for and
validity of the relevant Collateral Documents, the creation and perfection (or
due recordation) of the Lien purportedly created thereby, and any other matters
relevant thereto, all in form and substance (and from counsel) reasonably
satisfactory to the Administrative Agent.
SECTION 5.18. Further Assurances. (a) Upon request by the
Administrative Agent, the Company will, and will cause each of the other Lien
Grantors to, at the Company's sole cost and expense, take all such actions and
execute, acknowledge and deliver all such documents as the Administrative Agent
shall deem necessary or appropriate in its reasonable judgment from time to time
to assure, perfect, convey, assign and transfer to the Collateral Agent the
property and rights conveyed or assigned pursuant to the Collateral Documents or
to facilitate the performance of the terms of the Collateral Documents or the
perfection, filing, registering or recording of the Security Interests.
(b) All costs and expenses in connection with the grant of any
Security Interest, including without limitation reasonable legal fees and other
reasonable costs and expenses in connection with the granting, perfecting and
maintenance of any Security Interest or the preparation, execution, delivery,
recordation or filing of documents and any other acts that the Administrative
Agent may reasonably request in connection with the grant of any Security
Interest shall be paid by the Company promptly upon demand.
(c) The Company will not, and will not permit any of its Domestic
Subsidiaries to, enter into or become subject to any agreement which would
impair their ability to comply, or which would purport to prohibit them from
complying, with the provisions of this Section.
SECTION 5.19. Fiscal Year. The Company will not change its Fiscal
Year from the calendar year.
SECTION 5.20. Use of Proceeds. The proceeds of the Loans will be
used by the Company for working capital and other general corporate purposes,
including acquisitions. None of such proceeds will be used in violation of any
applicable law or regulation.
SECTION 5.21. Incorporation of Any More Favorable Covenants. If the
Company agrees, after the date of this Agreement, to any covenant for the
benefit
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of any lender or any holder of its debt securities that is more favorable to
such lender or holder in any material respect than the covenants set forth in
this Article 5, the Company shall promptly notify the Lenders thereof and, if
requested to do so by the Required Lenders, enter into an amendment to this
Agreement setting forth a comparable covenant for the benefit of the Lenders;
provided that this Section shall not apply to any covenant that (i) relates
solely to the collateral securing any debt that is permitted to be secured by
Section 5.12 or (ii) is a type of covenant that, if included herein, would in
accordance with customary practices be included in a portion of this Agreement
other than this Article 5 (or a definition of a term used in this Article 5).
SECTION 5.22. Limitation on Hedging Agreements. Neither the Company
or any of its Subsidiaries will enter into any Hedging Agreement for speculative
purposes.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan shall not be paid when due or any
interest on any Loan, any fee or any other amount payable hereunder shall not be
paid within three Domestic Business Days after the due date thereof;
(b) the Company shall fail to observe or perform any covenant
contained in Section 5.01(e), or in Sections 5.07 to 5.17, inclusive, or in
Section 5.19 or 5.20; or any Lien Grantor shall fail to observe or perform any
covenant contained in Section 5(a), (b) or (j) of the Security Agreement;
(c) the Company shall fail to perform any covenant contained in
Section 5.01(a) or 5.01(b) and such failure shall continue for five days;
(d) any Polaroid Obligor shall fail to observe or perform any
covenant or agreement on its part (other than those covered by clause (a), (b)
or (c) above) contained in the Financing Documents for 30 days after written
notice thereof has been given to the Company by the Administrative Agent at the
request of any Lender;
(e) any representation, warranty, certification or statement made by
any Polaroid Obligor in this Agreement or any other Financing Document or in any
certificate, financial statement or other document
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delivered pursuant hereto or thereto shall prove to have been incorrect in any
material respect when made (or deemed made);
(f) the Company or any Subsidiary shall fail to make any payment in
respect of any Debt (other than the Notes) when due and such failure shall
continue for more than any expressly applicable period of grace with respect
thereto, and the aggregate principal amount of such Debt and any Debt referred
to in Section 6.01(g) below is at least $10,000,000;
(g) the Company or any Subsidiary shall fail to observe or perform
any term, covenant or agreement contained in any agreement or instrument (other
than the Financing Documents) by which it is bound evidencing or securing or
relating to any Debt or any other condition or event shall occur, if such
failure, condition or event has the effect of accelerating the maturity of such
Debt or permits (or, with the giving of notice or lapse of time or both, would
permit) the holder or holders of such Debt or a trustee or other representative
acting on their behalf to cause or declare acceleration of the maturity thereof,
and the aggregate principal amount of such Debt and any Debt referred to in
Section 6.01(f) above is at least $10,000,000;
(h) the Company or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or (except in the case of a Foreign Subsidiary
being liquidated for reasons other than insolvency) seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(i) an involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the
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Company or any Subsidiary under the federal bankruptcy laws as now or hereafter
in effect;
(j) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a payment
obligation payable in the current year in excess of $10,000,000;
(k) a final and unappealable judgment or order for the payment of
money in excess of $10,000,000 (excluding any portion thereof covered by
insurance and as to which the insurance company has admitted liability) shall be
rendered against the Company or any Subsidiary and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days; provided that, if
such judgment or order permits amounts to be paid over a greater period of time,
such judgment or order may continue unsatisfied as to such amounts for such
greater period;
(l) a Change in Control shall have occurred;
(m) unless previously released pursuant to the applicable provisions
of the Financing Documents, any Lien created by any Collateral Document shall at
any time fail to constitute a valid and (to the extent required by the
Collateral Documents) perfected Lien on all the Collateral purported to be
subject thereto, securing all the obligations purported to be secured thereby,
with the priority required by the Financing Documents, or any Lien Grantor shall
so assert in writing; or
(n) unless previously released pursuant to the applicable provisions
of the Financing Documents, any Subsidiary Guaranty Agreement (or any provision
thereof) shall cease to be in full force and effect or the Company or any
Subsidiary Guarantor, or any Person acting
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on behalf of the Company or any Subsidiary Guarantor, shall so assert in
writing;
then, and in every such event, the Administrative Agent shall (i) if requested
by Lenders having more than 50% in aggregate amount of the Commitments, by
notice to the Company terminate the Commitments and they shall thereupon
terminate, and (ii) if requested by Lenders holding Notes evidencing more than
50% in aggregate outstanding principal amount of the Loans, by notice to the
Company declare the Loans (together with accrued interest thereon) to be, and
the Loans (together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company; provided that if any
Event of Default specified in Section 6.01(h) or 6.01(i) above occurs with
respect to the Company, then, without any notice to the Company or any other act
by the Administrative Agent or the Lenders, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
SECTION 6.02. Notice of Default. The Administrative Agent shall,
promptly upon being requested to do so by any Lender, give notice to the Company
under Section 6.01(d) and thereupon notify all the Lenders thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. (a) Each Lender
irrevocably appoints and authorizes the Administrative Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
other Financing Documents as are delegated to it by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
(b) Each Lender authorizes and directs the Collateral Agent to
execute and deliver the Collateral Documents and irrevocably appoints and
authorizes the Collateral Agent to act as its agent in connection with the
Collateral Documents and to take such action as agent on its behalf and to
exercise such powers under the Collateral Documents as are delegated to it by
the terms thereof, together with all such powers as are reasonably incidental
thereto.
SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust Company
of New York shall have the same rights and powers under the Financing Documents
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as any other Lender and may exercise or refrain from exercising the same as
though it were not an Agent, and Morgan Guaranty Trust Company of New York and
its affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Company or any Subsidiary or Affiliate as if it
were not an Agent hereunder.
SECTION 7.03. Action by Administrative Agent. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. Either Agent may consult
with legal counsel (who may be counsel for any of the Polaroid Obligors),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. No Agent or Co-Agent (and none of
their respective directors, officers, agents or employees) shall be liable for
any action taken or not taken by it in connection herewith (i) with the consent
or at the request or direction of the Required Lenders (or the Super-Majority
Lenders when their consent is required) or (ii) in the absence of its own gross
negligence or willful misconduct. No Agent or Co-Agent (and none of their
respective directors, officers, agents or employees) shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with the Financing Documents or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any Polaroid Obligor; (iii) the satisfaction of any condition
specified in Article 3, except, in the case of the Administrative Agent, receipt
of items required to be delivered to the Administrative Agent; or (iv) the
validity, effectiveness or genuineness of any Financing Document or any other
instrument or writing furnished in connection herewith. Neither Agent shall
incur any liability by acting in reliance upon any notice, consent, certificate,
statement or other writing (which may be a bank wire, telex, facsimile or
similar writing) reasonably believed by it to be genuine or to be signed by the
proper party or parties.
SECTION 7.06. Indemnification. Each Lender shall, ratably in
accordance with its Commitment, indemnify the Agents and the Co-Agent (to the
extent not reimbursed by the Company) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(collectively, "Liabilities") that such Agent or the Co-Agent may suffer or
incur in connection with the
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Financing Documents or any action taken or omitted by it thereunder, except any
Liability resulting from its gross negligence or willful misconduct.
SECTION 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon either Agent, the Co-Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon either Agent, the Co-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 decisions in taking or not taking any action under the
Financing Documents.
SECTION 7.08. Resignation of Administrative Agent. (a) The
Administrative Agent may resign at any time (effective upon acceptance of its
appointment by a successor Administrative Agent) by giving written notice
thereof to the Lenders and the Company. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Administrative Agent, with
the consent of the Company (if no Default shall have occurred and be
continuing), which consent shall not be unreasonably withheld. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent gives notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a Lender, if a Lender is able and willing
to serve as the Administrative Agent, or, if no Lender is able and willing to
serve as the Administrative Agent, a commercial bank organized or licensed under
the laws of the United States or of any State thereof and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of its
appointment as the Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder.
(b) The Collateral Agent may resign at any time as provided in
Section 11(h) of the Security Agreement.
(c) The Co-Agent may resign at any time by giving notice of its
resignation to the Lenders and the Company.
(d) After any Agent or the Co-Agent resigns, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent or the Co-Agent, as the case may be.
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ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Group of
Euro-Dollar Loans:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in U.S. dollars (in the applicable amounts) are not being offered to
the Reference Banks in the London interbank market for such Interest Period, or
(b) Lenders having 50% or more of the aggregate principal amount of
the Commitments advise the Administrative Agent that the London Interbank
Offered Rate as determined by the Administrative Agent will not adequately and
fairly reflect the cost to such Lenders of funding their Euro-Dollar Loans for
such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Company and
the Lenders, whereupon until the Administrative Agent notifies the Company and
the Lenders that the circumstances giving rise to such suspension no longer
exist, (i) the obligations of the Lenders to make Euro-Dollar Loans or to
continue or convert outstanding Loans as or into Euro-Dollar Loans shall be
suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a
Base Rate Loan on the last day of the then current Interest Period applicable
thereto. Thereafter, unless the Company notifies the Administrative Agent at
least two Domestic Business Days before the date of any Euro-Dollar Borrowing
for which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Euro-Dollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Lender (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so
notify the Administrative Agent, the Administrative Agent shall forthwith give
notice thereof to the other
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Lenders and the Company, whereupon until such Lender notifies the Company and
the Administrative Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Lender to make Euro-Dollar Loans, or to
convert outstanding Base Rate Loans into Euro-Dollar Loans or to continue
outstanding Euro-Dollar Loans as Euro-Dollar Loans for an additional Interest
Period shall be suspended. Before giving any notice to the Administrative Agent
pursuant to this Section, such Lender shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender. If such notice is given, all Euro-Dollar Loans of such Lender then
outstanding shall begin bearing interest at the rate applicable to Base Rate
Loans, notwithstanding any prior election by the Company to the contrary, either
(a) on the last day of the then current Interest Period applicable to such
Euro-Dollar Loans if such Lender may lawfully continue to maintain and fund such
Loans at the rate applicable to Euro-Dollar Loans to such day or (b) immediately
if such Lender may not lawfully continue to maintain and fund such Loans at the
rate applicable to Euro-Dollar Loans to such day (in which case the Company
shall reimburse such Lender for any resulting loss or expense as provided in
Section 2.10).
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
the date of this Agreement, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency:
(i) shall subject any Lender (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its
Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar
Loans, or shall change the basis of taxation of payments to any
Lender (or its Applicable Lending Office) of the principal of or
interest on its Euro-Dollar Loans or any other amounts due under
this Agreement in respect of its Euro-Dollar Loans or its obligation
to make Euro-Dollar Loans (except for changes in the rate of tax on
the overall net income of such Lender or its Applicable Lending
Office imposed by the jurisdiction in which such Lender's principal
executive office or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any
reserve, insurance assessment, special deposit or similar
requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but
excluding any such
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requirement included in an applicable Euro-Dollar Reserve
Percentage) against assets of, deposits with or for the account of,
or credit extended by, any Lender (or its Applicable Lending Office)
or shall impose on any Lender (or its Applicable Lending Office) or
on the London interbank market any other condition affecting its
Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar
Loans;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making or maintaining any Euro-Dollar
Loan, or to reduce the amount of any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Lender to be material, then, within
15 days after written demand by such Lender (with a copy to the Administrative
Agent) showing in reasonable detail the calculation of any additional amounts
payable, the Company shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date of this
Agreement, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Lender (or its Parent)
as a consequence of such Lender's obligations hereunder to a level below that
which such Lender (or its Parent) could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, within 15 days after written demand by such Lender (with
a copy to the Administrative Agent) showing in reasonable detail the calculation
of any additional amounts payable, the Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender (or its Parent) for
such reduction.
(c) Each Lender will promptly notify the Company and the
Administrative Agent of any event of which it has knowledge, occurring after the
date of this Agreement, which will entitle such Lender to compensation pursuant
to this Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
it. A certificate of any Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be
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conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods. The Company
shall not be obligated to compensate any Lender pursuant to this Section for
increased costs or reduced return accruing prior to the date which is six months
before such Lender requests compensation; provided that if any law, rule or
regulation, or interpretation or administration thereof, or any request or
directive giving rise to increased costs or reduced returns has retroactive
effect, such Lender shall be entitled to claim compensation hereunder for the
period commencing on such date of retroactive effect through the date of
adoption or change or promulgation thereof without regard to the foregoing
limitation.
SECTION 8.04. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Lender to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation
under Section 8.03(a) and the Company shall, by at least five Euro-Dollar
Business Days' prior notice to such Lender through the Administrative Agent,
have elected that the provisions of this Section shall apply to the Lender
demanding such compensation, then, unless and until such Lender notifies the
Company that the circumstances giving rise to such suspension or demand for
compensation no longer apply, all Loans of such Lender which would otherwise
bear interest at the rate applicable to Euro-Dollar Loans shall instead bear
interest at the rate applicable to Base Rate Loans (on which interest and
principal shall be payable contemporaneously with the related Loans of the other
Lenders), notwithstanding any prior election by the Company to the contrary.
SECTION 8.05. Substitution of Lender. (a) If (i) the obligation of
any Lender to make or maintain Euro-Dollar Loans is suspended pursuant to
Section 8.02, (ii) any Lender (or any Participant in its Loans) is demanding
compensation under Section 8.03 or (iii) any Lender is requesting compensation
under Section 2.15, the Company shall have the right to seek a bank or banks
(each a "Substitute Lender"), which may be one or more of the Lenders or one or
more other banks reasonably satisfactory to the Administrative Agent, to
purchase the Note and assume the Commitment of such Lender (the "Affected
Lender") and, if the Company locates one or more Substitute Lenders, the
Affected Lender shall, upon payment to it of the purchase price agreed between
it and the Substitute Lender or Lenders (or, failing such agreement, a purchase
price equal to the outstanding principal amount of its Loans and accrued
interest thereon to the date of payment) plus any amount (other than principal
and interest) then due to it or accrued for its account hereunder, assign all
its rights and obligations under this Agreement and its Note (including its
Commitment) to the Substitute Lender or Lenders, and the Substitute Lender or
Lenders shall assume such rights and obligations pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit F hereto, whereupon
(i) the Commitment of each Substitute Lender that is already a
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Lender shall be increased by the portion of the Affected Lender's Commitment so
assigned to and assumed by it and (ii) each Substitute Lender that is not
already a Lender shall become a Lender party to this Agreement and shall acquire
all the rights and obligations of a Lender with a Commitment equal to the
portion of the Affected Lender's Commitment so assigned to and assumed by it.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Company or the Administrative Agent, at its
address or telex or facsimile number set forth on the signature pages hereof,
(y) in the case of any Subsidiary Guarantor, in care of the Company, (z) in the
case of any Lender, at its address or telex or facsimile number set forth in its
Administrative Questionnaire or (z) in the case of any party, at such other
address or telex or facsimile number as such party may hereafter specify for the
purpose by notice to the Administrative Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address or received at the facsimile number specified in this Section;
provided that notices to the Administrative Agent under Article 2 or Article 8
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by any Agent or any
Lender in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The
Company shall pay (i) all reasonable out-of-pocket expenses of the Agents,
including reasonable fees and disbursements of special counsel for the Agents,
in connection with the preparation of the Financing Documents, any waiver or
consent thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Agents or any Lender, including fees and disbursements of
62
<PAGE>
counsel, in connection with such Event of Default and any collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
The Company shall indemnify the Agents and each Lender against any transfer
taxes, documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of the Financing Documents.
(b) The Company agrees to indemnify the Agents, the Co-Agent and
each Lender, and hold each of them harmless, from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without
limitation, reasonable fees and disbursements of counsel, which may be incurred
by such Lender (or by such Agent or the Co-Agent) in connection with any
investigative, administrative or judicial proceeding (whether or not it shall be
designated a party thereto) relating to or arising out of the Financing
Documents or any actual or proposed use of proceeds of Loans hereunder; provided
that none of the Agents, the Co-Agent and the Lenders shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Lender agrees that if (i) it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Lender in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Lender and (ii) such
inequality shall have continued for more than 15 days, the Lender receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Lenders, and such other adjustments shall be made from time to
time, as may be required so that all such payments of principal and interest
with respect to the Notes held by the Lenders shall be shared by the Lenders pro
rata; provided that nothing in this Section shall impair the right of any Lender
to exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Company
other than its indebtedness hereunder. The Company agrees, to the fullest extent
it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Company in the amount of such participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed or otherwise approved in writing
by the Company and the Required Lenders (and, if the rights or duties of the
63
<PAGE>
Administrative Agent are affected thereby, by the Administrative Agent),
provided that no such amendment or waiver shall:
(i) unless signed or otherwise approved in writing by
all the Lenders, (A) increase or decrease any Commitment of any
Lender (except for a ratable decrease in the Commitments of all the
Lenders) or subject any Lender (without its prior written consent)
to any additional obligation or create any additional Commitment
hereunder, (B) reduce the principal of or rate of interest on any
Loan or any fee hereunder, (C) postpone the date fixed for any
payment of principal of or interest on any Loan or any fee
hereunder, (D) reduce the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans, or the number of
Lenders, which shall be required for the Lenders or any of them to
take any action under this Section or any other provision of this
Agreement or (E) change this clause (i); or
(ii) unless signed by the Super-Majority Lenders, (A)
release any Subsidiary Guarantor from its obligations under its
Subsidiary Guaranty Agreement (except as expressly provided in
Section 2.18), (B) release any Collateral (except as expressly
provided in Section 2.17 hereof and Section 14 of the Security
Agreement) or (C) change Section 2.17 or 2.18, the definition of
"Designated Business", "Designated Subsidiary", "Guaranteed
Obligations" or "Secured Obligations" or this clause (ii).
(b) Any provision of the Collateral Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
each relevant Polaroid Obligor and the Collateral Agent with the consent of the
Required Lenders; provided that no such amendment or waiver shall, unless signed
by the Super-Majority Lenders, (i) effect or permit a release of any Collateral
(except as expressly provided in Section 2.17 hereof and Section 14 of the
Security Agreement) or (ii) change Section 14 of the Security Agreement.
(c) Notwithstanding the foregoing provisions of this Section, any of
the Financing Documents may be amended (or amended and restated) to provide for
the Additional Loans, the designation thereof as additional Guaranteed
Obligations and additional Secured Obligations, the addition of additional
Collateral, the inclusion of the lenders of such Additional Loans in the terms
"Lenders", "Required Lenders" and "Super-Majority Lenders" and any consequential
or related changes in connection with the foregoing; provided that any such
amendment, or amendment and restatement, (i) is signed (or otherwise approved in
writing) by the Company, the Agents, the Required Lenders and each lender that
agrees to make any Additional Loan and (ii) does not, unless signed or otherwise
approved in writing by each Lender adversely affected thereby, have any effect
64
<PAGE>
specified in clause (A), (B) or (C) of Section 9.05(a)(i) or change the effect
of Section 9.05(a)(ii) or 9.05(b), except to the extent that (x) the terms
"Lenders", "Required Lenders" and "Super-Majority Lenders" are redefined to
include the lenders of Additional Loans and (y) additional Commitments are added
hereunder, or Commitments of existing Lenders are increased hereunder, to
provide for Additional Loans.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Company may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all the Lenders.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
its Loans. In the event of any such grant by a Lender of a participating
interest to a Participant, whether or not upon notice to the Company and the
Administrative Agent, such Lender shall remain responsible for the performance
of its obligations hereunder, and the Company and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Financing Documents. Any agreement
pursuant to which any Lender may grant such a participating interest shall
provide that such Lender shall retain the sole right and responsibility to
enforce the obligations of the Company under the Financing Documents including,
without limitation, the right to approve any amendment, modification or waiver
of any provision thereof; provided that such participation agreement may provide
that such Lender will not, without the consent of the Participant, agree to any
modification, amendment or waiver of this Agreement (x) described in clause (B)
or (C) of Section 9.05(a)(i) or (y) that would change the requirement that all
the Lenders must sign or approve any amendment or waiver described in clause (B)
or (C) of Section 9.05(a)(i). Subject to Section 9.06(e) below, the Company
agree that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Article 8 with respect to its
participating interest. An assignment or other transfer which is not permitted
by Section 9.06(c) or 9.06(d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this Section 9.06(b).
(c) Any Lender may at any time, upon prior notice to the Company and
the Administrative Agent, assign to one or more banks or other institutions
(each an "Assignee") a proportionate part (equivalent to an initial Commitment
of not less than $5,000,000) of each of its rights and obligations under this
Agreement and its Note, and such Assignee shall assume such rights and
obligations pursuant to an Assignment and Assumption Agreement substantially in
the form of Exhibit
65
<PAGE>
F hereto executed by such Assignee and such transferor Lender with (and subject
to) the subscribed consent of the Company, which consent shall not be
unreasonably withheld, and the Administrative Agent; provided that no such
consent shall be required if (i) the Assignee is an affiliate of such transferor
Lender or was a Lender immediately before such assignment or (ii) on the date of
such assignment, an Event of Default shall have occurred and be continuing under
Section 6.01(a), 6.01(h) or 6.01(i) or as a result of the Company's failure to
observe or perform any covenant contained in Section 5.07, 5.08 or 5.11. Upon
execution and delivery of such an instrument, payment by such Assignee to such
transferor Lender of an amount equal to the purchase price agreed between such
transferor Lender and such Assignee, delivery to the Administrative Agent and
the Company of an executed copy of such instrument and payment by such Assignee
to the Administrative Agent of a processing fee of $2,500, such Assignee shall
be a Lender party to this Agreement and shall have all the rights and
obligations of a Lender with a Commitment as set forth in such instrument of
assumption, and the transferor Lender shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this Section 9.06(c), the transferor Lender, the Administrative Agent and the
Company shall make appropriate arrangements so that, if required, a new Note is
issued to the Assignee. If the Assignee is not incorporated under the laws of
the United States or a State thereof, it shall deliver to the Company and the
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 2.13.
(d) Any Lender may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Section 8.03 than
such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or pursuant to Section 8.05 or by reason of the provisions of Section
8.02 or 8.03 requiring such Lender to designate a different Applicable Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
SECTION 9.07. No Reliance on Margin Stock. Each of the Lenders
represents to the Administrative Agent and each of the other Lenders that it in
good faith is not relying upon any "margin stock" (as defined in Regulation U)
as collateral in the extension or maintenance of the credit provided for in this
Agreement.
66
<PAGE>
SECTION 9.08. WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
SECTION 9.09. Submission to Jurisdiction. Each Polaroid Obligor
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York City for purposes of all legal proceedings arising out of or
relating to the Financing Documents or the transactions contemplated thereby.
Each Polaroid Obligor irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.10. New York Law. This Agreement and each Note shall be
construed in accordance with and governed by the laws of the State of New York.
SECTION 9.11. Confidentiality. Any information disclosed by the
Company to either Agent or any of the Lenders, which was designated proprietary
or confidential at the time of receipt thereof by such Agent or Lender, shall be
used solely for purposes of the Financing Documents and not in any other manner
detrimental to the Company and, if such information is not otherwise in the
public domain, shall not be disclosed by such Agent or Lender to any other
Person except (i) to its independent accountants and legal counsel (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential), (ii) pursuant to statutory and regulatory
requirements, (iii) pursuant to any mandatory court order, subpoena or other
legal process, (iv) to any Agent or any Lender, (v) pursuant to any agreement
heretofore or hereafter made between such Lender and the Company which permits
such disclosure, (vi) in connection with the exercise of any remedy under any
Financing Document or (vii) subject to an agreement containing provisions
substantially the same as those of this Section, to any participant in or
assignee of, or prospective participant in or assignee of, any Loan or
Commitment (it being understood that prior to any such disclosure contemplated
by clauses (ii) and (iii) above, such Agent or Lender shall, if practicable,
give the Company prior written notice of such disclosure).
SECTION 9.12. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
67
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
POLAROID CORPORATION
By:
------------------------------
Name:
Title:
784 Memorial Drive
Cambridge, Massachusetts 02139
Attention: Treasurer
Telex number: 921 482
Facsimile number:
68
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
--------------------------
Name:
Title:
ABN AMRO BANK N.V.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
--------------------------
Name:
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
--------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By:
--------------------------
Name:
Title:
69
<PAGE>
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:
--------------------------
Name:
Title:
ROYAL BANK OF CANADA
By:
--------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED, NEW
YORK BRANCH
By:
--------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By:
--------------------------
Name:
Title:
70
<PAGE>
FLEET NATIONAL BANK
By:
--------------------------
Name:
Title:
MELLON BANK, N.A.
By:
--------------------------
Name:
Title:
NATIONSBANK, N.A.
By:
--------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------
Name:
Title:
71
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent
By:
--------------------------------
Name:
Title:
60 Wall Street
New York, New York 10260-0060
Attention: Loan Department
Telex number: 177615 MGT UT
Facsimile number: 212-648-5014
BANKBOSTON, N.A., as Co-Agent
By:
--------------------------------
Name:
Title:
100 Federal Street
Mail Stop: 01-10-01
Boston, MA 02110
Attention: Grace A. Barnett
Telex number: 4996527
Facsimile number: 617-434-0601
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Collateral Agent
By:
--------------------------------
Name:
Title:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Jeannie Mattson
Facsimile number: (302) 634-1852
72
<PAGE>
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Name of Lender Commitment
- -------------- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $ 45,000,000
ABN AMRO Bank N.V. 35,000,000
BankBoston, N.A. 35,000,000
Bank of Tokyo-Mitsubishi Trust Company 25,000,000
Credit Lyonnais New York Branch 25,000,000
Deutsche Bank AG, New York and/or Cayman Islands Branches 25,000,000
The First National Bank of Chicago 25,000,000
Royal Bank of Canada 25,000,000
The Sumitomo Bank, Limited, New York Branch 25,000,000
Wachovia Bank, N.A. 25,000,000
Fleet National Bank 15,000,000
Mellon Bank, N.A. 15,000,000
NationsBank, N.A. 15,000,000
PNC Bank, National Association 15,000,000
------------
TOTAL COMMITMENTS $350,000,000
</TABLE>
<PAGE>
PRICING SCHEDULE
The "Euro-Dollar Margin", "Base Rate Margin", "Commitment Fee Rate"
and "Facility Fee Rate" for any day are the respective rates per annum set forth
below in the applicable row in the column corresponding to the Pricing Level
that applies on such day:
<TABLE>
<CAPTION>
=================================================================================================================================
Level I Level II Level III Level IV Level V Level VI Level VII
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Euro-Dollar Margin .190% .225% .275% 1.250% 1.525% 2.025% 2.275%
- ---------------------------------------------------------------------------------------------------------------------------------
Base Rate Margin .000% .000% .000% .250% .525% 1.025% 1.275%
- ---------------------------------------------------------------------------------------------------------------------------------
Facility Fee Rate .085% .100% .100% .250% .475% .475% .725%
- ---------------------------------------------------------------------------------------------------------------------------------
Commitment Fee Rate .000% .000% .025% .025% .025% .025% .025%
=================================================================================================================================
</TABLE>
Level V Pricing will apply from and including the Closing Date to
and including the earlier of (i) March 15, 1999 or (ii) the first day after
December 11, 1998 on which both Moody's and S&P shall have confirmed the
Company's Long-Term Debt Ratings (without negative qualification). For each day
thereafter, the applicable Pricing Level will be determined on the basis of the
following definitions:
"Level I Pricing" will apply on any day if, on such day, the
Company's Long-Term Debt Ratings are (i) A- or higher by S&P and Baa1 or higher
by Moody's or (ii) BBB+ by S&P and A3 or higher by Moody's.
"Level II Pricing" will apply on any day if, on such day, the
Company's Long-Term Debt Ratings are BBB+ by S&P and Baa1 by Moody's.
"Level III Pricing" will apply on any day if, on such day, the
Company's Long-Term Debt Ratings are BBB by S&P or Baa2 by Moody's.
"Level IV Pricing" will apply on any day if, on such day, (i) the
Company's Long-Term Debt Ratings are BBB- or higher by S&P and Baa3 or higher by
Moody's and (ii) no lower Pricing Level applies.
"Level V Pricing" will apply on any day if, on such day, (i) the
Company's Long-Term Debt Ratings are BB+ or higher by S&P and Ba1 or higher by
Moody's and (ii) no lower Pricing Level applies.
"Level VI Pricing" will apply on any day if, on such day, (i) the
Company's Long-Term Debt Ratings are BB or higher by S&P and Ba2 or higher by
Moody's and (ii) no lower Pricing Level applies.
<PAGE>
"Level VII Pricing" will apply on any day if, on such day, no other
Pricing Level applies.
"Pricing Level" means any one of the seven pricing levels
represented by Level I Pricing, Level II Pricing, Level III Pricing, Level IV
Pricing, Level V Pricing, Level VI Pricing and Level VII Pricing. For purposes
of this Pricing Schedule, Level I Pricing is the lowest Pricing Level and Level
VII Pricing is the highest Pricing Level.
For purposes of this Pricing Schedule, the Long-Term Debt Ratings in effect on
any day are the Long-Term Debt Ratings in effect at the close of business on
such day.
2
<PAGE>
EXHIBIT A
NOTE
New York, New York
_________________, 19__
For value received, Polaroid Corporation, a Delaware corporation
(the "Company"), promises to pay to the order of _____________________ (the
"Lender"), for the account of its Applicable Lending Office, the unpaid
principal amount of all Loans made by the Lender to the Company pursuant to the
Credit Agreement (as defined below) or pursuant to the Existing Credit Agreement
(as defined in the Credit Agreement), such principal amount to be payable on the
Termination Date. The Company promises to pay interest on the unpaid principal
amount of such Loans on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Lender and all repayments of the principal
thereof shall be recorded by the Lender and, prior to any transfer hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Lender on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that any failure by the Lender to make (or any error in
making) any such recordation or endorsement shall not affect the obligations of
the Company hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Amended and
Restated Credit Agreement dated as of December 11, 1998 among Polaroid
Corporation, the lenders party thereto, Morgan Guaranty Trust Company of New
York, as Administrative Agent and Collateral Agent, and BankBoston, N.A. as
Co-Agent (as the same may be amended from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
POLAROID CORPORATION
By:
------------------------
Name:
Title:
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Amount of Amount of Notation
Date Loan Principal Repaid Made By
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE>
EXHIBIT B
OPINION OF SIMPSON THACHER & BARTLETT
SPECIAL COUNSEL FOR THE COMPANY
December 11, 1998
Morgan Guaranty Trust Company of New York, as Administrative Agent (the
"Administrative Agent") and as Collateral Agent (the "Collateral Agent")
under the Credit Agreement, as hereinafter defined and
The Lenders listed on Schedule I hereto which are parties to the Credit
Agreement on the date hereof
c/o Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Re: Amended and Restated Credit Agreement, dated as
of December 11, 1998 (the "Credit Agreement")
among Polaroid Corporation (the "Company"), the
lending institutions identified in the Credit
Agreement (the "Lenders"), BankBoston, N.A. as
Co-Agent (the "Co-Agent"), the Collateral Agent
and the Administrative Agent
Ladies and Gentlemen:
We have acted as special counsel to Polaroid Corporation, a Delaware
corporation, the subsidiaries of the Company named on Schedule II attached
hereto (each, a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors"; the Company and the Subsidiary Guarantors being referred to herein
collectively as the "Credit Parties") in connection with the preparation,
execution and delivery of the following documents:
(a) the Credit Agreement;
(b) the Security Agreement;
<PAGE>
(c) the Subsidiary Guaranty Agreement; and
(d) the Notes delivered to the Lenders on the date hereof.
The documents described in the foregoing clauses (a) through (d) are
collectively referred to herein as the "Credit Documents." Unless otherwise
indicated, capitalized terms used but not defined herein shall have the
respective meanings set forth in the Credit Agreement. This opinion is furnished
to you pursuant to Section 3.01(g) of the Credit Agreement.
In connection with this opinion, we have examined:
(A) the Credit Agreement, signed by the Company, the
Administrative Agent, the Collateral Agent, the Co-Agent
and certain of the Lenders; and
(B) each other Credit Document, signed by each Credit Party
party thereto.
We also have examined the originals, or duplicates or certified or
conformed copies, of such records, agreements, instruments and other documents
and have made such other investigations as we have deemed relevant and necessary
in connection with the opinions expressed herein. As to questions of fact
material to this opinion, we have relied upon certificates of public officials
and of officers and representatives of the Credit Parties. In addition, we have
examined, and have relied as to matters of fact upon, the representations made
in the Credit Documents.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
In addition, we have assumed that (1) the Credit Parties have rights
in the Collateral existing on the date hereof and will have rights in property
which becomes Collateral after the date hereof and (2) "value" (as defined in
Section 1- 201(44) of the Uniform Commercial Code as in effect in the State of
New York (the "New York UCC")) has been given by the Lenders to the Company for
the security interests and other rights in the Collateral.
Based upon and subject to the foregoing, and subject to the
qualifications and limitations set forth herein, we are of the opinion that:
B-2
<PAGE>
1. Each of the Credit Parties has duly authorized, executed and
delivered each Credit Document to which it is a party.
2. Assuming that proceeds of borrowings have been and will be used
in accordance with the terms of the Credit Agreement, the execution and delivery
by each Credit Party of the Credit Documents to which it is a party, the
borrowings by the Company in accordance with the terms of the Credit Documents,
and the performance of each Credit Party's payment obligations thereunder and
granting of the security interests pursuant to the Security Agreement by each
Credit Party which is a party thereto will not result in any violation of any
Federal or New York statute or the Delaware General Corporation Law or any rule
or regulation issued pursuant to any New York or Federal statute or the Delaware
General Corporation Law or any order known to us issued by any court or
governmental agency or body.
3. No consent, approval, authorization, order, filing, registration
or qualification of or with any Federal or New York governmental agency or body
or any Delaware governmental agency or body acting pursuant to the Delaware
General Corporation Law is required for the execution and delivery by any Credit
Party of the Credit Documents to which it is a party, the borrowings by the
Company in accordance with the terms of the Credit Documents or the performance
by the Credit Parties of their respective payment obligations under the Credit
Documents or the granting of any security interests under the Security Agreement
by each Credit Party which is a party thereto, except filings required for the
perfection of security interests granted pursuant to the Security Agreement.
4. Assuming that each of the Credit Documents is a valid and legally
binding obligation of each of the Lenders parties thereto and assuming that (a)
each of the Credit Parties is validly existing and in good standing under the
laws of the jurisdiction in which it is organized, (b) execution, delivery and
performance by each Credit Party of the Credit Documents to which it is a party
do not violate the laws of the jurisdiction in which it is organized or any
other applicable laws (excepting the laws of the State of New York, the General
Corporation Law of the State of Delaware and the Federal laws of the United
States), (c) execution, delivery and performance by each Credit Party of the
Credit Documents to which it is a party do not constitute a breach or violation
of any agreement or instrument which is binding upon such Credit Party, each
Credit Document constitutes the valid and legally binding obligation of each
Credit Party which is a party thereto, enforceable against such Credit Party in
accordance with its terms.
5. The Security Agreement creates in favor of the Collateral Agent
for the benefit of the Lenders a security interest in the collateral described
therein in
B-3
<PAGE>
which a security interest may be created under Article 9 of the New York UCC
(the "Security Agreement Article 9 Collateral").
6. The security interest of the Collateral Agent for the benefit of
the Lenders in that portion of the collateral described in the Security
Agreement identified on Schedule III as instruments will be a perfected security
interest upon delivery of such instruments to the Collateral Agent in the State
of New York.
7. No Credit Party is an "investment company" within the meaning of
and subject to regulation under the Investment Company Act of 1940, as amended.
Our opinions in paragraphs 4 and 5 above are subject to (i) the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law) and (iii) any implied covenant of good faith and fair
dealing.
Our opinions in paragraphs 5 and 6 are limited to Article 9 of the
New York UCC, and therefore these opinion paragraphs do not address (i)
collateral of a type not subject to Article 9 of the New York UCC, and (ii)
under New York UCC ss. 9-103 what law governs perfection of the security
interests granted in the collateral covered by this opinion letter.
We express no opinion with respect to:
(A) the effect of ss. 9-306(2) of the New York UCC with respect to
any proceeds of Collateral that are not identifiable;
(B) the effect of Section 552 of the Bankruptcy Code (11 U.S.C. 552)
(relating to property acquired by a pledgor after the commencement of a case
under the United States Bankruptcy Code with respect to such pledgor) and
Section 506(c) of the Bankruptcy Code (11 U.S.C. 506(c) (relating to certain
costs and expenses of a trustee in preserving or disposing of collateral;
(C) the effect of any provision of the Credit Documents which is
intended to establish any standard other than a standard set forth in the New
York UCC as the measure of the performance by any party thereto of such party's
obligations of good faith, diligence, reasonableness or care or of the
fulfillment of the duties imposed on any secured party with respect to the
maintenance, disposition or redemption of collateral, accounting for surplus
proceeds of collateral or accepting collateral in discharge of liabilities;
B-4
<PAGE>
(D) the effect of any provision of the Credit Documents which is
intended to permit modification thereof only by means of an agreement signed in
writing by the parties thereto;
(E) the effect of any provision of the Credit Documents insofar as
it provides that any Person purchasing a participation from a Lender or other
Person may exercise set-off or similar rights with respect to such participation
or that any Lender or other Person may exercise set-off or similar rights other
than in accordance with applicable law;
(F) the effect of any provision of the Credit Documents imposing
penalties or forfeitures;
(G) the enforceability of any provision of any of the Credit
Documents to the extent that such provision constitutes a waiver of illegality
as a defense to performance of contract obligations;
(H) the effect of any provision of the Credit Documents relating to
indemnification or exculpation in connection with violations of any securities
laws or relating to indemnification, contribution or exculpation in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated Person or the Person receiving contribution;
(I) Section 9.04 of the Credit Agreement and any other provision of
the Credit Agreement insofar as it purports to grant a right of setoff in
respect of the Company's or its subsidiaries' assets (i) to any person other
than a creditor of the Company or subsidiary, as the case may be, or (ii) to any
Lender in an amount greater than the amount owing by the Company or subsidiary,
as the case may be, to such Lender;
(J) Section 2.04(c) of the Credit Agreement insofar as it relates to
post- judgment or default interest rates; and
(K) the enforceability of Section 2.14 of the Credit Agreement
concerning judgment in a different currency.
We understand that you are relying on the opinion of Thomas M.
Lemberg, General Counsel of the Company, and Bingham Dana LLP, special
Massachusetts counsel to the Company, of even date herewith.
In connection with the provisions whereby the Credit Parties submit
to the jurisdiction of the United States District Court for the Southern
District of New York, we note the limitations of 28 U.S.C. Sections 1331 and
1332 on federal
B-5
<PAGE>
court jurisdiction, and we also note that such submissions cannot supersede that
court's discretion in determining whether to transfer an action from one federal
court to another under 28 U.S.C. Section 1404(a).
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the Federal law of the United States and the General Corporation
Law of the State of Delaware.
This opinion letter is rendered to you in connection with the above
described transactions. This opinion letter may not be relied upon by you for
any other purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.
Very truly yours,
B-6
<PAGE>
Schedule I
The Lenders
B-7
<PAGE>
Schedule II
Subsidiary Guarantors
B-8
<PAGE>
Schedule III
Instruments and Agreements
B-9
<PAGE>
EXHIBIT C
OPINION OF THOMAS M. LEMBERG,
GENERAL COUNSEL OF THE COMPANY
December 11, 1998
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
As Senior Vice President and General Counsel of Polaroid
Corporation, a Delaware corporation (the "Company"), I am familiar with the
Amended and Restated Credit Agreement dated as of December 11, 1998 (the "Credit
Agreement") among the Company, the Lenders party thereto, Morgan Guaranty Trust
Company of New York, as Administrative Agent and Collateral Agent, and
BankBoston, N.A., as Co-Agent. Capitalized terms defined in the Credit Agreement
or the Security Agreement are used herein as therein defined. The Credit
Agreement, the Security Agreement, the Subsidiary Guaranty Agreement delivered
today and the Notes delivered today are referred to herein as the "Covered
Documents". This opinion is being rendered to you pursuant to Section 3.01(g) of
the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of opinion that:
1. Each Polaroid Obligor is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation
<PAGE>
and has all corporate powers and, to the best of my knowledge, all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, the absence of which would have a Material
Adverse Effect.
2. The execution, delivery and performance by each Polaroid Obligor
of the Covered Documents to which it is a party (i) are within its corporate
powers and have been duly authorized by all necessary corporate action, (ii)
require no action by or in respect of, or filing with, any governmental body,
agency or official and (iii) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of its certificate of
incorporation or by-laws or, to the best of my knowledge, of any agreement,
judgment, injunction, order, decree or other instrument binding upon it or, to
the best of my knowledge, result in the creation or imposition of any Lien
(other than Liens created by the Collateral Documents) on any of its assets.
Each Covered Document has been duly executed and delivered by each Polaroid
Obligor that is a party thereto.
3. To the best of my knowledge, neither the Company nor any of its
Subsidiaries is in violation of, or in default under, any term or provision of
any charter, by-law, mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ or injunction applicable to it, such
that such violations and defaults in the aggregate could reasonably be expected
to result in a Material Adverse Effect or materially adversely affect the
ability of the Company or any other Polaroid Obligor to perform in any material
respect its obligations under the Financing Documents.
4. Except as disclosed in the Company's 1997 Form 10-K and the
Company's Third Quarter 1998 Form 10-Q, to the best of my knowledge there is no
(i) injunction, stay, decree or order issued by any court or arbitrator or any
governmental body, agency or official or (ii) action, suit or proceeding pending
or threatened against or affecting, the Company or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency or official in
which there is a reasonable likelihood of an adverse decision, in either case
(x) which could reasonably be expected to result in a Material Adverse Effect or
(y) which could materially adversely affect the ability of the Company or any
other Polaroid Obligor to perform its obligations under the Financing Documents.
5. To the best of my knowledge, there is no (i) injunction, stay,
decree or order issued by any court or arbitrator or any governmental body,
agency or official or (ii) action, suit or proceeding pending or threatened
against or affecting, the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood of
C-2
<PAGE>
an adverse decision, in either case which in any manner draws into question the
validity of any of the Financing Documents.
I am a member of the bar of the District of Columbia and do not
express any opinion as to any laws other than the General Corporation Law of the
State of Delaware and the Federal laws of the United States of America.
This opinion is delivered to you pursuant to the instruction of the
Company and is rendered solely to you in connection with the above matter. This
opinion is intended only for the benefit of the Lenders, the Agents and their
respective successors and assigns as permitted under the Covered Documents. This
opinion may not be relied upon by you for any other purpose or relied upon by
any other person without my prior written consent.
Very truly yours,
C-3
<PAGE>
EXHIBIT D
December 11, 1998
To the Lenders and Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
and Collateral Agent
60 Wall Street
New York, NY 10260
Re: Polaroid Corporation
Ladies and Gentlemen:
We have acted as special counsel in the Commonwealth of
Massachusetts (the "State") to Polaroid Corporation, a Delaware corporation (the
"Borrower"), Polaroid Caribbean Corporation, a Delaware corporation, Polaroid
Eyewear, Inc., a Delaware corporation, Inner City, Inc., a Delaware corporation,
Polaroid Digital Solutions, Inc., a Delaware corporation, and Polaroid ID
Systems, Inc., a Delaware corporation (collectively with the Borrower, the
"Polaroid Obligors"), in connection with the creation and perfection of certain
security interests granted by the Polaroid Obligors to Morgan Guaranty Trust
Company of New York, as Collateral Agent for certain lenders (the "Lenders")
party to an Amended and Restated Revolving Credit Agreement, dated as of
December 11, 1998 (the "Credit Agreement"), among the Borrower, the Collateral
Agent, Morgan Guaranty Trust Company of New York, as Administrative Agent and
the lending institutions party thereto and referred to therein as the Lenders
(the "Lenders"), and BankBoston, N.A., as Co-Agent. Unless otherwise defined
herein, the capitalized terms used herein shall have the meanings assigned to
such terms in the Credit Agreement.
We have examined copies of drafts dated December 9, 1998, of the
following documents:
i. the Credit Agreement;
ii. the Notes;
iii. the Subsidiary Guaranty Agreement;
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
iv. the Security Agreement; and
v. the Uniform Commercial Code financing statement(s) (the
"Financing Statements"), copies of which are attached hereto as
Exhibit A, to be filed in the State, executed and delivered by
each of the respective Polaroid Obligors, as debtor, and in each
case in favor of the Collateral Agent as secured party.
The Credit Agreement, the Notes, the Subsidiary Guaranty Agreement,
the Security Agreement and the Financing Statements are referred to herein,
together, as the "Operative Documents". This opinion is based entirely on our
review of the documents listed in the preceding paragraph, and we have made no
other documentary review or investigation of any kind whatsoever for purposes of
this opinion.
As to all matters of fact (including factual conclusions and
characterizations and descriptions of purpose, intention or other state of
mind), we have relied, with your permission, entirely upon the representations
and warranties of the Polaroid Obligors set forth in the Credit Agreement and
each of the other Operative Documents, and have assumed, without independent
inquiry, the accuracy of those representations and warranties.
We have assumed the genuineness of all signatures, the conformity to
the originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document and we
further assume that the Operative Documents are executed and delivered by the
parties thereto in the form of the drafts delivered to us as set forth above.
For purposes of this opinion, we have made such examination of law
as we have deemed necessary. This opinion is limited solely to the internal
substantive laws of the State as applied by courts located in the State without
regard to choice of law, and we express no opinion as to the laws of any other
jurisdiction. Without limitation of the generality of the foregoing, we express
no opinion as to the effect of any federal laws. To the extent to which this
opinion deals with matters governed by or relating to the laws of the State of
New York,
D-2
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
by which the Operative Documents (other than the Financing Statements) are
stated to be governed, we have assumed, with your permission, that the Credit
Agreement and the other Operative Documents are stated to be governed by the
internal substantive laws of the State. Except as set forth in paragraph 6
below, no opinion is given herein as to the choice of law or internal
substantive rules of law that any court or other tribunal may apply to the
transactions contemplated by the Credit Agreement and the other Operative
Documents.
Our opinion is further subject to the following exceptions,
qualifications and assumptions, all of which we understand to be acceptable to
you:
(a) We have assumed without any independent investigation that (i)
each party to the Credit Agreement and the other Operative Documents, including
the Polaroid Obligors, at all times relevant thereto, is validly existing and in
good standing under the laws of the jurisdiction in which it is organized, and
is qualified to do business and in good standing under the laws of each
jurisdiction where such qualification is required generally or necessary in
order for such party to enforce its rights under such Operative Documents, (ii)
each party to the Credit Agreement and the other Operative Documents, including
the Polaroid Obligors, at all times relevant thereto, had and has the full
power, authority and legal right under its certificate of incorporation,
partnership agreement, by-laws, and other governing organizational documents,
and the applicable corporate, partnership, or other enterprise legislation and
other applicable laws, as the case may be, to execute, to deliver and to perform
its obligations under, the Credit Agreement and the other Operative Documents,
and (iii) each party to the Credit Agreement and the other Operative Documents,
including the Polaroid Obligors, has duly executed and delivered each of such
agreements and instruments to which it is a party and that the execution and
delivery of such agreements and instruments and the transactions contemplated
thereby have been duly authorized by all proper corporate proceedings.
(b) We have assumed without any independent investigation (i) that
each of the Polaroid Obligors has received the agreed to consideration (as
stated in the Operative Documents) for the incurrence of the obligations
applicable to it under the terms of the Credit Agreement and the other Operative
Documents, and accordingly has received "value" (as defined in the
D-3
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
Massachusetts UCC, as defined below), and (ii) that each of the Credit Agreement
and the other Operative Documents is a valid and binding obligation of each
party thereto, including each of the Polaroid Obligors, enforceable against each
such party in accordance with its terms.
(c) The enforceability of the rights and remedies of the Collateral
Agent and the other applicable secured parties under the Security Agreement and
the other Operative Documents is subject to the effect of any applicable
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium, marshaling or other laws and rules of law affecting
the enforcement generally of creditors' rights and remedies (including such as
may deny giving effect to waivers of debtors' or guarantors' rights).
(d) We express no opinion as the availability of any specific or
equitable relief of any kind.
(e) Certain provisions of the Security Agreement may not be
enforceable but, in our judgment, subject to the other exceptions, limitations,
and qualifications set forth in this letter and subject to the fact that there
may be economic and other consequences arising out of any judicial,
administrative, procedural, or other delay, the inclusion of such provisions
does not render the Security Agreement invalid as a whole and does not render
the Security Agreement, taken as a whole, inadequate for the practical
realization of the principal rights and benefits contemplated thereby.
(f) The enforcement of any of your rights may in all cases be
subject to an implied duty of good faith and fair dealing and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity) and, as to any of your rights to collateral
security, will be subject to a duty to act in a commercially reasonable manner.
(g) We express no opinion as to the enforceability of any particular
provision of any of the Operative Documents relating to (i) waivers of rights to
object to jurisdiction or venue, or consents to jurisdiction or venue, (ii)
waivers of rights to (or methods of) service of process, or rights to trial by
jury, or other rights or benefits bestowed by operation of law, (iii) waivers of
any applicable defenses, setoffs, recoupments, or counterclaims, (iv) waivers or
D-4
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
variations of provisions which are not capable of waiver or variation under
Sections 1-102(3), 9-501(3), or other provisions of the Uniform Commercial Code
("UCC") of the Commonwealth of Massachusetts (the "Massachusetts UCC"), (v) the
grant of powers of attorney to the Administrative Agent, the Collateral Agent or
any Lender, (vi) exculpation or exoneration clauses, indemnity clauses, and
clauses relating to releases or waivers of unmatured claims or rights, (vii)
submission to binding arbitration, or (viii) the imposition or collection of
interest on overdue interest or providing for a penalty rate of interest or late
charges on overdue or defaulted obligations, or the payment of any premium,
liquidated damages, or other amount which may be held by any court to be a
"penalty" or a "forfeiture". We express no opinion as to the effect of
suretyship defenses, or defenses in the nature thereof, with respect to the
obligations of any applicable guarantor, joint obligor, surety, accommodation
party, or other secondary obligor. We also call to your attention that any
provision of the Operative Documents which may permit the Administrative Agent,
the Collateral Agent or any Lender to withhold funding due to the existence of
mechanic's liens on Massachusetts property, or require dissolution of such
mechanic's liens before further funding will be provided, may be limited or
unenforceable pursuant to the provisions of Massachusetts General Laws Chapter
254, Section 33.
(h) No opinion is given herein as to the effect of so-called "usury
savings clauses" or other provisions of the Operative Documents purporting to
deal with compliance with usury laws or other laws relating to limitations on
the amount of interest or other similar charges which lenders may make or
receive in connection with lending transactions (together, "Interest Limitation
Laws"). No opinion is given herein as to the effect as to the Administrative
Agent, the Collateral Agent or any Lender of such Interest Limitation Laws of
the State on the validity or enforceability of any of the Credit Agreement or
the other Operative Documents if the Administrative Agent, the Collateral Agent
or such Lender has neither given an effective notice to the Office of the
Attorney General of the State pursuant to Massachusetts General Laws Chapter
271, Section 49(d), nor is exempted from the application of Massachusetts
General Laws Chapter 271, Section 49 pursuant to paragraph (e) thereof. Further,
no opinion is given herein as to any other similar laws or requirements in any
other jurisdiction.
D-5
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
We note for your information that under Massachusetts General Laws
Chapter 271, Section 49, contracting for, charging, taking or receiving interest
or expenses in excess of 20% per annum in the aggregate in exchange for either a
loan of money or other property is a criminal offense. Paragraph (d) of the
statute exempts from the coverage of the statute any person who notifies the
attorney general of the State of such person's intent to engage in a transaction
or transactions which would otherwise be proscribed by paragraph (a) of the
statute, provided the person maintains records of the transaction(s) in a
prescribed form. Paragraph (e) states that the provisions of the statute shall
not apply to, inter alia, any lender subject to control, regulation or
examination by any state or federal regulatory agency.
(i) We note that, under the laws of the State, the remedies
available in the State for the enforcement of the Credit Agreement or the other
Operative Documents could be affected by any failure of the Administrative
Agent, the Collateral Agent or any Lender not organized in the State (i) to
file, pursuant to Massachusetts General Laws Chapter 181, Section 4, the
certificates and reports with the Secretary of State of the Commonwealth of
Massachusetts required of every foreign corporation doing business in the State
or (ii) to comply with the provisions of Massachusetts General Laws Chapter 167,
Sections 37 and 38, prohibiting (with certain limited exceptions not relevant
here) out-of-state banking associations or corporations from transacting banking
business in the State. Further, no opinion is given herein as to any other
similar laws or requirements in any other jurisdiction. We believe, however,
that, while the question is not wholly free from doubt in the absence of
decisions of the Supreme Judicial Court of Massachusetts directly on point, if
the issue were presented to the Supreme Judicial Court of Massachusetts, the
Court should rule that the Administrative Agent, the Collateral Agent or such
Lender need not comply with Massachusetts General Laws Chapter 181, Section 4,
in order to exercise in the State the remedies provided for in or contemplated
by the Operative Documents, and that the provisions of Massachusetts General
Laws Chapter 167, Sections 37 and 38, may not properly be applied to prevent the
Administrative Agent, the Collateral Agent or such Lender from exercising such
remedies, assuming in each case that the contacts of the Administrative Agent,
the Collateral Agent or such Lender with the State are limited to those
resulting from the Operative Documents and that the Administrative Agent, the
Collateral Agent or such Lender will not (either directly or through any agent
or other representative on its behalf) take
D-6
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
possession of, or title to, or operate, any portion of the Collateral or any
other assets of the Polaroid Obligors within the State.
(j) When any opinion set forth below is given to our knowledge, or
to the best of our knowledge, or with reference to matters of which we are aware
or which are known to us, or with a similar qualification, that knowledge is
limited to the actual knowledge of the individual lawyers in this firm who have
participated directly and substantively in the specific transactions to which
this opinion relates and without any special or additional investigation
undertaken for the purposes of this opinion.
(k) We express no opinion as to the effect of events occurring,
circumstances arising, or changes of law becoming effective or occurring, after
the date hereof on the matters addressed in this opinion letter, and we assume
no responsibility to inform you of additional or changed facts, or changes in
law, of which we may become aware.
(l) We express no opinion as to the legality, the permitting or
licensing status or the zoning of any structure or any use of any real estate,
including without limitation compliance with any environmental or safety laws,
whether or not such real estate is subject to the security interests purportedly
created pursuant to the Operative Documents.
(m) We have made no examination of, and no opinion is given herein
as to, any Polaroid Obligor's title to or other ownership rights in, the
accuracy of the descriptions of, or the existence of any liens, charges,
encumbrances, restrictions or limitations on, or adverse claims against, any of
the property or assets of any Polaroid Obligor. We have assumed without any
independent investigation that each Polaroid Obligor has rights in the
Collateral and any other assets in which it purports to grant a security
interest under the Operative Documents, and that each of the Operative Documents
executed by each Polaroid Obligor creates a valid security interest in such
portion of the Collateral and any such other assets in which a security interest
may be created by contract to secure the obligations of such Polaroid Obligor to
the extent that laws other than those of the State are relevant thereto. We
express no opinion as to the priority or (except to the extent specifically set
forth in paragraphs 1 and 2 below) the attachment, validity, or perfection of
any security interest, mortgage, or other
D-7
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
lien or encumbrance with respect to any of the property or assets of any
Polaroid Obligor. Further, we express no opinion as to any security interest in
any Collateral or any other assets excluded from, or not governed by, Article 9
of the Massachusetts UCC. We call your attention to the following:
(i) the effectiveness of any UCC financing
statement filed in the State terminates five years after
the date of filing unless a continuation statement is
filed within the period of six months prior to such
termination in accordance with Section 9-403 of the
Massachusetts UCC;
(ii) Section 9-402(7) of the Massachusetts
UCC provides that if the relevant debtor so changes its
name (or, in the case of an organization, its name,
identity or corporate structure) that a filed UCC
financing statement becomes seriously misleading, the
filing of such UCC financing statement is not effective
to perfect a security interest in collateral acquired by
such debtor more than four months after such change
unless a new appropriate UCC financing statement is
filed before the expiration of that period;
(iii) if certain tangible collateral is
moved to a location with respect to which a UCC
financing statement has not been filed or if the
location of the relevant debtor changes to a location
with respect to which a UCC financing statement has not
been filed, Section 9-103 of the Massachusetts UCC may
require that a new appropriate UCC financing statement
be filed in the applicable jurisdiction of such new
location within four months after such move to continue
perfection of the security interest;
(iv) there exist certain limitations,
resulting from the operation of Section 9-306 of the
Massachusetts UCC, on the perfection of any security
interest in proceeds of collateral, such that further
action (in or out of the State) may be necessary to
maintain perfection of such interests;
D-8
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
(v) under Sections 9-307, 9-308, and 9-309
of the Massachusetts UCC, purchasers of certain types of
collateral may take the same free of a perfected
security interest;
(vi) Section 552 of the federal Bankruptcy
Code limits the extent to which property acquired by a
debtor after the commencement of a case under the
Bankruptcy Code may be subject to a security interest
resulting from any security agreement entered into by
the debtor before the commencement of the case; and
under Section 547 of the Bankruptcy Code, a security
interest that is deemed transferred within the relevant
period set forth in Section 547(e) of the Bankruptcy
Code may be avoidable under certain circumstances;
(vii) the filing of UCC financing statements
will not result in the perfection of a security interest
in items of collateral (such as motor vehicles) which
are subject to a certificate of title or registration
statute or other statute which specifies a method of
security interest perfection different than the filing
of UCC financing statements;
(viii) a security interest may not attach as
to contracts, licenses or permits which are not
assignable under applicable law, or are not assignable
by their terms (except in the case of contracts where
terms prohibiting an assignment are ineffective under
Sections 2A-303 or 9-318(4) of the Massachusetts UCC) or
which are assignable only with the consent of government
agencies or officers;
(ix) we assume that none of the Polaroid
Obligors is a "transmitting utility" (as such term is
defined in Section 9-105 of the Massachusetts UCC);
(x) to the extent that the Operative
Documents create security interests in assets consisting
of "accounts", "chattel paper", or "general intangibles"
(each as defined in Article 9 of the Massachusetts UCC),
any security interests in such Collateral may
D-9
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
be subject to the limitations set forth in Section 9-318
of the Massachusetts UCC; and, in any event, any
security interests in the assets of any Polaroid Obligor
may be subject to the economic effects of valid
recoupments, offsets, counterclaims, and similar rights
of account debtors, lessees, or other contractual
parties, the terms of leases and other contracts between
any Polaroid Obligor and such lessees or other parties,
and any claims or defenses of such lessees or other
parties against any Polaroid Obligor arising under or
extrinsic to such leases or other contracts; and
(xi) the rights of the Administrative Agent,
the Collateral Agent and the Lenders with respect to
collateral consisting of obligations as to which a
governmental or similar entity is the account debtor or
other obligor may be subject to compliance by the
Administrative Agent, the Collateral Agent and the
Lenders with the Federal Assignment of Claims Act or
similar Federal or state laws.
(n) For purposes of our opinion rendered in paragraph 5 below, we
have assumed that the transactions contemplated by the Operative Documents bear
a reasonable relation to the State of New York.
Based on the foregoing, and subject to the limitations and
qualifications set forth below, we are of the opinion that:
1. The provisions of the Security Agreement are effective under the
Massachusetts UCC to create a valid, attached security interest in favor of the
Collateral Agent, for the benefit of the Collateral Agent and the Lenders, in
all right, title and interest of the Polaroid Obligors in those items and types
of Collateral described in the Security Agreement to which Article 9 of the
Massachusetts UCC is applicable.
2. The Financing Statements are in appropriate form for filing under
Article 9 of the Massachusetts UCC with the Filing Offices referred to below.
Upon the proper filing of the Financing Statements in the filing offices (the
"Filing Offices") listed on Exhibit B hereto, together with the payment of any
requisite filing or recording fees, the Collateral Agent, for the benefit of the
D-10
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
Collateral Agent and the Lenders, will have a perfected security interest under
Article 9 of the Massachusetts UCC in so much of the Collateral as constitutes
personal property of the Polaroid Obligors in which a security interest can be
perfected by the filing of UCC financing statements in the State under Article 9
of the Massachusetts UCC, and such perfected security interest will secure the
Loans (if any) made at the time of the closing under the Credit Agreement and
future Loans made under the Credit Agreement, in each case as and to the extent
provided in the Security Agreement and Section 9-204 of the Massachusetts UCC,
subject to the provisions of the aforesaid Section 9-204 and Sections 9-301,
9-307 and 9-312 of the Massachusetts UCC. For purposes of this paragraph, we
have assumed that (a) Exhibit B constitutes an accurate and complete list of
each place of business of each of the Polaroid Obligors and each location of
Collateral in the State, (b) the address of the respective Polaroid Obligors set
forth in the Financing Statements is an accurate mailing address of such
Polaroid Obligor, (c) the name of the respective Polaroid Obligors set forth in
the Financing Statements is such Polaroid Obligor's correct legal name as
evidenced by its certificate of incorporation or other charter document, and (d)
the Collateral covered by the Financing Statements does not include any timber
to be cut, minerals or the like (including oil and gas), accounts subject to
Section 9-103(5) of the Massachusetts UCC, equipment used in farming operations,
farm products, accounts or general intangibles arising from or relating to the
sale of farm products by a farmer, or consumer goods, as such terms are used in
Section 9-401 of the Massachusetts UCC.
3. Except for the filings necessary to create, record or perfect, or
maintain the perfection of the security interests created by the Operative
Documents, to the best of our knowledge, no consent or approval by, or any
notification of or filing with, any court, public body or authority of the State
is required to be obtained or effected by any of the Polaroid Obligors in
connection with the execution, delivery and performance by such Polaroid Obligor
of each of the Operative Documents to which it is a party or the consummation by
such Polaroid Obligor of the transactions contemplated thereby.
4. No state or local mortgage recording tax, stamp tax, documentary
tax or other similar fees, taxes or governmental charges (other than nominal
statutory filing and recording fees to be paid upon filing each Financing
Statement for record) are required to be paid in the State in connection with
the
D-11
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
creation and perfection of the security interests created by the Operative
Documents.
5. The Operative Documents provide that they are to be governed by
the laws of the State of New York. Section 1-105 of the Massachusetts UCC
generally provides that when a transaction bears a reasonable relation to the
State and also to another state or nation, the parties may agree that the law
either of the State or such other state or nation shall govern their rights and
duties, subject to certain exceptions set forth in Section 1-105, including,
without limitation, the application of the provisions of Section 9-103 of the
Massachusetts UCC. Because the analysis of choice of law issues under Section
1-105 involves a case-by-case determination of the "reasonable relation" of the
relevant transaction to the state or nation in question, we are unable to
predict with certainty the outcome in the event that a Massachusetts state court
or a federal court sitting in the State as the forum state and applying
Massachusetts conflict of law rules (in either case, a "Massachusetts Court")
were to be presented with the issue as to whether to give effect to the above
mentioned choice of law provisions of the Operative Documents. Nevertheless,
based on the assumption that the transactions contemplated by the Operative
Documents bear a reasonable relation to the State of New York, we believe that a
Massachusetts Court should give effect, to the extent provided in Section 1-105
of the Massachusetts UCC, to the agreement of the parties that New York law
shall govern the Operative Documents, but excluding, in any event, the
perfection and the effects of perfection or nonperfection (and, in certain
cases, the priority) of security interests as and to the extent provided by the
choice of law rules contained in Section 9-103 of the Massachusetts UCC, and
excluding the other matters referred to in Section 1-105 of the Massachusetts
UCC as constituting exceptions to the ability of the parties generally under
such Section 1-105 to choose the law that is to govern a particular transaction.
6. Assuming, without independent investigation, that each of the
Administrative Agent, the Collateral Agent and the other Lenders has given an
effective notice to the Office of the Attorney General of the State pursuant to
Massachusetts General Laws Chapter 271, Section 49(d) or is exempted from the
application of Massachusetts General Laws Chapter 271, Section 49 pursuant to
the provisions of paragraph (e) thereof, and that the Loans are not secured by
any
D-12
<PAGE>
To the Lenders and Agents Referred to Below
December 11, 1998
mortgages on residential real estate in the State, the payment of interest
provided for in the Operative Documents will not violate any usury laws of the
State.
This opinion is delivered to you pursuant to the instruction of the
Polaroid Obligors and is rendered solely to you in connection with the above
matter. This opinion is issued as of the date hereof and is limited to the laws
now in effect and facts and circumstances known to us as of the date hereof.
This opinion is intended only for the benefit of the Lenders, the Agents and
their respective successors and assigns as permitted under the Operative
Documents. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
D-13
<PAGE>
EXHIBIT A
FINANCING STATEMENTS
[Copies to be provided to us by Davis Polk]
D-14
<PAGE>
EXHIBIT B
MASSACHUSETTS FILING OFFICES
1. Polaroid Corporation
Principal Office: 784 Memorial Drive, Cambridge, MA 02139
Locations of certain assets and other places of business in
Massachusetts: Bedford, Cambridge, Needham, Newton, Norwood and
Waltham
Filing Office(s):
Secretary of State of the Commonwealth of Massachusetts ("SOS MA");
Clerk of the Town of Bedford, Massachusetts
Clerk of the City of Cambridge, Massachusetts
Clerk of the Town of Needham, Massachusetts
Clerk of the City of Newton, Massachusetts
Clerk of the Town of Norwood, Massachusetts
Clerk of the City of Waltham, Massachusetts
2. Polaroid Caribbean Corporation
Principal Office: 784 Memorial Drive, Cambridge, MA 02139
No other locations in Massachusetts.
Filings Office(s):
SOS MA
Clerk of the City of Cambridge, Massachusetts
3. Polaroid Eyewear, Inc.
Principal Office: 784 Memorial Drive, Cambridge, MA 02139
Locations of certain assets and other places of business in
Massachusetts: 25 Braintree Hill Office Park, Suite 101,
Braintree, MA 02184
Filing Office(s):
SOS MA
Clerk of the City of Cambridge, Massachusetts
Clerk of the Town of Braintree, Massachusetts
4. Inner City, Inc.
Principal Office: 120 Southampton Street, Roxbury, MA 02118
Locations of certain assets and other places of business in
Massachusetts: 784 Memorial Drive, Cambridge, MA 02139
Filing Office(s):
SOS MA
Clerk of the City of Boston, Massachusetts
Clerk of the City of Cambridge, Massachusetts
D-15
<PAGE>
5. Polaroid Digital Solutions, Inc.
Principal Office: 784 Memorial Drive, Cambridge, MA 02139
No other locations in Massachusetts.
Filing Office(s):
SOS MA
Clerk of the City of Cambridge, Massachusetts
6. Polaroid ID Systems, Inc.
Principal Office: 784 Memorial Drive, Cambridge, MA 02139
No other locations in Massachusetts.
Filing Office(s):
SOS MA
Clerk of the City of Cambridge, Massachusetts
D-16
<PAGE>
EXHIBIT E
OPINION OF DAVIS POLK & WARDWELL,
SPECIAL COUNSEL FOR THE AGENTS
December 11, 1998
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Amended and Restated
Credit Agreement dated as of December 11, 1998 (the "Credit Agreement") among
Polaroid Corporation, a Delaware corporation (the "Company"), the lenders party
thereto (the "Lenders"), Morgan Guaranty Trust Company of New York, as
Administrative Agent and Collateral Agent, and BankBoston, N.A., as Co-Agent.
Unless otherwise defined herein, terms defined in the Credit Agreement or the
Security Agreement are used herein as therein defined. The Credit Agreement, the
Security Agreement, the Subsidiary Guaranty Agreement delivered today and the
Notes delivered today are referred to herein as the "Covered Documents". This
opinion is being rendered to you pursuant to Section 3.01(h) of the Credit
Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. In such examination, we have assumed without
independent investigation that each Polaroid Obligor is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and that the execution, delivery and performance by each Polaroid
Obligor (other than the Company) of the Covered Documents to which it is a party
are within its corporate powers and have been duly authorized by all necessary
corporate action.
<PAGE>
We note that these topics are addressed in the opinion of Thomas M. Lemberg,
General Counsel of the Company, dated and delivered to you today.
Upon the basis of the foregoing and subject to the assumptions and
qualifications hereinafter set forth, it is our opinion that:
1. The execution, delivery and performance by the Company of the
Credit Agreement, the Security Agreement and the Notes are within the Company's
corporate powers and have been duly authorized by all necessary corporate
action.
2. Each Covered Document constitutes a valid and binding agreement
of each Polaroid Obligor that is a party thereto, in each case enforceable in
accordance with its terms, subject to (i) the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law) and (iii)
any implied covenant of good faith and fair dealing.
3. The Security Agreement creates in favor of the Collateral Agent
for the benefit of the Secured Parties a valid security interest in all
Collateral in which a valid security interest may be created under Article 9 of
the Uniform Commercial Code as in effect in the State of New York on the date
hereof (the "New York UCC"), in each case securing the Secured Obligations of
the relevant Lien Grantor.
The foregoing opinion is subject to the following qualifications:
(a) We note the possible unenforceability in whole or in
part of certain remedial provisions of the Security Agreement,
although the inclusion of such provisions does not render any
Security Interest purported to be granted or created thereby
invalid, and the Security Agreement contains, in our judgment,
adequate remedial provisions for the practical realization of the
rights and benefits intended to be afforded thereby.
(b) We express no opinion as to the effect (if any) of
any law of any jurisdiction (except the State of New York) in which
any Lender is located that may limit the rate of interest that such
Lender may charge or collect.
E-2
<PAGE>
(c) We note that both the grantor of a security interest
and a guarantor of a secured obligation are entitled to certain
unwaivable rights as "debtors" under the UCC, and our opinion is
subject thereto.
(d) We express no opinion as to the right, title or
interest of any Lien Grantor in or to any Collateral.
(f) We express no opinion as to the creation, perfection
or priority of any Security Interest, except as expressly set forth
in paragraph 3.
(g) We express no opinion as to the applicability or
effect of the Assignment of Claims Act of 1940, as amended, to the
extent that it might limit the rights of the Secured Parties to
enforce any contractual rights or claims of the Lien Grantors
against the Federal government or any governmental entity (but not
with respect to the validity of the Security Interests under Article
9 of the New York UCC in such rights or claims, with respect to
Persons who are not parties to such contracts acting in their
capacity as such).
(h) We express no opinion as to the effect of Section
548 of the United States Bankruptcy Code or any similar provisions
of State law.
We are members of the bar of the State of New York. We express no
opinion as to any laws other than the laws of the State of New York, the General
Corporation Law of the State of Delaware and the Federal laws of the United
States of America.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
E-3
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ___ between [ASSIGNOR] (the
"Assignor") and [ASSIGNEE] (the "Assignee").
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement (this "Agreement")
relates to the Amended and Restated Credit Agreement dated as of December 11,
1998 (as the same may be amended from time to time, the "Credit Agreement")
among Polaroid Corporation (the "Company"), the Lenders party thereto, Morgan
Guaranty Trust Company of New York, as Administrative Agent (the "Administrative
Agent") and Collateral Agent, and BankBoston, N.A., as Co-Agent;
WHEREAS, as provided in the Credit Agreement, the Assignor has a
Commitment to make Loans to the Company in an aggregate principal amount at any
time outstanding not to exceed $__________;
WHEREAS, Loans made to the Company by the Assignor are outstanding
under the Credit Agreement at the date hereof in an aggregate principal amount
of $__________; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of [all/a
portion](1) of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount") together with a corresponding portion of each of its
outstanding Loans, and the Assignee proposes to accept such assignment of such
rights and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee (a) all of the rights of the Assignor under the Credit Agreement and
its Note to the extent of the Assigned Amount and (b) a corresponding portion of
each of its
- -----------------
(1) Select as appropriate.
<PAGE>
outstanding Loans, and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount. Upon (i) the execution and
delivery of this Agreement by the Assignor and the Assignee[, and the consent
hereto by the Company and the Administrative Agent](1) and (ii) payment by the
Assignee of the amounts specified in Section 3 of this Agreement required to be
paid on the date hereof and the processing fee specified in Section 9.06(c) of
the Credit Agreement, (A) the Assignee shall, as of the date hereof, succeed to
the rights and be obligated to perform the obligations of a Lender under the
Credit Agreement with respect to the Assigned Amount and acquire the rights of
the Assignor with respect to a corresponding portion of each of its outstanding
Loans and (B) the Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor shall be released from its obligations
under the Credit Agreement to the extent such obligations have been so assumed
by the Assignee. The assignment provided for herein shall be without recourse to
the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds an amount equal to $_________[, being the sum of
(i) the aggregate principal amount of the outstanding Loans so assigned, (ii)
interest accrued thereon to but excluding the date hereof and (iii) commitment
and facility fees accrued in respect thereof to but excluding the date
hereof](2). It is understood that commitment and facility fees accrued to the
date hereof on the Assigned Amount are for the account of the Assignor and such
fees accruing on the Assigned Amount on and after the date hereof are for the
account of the Assignee. Each of the Assignor and the Assignee agrees that, if
it receives any amount under the Credit Agreement which is for the account of
the other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
[SECTION 4. Consent of the Company and the Administrative Agent.
This Agreement is conditioned upon the consent of the Company (which consent
shall not be unreasonably withheld) and the Administrative Agent pursuant to
Section 9.06(c) of the Credit Agreement.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of any Polaroid
Obligor, or the validity or
- --------
(1) Delete bracketed words and Section 4 if consent is not required.
(2) Delete if not applicable.
F-2
<PAGE>
enforceability of the obligations of any Polaroid Obligor under the Financing
Documents. The Assignee acknowledges that it has, independently and without
reliance on the Assignor, and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Polaroid
Obligors.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By:
------------------------------
Name:
Title:
[ASSIGNEE]
By:
------------------------------
Name:
Title:
[The undersigned consent to the foregoing
assignment.
POLAROID CORPORATION
By:
----------------------------
Name:
Title:
F-3
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Administrative Agent
By:
------------------------------
Name:
Title:](1)
- --------
(1) Delete if consent is not required.
F-4
<PAGE>
EXHIBIT G
SUBSIDIARY GUARANTY AGREEMENT
Agreement dated as of ____________, ____ (as amended from time to
time, this "Subsidiary Guaranty Agreement") by the undersigned Material Domestic
Subsidiaries (the "Guarantors") of Polaroid Corporation, a Delaware corporation
(the "Company"), for the benefit of the holders from time to time of
the Guaranteed Obligations referred to below.
WHEREAS, the Company has entered into an Amended and Restated Credit
Agreement dated as of December 11, 1998 among the Company, the Lenders party
thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent and
Collateral Agent, and BankBoston, N.A., as Co-Agent (as amended from time to
time, the "Credit Agreement");
WHEREAS, the Company wishes to cause each Subsidiary that is, or
hereafter becomes, a Material Domestic Subsidiary to guarantee the Company's
Guaranteed Obligations referred to below by signing a Subsidiary Guaranty
Agreement substantially in the form hereof; and
WHEREAS, each Guarantor benefits, directly or indirectly, from the
availability of financing to the Company under the Credit Agreement,
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor agrees as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. In addition, the following terms, as used herein, have the
following meanings:
"Contingent Guaranteed Obligations" means, at any time, all
contractual obligations pursuant to which a Guaranteed Obligation might arise
after such time, e.g., the unused portion of a Commitment under the Credit
Agreement, an obligation to reimburse an issuing bank for amounts not yet drawn
under an outstanding letter of credit or a conditional obligation to make a
future payment under an outstanding Hedging Agreement.
"Guaranteed Obligations" means (i) all principal of all Loans
outstanding from time to time under the Credit Agreement, all interest
(including without limitation Post-Petition Interest) on such Loans and all
other amounts
<PAGE>
(including fees and disbursements of counsel) now or hereafter payable by the
Company pursuant to any Financing Document, (ii) if the Company designates loans
from banks or other financial institutions as additional Guaranteed Obligations,
as permitted by Section 2.16(a) of the Credit Agreement, all principal of such
loans, all interest (including without limitation Post-Petition Interest) on
such loans and all other amounts (including fees and disbursements of counsel)
now or hereafter payable by the Company with respect thereto, and (iii) any
other obligations designated by the Company as additional Guaranteed Obligations
pursuant to Section 2.16 of the Credit Agreement.
"Guaranteed Party" means a holder of a Guaranteed Obligation.
"Relevant Documents" means the Financing Documents and any other
agreement or instrument that sets forth the rights of a holder of a Guaranteed
Obligation.
"Subsidiary Guarantors" means each Subsidiary that signs this
Subsidiary Guaranty Agreement or any other Subsidiary Guaranty Agreement.
SECTION 2. The Guarantees. Each Guarantor, jointly and severally,
unconditionally and irrevocably guarantees the full and punctual payment of all
Guaranteed Obligations as and when the same shall become due, whether at
maturity or by declaration or otherwise, according to the terms hereof and
thereof. If the Company fails punctually to pay any Guaranteed Obligation when
due, each Guarantor unconditionally agrees to cause such payment to be made
punctually as and when the same shall become due, whether at maturity or by
declaration or otherwise, and as if such payment were made by the Company.
SECTION 3. Guarantee Unconditional. Except as provided in Section 8
hereof, the obligations of each Guarantor under this Subsidiary Guaranty
Agreement shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of any other Polaroid
Obligor under any Relevant Document by operation of law or
otherwise;
(b) any modification, amendment or waiver of or
supplement to any Relevant Document;
(c) any release, impairment, non-perfection or
invalidity of any direct or indirect security, or of any guarantee
or other liability of any third party, for any obligation of any
other Polaroid Obligor under any Relevant Document;
G-2
<PAGE>
(d) any change in the corporate existence, structure or
ownership of any other Polaroid Obligor, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting any
other Polaroid Obligor or its assets, or any resulting release or
discharge of any obligation of any other Polaroid Obligor contained
in any Relevant Document;
(e) the existence of any claim, set-off or other rights
which such Guarantor may have at any time against any other Polaroid
Obligor, any Agent, any Guaranteed Party or any other Person,
whether or not arising in connection with this Subsidiary Guaranty
Agreement; provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or
against any other Polaroid Obligor for any reason of any Relevant
Document, or any provision of applicable law or regulation
purporting to prohibit the payment by any other Polaroid Obligor of
any amount payable by it under any Relevant Document; or
(g) any other act or omission to act or delay of any
kind by any other Polaroid Obligor, any Agent or any Guaranteed
Party or any other Person or any other circumstance whatsoever that
might, but for the provisions of this Section, constitute a legal or
equitable discharge of such Guarantor's obligations under this
Subsidiary Guaranty Agreement.
SECTION 4. Discharge Upon Payment in Full; Reinstatement in Certain
Circumstances. (a) Each Guarantor's obligations hereunder constitute a
continuing guaranty and shall remain in full force and effect until either:
(i) all outstanding Guaranteed Obligations shall have
been paid in full and, if any material portion of such Guaranteed
Obligations shall have been refinanced with the proceeds of
obligations guaranteed by such Guarantor, all Contingent Guaranteed
Obligations shall have expired or been terminated; or
(ii) such Guarantor shall have been released from its
obligations hereunder pursuant to Section 2.18 of the Credit
Agreement.
(b). If at any time any payment of a Guaranteed Obligation is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, each Guarantor's
obligations hereunder with respect to such Guaranteed Obligation shall be
reinstated at such time as though such payment had become due but had not been
made at such time.
G-3
<PAGE>
SECTION 5. Waiver. Each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against the Company or any other Person or against any security.
SECTION 6. Subrogation and Contribution. When any Guarantor makes
any payment hereunder with respect to a Guaranteed Obligation, such Guarantor
shall be subrogated to the rights of the payee against the Company with respect
to the portion of such Guaranteed Obligation paid by such Guarantor, and shall
also have a right of contribution in respect of such payment against all other
Subsidiary Guarantors pro rata among them based on their respective net fair
values as enterprises; provided that such Guarantor shall not enforce any
payment by way of subrogation against the Company or contribution against any
other Subsidiary Guarantor so long as (i) any Contingent Guaranteed Obligation
has not expired or been terminated or (ii) any outstanding Guaranteed Obligation
has not been paid in full.
SECTION 7. Stay of Acceleration. If acceleration of the time for
payment of any Guaranteed Obligation under any Relevant Document is stayed upon
the insolvency, bankruptcy or reorganization of the Company, all Guaranteed
Obligations otherwise subject to acceleration under the terms of such Relevant
Document shall nonetheless be payable by each Guarantor hereunder forthwith on
demand by the Administrative Agent made, in the case of any Loans, at the
request of the requisite number of Lenders specified in Article 6 of the Credit
Agreement or, in the case of obligations in respect of any other Guaranteed
Obligation, at the request of the relevant Guaranteed Party.
SECTION 8. Limit of Liability. The Guarantors and the beneficiaries
of this Subsidiary Guaranty Agreement intend that this Subsidiary Guaranty
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
and to the extent that the obligations of any Guarantor under this Subsidiary
Guaranty Agreement would, in the absence of this sentence, be adjudicated to be
invalid or unenforceable because of any applicable state or federal law relating
to fraudulent conveyances or transfers, then the amount of such Guarantor's
liability hereunder in respect of the Guaranteed Obligations shall be deemed to
be reduced ab initio to the maximum amount which would be permitted without
causing such Guarantor's obligations hereunder to be so invalidated.
SECTION 9. Notices. All notices, requests and other communications
to any Guarantor shall be in writing (including bank wire, facsimile
transmission or similar writing) and shall be given to it at its address or
facsimile number set forth on the signature pages hereof or at such other
address or facsimile number as it may hereafter specify for the purpose by
notice to the Administrative Agent in the
G-4
<PAGE>
manner provided for notices to the Administrative Agent in the Credit Agreement.
Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section.
SECTION 10. Governing Law; Submission to Jurisdiction. This
Subsidiary Guaranty Agreement shall be governed by and construed in accordance
with the laws of the State of New York. Each Guarantor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to the Relevant
Documents or the transactions contemplated thereby. Each Guarantor irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 11. Successors and Assigns. This Subsidiary Guaranty
Agreement is for the benefit of the Guaranteed Parties and their respective
successors and assigns. If any Guaranteed Obligations are assigned pursuant to
Section 9.06 of the Credit Agreement or otherwise, the rights of the holder
thereof hereunder, to the extent applicable to the indebtedness so assigned,
shall be transferred with such indebtedness. No Guarantor may assign or
otherwise transfer any of its rights or obligations under this Subsidiary
Guaranty Agreement without the prior written consent of the Super-Majority
Lenders.
SECTION 12. No Waiver. No failure or delay by any Agent or any
Guaranteed Party in exercising any right, power or privilege under any Relevant
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies provided in the
Relevant Documents shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 13. Amendments and Waivers. Any provision of this Subsidiary
Guaranty Agreement may be amended, supplemented, modified or waived if (but only
if) such amendment, supplement, modification or waiver is in writing and is
signed by each Guarantor and the Administrative Agent (with the written consent
of the Required Lenders); provided that (i) the Guarantor may be released from
its obligations under this Subsidiary Guaranty Agreement only as provided in
Section 2.18 of the Credit Agreement and (ii) the definition of "Guaranteed
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<PAGE>
Obligations" and this Section 13 may not be amended without the written consent
of the Super-Majority Lenders.
SECTION 14. Counterparts. This Subsidiary Guaranty Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto were upon the same instrument.
SECTION 15. WAIVER OF JURY TRIAL. EACH GUARANTOR
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE RELEVANT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY. EACH GUARANTOR (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES TO THE RELEVANT DOCUMENTS HAVE BEEN INDUCED TO ENTER INTO THE RELEVANT
DOCUMENTS BY (AMONG OTHER THINGS) THE WAIVERS AND CERTIFICATIONS IN THIS SECTION
15 AND SECTION 9.08 OF THE CREDIT AGREEMENT.
IN WITNESS WHEREOF, each Guarantor has caused this Subsidiary
Guaranty Agreement to be duly executed by its authorized officer as of the day
and year first above written.
[NAME OF GUARANTOR]
By:
---------------------------
Name:
Title:
Address:
Facsimile:
[ADD SIGNATURE BLOCKS
FOR OTHER GUARANTORS]
G-6
<PAGE>
EXHIBIT H
INITIAL SUBSIDIARY GUARANTORS
I. Initial Subsidiary Guarantors that are Lien Grantors on the Closing Date:
Inner City, Inc.
Polaroid Caribbean Corporation
Polaroid Digital Solutions, Inc.
Polaroid Eyewear, Inc.
Polaroid ID Systems, Inc.
II. Initial Subsidiary Guarantors that are not Lien Grantors on the Closing
Date:
Polaroid Asia Pacific Limited
Polaroid Malaysia Limited
PRD Capital Inc.
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
dated as of
December 11, 1998
among
Polaroid Corporation
The Subsidiary Guarantors Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
--------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Definitions........................................................... I-3
SECTION 2. The Security Interests................................................ I-9
SECTION 3. Representations and Warranties........................................I-10
SECTION 4. Delivery of Certain Collateral........................................I-11
SECTION 5. Further Assurances; Covenants.........................................I-12
SECTION 6. General Authority.....................................................I-15
SECTION 7. Remedies upon Event of Default........................................I-16
SECTION 8. Fees and Expenses; Indemnification....................................I-17
SECTION 9. Limitation on Duty of Collateral Agent in Respect of Collateral.......I-18
SECTION 10. Application of Proceeds..............................................I-18
SECTION 11. Concerning the Collateral Agent......................................I-21
SECTION 12. Appointment of Co-Collateral Agents..................................I-24
SECTION 13. Preservation of Collateral; Recovery of Expenses.....................I-24
SECTION 14. Termination of Security Interests; Releases of Collateral
(including Insurance Proceeds).....................................I-24
SECTION 15. Additional Lien Grantors.............................................I-26
SECTION 16. Notices..............................................................I-26
SECTION 17. Waivers, Remedies Not Exclusive......................................I-27
SECTION 18. Successors and Assigns...............................................I-27
SECTION 19. Changes in Writing...................................................I-27
SECTION 20. New York Law.........................................................I-27
SECTION 21. Severability.........................................................I-27
Exhibit A -- Form of Security Agreement Supplement
Exhibit B -- Form of Perfection Certificate
</TABLE>
I-2
<PAGE>
SECURITY AGREEMENT
AGREEMENT dated as of December 11, 1998 among POLAROID CORPORATION,
the SUBSIDIARY GUARANTORS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Collateral Agent.
WHEREAS, the Company wishes (i) to secure its obligations under the
Credit Agreement described in Section 1 below and (ii) to be able to secure
certain of its other obligations, in each case by granting Liens on its
receivables, its domestic inventory and certain related assets and rights to the
Collateral Agent as provided in this Agreement and the other Collateral
Documents;
WHEREAS, except as otherwise provided in the Credit Agreement, the
Company will cause each of its Material Domestic Subsidiaries to guarantee the
foregoing obligations of the Company and to secure its guarantee thereof by
granting Liens on its receivables, its domestic inventory and certain related
assets and rights to the Collateral Agent as provided in the Collateral
Documents; and
WHEREAS, the Lien Grantors desire to be able from time to time (with
the consent of the Required Lenders or the Super-Majority Lenders, as specified
in the Credit Agreement) to secure other obligations hereunder and/or add other
assets to the Collateral hereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and
not otherwise defined herein have, as used herein, the respective meanings
provided for therein. The following additional terms, as used herein, have the
following meanings:
"Accounts" means, with respect to any Lien Grantor, all "accounts"
(as defined in the UCC) and all rights to payments of royalties and licensing,
management and other fees, now owned or hereafter acquired by such Lien Grantor,
and also means and includes all accounts receivable, contract rights, book
debts, notes, drafts and other obligations or indebtedness owing to such Lien
Grantor arising from the performance of services by it and/or the sale, lease or
exchange of goods or other property by it (including, without limitation, any
such obligation or indebtedness which might be characterized as an account,
contract
I-3
<PAGE>
right or general intangible under the Uniform Commercial Code in effect in any
jurisdiction) and all of such Lien Grantor's rights in, to and under all
contracts or purchase orders for goods, services or other property, and all of
such Lien Grantor's rights to any goods, services or other property represented
by any of the foregoing (including returned or repossessed goods and unpaid
sellers' rights of recission, replevin, reclamation and rights to stoppage in
transit) and all monies due to or to become due to such Lien Grantor under all
contracts for the performance of services by it and/or the sale, lease or
exchange of goods or other property by it (whether or not yet earned by
performance on the part of such Lien Grantor), in each case whether now existing
or hereafter arising or acquired, including, without limitation, the right to
receive the proceeds of said contracts and purchase orders and all collateral
security and guarantees of any kind given by any Person with respect to any of
the foregoing.
"Collateral" means all property, whether now owned or hereafter
acquired, in which a security interest or other Lien is granted or purported to
be granted to the Collateral Agent pursuant to the Collateral Documents,
provided that the term "Collateral" shall not include any indebtedness of any
Restricted Subsidiary for money borrowed. When used with respect to a specific
Lien Grantor, the term "Collateral" means all such property in which such a
security interest or other Lien is granted or purported to be granted to the
Collateral Agent by such Lien Grantor.
"Collateral Agent" means Morgan Guaranty Trust Company of New York,
in its capacity as Collateral Agent for the holders of the Secured Obligations
under the Collateral Documents, and its successors in such capacity.
"Collateral Documents" means this Agreement, the Security Agreement
Supplements and all other supplemental or additional security agreements or
similar instruments delivered pursuant hereto or thereto.
"Company" means Polaroid Corporation, a Delaware corporation, and
its successors.
"Consolidated Net Tangible Assets" means total assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (a) all current liabilities and (b) all goodwill, trade names,
trademarks, patents, organization expenses and other like intangibles, all as
set forth on the most recent balance sheet of the Company and its consolidated
subsidiaries and computed in accordance with generally accepted accounting
principles.
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<PAGE>
"Contingent Secured Obligation" means, at any time, any Secured
Obligation (or portion thereof) that is contingent in nature at such time,
including (without limiting the generality of the foregoing) any Secured
Obligation that is:
(i) an obligation to reimburse a bank or other financial
institution for drawings not yet made under a letter of credit, or a
Guarantee of any such obligation;
(ii) an obligation to provide collateral to or for the
benefit of a bank or other financial institution to secure
reimbursement obligations arising from drawings not yet made under a
letter of credit, or a Guarantee of any such obligation;
(iii) a conditional obligation to make a future payment
to or for the benefit of the relevant counterparty under a Hedging
Agreement, or a Guarantee of any such obligation; and
(iv) any other Secured Obligation which is contingent in
nature at the time of determination.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of December 11, 1998 among the Company, the Lenders party thereto,
Morgan Guaranty Trust Company of New York, as Administrative Agent and
Collateral Agent, and BankBoston, N.A., as Co-Agent, as amended and/or
restated from time to time.
"Existing Credit Agreement" means the Credit Agreement dated as of
March 19, 1997 among the Company, the banks party thereto, Morgan Guaranty Trust
Company of New York, as Administrative Agent, and BankBoston, N.A. (f/k/a The
First National Bank of Boston), as Co-Agent, as in effect from time to time
before the Closing Date.
"Instruments" means, with respect to any Lien Grantor, all
"instruments", "chattel paper" or "letters of credit" (each as defined in the
UCC) evidencing, representing, arising from or existing in respect of, relating
to, securing or otherwise supporting the payment of, any Account (other than any
indebtedness of any Restricted Subsidiary for borrowed money), including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by such Lien Grantor.
"Inventory" means, with respect to any Lien Grantor, all "inventory"
(as defined in the UCC), now owned or hereafter acquired by it, located in the
United States.
I-5
<PAGE>
"Lien Grantor" means the Company, any Subsidiary Guarantor listed on
the signature pages hereof under the caption "Subsidiary Guarantors" and any
Subsidiary Guarantor that shall, at any time after the date hereof, become "Lien
Grantor" and a party hereto pursuant to Section 15.
"Liquid Investments" means Temporary Cash Investments; provided that
(x) each Liquid Investment shall mature within 30 days after it is acquired by
the Collateral Agent and (y) in order to provide the Collateral Agent, for the
benefit of the Secured Parties, with a perfected security interest therein, each
Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments,
or if non-negotiable then issued in the name of the Collateral
Agent, which (together with any appropriate instruments of transfer)
are delivered to, and held by, the Collateral Agent or an agent
thereof (which shall not be the Company or any of its Subsidiaries
or Affiliates) in the State of New York; or
(ii) in book-entry form and issued by the United States
and subject to pledge under applicable state law and Treasury or
appropriate agency regulations and as to which (in the opinion of
counsel to the Collateral Agent) appropriate measures shall have
been taken to perfect the Security Interests.
"Non-Contingent Secured Obligation" means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
"Officer's Certificate" means a certificate signed by an executive
officer of the Company and delivered to the Collateral Agent.
"Opinion of Counsel" means a written opinion of legal counsel (who
may be counsel to a Lien Grantor or other counsel, in either case approved by
the Administrative Agent or the Required Lenders in a writing delivered to the
Collateral Agent) addressed and delivered to the Collateral Agent.
"Original Lien Grantor" means the Company or any Subsidiary
Guarantor that grants a Lien on any of its assets hereunder on the Closing Date.
"Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit B hereto, completed and
supplemented with the schedules and attachments contemplated thereby to the
I-6
<PAGE>
satisfaction of the Collateral Agent, and duly executed by a duly authorized
officer of such Lien Grantor.
"Permitted Liens" means (i) the Security Interests and (ii) the
other Liens on the Collateral permitted to be created or assumed or to exist
pursuant to Section 5.12 of the Credit Agreement.
"Pledged Instruments" means at any time all Instruments included in
the Collateral at such time.
"Post-Petition Interest" means any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
reorganization or insolvency of the Company (or would accrue but for the
operation of applicable bankruptcy, reorganization or insolvency laws), whether
or not such interest is allowed or allowable as a claim in any such case,
proceeding or other action.
"Principal Property" means any real estate or any manufacturing or
processing plant or warehouse owned or leased by the Company or any Restricted
Subsidiary of the Company which is located within the United States of America
and the gross book value (including related land and improvements thereon and
all machinery and equipment included therein without deduction of any
depreciation reserves) of which on the date as of which the determination is
being made exceeds 2% of Consolidated Net Tangible Assets, other than (a) any
property which in the opinion of the board of directors of the Company is not of
material importance to the total business conducted by the Company as an
entirety or (b) any portion of a particular property which is found by the board
of directors of the Company not to be of material importance to the use or
operation of such property.
"Proceeds" means, with respect to any Lien Grantor, all proceeds of,
and all other profits, products, rents or receipts, in whatever form, arising
from the collection, sale, lease, exchange, assignment, licensing or other
disposition of, or other realization upon, its Collateral, including without
limitation all claims of such Lien Grantor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any of its Collateral, and
any condemnation or requisition payments (or settlement payments in lieu
thereof) with respect to any of its Collateral, in each case whether now
existing or hereafter arising.
"Restricted Subsidiary" means a Subsidiary of the Company (a)
substantially all the property of which is located, or substantially all the
business
I-7
<PAGE>
of which is carried on, within the United States of America and (b) which owns a
Principal Property.
"Secured Obligations" means:
(a) with respect to the Company, (i) all principal of all Loans
outstanding from time to time under the Credit Agreement, all interest
(including without limitation Post-Petition Interest) on such Loans and all
other amounts (including fees and disbursements of counsel) now or hereafter
payable by the Company pursuant to any Financing Document, (ii) if the Company
designates loans from banks or other financial institutions as additional
Secured Obligations, as permitted by Section 2.16(a) of the Credit Agreement,
all principal of such loans, all interest (including without limitation
Post-Petition Interest) on such loans and all other amounts (including fees and
disbursements of counsel) now or hereafter payable by the Company with respect
thereto and (iii) any other obligations designated by the Company as additional
Secured Obligations pursuant to Section 2.16 of the Credit Agreement; and
(b) with respect to any Subsidiary Guarantor, all obligations of
such Subsidiary Guarantor under its Subsidiary Guaranty Agreement.
"Secured Parties" means the holders from time to time of the Secured
Obligations.
"Secured Party Requesting Notice" means, at any time, a Secured
Party which has, at least five Domestic Business Days prior thereto, delivered
to the Collateral Agent a written notice (a) stating that it holds one or more
Secured Obligations and wishes to receive copies of the notices and instructions
referred to in Section 11(i) and (b) setting forth its address or facsimile
number to which such copies should be sent.
"Security Agreement Supplement" means a Security Agreement
Supplement, substantially in the form of Exhibit A hereto, executed and
delivered to the Collateral Agent for the purpose of adding a new Subsidiary
Guarantor as a party hereto pursuant to Section 15 and/or for the purpose of
adding additional property to the Collateral.
"Security Interests" means the security interests in the Collateral
granted by the Lien Grantors under the Collateral Documents.
"Security Release Date" means the first day after the Closing Date
on which both S&P and Moody's have confirmed the Company's Long-Term Debt
I-8
<PAGE>
Ratings (without negative qualification) at BBB- or higher by S&P and Baa3 or
higher by Moody's.
"Subsidiary Guarantors" means each Subsidiary listed on the
signature pages hereof under the caption "Subsidiary Guarantors" and each
Subsidiary that shall, at any time after the Closing Date, execute a Subsidiary
Guaranty Agreement.
"Temporary Cash Investments" has the meaning set forth in Section 1
of the Credit Agreement.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided that if, by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of any Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. The Security Interests.
(a) In order to secure the full and punctual payment of its Secured
Obligations in accordance with the terms thereof, each Lien Grantor grants to
the Collateral Agent for the benefit of the Secured Parties a continuing
security interest in all right, title and interest of such Lien Grantor in and
to all of the following property, whether now owned or existing or hereafter
acquired or arising and (except as provided in the definition of "Inventory")
regardless of where located:
(i) all Accounts;
(ii) all Instruments;
(iii) all Inventory;
(iv) all books and records (including, without
limitation, customer lists, credit files, computer programs,
printouts and other computer materials and records) of such Lien
Grantor pertaining to any of the collateral described in clauses
(i), (ii), (iii) and (v) of this subsection; and
(v) all Proceeds of the collateral described in the
foregoing clauses (i) through (iv);
I-9
<PAGE>
provided that property and/or transactions that are excluded from Article 9 of
the UCC by Section 9-104 thereof are excluded from the foregoing security
interests.
(b) The Security Interests are granted as security only and shall
not subject the Collateral Agent or any other Secured Party to, or transfer or
in any way affect or modify, any obligation or liability of any Lien Grantor
with respect to any of the Collateral or any transaction in connection
therewith.
SECTION 3. Representations and Warranties. Each Original Lien
Grantor represents and warrants that:
(a) Such Original Lien Grantor has good and marketable title to all
of its Collateral (subject to exceptions which are, in the aggregate, not
material), free and clear of any Liens other than Permitted Liens. Such Original
Lien Grantor has taken all actions, if any, necessary under the UCC to perfect
its interest in any Accounts purchased or otherwise acquired by it, as against
its assignors and creditors of its assignors.
(b) Such Original Lien Grantor has not performed any acts that might
prevent the Collateral Agent from enforcing any of the provisions of the
Collateral Documents or that would limit the Collateral Agent in any such
enforcement. No financing statement, security agreement, mortgage or similar or
equivalent document or instrument covering all or any part of the Collateral
owned by it is on file or of record in any jurisdiction in which such filing or
recording would be effective to perfect or record a Lien on such Collateral,
except financing statements, security agreements, mortgages or similar or
equivalent documents or instruments with respect to Permitted Liens. After the
Closing Date, no Collateral owned by it will be in the possession of any Person
(other than such Original Lien Grantor) asserting any claim thereto or security
interest therein, except that the Collateral Agent or its designee may have
possession of Collateral as contemplated hereby.
(c) Such Original Lien Grantor has delivered a Perfection
Certificate to the Collateral Agent. The information set forth therein is
correct and complete in all material respects as of the Closing Date. Within 60
days after the Closing Date, such Original Lien Grantor will furnish to the
Collateral Agent a file search report from each UCC filing office listed in its
Perfection Certificate.
(d) The Security Interests constitute, under the UCC, valid security
interests in all Collateral owned by such Original Lien Grantor, securing its
Secured Obligations, except to the extent that certain collateral and/or
transactions are excluded from Article 9 of the UCC by Section 9-104 thereof.
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<PAGE>
(e) Upon delivery of the Pledged Instruments (if any) owned by such
Original Lien Grantor to the Collateral Agent in accordance with Section 4, the
Security Interests in such Collateral will be perfected, subject to no prior
Lien.
(f) When UCC financing statements describing the collateral as set
forth in Schedule 6(A) to such Original Lien Grantor's Perfection Certificate
shall have been filed in the offices specified in such Perfection Certificate,
the Security Interests will constitute perfected security interests in the
Collateral owned by such Original Lien Grantor to the extent that a security
interest therein may be perfected by filing pursuant to the UCC, prior to all
Liens and rights of others therein except Permitted Liens. Except for the filing
of such UCC financing statements, no registration, recordation or filing with
any governmental body, agency or official is required in connection with the
execution or delivery of the Collateral Documents or is necessary for the
validity or enforceability thereof or for the perfection of the Security
Interests or for the enforcement of the Security Interests. The representations
in this subsection (f) as to perfection of the Security Interests do not apply
to inventories which, in the aggregate for all Lien Grantors, do not exceed 1%
in book value of the aggregate domestic inventory of all Lien Grantors.
(g) Such Lien Grantor's Collateral is insured in accordance with the
requirements of the Credit Agreement.
(h) All of such Lien Grantor's Inventory has or will have been
produced in compliance with the applicable requirements of the Fair Labor
Standards Act, as amended.
SECTION 4. Delivery of Certain Collateral. (a) On the Closing Date,
each Original Lien Grantor is delivering to the Collateral Agent as Collateral
hereunder all Instruments (if any) then owned by such Original Lien Grantor.
(b) On the date it signs and delivers its Security Agreement
Supplement, each Lien Grantor (other than an Original Lien Grantor) will deliver
to the Collateral Agent as Collateral hereunder all Instruments (if any) then
owned by such Lien Grantor.
(c) After the Closing Date (in the case of an Original Lien Grantor)
or the date of its Security Agreement Supplement (in the case of any other Lien
Grantor), if any Lien Grantor receives any Instrument in which a security
interest is granted pursuant to Section 2 hereof or pursuant to any Security
Agreement Supplement signed by it, such Lien Grantor will immediately deliver
such Instrument to the Collateral Agent to be held by it as Collateral
hereunder;
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provided that no Lien Grantor shall be required to deliver to the Collateral
Agent any Instrument if, after giving effect thereto, the aggregate value of all
Instruments owned by the Lien Grantors and not delivered to the Collateral Agent
would not exceed $100,000.
(d) Notwithstanding the foregoing, so long as no Event of Default
shall have occurred and be continuing, the Collateral Agent shall, promptly upon
request by any Lien Grantor, make appropriate arrangements for making any
Instrument pledged by such Lien Grantor hereunder available to it for purposes
of presentation, collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate by the Collateral Agent, against trust receipt or
like document).
(e) All Pledged Instruments delivered to the Collateral Agent
hereunder will be endorsed to the order of the Collateral Agent, or accompanied
by duly executed instruments of assignment, all in form and substance
satisfactory to the Collateral Agent, and accompanied by any required transfer
tax stamps.
SECTION 5. Further Assurances; Covenants. Each Lien Grantor
covenants as follows:
(a) It will not change its name, identity or corporate structure in
any manner unless it shall have (i) given the Collateral Agent at least 10 days'
prior notice thereof and (ii) delivered an Opinion of Counsel with respect
thereto in accordance with Section 5(d), provided that delivery of such an
Opinion of Counsel shall not be required if the Collateral Agent reasonably
determines that such change could not affect the perfection or priority of any
Security Interest in any Collateral.
(b) It will not change (i) the location of its chief executive
office or chief place of business or (ii) the locations where it keeps or holds
any Collateral (except Inventory in transit from one such location to another)
or any records relating thereto from the applicable locations described in its
Perfection Certificate, unless such Lien Grantor shall have (x) given the
Collateral Agent at least 10 days' prior notice thereof and (y) delivered an
Opinion of Counsel with respect thereto in accordance with Section 5(d),
provided that delivery of such an Opinion of Counsel shall not be required if
the Collateral Agent reasonably determines that such change could not affect the
perfection or priority of any Security Interest in any Collateral. Such Lien
Grantor will not in any event change the location of any Collateral owned by it
if such change would cause the Security Interests in such Collateral to lapse or
cease to be perfected.
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<PAGE>
(c) It will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement or
other paper and take any other action (including, without limitation, any
filings of financing or continuation statements under the UCC) that from time to
time may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to create, preserve, perfect, confirm or validate the Security
Interests in such Lien Grantor's Collateral or to enable the Collateral Agent
and the other Secured Parties to obtain the full benefits of the Collateral
Documents, or to enable the Collateral Agent to exercise and enforce any of its
rights, powers and remedies thereunder with respect to any of such Lien
Grantor's Collateral. To the extent permitted by applicable law, such Lien
Grantor authorizes the Collateral Agent to execute and file such financing
statements or continuation statements without such Lien Grantor's signature
appearing thereon. Such Lien Grantor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. Such Lien Grantor shall pay the costs
of, or incidental to, any recording or filing of any such financing or
continuation statements in which it is named as the debtor.
(d) Before it takes any action contemplated by Section 5(a) or 5(b),
such Lien Grantor will, at its expense, cause to be delivered to the Collateral
Agent an Opinion of Counsel, in form and substance reasonably satisfactory to
the Collateral Agent, to the effect that all financing statements and amendments
or supplements thereto, continuation statements and other documents required to
be recorded or filed in order to perfect and protect the Security Interests
against all creditors of and purchasers from such Lien Grantor (except any
continuation statements specified in such Opinion of Counsel that are to be
filed more than six months after the date thereof) have been filed in each
filing office necessary for such purpose; provided that delivery of such an
Opinion of Counsel shall not be required if the Collateral Agent shall have
reasonably determined that such action could not affect the perfection or
priority of any Security Interest in any Collateral and so advised such Lien
Grantor.
(e) If any of its Collateral is at any time in the possession or
control of any warehouseman, bailee or agent, such Lien Grantor will notify such
warehouseman, bailee or agent of the Security Interests and instruct it to hold
all such Collateral for the Collateral Agent's account subject to the Collateral
Agent's instructions (which shall permit such Collateral to be removed by such
Lien Grantor in the ordinary course of business until the Collateral Agent
notifies such warehouseman, bailee or agent that an Event of Default has
occurred and is continuing).
(f) It shall keep full and accurate books and records relating to
its Collateral, and stamp or otherwise mark such books and records in such
manner
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as the Collateral Agent may reasonably request in order to reflect the Security
Interests.
(g) It shall use commercially reasonable efforts to cause to be
collected from its account debtors, as and when due, any and all amounts owing
under or on account of each of its Accounts (including, without limitation,
Accounts which are delinquent, such Accounts to be collected in accordance with
lawful collection procedures) and shall apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such Accounts.
Subject to the rights of the Collateral Agent and the other Secured Parties
hereunder if an Event of Default shall have occurred and be continuing, such
Lien Grantor may allow in the ordinary course of business as adjustments to
amounts owing under its Accounts (i) any extension or renewal of the time or
times of payment, or settlement for less than the total unpaid balance, which
such Lien Grantor finds appropriate in accordance with sound business judgment
and (ii) refunds or credits, all in accordance with such Lien Grantor's ordinary
course of business consistent with its historical collection practices. The
costs and expenses (including, without limitation, attorney's fees) of
collection, whether incurred by such Lien Grantor or the Collateral Agent, shall
be borne by such Lien Grantor.
(h) If an Event of Default shall have occurred and be continuing,
such Lien Grantor will, if requested to do so by the Collateral Agent, promptly
notify (and such Lien Grantor hereby authorizes the Collateral Agent so to
notify) each account debtor in respect of any of its Accounts or Instruments
that such Collateral has been assigned to the Collateral Agent hereunder, and
that any payments due or to become due in respect of such Collateral are to be
made directly to the Collateral Agent or its designee.
(i) Such Lien Grantor will not sell, lease, exchange, assign or
otherwise dispose of, or grant any option with respect to, any of its
Collateral; provided that, unless an Event of Default shall have occurred and be
continuing, such Lien Grantor may sell, lease or otherwise dispose of its
Inventory in the ordinary course of business. Concurrently with any sale or
disposition permitted by the foregoing proviso, the Security Interests in the
assets sold or disposed of (but not in any Proceeds arising from such sale or
disposition) shall cease immediately without any further action on the part of
the Collateral Agent or any other Secured Party.
(j) Such Lien Grantor will, promptly upon request, provide to the
Collateral Agent all information and evidence it may reasonably request
concerning such Lien Grantor's Collateral to enable the Collateral Agent to
enforce the provisions of the Collateral Documents.
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(k) From time to time upon request by the Collateral Agent, such
Lien Grantor shall, at its expense, cause to be delivered to the Secured Parties
an Opinion of Counsel satisfactory to the Collateral Agent as to such matters
relating to the transactions contemplated hereby as the Required Lenders may
reasonably request.
SECTION 6. General Authority. Each Lien Grantor hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power of
substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of such
Lien Grantor, to the extent permitted by law to exercise, at any time and from
time to time while an Event of Default shall have occurred and be continuing,
all or any of the following powers with respect to all or any of such Lien
Grantor's Collateral:
(a) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the Collateral
Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
provided that (i) before exercising any of such powers, the Collateral Agent
shall notify such Lien Grantor that it intends to exercise one or more of its
powers under this Section and (ii) the Collateral Agent shall give such Lien
Grantor not less than ten days' prior written notice of the time and place of
any sale or other intended disposition of any Collateral owned by such Lien
Grantor, except any such Collateral which threatens to decline speedily in value
or is of a type customarily sold on a recognized market. The Collateral Agent
and each Lien Grantor agree that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
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SECTION 7. Remedies upon Event of Default. (a) If an Event of
Default shall have occurred and be continuing, the Collateral Agent may exercise
(or cause its co-agents and co-trustees, if any, to exercise) any or all of the
remedies available to it (or to such co-agents or co-trustees) under the
Collateral Documents.
(b) Without limiting the generality of the foregoing, if an Event of
Default shall have occurred and be continuing, the Collateral Agent may exercise
on behalf of the Secured Parties all the rights of a secured party under the UCC
(whether or not in effect in the jurisdiction where such rights are exercised)
with respect to any Collateral and, in addition, the Collateral Agent may sell
the Collateral or any part thereof at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Collateral Agent shall deem
satisfactory. Any Secured Party may be the purchaser of any or all of the
Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale). The
Collateral Agent is authorized, in connection with any such sale, if it deems it
advisable so to do, to impose such limitations or conditions as the Collateral
Agent deems necessary or advisable in order to comply with any law. Each Lien
Grantor agrees that it will execute and deliver such documents and take such
other action as the Collateral Agent deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the
Collateral Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Lien Grantor
which may be waived, and each Lien Grantor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. Notice of any
such sale shall be given to the relevant Lien Grantor(s) as required by Section
6 and shall (i) in case of a public sale, state the time and place fixed for
such sale, (ii) in case of sale at a broker's board or on a securities exchange,
state the board or exchange at which such sale is to be made and the day on
which the Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (iii) in case of a private sale,
state the day after which such sale may be consummated. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix in the notice of such sale. At
any such sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such sale pursuant to any such notice. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned
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from time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same may be so
adjourned. If all or any part of the Collateral is sold on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the selling price is paid by the purchaser thereof, but the Collateral Agent
shall not incur any liability if such purchaser fails to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice. The Collateral Agent, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(c) For the purpose of enforcing any and all rights and remedies
under this Agreement, the Collateral Agent may (i) require each Lien Grantor to,
and each Lien Grantor agrees that it will, at its expense and upon the request
of the Collateral Agent, forthwith assemble all or any part of its Collateral as
directed by the Collateral Agent and make it available at a place designated by
the Collateral Agent which is, in its opinion, reasonably convenient to the
Collateral Agent and such Lien Grantor, whether at the premises of such Lien
Grantor or otherwise, (ii) to the extent permitted by applicable law, enter,
with or without process of law and without breach of the peace, any premises
where any of the Collateral is or may be located, and without charge or
liability to it seize and remove such Collateral from such premises, (iii) have
access to and use such Lien Grantor's books and records relating to its
Collateral and (iv) prior to the disposition of such Lien Grantor's Collateral,
store or transfer it without charge in or by means of any storage or
transportation facility owned or leased by such Lien Grantor, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to the
extent the Collateral Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any trademark, trade name,
copyright, patent or technical process used by such Lien Grantor. The Collateral
Agent may also render any or all of such Collateral unusable at such Lien
Grantor's premises and may dispose of such Collateral on such premises without
liability for rent or costs.
SECTION 8. Fees and Expenses; Indemnification. The Company agrees
that it will forthwith upon demand pay to the Collateral Agent:
(i) the amount of any taxes which the Collateral Agent
may have been required to pay by reason of the Security Interests or
to free any of the Collateral from any Lien thereon;
(ii) the amount of any and all reasonable out-of-pocket
expenses, including transfer taxes and reasonable fees and
disbursements of counsel
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and of any other experts, which the Collateral Agent may incur in
connection with the enforcement of the Collateral Documents,
including such expenses as are incurred in connection with (x) the
collection, sale or other disposition of any Collateral or (y) the
exercise by the Collateral Agent of any of the rights or powers
conferred upon it hereunder;
(iii) the amount of any fees that the Company shall have
agreed in writing to pay to the Collateral Agent and that shall have
become due and payable in accordance with such written agreement;
and
(iv) the amount required to indemnify the Collateral
Agent for, or hold it harmless and defend it against, any loss,
liability or expense (including the reasonable fees and expenses of
its counsel and any experts or co-agents appointed hereunder)
incurred or suffered by the Collateral Agent in connection with the
Collateral Documents, except to the extent that such loss, liability
or expense arises from the Collateral Agent's gross negligence or
willful misconduct or a breach of any duty that the Collateral Agent
has under the Collateral Documents (after giving effect to Sections
9 and 11 hereof).
Any such amount not paid to the Collateral Agent on demand shall bear interest
for each day until paid at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day.
SECTION 9. Limitation on Duty of Collateral Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody and
preservation thereof, the Collateral Agent shall have no duty as to any
Collateral in its possession or control or in the possession or control of any
agent or bailee or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Collateral
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of any act or
omission of any agent or bailee selected by the Collateral Agent in good faith
or by reason of any act or omission by the Collateral Agent pursuant to
instructions from the Required Lenders (or the Super-Majority Lenders when their
consent is required), except to the extent that such liability arises from the
Collateral Agent's gross negligence or willful misconduct.
SECTION 10. Application of Proceeds. (a) If an Event of Default has
occurred and is continuing, the Collateral Agent may (and shall if instructed by
the Required Lenders in writing to do so) apply the proceeds of any sale of, or
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other realization upon, all or any part of the Collateral to pay the Secured
Obligations. Any such payment shall be made in the following order of
priorities:
first, to pay the expenses of such sale or other
realization, including reasonable compensation to agents of and
counsel for the Collateral Agent, and all expenses, liabilities and
advances incurred or made by the Collateral Agent in connection with
the Collateral Documents, and any other amounts then due and payable
to the Collateral Agent pursuant to Sections 8 and 13 hereof and
Section 9.03 of the Credit Agreement;
second, to pay the unpaid principal of the Secured
Obligations ratably (or provide for the payment thereof pursuant to
subsection (b) of this Section), until payment in full of the
principal of all Secured Obligations shall have been made (or so
provided for);
third, to pay all interest (including Post-Petition
Interest) on the Secured Obligations and all facility fees and
commitment fees payable under the Credit Agreement ratably, until
payment in full of all such interest and fees shall have been made;
fourth, to pay all other Secured Obligations ratably (or
provide for the payment thereof pursuant to subsection (b) of this
Section), until payment in full of all such other Secured
Obligations shall have been made (or so provided for); and
finally, to pay to the relevant Lien Grantor or its
successors or assigns, or as a court of competent jurisdiction may
direct, any surplus then remaining from the proceeds of the
Collateral owned by it;
provided that Collateral owned by a Subsidiary Guarantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses first, second, third
and fourth only to the extent that the Secured Obligations referred to therein
are guaranteed by such Subsidiary Guarantor (subject to the limitation in
Section 8 of its Subsidiary Guaranty Agreement). The Collateral Agent may make
such distributions hereunder in cash or in kind or, on a ratable basis, in any
combination thereof.
(b) If at any time any portion of any monies collected or received
by the Collateral Agent would, but for the provisions of this subsection (b), be
payable pursuant to subsection (a) of this Section in respect of a Contingent
Secured Obligation, the Collateral Agent shall not apply any monies to pay such
Contingent Secured Obligation but instead shall request the holder thereof, at
least 10 days before each proposed distribution hereunder, to notify the
Collateral
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Agent as to the maximum amount of such Contingent Secured Obligation if then
ascertainable (e.g., in the case of a letter of credit, the maximum amount
available for subsequent drawings thereunder). If the holder of such Contingent
Secured Obligation does not notify the Collateral Agent of the maximum
ascertainable amount thereof at least two Domestic Business Days before such
distribution, such holder shall not be entitled to share in such distribution.
If such holder does so notify the Collateral Agent as to the maximum
ascertainable amount thereof, the Collateral Agent will allocate to such holder
a portion of the monies to be distributed in such distribution, calculated as if
such Contingent Secured Obligation were outstanding in such maximum
ascertainable amount. However, the Collateral Agent shall not apply such portion
of such monies to pay such Contingent Secured Obligation, but instead shall hold
such monies or invest such monies in Liquid Investments at the direction of the
relevant Lien Grantor. All such monies and Liquid Investments and all proceeds
thereof shall constitute Collateral hereunder and shall be subject to the
relevant Security Interests, but shall be subject to distribution in accordance
with this subsection (b) rather than subsection (a) above. The Collateral Agent
shall hold all such monies and Liquid Investments and the net proceeds thereof
in trust until such time as all or part of such Contingent Secured Obligation
becomes a Non-Contingent Secured Obligation, whereupon the Collateral Agent at
the request of the relevant Secured Party shall apply the amount so held in
trust to pay such Non-Contingent Secured Obligation; provided that, if the other
Secured Obligations theretofore paid pursuant to the same clause of subsection
(a) (i.e., clause second or fourth) were not paid in full, the Collateral Agent
shall apply the amount so held in trust to pay the same percentage of such
Non-Contingent Secured Obligation as the percentage of such other Secured
Obligations theretofore paid pursuant to the same clause of subsection (a). If
(i) the holder of such Contingent Secured Obligation shall advise the Collateral
Agent that no portion thereof remains in the category of a Contingent Secured
Obligation and (ii) the Collateral Agent still holds any amount held in trust
pursuant to this subsection (b) in respect of such Contingent Secured Obligation
(after paying all amounts payable pursuant to the preceding sentence with
respect to any portions thereof that became Non-Contingent Secured Obligations),
such remaining amount shall be applied by the Collateral Agent in the order of
priorities set forth in subsection (a) of this Section.
(c) In making the payments and allocations required by this Section,
the Collateral Agent may rely upon information supplied to it pursuant to
Section 11(f). All distributions made by the Collateral Agent pursuant to this
Section shall be final (except in the event of manifest error) and the
Collateral Agent shall have no duty to inquire as to the application by the
Secured Parties of any amount distributed to them.
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SECTION 11. Concerning the Collateral Agent. (a) The Collateral
Agent is authorized to take all such action as is provided or permitted to be
taken by it as Collateral Agent under the Collateral Documents and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein including, without limitation, the timing and methods of realization
upon the Collateral, the Collateral Agent shall act or refrain from acting in
accordance with written instructions from the Required Lenders or, in the
absence of such instructions, in accordance with its discretion (subject to the
following provisions of this Section).
(b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any Collateral, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Collateral Documents. The Collateral Agent shall have no duty to
ascertain or inquire as to the performance or observance of any of the terms of
any Collateral Document, the Credit Agreement or any other agreement relating to
the Secured Obligations.
(c) The obligations of the Collateral Agent under the Collateral
Documents are only those expressly set forth therein. In any case in which the
Collateral Agent is authorized to exercise any power or discretion, the
Collateral Agent may refrain from such exercise unless directed in writing by
the Required Lenders to act in the manner specified in such direction.
(d) The Collateral Agent may:
(i) consult with legal counsel (who may be counsel for
any of the Polaroid Obligors) and
(ii) to the extent that the Collateral Agent in good
faith deems it appropriate in connection with its duties hereunder
to do so, consult with independent public accountants and other
experts selected by it in connection with any matter arising under
the Collateral Documents and shall not be liable for any action
taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(e) Neither the Collateral Agent nor any of its directors, officers,
agents, or employees shall be liable for any action taken or not taken by it in
connection with any Collateral Document (i) with the consent or at the request
or direction of the Required Lenders (or the Super-Majority Lenders when their
consent is required) or (ii) in the absence of its own gross negligence or
willful misconduct. However, nothing in this subsection (e) shall affect any
rights any Lien Grantor
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may have against the Required Lenders or the Super-Majority Lenders for giving
any consent, request, notice or instruction. Neither the Collateral Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Collateral Document, (ii) the
performance or observance of any of the covenants or agreements of any Lien
Grantor or (iii) the validity, effectiveness or genuineness of any Collateral
Document or any other instrument or writing furnished in connection therewith.
The Collateral Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement or other writing (which may be a
bank wire, telex, facsimile or similar writing) believed by it to be genuine or
to be signed by the proper party or parties.
(f) For all purposes of the Collateral Documents, including without
limitation determining from time to time the amounts of the Secured Obligations,
whether a Secured Obligation is a Contingent Secured Obligation or not, or
whether any notice, request, direction or instruction has been given by the
Required Lenders, the Super-Majority Lenders or any other Secured Party or
Secured Parties entitled to give the same under any provision of the Collateral
Documents, the Collateral Agent shall be entitled to rely upon information from
the following sources (and may refrain from acting on the basis of such
information until two Domestic Business Days after it receives all such
information required to enable it to take such action):
(i) the Administrative Agent for information as to the
parties to the Credit Agreement and their respective Secured
Obligations outstanding thereunder (including whether any action has
been taken or instruction given by the Required Lenders or the
Super-Majority Lenders);
(ii) any Secured Party for information as to itself and
its Secured Obligations (or any trustee, agent or similar
representative designated pursuant to Section 2.16(d) of the Credit
Agreement to supply such information), to the extent that the
Collateral Agent has not received such information from the
Administrative Agent; and
(iii) any Lien Grantor for information as to any Secured
Party and its Secured Obligations, to the extent that the Collateral
Agent has not received such information from the sources referred to
in clauses (i) and (ii) above.
(g) The Collateral Agent shall have no liability to any Lien Grantor
or any Secured Party for actions taken in reliance on such information, except
to the
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extent that such liability arises from the Collateral Agent's gross negligence
or willful misconduct.
(h) The Collateral Agent may resign at any time (effective upon
acceptance by a successor Collateral Agent of its appointment hereunder) by
giving written notice thereof to the Administrative Agent, each of the Secured
Parties Requesting Notice and the Company. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Collateral Agent,
with the consent of the Company (if no Default shall have occurred and be
continuing), which consent shall not be unreasonably withheld. If no successor
Collateral Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Collateral
Agent gives notice of resignation, the retiring Collateral Agent may, on behalf
of the Secured Parties, appoint a successor Collateral Agent, which shall be a
Lender, if a Lender is able and willing to serve as the Collateral Agent, or, if
no Lender is able and willing to serve as the Collateral Agent, a commercial
bank organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $100,000,000. Upon
the acceptance of its appointment as Collateral Agent hereunder by a successor
Collateral Agent, such successor Collateral Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Collateral Agent,
and the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder. After any retiring Collateral Agent's resignation
hereunder as Collateral Agent, the provisions of this Section and Sections 8 and
9 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was the Collateral Agent.
(i) Within two Domestic Business Days after it receives or sends any
notice or instructions referred to in this subsection (i), the Collateral Agent
shall send to the Administrative Agent (for distribution to all the Lenders) and
to each Secured Party Requesting Notice, a copy of (x) any certificate
designating additional obligations as Secured Obligations received by the
Collateral Agent pursuant to Section 2.16 of the Credit Agreement, (y) any other
notice given by the Collateral Agent to any Lien Grantor, or received by it from
any Lien Grantor, pursuant to Section 6, 7 or 10 and (z) any instructions
received by the Collateral Agent from the Administrative Agent pursuant to
Section 14.
(j) The Collateral Agent may refuse to act on any notice, direction
or instruction from the Administrative Agent, the Required Lenders, the
SuperMajority Lenders or any Secured Party or any agent, trustee or similar
representative thereof which, in the Collateral Agent's opinion, is contrary to
law or the provisions of any Collateral Document, is unduly prejudicial to
Secured Parties not joining in such notice, direction or instruction or may
expose the Collateral Agent to liability (unless the Collateral Agent shall have
been
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adequately indemnified for such liability by the Secured Parties that gave, or
instructed the Administrative Agent to give, such notice, direction or
instruction).
SECTION 12. Appointment of Co-Collateral Agents. At any time or
times, in order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint another bank or trust company or one or more other
persons, either to act as co-agent or co-agents, jointly with the Collateral
Agent, or to act as separate agent or agents on behalf of the Secured Parties
with such power and authority as may be necessary for the effectual operation of
the provisions of any Collateral Document and may be specified in the instrument
of appointment (which may, in the discretion of the Collateral Agent, include
provisions for the protection of such co-agent or separate agent similar to the
provisions of Section 11).
SECTION 13. Preservation of Collateral; Recovery of Expenses. If any
Lien Grantor fails to comply with the provisions of any Financing Document and,
as a result, the value of any Collateral or the validity, perfection, rank or
value of any Security Interest is thereby diminished or reasonably likely to be
diminished or put at risk, the Collateral Agent may, but shall not be required
to, effect such compliance on behalf of such Lien Grantor, and the Company shall
reimburse the Collateral Agent for the costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, any and all excise,
property, sales and use taxes imposed by any state, federal or other local
authority on any Collateral, or in respect of periodic appraisals and
inspections of the Collateral to the extent the same may be requested by the
Required Lenders from time to time, or in respect of the sale or other
disposition thereof shall be paid by the Company; and if the Company fails to
pay any portion thereof promptly when due, the Collateral Agent or any Lender
may, at its option, but shall not be required to, pay the same and charge the
Company's account therefor, and the Company agreed to reimburse the Collateral
Agent or such Lender therefor on demand. All sums so paid or incurred by the
Collateral Agent or any Lender for any of the foregoing purposes and any and all
other sums for which the Company may become liable hereunder and all costs and
expenses (including attorneys' fees, legal expenses and court costs) reasonably
incurred by the Collateral Agent or any Lender in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to Base
Rate Loans plus 2%, be additional Secured Obligations hereunder.
SECTION 14. Termination of Security Interests; Releases of
Collateral (including Insurance Proceeds). (a) The Security Interests shall
terminate and all
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rights to each item of Collateral shall revert to the Lien Grantor that owns
such item of Collateral when:
(i) the Collateral Agent shall have received
instructions to that effect from the Administrative Agent pursuant
to Section 2.17 of the Credit Agreement; or
(ii) the Commitments shall have terminated, all
outstanding Secured Obligations shall have been paid in full and, if
any material portion of such Secured Obligations shall have been
refinanced on a secured basis, all Contingent Secured Obligations
shall have expired or been terminated.
(b) Upon any such termination of the Security Interests or release
of Collateral, the Collateral Agent will, at the expense of any Lien Grantor,
execute and deliver to such Lien Grantor such documents as such Lien Grantor
shall reasonably request to evidence the termination of the relevant Security
Interests or the release of the relevant Collateral, as the case may be.
(c) If the Collateral Agent receives proceeds under an insurance
policy as to which it is named as loss payee pursuant to Section 5.03 of the
Credit Agreement, the Collateral Agent shall release to the appropriate Lien
Grantor any portion of such insurance proceeds that is not included in the
Collateral (i.e., that does not, for purposes of Section 9-306 of the UCC,
constitute insurance payable by reason of loss or damage to inventory included
in the Collateral), upon receipt by the Collateral Agent of an Officer's
Certificate (i) requesting such release and (ii) certifying that the amount to
be released does not constitute insurance payable by reason of loss or damage to
any such inventory. The Collateral Agent shall release to the appropriate Lien
Grantor from time to time any insurance proceeds that do constitute insurance
payable by reason of loss or damage to any such inventory; provided that (x) the
Collateral Agent receives an Officer's Certificate requesting such release and
certifying that the amount to be released does not exceed the book value of
inventory theretofore added to the Collateral to replace the inventory with
respect to which such insurance proceeds were paid and (ii) no Event of Default
shall have occurred and be continuing on the date of such release. Each
Officer's Certificate delivered pursuant to this subsection shall set forth the
calculation of the amount to be released in a manner reasonably satisfactory to
the Collateral Agent. Any insurance proceeds held by the Collateral Agent
pursuant to this subsection may be invested in Liquid Investments from time to
time at the Company's request.
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SECTION 15. Additional Lien Grantors. Any Subsidiary which becomes a
Subsidiary Guarantor after the date hereof may become a party hereto by
executing and delivering to the Collateral Agent a Security Agreement
Supplement, whereupon such Subsidiary shall become a "Lien Grantor" and a party
hereto.
SECTION 16. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party:
(i) in the case of the Company, to it at its address or
facsimile number set forth in the Credit Agreement;
(ii) in the case of any Subsidiary Guarantor, to it at
its address or facsimile number set forth in its Subsidiary Guaranty
Agreement;
(iii) in the case of the Collateral Agent, to it at:
J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Jeannie Mattson
Facsimile: (302) 634-1852
(iv) in the case of any Lender, to the Administrative
Agent to be forwarded to such Lender at its address or facsimile
number specified in or pursuant to Section 9.01 of the Credit
Agreement;
(v) in the case of any Secured Party Requesting Notice,
to it at such address or facsimile number as such party may
hereafter specify for the purpose by notice to the Collateral Agent;
or
(vi) in the case of any party, to it at such other
address or facsimile number as such party may hereafter specify for
the purpose by notice to the Collateral Agent and the Lien Grantors.
Each such notice, request or other communication shall be effective (x) if given
by facsimile transmission, when transmitted to the facsimile number referred to
in this Section and confirmation of receipt is received, (y) if given by mail,
ten days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (z) if given by any other means, when
delivered at the address referred to in this Section.
I-26
<PAGE>
SECTION 17. Waivers, Remedies Not Exclusive. No failure on the part
of the Collateral Agent or any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right or remedy under
any Collateral Document shall operate as a waiver thereof; nor shall any single
or partial exercise by the Collateral Agent or any Secured Party of any right or
remedy under the Credit Agreement or any Collateral Document preclude any other
or further exercise thereof or the exercise of any other right or remedy. The
rights and remedies specified in the Collateral Documents and the Credit
Agreement are cumulative and are not exclusive of any other rights or remedies
provided by law.
SECTION 18. Successors and Assigns. This Agreement is for the
benefit of the Collateral Agent and the Secured Parties and their respective
successors and assigns, and in the event of an assignment of all or any of the
Secured Obligations, the rights of the holder thereof under the Collateral
Documents, to the extent applicable to the indebtedness so assigned, shall be
transferred with such indebtedness. This Agreement shall be binding on the Lien
Grantors and their respective successors and assigns, provided that no Lien
Grantor may assign or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of the Super-Majority Lenders.
SECTION 19. Changes in Writing. Any provision of this Agreement may
be amended, supplemented, modified or waived if (but only if) such amendment,
supplement, modification or waiver is in writing and is signed by each Lien
Grantor and the Collateral Agent (with the written consent of the Required
Lenders); provided that (i) the written consent of all the Lenders will be
required to modify Section 10 or this Section 19 and (ii) the written consent of
the SuperMajority Lenders will be required to modify Section 14, the definition
of "Secured Obligations" or the definition of "Security Release Date".
SECTION 20. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except as
otherwise required by mandatory provisions of law and except to the extent that
remedies provided by the laws of any jurisdiction other than the State of New
York are governed by the laws of such jurisdiction.
SECTION 21. Severability. If any provision of any Collateral
Document is invalid or unenforceable in any jurisdiction, then, to the fullest
extent permitted by law, the other provisions of the Collateral Documents shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Collateral Agent and the Secured Parties in order to
carry out the intentions of the parties thereto as nearly as may be possible;
and the invalidity or unenforceability of any provision thereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
I-27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
POLAROID CORPORATION
By:
----------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Collateral Agent
By:
----------------------------
Name:
Title:
INNER CITY, INC.
By:
----------------------------
Name:
Title:
POLAROID CARIBBEAN
CORPORATION
By:
----------------------------
Name:
Title:
I-28
<PAGE>
POLAROID DIGITAL SOLUTIONS, INC.
By:
----------------------------
Name:
Title:
POLAROID EYEWEAR, INC.
By:
----------------------------
Name:
Title:
POLAROID ID SYSTEMS, INC.
By:
----------------------------
Name:
Title:
I-29
<PAGE>
EXHIBIT A
to Security Agreement
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _______, ____, between
[name of Lien Grantor] (the "Lien Grantor") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent.
WHEREAS, Polaroid Corporation, the Subsidiary Guarantors party
thereto and Morgan Guaranty Trust Company of New York, as Collateral Agent are
parties to a Security Agreement dated as of December 11, 1998 (as heretofore
amended and/or supplemented from time to time, the "Security Agreement");
WHEREAS, terms defined in the Security Agreement (or whose
definitions are incorporated by reference in Section 1 of the Security
Agreement) and not otherwise defined herein have, as used herein, the respective
meanings provided for therein; and
WHEREAS, the Lien Grantor desires [to become a party to the Security
Agreement as an additional Lien Grantor thereunder and] to grant a security
interest in certain of its property to the Collateral Agent as provided herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. (a) In order to secure the full and
punctual payment of its Secured Obligations in accordance with the terms
thereof, the Lien Grantor grants to the Collateral Agent for the benefit of the
Secured Parties a continuing security interest in all of the following property
of the Lien Grantor, whether now owned or existing or hereafter acquired or
arising and regardless of where located (the "New Collateral"):
[describe assets being added to the Collateral]
(b) The foregoing Security Interests are granted as security only
and shall not subject the Collateral Agent or any other Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the Lien
Grantor with respect to any of the New Collateral or any transaction in
connection therewith.
2. Delivery of Collateral. Concurrently with delivering this
Security Agreement Supplement to the Collateral Agent, the Lien Grantor is
complying
I-30
<PAGE>
with the provisions of Section 4 of the Security Agreement with respect to all
Instruments (if any) included in the New Collateral.
[3. Party to Security Agreement. Upon delivery of this Security
Agreement Supplement to the Collateral Agent, the Lien Grantor will become a
party to the Security Agreement and will thereafter have all of the rights and
obligations of a Lien Grantor thereunder and be bound by all of the provisions
thereof as fully as if the Lien Grantor were one of the original parties
thereto.]
4. Address of Lien Grantor. The address and facsimile number of the
Lien Grantor to which all notices, requests and other communications shall be
sent pursuant to Section 16 of the Security Agreement is:
[address and facsimile number of Lien Grantor]
5. Representations and Warranties.(1) (a) The Lien Grantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of [jurisdiction of incorporation].
(b) The Lien Grantor has delivered a Perfection Certificate to the
Collateral Agent. The information set forth therein is correct and complete as
of the date hereof. Within 60 days of the date hereof, the Lien Grantor shall
furnish to the Collateral Agent file search reports from each relevant UCC
filing office confirming the filing information set forth in such Perfection
Certificate.
(c) The execution and delivery of this Security Agreement Supplement
by the Lien Grantor and the performance by it of its obligations under the
Security Agreement as supplemented hereby are within its corporate or other
powers, have been duly authorized by all necessary corporate or other action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its Organizational Documents, or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon it or result in the creation or imposition of any Lien (other than
the Liens created by the Collateral Documents) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a
valid and binding agreement of the Lien Grantor, enforceable in accordance with
its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting creditors'
- ----------------
(1) Modify as needed for any Lien Grantor that is not a corporation.
I-31
<PAGE>
rights generally, (ii) general equitable principles (whether considered in a
proceeding in equity or at law) and (iii) any implied covenant of good faith and
fair dealing.
(e) Each of the representations and warranties set forth in Section
3 of the Security Agreement is true as applied to the Lien Grantor and the New
Collateral.
6. Governing Law. This Security Agreement Supplement shall be
construed in accordance with and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have cause this Security
Agreement Supplement to be duly executed by their respective authorized officers
as of the day and year first above written.
[NAME OF LIEN GRANTOR]
By:
-------------------------
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Collateral Agent
By:
-------------------------
Name:
Title:
I-32
<PAGE>
EXHIBIT B
to Security Agreement
PERFECTION CERTIFICATE
The undersigned, an executive officer of [NAME OF LIEN GRANTOR], a
[jurisdiction of incorporation] corporation1 (the "Lien Grantor"), hereby
certifies with reference to the Security Agreement dated as of December 11, 1998
among Polaroid Corporation, the Subsidiary Guarantors party thereto and Morgan
Guaranty Trust Company of New York, as Collateral Agent (terms defined therein
being used herein as therein defined), to the Collateral Agent and each other
Secured Party as follows:
1. Names.(1) (a) The exact corporate name of the Lien Grantor as it
appears in its certificate of incorporation is as follows:
(b) Set forth below is each other corporate name the Lien Grantor
has had since its organization, together with the date of the relevant change.
(c) Except as set forth in Schedule 1, the Lien Grantor has not
changed its identity or corporate structure in any way within the past five
years.
[Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form,
nature or jurisdiction of corporate organization. If any such change
has occurred, include in Schedule 1 the information required by
paragraphs 1, 2 and 3 of this certificate as to each acquiree or
constituent party to a merger or consolidation.]
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Lien Grantor or any of its divisions
or other business units at any time during the past five years:
2. Current Locations. (a) The chief executive office of the Lien
Grantor is located at the following address:
Mailing Address County State
- --------------- ------ -----
- --------------
(1) Modify as needed if Lien Grantor is not a corporation.
I-33
<PAGE>
(b) The following are all the locations where the Lien Grantor
maintains any Inventory not identified above:
Mailing Address County State
- --------------- ------ -----
(c) The following are the names and addresses of all Persons other
than the Lien Grantor which have possession of any of the Lien Grantor's
Inventory:
Mailing Address County State
- --------------- ------ -----
3. Prior Locations. (a) Set forth below is the information required
by subparagraph 2(a) above with respect to each location or place of business
maintained by the Lien Grantor at any time during the past five years:
(b) Set forth below is the information required by subparagraphs
2(b) and 2(c) above with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:
4. Unusual Transactions. Except as set forth in Schedule 4, all
Accounts have been originated by the Lien Grantor and all Inventory has been
acquired by the Lien Grantor in the ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true
copy of a file search report from the Uniform Commercial Code filing officer in
each jurisdiction identified in paragraph 2 or 3 above with respect to each name
set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy
of each financing statement or other filing identified in such file search
reports.
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 6(A) hereto has been duly filed in the
Uniform Commercial Code filing office in each jurisdiction identified in
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each such
filing duly acknowledged by the filing officer.
I-34
<PAGE>
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule
setting forth filing information with respect to the filings described in
paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph 6 above have been paid.
IN WITNESS WHEREOF, I have hereunto set my hand this __ day of
______________, ____.
----------------------------
Name:
Title:
I-35
<PAGE>
Schedule 6(A) to
Perfection Certificate
DESCRIPTION OF COLLATERAL
All accounts, instruments, inventory, chattel paper, letters of
credit and contract rights and all rights to receive payments of royalties and
licensing, management and other fees, now owned or hereafter acquired, wherever
located, and all proceeds thereof.
I-36
<PAGE>
Schedule 6(A) to
Perfection Certificate
SCHEDULE OF FILINGS
Debtor Filing Officer File Number Date of Filing(1)
- ------ -------------- ----------- -----------------
- ----------------
(1) Indicate lapse date, if other than fifth anniversary.
I-37
Exhibit 99.1
------------
Media Relations Investor Relations
Nancy Childs Phil Ruddick
(781) 386-3122 (781) 386-6638
[email protected] [email protected]
For Immediate Release
POLAROID REPORTS 4Q98 AND FULL-YEAR RESULTS
$11.1 Million Operating Profit in 4Q98, Excluding Certain Charges
Cash Position Significantly Improved
CAMBRIDGE, Mass., -- January 21, 1999 -- Polaroid Corporation
(NYSE:PRD) today reported an operating profit of $11.1 million, compared to
$66.2 million in the fourth quarter of 1997, excluding restructuring and other
charges in both periods. The company significantly reduced its year-end debt,
net of cash on hand, by more than $100 million from the end of the third quarter
1998.
The operating loss for the fourth quarter of 1998 was $82.4 million,
compared with 1997's fourth quarter loss of $293.5 million, including
restructuring and other charges in both periods. The 1998 fourth quarter
operating results reflect the continuation of the dealer inventory adjustment
program, unfavorable variances caused by reduced manufacturing volumes, start-up
costs for new products and lower international sales. These factors were
partially offset by savings from restructuring and by essentially achieving the
company's goal of reaching break-even in its digital business by the end of
1998.
- more -
<PAGE>
Fourth Quarter 1998 Earnings -- 2
The company reported a net loss of $75.5 million, or $1.72 per diluted
share, for the 1998 fourth quarter compared with a net loss of $202.8 million,
or $4.51 per diluted share in the same period a year earlier, including
restructuring and other charges in both periods. In the fourth quarter of 1998,
the company had restructuring charges of $50.0 million, as well as $43.5 million
for the write-off of assets, the largest of which was in Russia. Restructuring
and other charges for the fourth quarter of 1997 totaled $359.7 million.
Additionally, the company sold $26.9 million in real estate for a pre-tax gain
of $24.0 million, in the fourth quarter of 1998.
Gary DiCamillo, chairman and chief executive officer said, "We knew the
fourth quarter would close out a difficult year, given worldwide market
conditions and the dealer inventory reduction program. While we are disappointed
with our fourth quarter earnings, we have greatly improved our cash position
since the end of the third quarter, and will more aggressively manage our asset
portfolio to strengthen our balance sheet. We have taken the hard decisions
necessary to turn Polaroid around and are now positioned for profitable growth
based on our new products strategy."
Worldwide sales in the fourth quarter of 1998 were $541.8 million,
compared with $607.6 million in the same period of 1997. U.S. sales were down
about six percent, due primarily to the dealer inventory adjustment;
international sales fell about 16 percent because of lower sales in Russia,
other emerging markets and some developed markets.
For the full year 1998, worldwide sales were $1.8 billion, down 14
percent from $2.1 billion in the same period of 1997. Excluding restructuring
and other charges, the company reported a 1998 operating profit of $44.5
million, compared with a 1997 operating profit of $200.6 million. Including
those charges, the 1998 net loss was $51.0 million, or $1.15 per diluted share
compared with a full year 1997 net loss of $126.7 million, or $2.81 per diluted
share.
- more -
<PAGE>
Fourth Quarter Earnings -- 3
Certain statements in the fourth paragraph of this press release are
forward-looking. In our most recent form 10-Q filed with the Securities and
Exchange Commission, we have noted a variety of factors that could cause our
actual results and experience to differ from our anticipated results or other
expectations expressed in those forward-looking statements.
Polaroid, with annual sales of more than $1.8 billion in 1998, is the
worldwide leader in instant imaging. Polaroid supplies instant and digital
cameras and films; digital imaging peripherals, software, media and systems
solutions; medical diagnostic imaging media; secure identification systems;
graphics imaging systems; sunglasses and polarizers to markets worldwide.
# # #
<PAGE>
POLAROID CORPORATION & SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Fourth Quarter Full Year
-------------- ---------
1998 1997 1998 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES:
UNITED STATES $ 301.5 $ 321.0 $ 992.3 $ 1,063.0
INTERNATIONAL 240.3 286.6 853.6 1,083.4
- --------------------------------------------------------- ---------------------------------------------------------------
TOTAL NET SALES 541.8 607.6 1,845.9 2,146.4
- --------------------------------------------------------- ---------------------------------------------------------------
COST OF SALES 354.0 387.8 1,108.4 1,229.8
MARKETING, RESEARCH, ENGINEERING AND
ADMINISTRATIVE EXPENSES 220.2 189.8 736.5 752.2
RESTRUCTURING AND OTHER 50.0 323.5 50.0 323.5
- --------------------------------------------------------- ---------------------------------------------------------------
TOTAL COSTS 624.2 901.1 1,894.9 2,305.5
- --------------------------------------------------------- ---------------------------------------------------------------
LOSS FROM OPERATIONS (82.4) (293.5) (49.0) (159.1)
OTHER INCOME / (EXPENSE) 23.4 (2.2) 67.7 15.0
INTEREST EXPENSE 17.5 13.2 57.6 47.8
- --------------------------------------------------------- ---------------------------------------------------------------
LOSS BEFORE INCOME TAXES (76.5) (308.9) (38.9) (191.9)
FEDERAL, STATE, AND FOREIGN INCOME TAX EXPENSE/(BENEFIT) (1.0) (106.1) 12.1 (65.2)
- --------------------------------------------------------- ---------------------------------------------------------------
NET LOSS $ (75.5) $ (202.8) $ (51.0) $ (126.7)
========================================================= ===============================================================
BASIC LOSS PER COMMON SHARE $ (1.72) $ (4.51) $ (1.15) $ (2.81)
DILUTED LOSS PER COMMON SHARE $ (1.72) $ (4.51) $ (1.15) $ (2.81)
CASH DIVIDENDS PER COMMON SHARE $ 0.15 $ 0.15 $ 0.60 $ 0.60
WEIGHTED AVERAGE COMMON SHARES USED FOR BASIC LOSS PER
SHARE CALCULATION (IN THOUSANDS) 43,883 44,934 44,168 45,084
COMMON SHARES OUTSTANDING AT END OF PERIOD (IN THOUSANDS) 43,990 44,536 43,990 44,536
========================================================= ===============================================================
</TABLE>
<PAGE>
POLAROID CORPORATION & SUBSIDIARY COMPANIES
SUPPLEMENTARY FINANCIAL INFORMATION
($ IN MILLIONS)
<TABLE>
<CAPTION>
Twelve Months
------------------------------------
Selected Cash Flow Data 1998 1997
- -------------------------------------- ---- ----
<S> <C> <C>
Additions to property, plant and equipment $ 191.1 $ 134.3
Depreciation $ 90.7 $ 111.5
At end of Fourth Quarter
------------------------------------
Balance Sheet 1998 1997
- -------------------------------------- ---- ----
Current assets
Cash and cash equivalents $ 105.0 $ 68.0
Short-term investments 16.6 11.0
Receivables 459.6 545.1
Inventories:
Raw materials 83.5 91.0
Work-in-process 190.5 192.4
Finished goods 259.3 222.7
---------- ------------
Total inventories 533.3 506.1
Prepaid expenses and other assets 298.6 289.1
---------- ------------
Total current assets 1,413.1 1,419.3
Net property, plant and equipment 566.5 512.5
Deferred tax assets 101.2 124.7
Other assets 107.9 76.2
---------- ------------
Total assets 2,188.7 2,132.7
========== ============
Liabilities and stockholders' equity
Current liabilities
Short-term debt 331.7 241.6
Current portion of long-term debt 200.0 -
Payables and accruals 366.6 277.3
Compensation and benefits 292.5 310.9
Federal, state and foreign income taxes 21.4 32.9
---------- ------------
Total current liabilities 1,212.2 862.7
Long-term debt 297.4 496.6
Accrued postretirement benefits 241.9 246.5
Accrued postemployment benefits 43.3 42.5
Common stockholders' equity
Common stock, $1 par value 75.4 75.4
Additional paid-in capital 417.4 435.9
Retained earnings 1,226.7 1,304.0
Accumulated other comprehensive income (33.4) (39.8)
Less: Treasury stock, at cost 1,291.5 1,290.0
Deferred compensation 0.7 1.1
---------- ------------
Total common stockholders' equity 393.9 484.4
---------- ------------
Total liabilities and stockholders' equity $2,188.7 $ 2,132.7
========== ============
</TABLE>
