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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission File Number 1-9733
CASH AMERICA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2018239
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
1600 WEST 7TH STREET
FORT WORTH, TEXAS 76102
(Address of principal executive offices) (Zip Code)
(817) 335-1100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
28,617,411 common shares, $.10 par value, were outstanding as of July 31, 1995
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CASH AMERICA INTERNATIONAL, INC.
INDEX TO 10-Q
PART I. FINANCIAL STATEMENTS
<TABLE>
Page
<S> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1995
and 1994 and December 31, 1994............................. 1
Consolidated Statements of Income - Three Months
and Six Months Ended June 30, 1995 and 1994................ 2
Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 1995 and 1994.................... 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994.................... 4
Notes to Consolidated Financial Statements................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.... 8
PART II. OTHER INFORMATION...................................... 19
SIGNATURE........................................................ 21
</TABLE>
<PAGE> 3
CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) (UNAUDITED)
=========================================================================================
June 30 Dec 31
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,807 $ 1,777 $ 4,827
Service charges receivable 19,081 15,902 18,626
Loans 78,941 59,878 78,095
Inventory, net 80,846 68,083 80,894
Prepaid expenses and other 5,673 4,752 6,794
-------- -------- --------
Total current assets 190,348 150,392 189,236
Property and equipment, net 67,042 54,969 63,241
Intangible assets, net 64,879 62,324 64,915
Other assets 8,165 3,075 6,865
-------- -------- --------
Total assets $330,434 $270,760 $324,257
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,894 $ 8,842 $ 13,790
Customer layaway deposits 4,243 3,442 3,576
Income taxes currently payable 4,601 2,687 3,661
-------- -------- --------
Total current liabilities 14,738 14,971 21,027
Long-term debt:
Bank lines of credit 95,535 52,750 89,796
Notes payable - TIAA 30,000 30,000 30,000
-------- -------- --------
125,535 82,750 119,796
Stockholders' equity:
Common stock, $.10 par value per
share, 80,000,000 shares authorized 3,024 3,024 3,024
Paid in surplus 121,576 121,031 121,481
Retained earnings 75,824 61,280 70,081
Foreign currency translation
adjustment (2,969) (4,039) (3,692)
-------- -------- --------
197,455 181,296 190,894
Less - shares held in treasury,
at cost (7,294) (8,257) (7,460)
-------- -------- --------
Total stockholders' equity 190,161 173,039 183,434
-------- -------- --------
Total liabilities and stockholders'
equity $330,434 $270,760 $324,257
======== ======== ========
=========================================================================================
</TABLE>
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
(UNAUDITED)
=================================================================================================
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
PAWN SERVICE CHARGES $28,983 $24,917 $59,086 $46,024
GROSS PROFIT FROM SALES
Sales 41,215 32,286 82,315 66,493
Cost of sales 33,899 25,939 68,033 53,277
------- ------- ------- -------
Gross profit 7,316 6,347 14,282 13,216
------- ------- ------- -------
NET REVENUES 36,299 31,264 73,368 59,240
------- ------- ------- -------
OPERATING EXPENSES
Operations 20,849 18,818 42,308 35,061
Administration 3,938 3,404 8,177 6,527
Amortization 938 887 1,849 1,734
Depreciation 2,871 2,033 5,598 3,922
------- ------- ------- -------
Total operating expenses 28,596 25,142 57,932 47,244
------- ------- ------- -------
Income from operations 7,703 6,122 15,436 11,996
Interest expense, net 2,529 1,202 4,987 2,163
Other (income)/expense 89 (31) 145 138
------- ------- ------- -------
Income before income taxes 5,085 4,951 10,304 9,695
Provision for income taxes 1,981 1,896 3,847 3,708
------- ------- ------- -------
NET INCOME $ 3,104 $ 3,055 $ 6,457 $ 5,987
======= ======= ======= =======
=================================================================================================
Net income per share:
Primary $ 0.11 $ 0.11 $ 0.22 $ 0.21
Fully diluted $ 0.11 $ 0.11 $ 0.22 $ 0.21
Weighted average shares (in thousands):
Primary 28,907 28,864 28,965 28,934
Fully diluted 28,907 28,864 28,965 28,934
=================================================================================================
</TABLE>
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
(Dollars in thousands, except shares) (UNAUDITED)
========================================================================================================================
FOREIGN
COMMON STOCK TREASURY STOCK CURRENCY
----------------------- PAID IN RETAINED --------------------- TRANSLATION
SHARES AMOUNT SURPLUS EARNINGS SHARES AMOUNT ADJUSTMENT TOTAL
----------- ------ -------- -------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 30,235,164 $3,024 $121,481 $70,081 1,666,099 $(7,460) $(3,692) $183,434
Net income 6,457 6,457
Dividends declared (714) (714)
Treasury shares reissued 73 (36,846) 166 239
Tax benefit from exercise
of stock options 22 22
Foreign currency
translation adjustment 723 723
----------- ------ -------- ------- --------- ------- ------- --------
Balance at
June 30, 1995 30,235,164 $3,024 $121,576 $75,824 1,629,253 $(7,294) $(2,969) $190,161
=========== ====== ======== ======= ========= ======= ======= ========
========================================================================================================================
Balance at
December 31, 1993 30,235,164 $3,024 $120,955 $56,004 1,832,137 $(7,953) $(5,308) $166,722
Net income 5,987 5,987
Dividends declared (711) (711)
Treasury shares acquired 68,500 (552) (552)
Treasury shares reissued 1 (56,538) 248 249
Tax benefit from exercise
of stock options 75 75
Foreign currency
translation adjustment 1,269 1,269
----------- ------ -------- ------- --------- ------- ------- --------
Balance at
June 30, 1994 30,235,164 $3,024 $121,031 $61,280 1,844,099 $(8,257) $(4,039) $173,039
=========== ====== ======== ======= ========= ======= ======= ========
========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Cash
Provided By Operating Activities:
Net income $6,457 $5,987
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization 1,849 1,734
Depreciation 5,598 3,922
Increase in service charges receivable (291) (2,633)
Decrease (increase) in inventory 252 (3,503)
Decrease in prepaid expenses and other 83 109
Decrease in accounts payable
and accrued expenses (7,933) (211)
Increase in layaway deposits, net 665 625
Increase in income taxes payable 750 189
Decrease in deferred taxes (745) (566)
-------- ---------
Net cash provided by operating activities 6,685 5,653
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans forfeited and transferred to inventory 41,018 29,606
Loans repaid or renewed 111,872 87,010
Loans made, including loans renewed (152,777) (125,529)
-------- ---------
Net decrease (increase) in loans 113 (8,913)
Acquisitions (1,412) (6,295)
Purchases of property and equipment (9,293) (9,954)
Proceeds from sales of property and equipment - 1,230
-------- ---------
Net cash used by investing activities (10,592) (23,932)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under bank lines of credit 5,150 18,750
Proceeds from issuance of long-term debt
Payment of notes payable assumed and other obligations
Proceeds from issuance of stock, net 238 248
Treasury shares acquired - (552)
Dividends paid (714) (711)
-------- ---------
Net cash provided by financing activities 4,674 17,735
-------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 213 76
-------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 980 (468)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,827 2,245
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,807 $1,777
======== =========
================================================================================
</TABLE>
See notes to consolidated financial statements.
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CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Cash America International, Inc. and its wholly owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation. At June 30, 1995, the Company had a 49% ownership
interest in Mr. Payroll Corporation ("Mr. Payroll") (see Note 4). The
investment is being accounted for using the equity method of accounting,
whereby the Company records its 49% share of earnings or losses of Mr. Payroll
in its consolidated financial statements.
The financial statements as of June 30, 1995 and 1994 and for the three
months and six months then ended are unaudited but, in management's opinion,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such interim periods.
Operating results for the three months and six months are not necessarily
indicative of the results that may be expected for the full fiscal year.
Certain amounts in the consolidated statements of income for the three
and six months ended June 30, 1994, have been reclassified to conform with the
presentation form adopted in 1995. These reclassifications have no effect on
the net income previously reported.
These financial statements and related notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1994 Annual Report to Stockholders.
NOTE 2 - ACQUISITION
On September 22, 1994, the Company acquired all of the outstanding
stock of Svensk Pantbelaning, a company operating a chain of ten pawnshops in
Sweden. The Company paid $5.4 million and assumed liabilities of $17 million,
consisting primarily of bank debt. The Company received $18 million of
tangible assets, consisting primarily of $16 million in pawn loans outstanding.
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NOTE 3 - LONG-TERM DEBT
On June 7, 1995, the Company extended the maturity date and made
certain modifications to its $125,000,000 unsecured bank line of credit
originally entered into on June 29, 1993. The agreement was modified to extend
the maturity of $100,000,000 of the line of credit to April 30, 1998, with the
remaining $25,000,000 portion scheduled to mature on June 5, 1996. As of June
30, 1995, no borrowings had been made under the $25,000,000 portion of the bank
line of credit, and $68,850,000 was borrowed against the $100,000,000
commitment. The Company has the option each year to request a one-year
extension, thus moving the maturity date of the entire facility forward one
year. Interest is paid quarterly at rates determined at the Company's option
of either the bank's prime lending rate or LIBOR plus 1%. The current interest
rate is 7.33%. In addition, the agreement provides for commitment fees of 3/8%
per annum on the unused portion of $100,000,000 of the commitment and .15% per
annum on the unused portion of $25,000,000 of the commitment. On May 3, 1995
the Company entered into an interest rate protection agreement for the two
years ending on May 5, 1997 that limits the maximum interest rate on
$20,000,000 of debt.
On May 12, 1993, the Company issued $30,000,000 of "8.33% Senior
Notes", due May 1, 2003. Interest is payable on May 1 and November 1 of each
year. Mandatory annual payments of $4,285,714 commence May 1997. On May 28,
1993, the Company entered into two swap agreements for $10,000,000 each, under
which the Company receives a fixed rate of 4.87% and pays the bank a variable
rate (currently 6.0%) repriced every six months to the prevailing 6 month BBA
average LIBOR rate. The effective interest rate on the Senior Notes for the
period June 2, 1995, to December 2, 1995 is 9.14% after taking into account the
two swap transactions.
On July 7, 1995, the Company issued $20,000,000 of "8.14% Senior
Notes", due July 7, 2007. Interest is payable on January 7 and July 7 of each
year. Mandatory annual payments of $4,000,000 commence on July 7, 2003.
Proceeds from the note issuance were applied to the debt outstanding under the
Company's line of credit.
On September 21, 1994, in conjunction with the acquisition of Svensk
Pantbelaning, the Company's wholly owned subsidiary, CAII Pantbelaning AB
(CAIIP), established a 193,750,000 Swedish Kronor ("SEK") term loan. The term
loan matures three years from the date of inception and there is no scheduled
amortization of the principal balance prior to maturity. Interest is payable
based on the Stockholm InterBank Offered Rate (STIBOR) plus 1%, currently at
9.64%. As of June 30, 1995, SEK 193,750,000 (approximately
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$26,685,000) was outstanding under the term loan. On June 2, 1995, CAIIP
entered into a floating-to-fixed interest rate exchange agreement. The
agreement fixes the interest rate on SEK 118,750,000 (approximately
$16,300,000) at 10.94% through August 17, 1998.
The Company's wholly owned subsidiary, Harvey & Thompson, Ltd., has a
committed 5 million pound sterling unsecured line of credit, which matures on
February 8, 1996, from a U.K. based commercial bank. Interest is payable
quarterly at an interest rate equal to the Bank's sterling cost of funds plus
60 basis points for borrowings less than 13 days and 55 basis points for
borrowings of 14 days or more. Harvey & Thompson, Ltd. pays a fee on the
unused portion of the line of credit of .15% per annum. The facility is
governed by a credit agreement which provides minimum levels of assets and net
worth which must be maintained by Harvey & Thompson. To date, Harvey &
Thompson has not borrowed under the line of credit.
NOTE 4 - INVESTMENT IN AFFILIATE
On July 13, 1994, the Company invested $2 million to acquire a 49%
interest in Mr. Payroll, a private, Texas-based company which sells franchises
for check-cashing kiosks. The Company is operating franchised check-cashing
kiosks in some of its pawnshop locations.
In conjunction with its investment, the Company has entered into a
revolving credit agreement with Mr. Payroll which provides for maximum
borrowings of $1.5 million from the Company. Interest is payable quarterly at
the LIBOR rate plus four percent. The entire unpaid principal balance is due
and payable in full on February 28, 1997. Mr. Payroll has granted the Company
a security interest in and lien on all of its assets. As of June 30, 1995, Mr.
Payroll had borrowings outstanding of $1,500,000.
NOTE 5 - LITIGATION
The Company is a defendant in certain lawsuits encountered in the
ordinary course of its business. In the opinion of management, the resolution
of these matters will not have a material adverse effect on the Company's
financial position or results of operations.
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SUMMARY OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 1995 vs
SECOND QUARTER ENDED JUNE 30, 1994
================================================================================
Summary Consolidated Financial Data
- --------------------------------------------
The following table sets forth selected consolidated financial data with
respect to the Company for the three months ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
($ in thousands)
1995 1994 Change
------- ------- ------
<S> <C> <C> <C>
Pawn service charges $28,983 $24,917 16%
Gross profit from sales
Sales 41,215 32,286 28%
Cost of sales 33,899 25,939 31%
------- ------- ------
Gross profit 7,316 6,347 15%
------- ------- ------
Net Revenues 36,299 31,264 16%
------- ------- ------
Other Data:
Gross profit as a percentage of sales 17.8% 19.7% (10%)
Average annualized inventory turnover 1.7X 1.6X 6%
Annualized yield on loans 149% 180% (17%)
Average inventory balance per
average location in operation $ 223 $ 215 4%
Average loan balance per
average location in operation $ 216 $ 185 17%
Average pawn loan at end of
period (whole dollars) $90 $74 22%
Expenses as a percentage of net revenues:
Operations 57.4% 60.2% (5%)
Administration 10.8% 10.9% (1%)
Depreciation and amortization 10.5% 9.3% 13%
Interest, net 7.0% 3.8% 84%
Locations in Operation:
Beginning of period 357 291
Acquired 0 3
Established 9 12
Combined --- ---
------- -------
End of period 366 306 20%
======= ======= ======
Average number of locations in
operation during the period (a) 362 300 21%
======= ======= ======
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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SIX MONTHS ENDED JUNE 30, 1995 vs
SIX MONTHS ENDED JUNE 30, 1994
================================================================================
Summary Consolidated Financial Data
- ----------------------------------------
The following table sets forth selected consolidated financial data with
respect to the Company for the six months ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
($ in thousands)
1995 1994 Change
------- ------- ------
<S> <C> <C> <C>
Pawn service charges $59,086 $46,024 28%
Gross profit from sales
Sales 82,315 66,493 24%
Cost of sales 68,033 53,277 28%
------- ------- ------
Gross profit 14,282 13,216 8%
------- ------- ------
Net Revenues 73,368 59,240 24%
------- ------- ------
Other Data:
Gross profit as a percentage of sales 17.4% 19.9% (13%)
Average annualized inventory turnover 1.7X 1.7X 0%
Annualized yield on loans 151% 176% (14%)
Average inventory balance per
average location in operation $228 $218 5%
Average loan balance per
average location in operation $221 $181 22%
Average pawn loan at end of
period (whole dollars) $90 $74 22%
Expenses as a percentage of net revenues:
Operations 57.7% 59.2% (3%)
Administration 11.1% 11.0% 1%
Depreciation and amortization 10.2% 9.5% 7%
Interest, net 6.8% 3.7% 84%
Locations in Operation:
Beginning of period 340 280
Acquired 3 11
Established 25 18
Combined (2) (3)
------- -------
End of period 366 306 20%
======= ======= ======
Average number of locations in
operation during the period (a) 356 291 22%
======= ======= ======
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
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2ND QUARTER 1995 VS 1994
IMPACT OF EXPANDING OPERATIONS
The Company expanded its operations over the 18-month period from December
31, 1993 through June 30, 1995 with the addition of 91 pawnshops. Sixty-seven
stores were started and 24 stores were acquired during the period, and five
stores were combined into existing locations for a net addition of 86 stores
during the 18-month period. At June 30, 1995, the Company operated 366
pawnshops--322 in 14 states in the United States, 34 jewelry-only and loan-only
pawnshops in the United Kingdom operating under the name Harvey & Thompson,
Ltd., and 10 loan-only pawnshops which concentrate primarily in jewelry in
Sweden and operate under the name Svensk Pantbelaning. The group of
corporations which comprise the Swedish chain was acquired in September 1994 in
a cash transaction.
Net revenues (total revenues less cost of sales) increased 16% and 24%,
respectively, for the three and six month periods ending June 30, 1995 over the
same periods of 1994, and is primarily attributable to an approximate 21%
increase in average stores open during the periods. Net revenues on comparable
stores (those in operation more than one year) increased 2% for the 3 months
and 6% for the 6 months ending June 30, 1995.
PAWN SERVICE CHARGES
Pawn service charges for the three months and six months ended June 30,
1995 increased 16% and 28% over the comparable periods in 1994 due to gains in
the number of average locations in operation. Pawn service charges on
comparable stores were unchanged in the second quarter and increased by 9% for
the first half of 1995 compared to 1994.
The Company attributes the increases in pawn service charges in comparable
stores to several factors. In the first quarter of 1994, the Company operated
its domestic pawnshops under a lower loan to value ratio, which determines the
amount to lend on a particular item. The Company's loan balance and pawn
service charges increased when it increased its loan to value ratio in domestic
stores during the second quarter of 1994, which subsequently increased the
amount of unredeemed merchandise available for sale to customers. The Company
believes that there was no change in comparable store pawn service charges in
the second quarter due, at least in part, to its customers' later receipt of
Federal income tax refunds than in previous years, as noted in the sales
discussion below. An increase in the yield on domestic loans to 217% for both
the quarter and first half of 1995 compared to 214% and
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210%, respectively, for the same periods in 1994 also contributed to the
increase in same store pawn service charges. The acquisition of Svensk
Pantbelaning accounted for approximately one-half and one-third, respectively,
of the increase in pawn service charges for the three and six month periods.
The Company's average dollar loan increased to $90 from $74, respectively,
and the average yield on loans outstanding decreased to approximately 150% from
approximately 180%, respectively, for both the three and six month periods
ending June 30, 1995 compared to the same periods in 1994. Both of these
factors are due to the acquisition of Svensk Pantbelaning, which has a higher
amount per loan and a lower yield (of approximately $230 and 50%, respectively)
than did the Company's consolidated operations in the United States and the
United Kingdom. The weighting of the Swedish loans in the Company's
consolidated portfolio caused these changes in yields and average loan amount.
The U.K. yield and the U.S. and U.K. average loan amounts were virtually
unchanged compared to the prior periods, and the U.S. yield increased as noted
above.
SALES AND GROSS PROFIT
Sales for the three and six months ended June 30, 1995 increased 28% and
24%, respectively, compared to the same periods of 1994. These increases were
due to the approximate 21% rise in average locations as noted above and to 14%
and 9% increases in sales from comparable stores from the prior period. The
sales increase in the quarter from comparable stores was due to two primary
factors. First, the amount of unredeemed merchandise available for resale was
greater for the second quarter and first half of 1995 due to the increase in
the Company's loan to value ratio, referred to above, after the first quarter
of 1994. Second, the Company believes that later receipt in 1995 than in 1994
of Federal income tax refunds caused sales to increase in the quarter. The
Company believes that many of its customers typically use a portion of their
refund to repay loans and purchase items of personal property.
Gross profit margins on retail sales were down to 17.8% and 17.4% for the
three and six months ending June 30, 1995 compared to 19.7% and 19.9% for the
same periods in 1994. Contributing to these declines were the higher cost in
merchandise from unredeemed loans, (relating to the changes in the Company's
loan to value ratio as described above), increased sales of jewelry at
wholesale, and the Company's use of price discounting to sell selected
merchandise. Inventory turns were relatively constant at approximately 1.7
times for each of the periods,
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with a slight increase in the second quarter of 1995 due to the increased
sales, discounting and sales at wholesale as discussed above.
EXPENSES
Operating expenses relative to net revenues decreased to 57% and 58% for
the quarter and first half, respectively, from 60% and 59% for the same periods
in 1994. Operating expenses increased 11% and 21% for the three and six months
ending June 30, 1995, despite the 21% increase in average stores in operation
for the period, as a result of a 4% decline for the quarter and a 1% increase
year to date from comparable stores.
Administrative expenses were unchanged as a percentage of net revenues at
11% for each of the two periods in both 1995 and 1994. The increases of 16%
and 25% for the three and six months of 1995 compared to 1994 is due to the
acquisition of Svensk Pantbelaning as well as increased expenses in the
Company's existing operations, which were needed to continue to build
infrastructure and systems to support an expanding store base.
Depreciation and amortization as a percentage of net revenues increased to
10.5% from 9.3% for the quarter and to 10.2% from 9.5% for the first half,
primarily due to amortization of intangibles related to the Swedish acquisition
and depreciation increases of approximately 42% in each of the two periods over
the prior year. This increase in depreciation was due to new store additions
and computer point-of-sale hardware and software, the installation of which was
completed in the Company's domestic stores in late 1994.
Net interest expense as a percentage of net revenues increased to 7% in the
quarter and first half of 1995 compared to 4% for each of the same periods in
1994, due to an increase in total debt and higher interest rates. Debt levels
increased to support new store development and to fund the acquisition of
Svensk Pantbelaning. Domestic average bank debt increased by 61% and 82%,
respectively, for the three and six month periods over the same periods in
1994. Weighted average interest rates on domestic debt increased to 8% for the
second quarter and first half of 1995 from 6% for both of the year-ago periods.
The borrowings of Swedish Kronor under a term loan bear interest at rates in
effect for Swedish currency which are currently higher than the U.S. average
rates noted above.
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OTHER (INCOME)/EXPENSE
During the second quarter and first half of 1995 and 1994, the Company
realized gains and losses on disposition of certain non-operating assets, rent
income, operating losses from its equity interest in Mr. Payroll Corporation,
and other miscellaneous items.
INCOME TAXES
The Company's effective tax rate increased to 39% for the second quarter
from 38% in 1994, and for the first half of 1995 was 37% compared to 38% in the
year ago period. The domestic effective tax rate increased to 42% and 41% for
the three and six month periods of 1995 compared to 39% for each of the two
periods last year as a result of more income from states which have a state
income tax and other miscellaneous factors. Tax rates in the Company's foreign
operations decreased to 33% and 31% for the second quarter and first half of
1995, respectively, from 37% and 36% in the prior year as a result of lower
tax rates for Svensk Pantbelaning and the utilization of miscellaneous tax
credits in the United Kingdom in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1995, the Company's capital expenditures totaled
$10.7 million. Capital investment included $1.4 million for the acquisition of
three pawnshops and $9.3 million for leasehold improvements and equipment for
start-up locations, additions to its computer systems, and other fixed asset
purchases.
The funding of these items has come from the Company's three-year, $125
million revolving bank line of credit and operating earnings. On May 3, 1995
the Company entered into an interest rate protection agreement for the two
years ending on May 5, 1997 that limits the interest rate on $20,000,000 of
debt. The Company's $30 million of Senior Notes, due May 1, 2003, to Teachers
Insurance and Annuity Association of America bear interest at 8.33% and are
payable in seven equal annual principal installments beginning May 1, 1997.
The Company entered into an interest rate swap in June of 1993 on $20 million
of these notes, which resulted in an effective floating interest rate,
currently at 9.14%, on the debt.
On July 7, 1995 the Company issued $20,000,000 of "8.14% Senior Notes", due
July 7, 2007. Interest is payable on January 7 and July 7 of each year.
Mandatory annual payments of $4,000,000 commence on July 7, 2003. Proceeds
from the note issuance were applied to the debt outstanding under the Company's
line of credit.
Page 13
<PAGE> 16
On September 21, 1994, in conjunction with the acquisition of Svensk
Pantbelaning, the Company's wholly owned subsidiary, CAII Pantbelaning AB
(CAIIP), established a 193,750,000 Swedish Kronor ("SEK") term loan. The term
loan matures three years from the date of inception and there is no scheduled
amortization of the principal balance prior to maturity. Interest is payable
at Stockholm InterBank Offered Rate (STIBOR) plus 1%, currently at 9.64%. As
of June 30, 1995, SEK 193,750,000 (approximately $26,685,000) was outstanding
under the term loan. On June 2, 1995, CAIIP entered into a floating-to-fixed
interest rate exchange agreement. The agreement fixes the interest rate on SEK
118,750,000 (approximately $16,100,000) at 10.94% through August 17, 1998.
Management believes that borrowings available under its $125 million
revolving bank line of credit facility and a L.5 million unused line of credit
available to Harvey & Thompson, Ltd. through a U.K. commercial bank, cash
generated from operations and current working capital of $176 million will be
sufficient to meet the Company's anticipated future capital requirements.
Page 14
<PAGE> 17
FOREIGN OPERATIONS
Presented below is selected consolidated financial data for Harvey &
Thompson and Svensk Pantbelaning as of June 30, 1995, and 1994 and for the
quarterly and six month periods then ended. Acquired on September 22, 1994,
Svensk Pantbelaning operates a ten store chain of loan-only pawnshops in Sweden
in a manner similar to the operations of Harvey & Thompson in the U.K.
Balance sheet data for Harvey & Thompson has been translated from
pounds sterling into U.S. dollars using the end of the period currency exchange
rates of 1.5955 and 1.5443 at June 30, 1995 and 1994, respectively. Income
statement data has been translated at average exchange rates of 1.5985 and
1.5906 for the three month and six month periods ending June 30, 1995,
respectively, compared to 1.4893 and 1.4874 for the same periods in 1994.
Balance sheet data for Svensk Pantbelaning has been translated from
Swedish Kronor into U.S. dollars using the end of the period currency exchange
rate of 7.2607 at June 30, 1995. Income statement data has been translated at
average exchange rates of 7.2967 and 7.3302 for the three month and six month
periods ending June 30, 1995, respectively.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1995 1994 Change
------- ------- ------
($ in thousands)
<S> <C> <C> <C>
Income Statement Data:
Net revenues $4,803 $2,457 95%
Operating expenses 2,450 1,197 105%
Income from operations 2,353 1,260 87%
Other Data:
Total average locations 43 29 48%
Gross profit margin 31.9% 37.4% (15)%
Average annualized inventory turns 2.9X 2.9X 0%
Ending loan balance $33,988 $13,815 146%
Average loan balance
per average location in operation $777 $456 70%
Expenses as a percentage of net revenues:
Operations 34.8% 33.5% 4%
Administration 11.5% 9.9% 16%
<CAPTION>
Six Months Ended June 30,
1995 1994 Change
------- ------- ------
Income Statement Data: ($ in thousands)
<S> <C> <C> <C>
Net revenues $9,580 $4,768 101%
Operating expenses 4,770 2,299 107%
Income from operations 4,810 2,469 95%
</TABLE>
Page 15
<PAGE> 18
<TABLE>
<S> <C> <C> <C>
Other Data:
Total average locations 43 29 48%
Gross profit margin 44.7% 38.9% 15%
Average annualized inventory turns 3.4X 3.1X 10%
Average loan balance
per average location in operation $755 $440 72%
Expenses as a percentage of net revenues
Operations 33.1% 32.8% 1%
Administration 12.1% 10.1% 20%
</TABLE>
Page 16
<PAGE> 19
DOMESTIC OPERATIONS
Presented below is selected financial data for the Company's domestic
operations as of June 30, 1995 and 1994 and for the three months then ended:
<TABLE>
<CAPTION>
($ in thousands)
1995 1994 Change
------- ------- ------
<S> <C> <C> <C>
Pawn service charges $24,271 $22,559 8%
Gross profit from sales
Sales 40,930 32,021 28%
Cost of sales 33,705 25,773 31%
------- ------- ------
Gross profit 7,225 6,248 16%
------- ------- ------
Net Revenues 31,496 28,807 9%
------- ------- ------
Other Data:
Gross profit as a percentage of sales 17.7% 19.5% (9%)
Average annualized inventory turnover 1.7X 1.6X 6%
Annualized yield on loans 217% 214% 1%
Average inventory balance per
average location in operation $253 $237 7%
Average loan balance per
average location in operation $141 $156 (10%)
Average pawn loan at end of
period (whole dollars) $67 $68 (1%)
Expenses as a percentage of net revenues:
Operations 60.9% 62.5% (3%)
Administration 10.8% 11.0% (2%)
Depreciation and amortization 11.4% 9.7% 18%
Interest, net 6.4% 4.3% 49%
Domestic Locations in Operation:
Beginning of period 314 262
Acquired --- 3
Established 8 12
Combined --- ---
------- -------
End of period 322 277 16%
======= ======= ======
Average number of locations in
operation during the period (a) 319 271 18%
======= ======= ======
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 17
<PAGE> 20
DOMESTIC OPERATIONS
Presented below is selected financial data for the Company's domestic
operations as of June 30, 1995 and 1994 and for the six months then ended:
<TABLE>
<CAPTION>
($ in thousands)
1995 1994 Change
------- ------- ------
<S> <C> <C> <C>
Pawn service charges $49,855 $41,486 20%
Gross profit from sales
Sales 81,534 65,903 24%
Cost of sales 67,601 52,917 28%
------- ------- ------
Gross profit 13,933 12,986 7%
Net Revenues 63,788 54,472 17%
------- ------- ------
Other Data:
Gross profit as a percentage of sales 17.1% 19.7% (13%)
Average annualized inventory turnover 1.7X 1.7X 0%
Annualized yield on loans 217% 210% 3%
Average inventory balance per
average location in operation $258 $241 7%
Average loan balance per
average location in operation $148 $152 (3%)
Average pawn loan at end of
period (whole dollars) $67 $68 (1%)
Expenses as a percentage of net revenues:
Operations 61.4% 61.5% 0%
Administration 11.0% 11.1% (1%)
Depreciation and amortization 11.0% 9.9% 11%
Interest, net 6.3% 4.0% 58%
Domestic Locations in Operation:
Beginning of period 300 251
Acquired 3 11
Established 21 18
Combined (2) (3)
------- -------
End of period 322 277 16%
======= ======= ======
Average number of locations in
operation during the period (a) 313 262 19%
======= ======= ======
</TABLE>
(a) Averages based on accumulation of month-end balances and dividing aggregate
total by total months in the period.
Page 18
<PAGE> 21
PART II
Item 1. LEGAL PROCEEDINGS
See Note 5 of Notes to Consolidated Financial Statements
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 26, 1995, the Company's Annual Meeting of Shareholders was
held. All of the nominees for director identified in the Company's Proxy
Statement, filed pursuant to Regulation 14A under the Securities Exchange Act
of 1934, were elected at the meeting to hold office until the next Annual
Meeting or until their successors are duly elected and qualified. The
shareholders ratified the Company's selection of independent auditors. There
was no other business brought before the meeting that required shareholder
approval. Votes were cast in the matters described below as follows (there
were no broker non-votes):
(a) Election of directors
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
Jack R. Daugherty 24,198,523 90,964
Morton A. Cohn 24,198,523 90,964
A. R. Dike 23,833,623 455,864
Daniel R. Feehan 24,197,793 91,694
James H. Greer 24,195,173 94,314
B. D. Hunter 23,835,023 454,464
Clifton H. Morris, Jr. 24,198,223 91,264
Carl P. Motheral 24,194,573 94,914
Samuel W. Rizzo 24,197,623 91,864
R. L. Waltrip 23,834,623 454,864
</TABLE>
Page 19
<PAGE> 22
(b) Ratification of Independent Auditors
For - 24,186,824
Against - 54,000
Abstain - 48,663
Item 5. OTHER INFORMATION
Effective July 7, 1995, the Company entered into a Note Agreement (the
"Note Agreement") with Teachers Insurance and Annuity Association of America
("Teachers") and, pursuant to the Note Agreement, issued to Teachers the
Company's 8.14% Senior Notes Due July 7, 2007 in the original principal amount
of $20,000,000. A copy of the Note Agreement is attached as an exhibit to this
Report.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Note Agreement between the
Company and Teachers Insurance
and Annuity Association of America
dated as of July 7, 1995.
27 - Financial Data Schedule
(b) Reports on Form 8-K - None
Page 20
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASH AMERICA INTERNATIONAL, INC.
--------------------------------
(Registrant)
BY: /S/ DALE R. WESTERFELD
-----------------------------
Dale R. Westerfeld
Vice President and
Chief Financial Officer
Date: August 11, 1995
Page 21
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Note Agreement between the
Company and Teachers Insurance
and Annuity Association of America
dated as of July 7, 1995.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
================================================================================
NOTE AGREEMENT
Between
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
("Purchaser")
And
CASH AMERICA INTERNATIONAL, INC.
("Company")
Dated as of July 7, 1995
Re: $20,000,000 8.14% Senior Notes Due July 7, 2007
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
ARTICLE I PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Authorization of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Sale and Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS AND INTERPRETATIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.02. Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.04. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.05. Resolutions, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.06. Purchase Permitted by Applicable Laws, Etc . . . . . . . . . . . . . . . . . 18
Section 3.07. Payment of Closing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.08. Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.09. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.10. Guaranty; Subrogation and Contribution Agreement . . . . . . . . . . . . . . 19
Section 3.11. Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.12. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.01. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.02. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.01. Required Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . 19
Section 5.02. Optional Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . 20
Section 5.03. Notice of Optional Prepayments; Officers' Certificate . . . . . . . . . . . 20
Section 5.04. Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . 20
Section 5.05. Maturity; Surrender, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 5.06. Retirement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . 21
Section 6.01. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.02. Organization, Qualification, Authorization, Etc . . . . . . . . . . . . . . 22
Section 6.03. Disclosure Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.04. Changes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.05. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.06. Indebtedness; Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.07. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.08. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.09. Title to Property, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.10. Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.11. Compliance with Applicable Laws, Permits and Contracts . . . . . . . . . . . 25
Section 6.12. Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.13. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.14. No Governmental Consents Required for Overall Transaction . . . . . . . . . 26
Section 6.15. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.16. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.17. Foreign Assets Control Regulations, Etc. . . . . . . . . . . . . . . . . . . 27
Section 6.18. Status Under Certain Federal Statutes . . . . . . . . . . . . . . . . . . . 27
Section 6.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.20. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.21. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.22. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.23. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.24. Patents, Trademarks, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.25. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.26. Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.27. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.28. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII PURCHASE FOR INVESTMENT; SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . 31
Section 7.01. Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.01. Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . 32
Section 8.02. Payment of Principal, Interest and Premium . . . . . . . . . . . . . . . . . 34
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 8.03. Payment of Taxes, Claims and Indebtedness . . . . . . . . . . . . . . . . . 34
Section 8.04. Maintenance of Existence and Rights; Conduct of Business . . . . . . . . . . 35
Section 8.05. Compliance with Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.06. Compliance with Contracts and Permits . . . . . . . . . . . . . . . . . . . 35
Section 8.07. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.08. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.09. Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . 36
Section 8.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.11. Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.12. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.13. Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.14. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.01. Consolidated Indebtedness for Money Borrowed . . . . . . . . . . . . . . . . 37
Section 9.02. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.03. Current Assets to Current Liabilities Ratio . . . . . . . . . . . . . . . . 38
Section 9.04. Current Assets to Total Indebtedness Ratio . . . . . . . . . . . . . . . . . 38
Section 9.05. Inventory Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 9.06. Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.08. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.09. Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.10. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.11. Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.12. Alteration of Contracts, Etc. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.14. Limitation on Sale or Issuance of Subsidiary Stock . . . . . . . . . . . . . 44
Section 9.15. Limitation on Sale of Properties . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.16. Dissolution; Liquidation; Merger; Consolidation . . . . . . . . . . . . . . 44
Section 9.17. Change of Name, Fiscal Year and Method of Accounting . . . . . . . . . . . . 45
Section 9.18. Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.19. Amendment of Organizational Documents . . . . . . . . . . . . . . . . . . . 45
Section 9.20. Limitation on Acquisition of New Subsidiaries . . . . . . . . . . . . . . . 45
Section 9.21. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.22. No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.23. Incorporation of More Restrictive Covenants . . . . . . . . . . . . . . . . 48
ARTICLE X EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Section 10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 10.02. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.01. Note Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.03. Consent to Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . 53
Section 11.04. Solicitation of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 11.05. Form, Registration, Transfer and Exchange of Notes; Lost Notes . . . . . . . 54
Section 11.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.07. Reliance on and Survival of Representations and Warranties . . . . . . . . . 55
Section 11.08. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.09. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.10. Substitution of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.11. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.12. Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.13. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.14. Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.15. Notes as Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.16. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.17. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.18. Representations, etc. Cumulative . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.19. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.21. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.22. Survival of Indemnities, Etc. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.23. Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.24. Liabilities of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.25. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 11.27. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
EXHIBIT A -- Form of Note
EXHIBIT B -- Form of Company Counsel Opinion
EXHIBIT C -- Form of General Counsel Opinion
EXHIBIT D -- Form of Purchaser Counsel Opinion
EXHIBIT E -- Form of Guaranty
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<PAGE> 6
EXHIBIT F -- Form of Subrogation and Contribution Agreement
SCHEDULE I -- Purchaser Information
SCHEDULE II -- List of Subsidiaries
SCHEDULE III -- List of Jurisdictions Where Company is Qualified to Do
Business as Foreign Corporation
SCHEDULE IV -- Permitted Liens
SCHEDULE V -- Material Contracts
SCHEDULE VI -- Description of Company Financials
SCHEDULE VII -- Description of Projections
SCHEDULE VIII -- Indebtedness
SCHEDULE IX -- Labor Contracts
SCHEDULE X -- Tradenames
SCHEDULE XI -- Investments
SCHEDULE XII -- Transferee Representations
SCHEDULE XIII -- Outstanding Indebtedness for Money Borrowed
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<PAGE> 7
NOTE AGREEMENT
CASH AMERICA INTERNATIONAL, INC.
As of July 7, 1995
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Securities Division
Ladies and Gentlemen:
Cash America International, Inc. (the "Company"), a Texas corporation,
hereby agrees with Teachers Insurance and Annuity Association of America (the
"Purchaser") as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES
Section 1.01. Authorization of Notes. The Company will duly authorize
the issue and sale of a series of its senior notes designated "8.14% Senior
Notes Due July 7, 2007" and limited in aggregate original principal amount to
$20,000,000 (the "Notes"). The Notes will (a) be issuable as registered notes,
without coupons, in denominations permitted by Section 11.05, (b) be dated the
date of issue thereof, (c) mature July 7, 2007, (d) bear interest on the unpaid
balance thereof from the date thereof to, but excluding, the date the principal
thereof shall have become due and payable at the rate of 8.14% per annum, (e)
bear interest on overdue principal, premium and (to the extent permitted by
law) interest at the Default Rate, (f) be entitled to the benefits of the
Guaranty and (g) be in the form of Exhibit A.
Section 1.02. Sale and Purchase of Notes. Subject to the terms and
conditions of this Agreement, the Company agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Company, the Notes at 100% of the
principal amount thereof. Such sale and purchase is sometimes herein referred
to as the "Private Placement."
Section 1.03. The Closing. The closing of the Private Placement (the
"Closing") shall take place at the offices of the Purchaser, at 11:00 a.m., New
York City time, on July 7, 1995 or on such prior Business Day as may be agreed
upon by the Company and the Purchaser (the "Closing Date"). At the Closing,
the Company will deliver the Notes in the form of a single Note (or such
greater number of Notes as the Purchaser may request in denominations permitted
by Section 11.05) payable to the Purchaser or its registered assigns against
payment of
<PAGE> 8
the purchase price therefor by electronic funds transfer to NationsBank of
Texas, N.A. for credit to such account as the Company may designate in writing
delivered to the Purchaser at least two Business Days prior to the Closing Date
for use in accordance with Section 4.01. By delivering payment on the Closing
Date for the Notes, the Purchaser shall be deemed to have confirmed as of the
Closing Date that the representations and warranties made by the Purchaser in
Article VII remain accurate as of the Closing Date. If, at the Closing, the
Company shall fail to tender the Notes to the Purchaser as provided above, or
any of the conditions specified in Article III shall not have been fulfilled to
the satisfaction of the Purchaser, the Purchaser shall, at its election, be
relieved of all further obligations under this Agreement, without thereby
waiving any other rights it may have by reason of such failure or such
nonfulfillment.
ARTICLE II
DEFINITIONS AND INTERPRETATIONS
Section 2.01. Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:
"Affiliate" means (a) when used with reference to any
corporation, any Person that, directly or indirectly, owns or controls
5% or more of any class of Voting Stock of such corporation or is a
director or officer of such corporation or is a Person in which such
corporation has a 5% or greater direct or indirect equity interest, (b)
when used with reference to any partnership, any Person that, directly
or indirectly, owns or controls 5% or more of either the capital or
profit interests of such partnership or is a partner or employee of such
partnership or is Person in which such partnership has 5% or greater
direct or indirect equity interest, (c) when used with reference to any
individual, any Person that is related to such individual by blood or
marriage or is a present or former ward, guardian, employer or employee
of such individual or is a trust or estate in which such individual owns
a 5% or greater beneficial interest or of which such individual serves
as trustee, executor or in any similar capacity and (d) when used with
reference to a trust or an estate, any Person that is a trustee,
executor, administrator or beneficiary thereof. Moreover, the term
"Affiliate", when used with reference to any Person, shall also mean any
other Person that, directly or indirectly, controls or is controlled by
or is under common control with such Person. As used in the preceding
sentence, the term "control" means the possession, directly or
indirectly, of the power to direct or to cause the direction of the
management and policies of the entity referred to, whether through
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controls" shall have meanings correlative to the
foregoing.
"Agreement" means this Note Agreement, as amended, supplemented
or modified from time to time.
"Applicable Contract" means any contract or agreement to which
the Company or any Subsidiary is a party or by which it or any of its
Properties is bound or under or pursuant to which its owns, maintains or
operates any of its Properties or conducts business.
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<PAGE> 9
"Applicable Permit" means any Permit to which the Company or
any Subsidiary is a party or by which it or any of its Properties is
bound or under or pursuant to which its owns, maintains or operates any
of its Properties or conducts business.
"Assurance" means, as to any Person, any contract, agreement or
understanding to guarantee, or in effect guarantee, any indebtedness
(the "Primary Obligation") of any other Person (the "Primary Obligor")
in any manner, whether directly or indirectly, including agreements:
(a) to purchase the Primary Obligation or any Property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of the Primary Obligation or (ii) to maintain working
capital or other balance sheet conditions, or otherwise to
advance or make available funds for the purchase or payment of
the Primary Obligation; or
(c) to purchase Property, securities or services
primarily for the purpose of assuring the holder of the Primary
Obligation of the ability of the Primary Obligor to make
payment of the Primary Obligation;
provided, however, that "Assurance" shall not include the endorsement by
any Person, in the ordinary course of business, of negotiable
instruments or documents for deposit or collection. The amount of any
Assurance shall be deemed to be an amount equal to the stated or
determinable amount of the Primary Obligation in respect of which such
Assurance is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming the Person
giving such Assurance is required to perform in respect thereof) as
determined by such Person in good faith.
"Bank Loan Agreement" means the Senior Revolving Credit
Facility Agreement dated as of June 29, 1993, among the Company, the
banks party thereto and NationsBank of Texas, N.A., as Agent as amended
by (i) the First Amendment to Senior Revolving Credit Facility Agreement
dated as of June 7, 1994, (ii) the Second Amendment to Senior Revolving
Credit Facility Agreement dated as of September 21, 1994, (iii) the
Third Amendment to Senior Revolving Credit Facility Agreement dated as
of March 10, 1995, and (iv) the Fourth Amendment to Senior Revolving
Credit Facility Agreement dated as of June 7, 1995.
"Bankruptcy Law" has the meaning specified in Section 10.01(j).
"Benefit Arrangement" means an employee benefit plan (within
the meaning of Section 3(3) of ERISA) which is not a Plan and with
respect to which the Company or a member of the ERISA Group has an
obligation or liability, whether or not current or contingent, to make
contributions or pay benefits.
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<PAGE> 10
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banking institutions in New York, New York
or Fort Worth, Texas are authorized or required by law, regulation or
executive order to be closed.
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 5.02
(any partial prepayment being applied in satisfaction of required
payments of principal in inverse order of their scheduled due dates) or
is declared to be or becomes immediately due and payable pursuant to
Section 10.01, as the context requires.
"CERCLA" means the Federal Comprehensive Environmental
Response, Compensation and Liability Act, as amended from time to time,
together with all regulations and rulings thereunder and all
interpretations thereof by the Environmental Protection Agency.
"Closing" has the meaning specified in Section 1.03.
"Closing Date" has the meaning specified in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, together with all regulations and rulings thereunder and
all interpretations thereof by the Internal Revenue Service.
"Company" has the meaning specified in the opening paragraph of
this Agreement.
"Company Financials" has the meaning specified in Section
6.03(a)(8).
"Consolidated Adjusted Net Income" means, with respect to any
period, consolidated net earnings (after income taxes) of the Company
and the Consolidated Subsidiaries for such period, determined in
accordance with GAAP, but excluding (a) any gain or loss in excess of
$1,000,000 (before income taxes) arising from the sale of capital assets
and (b) any other items which would be considered extraordinary items in
accordance with GAAP.
"Consolidated Current Assets" means, as of any date, the
current assets which would be reflected on a consolidated balance sheet
of the Company and the Consolidated Subsidiaries prepared as of such
date in accordance with GAAP.
-4-
<PAGE> 11
"Consolidated Current Liabilities" means, as of any date, the
current liabilities which would be reflected on a consolidated balance
sheet of the Company and the Consolidated Subsidiaries prepared as of
such date in accordance with GAAP.
"Consolidated Indebtedness for Money Borrowed" means, at any
date, the Indebtedness for Money Borrowed of the Company and the
Consolidated Subsidiaries consolidated as of such date in accordance
with GAAP.
"Consolidated Subsidiary" means, at any date, any Subsidiary
the accounts of which would, in accordance with GAAP, be consolidated
with those of the Company in its consolidated financial statements as of
such date.
"Consolidated Tangible Net Worth" means, as of any date, the
total shareholders' equity which would appear on a consolidated balance
sheet of the Company and the Consolidated Subsidiaries prepared as of
such date in accordance with GAAP less the sum of (i) the aggregate
amount of all currency translation adjustments (gains and losses) shown
on such balance sheet and (ii) the net book value of all Intangible
Assets shown on such balance sheet. As used in this definition,
"Intangible Assets" means those assets (including licenses, patents,
copyrights, trademarks, tradenames, franchises, goodwill, experimental
expenses and other similar assets) which would be classified as
intangible assets for purposes of a balance sheet prepared in accordance
with GAAP.
"Default" means, with respect to any Loan Document, any event
or condition that constitutes, or with the giving of notice or the lapse
of time or both would constitute, a default thereunder or breach
thereof. Without limitation of the foregoing, "Default" shall include
any Event of Default as well as any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Default Rate" means, at any time, a rate of interest per annum
equal to the lesser of (a) 2% above the interest rate then payable on
the Notes and (b) the Highest Lawful Rate.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on a semiannual basis) equal to the
Reinvestment Yield with respect to such Called Principal.
"Dollars" and the sign "$" means lawful currency of the United
States of America.
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<PAGE> 12
"Environmental Claim" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment,
order, consent decree, penalty, fine, lien, proceeding or claim (whether
administrative, judicial or private in nature) arising (a) pursuant to,
or in connection with an actual or alleged violation of, any
Environmental Law, (b) in connection with any Hazardous Material, (c)
from any abatement, removal, remedial, corrective or other response
action in connection with a Hazardous Material, Environmental Law or
other order of a Governmental Authority or (d) from any actual or
alleged damage, injury, threat or harm to health, safety, natural
resources or the environment.
"Environmental Laws" means applicable laws (including the
common law), regulations or rules, and any applicable judicial or
administrative interpretations thereof, as well as any applicable
judicial or administrative orders, decrees or judgments, relating to
pollution, environmental, health, safety, industrial hygiene or similar
matters.
"Environmental Permit" means any Permit required under
applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules, regulations, rulings
and interpretations adopted by the Internal Revenue Service or the
Department of Labor thereunder.
"ERISA Group" means all corporations, trades or businesses
(whether or not incorporated) and other persons or entities which,
together with the Company, are treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" has the meaning specified in Section 10.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means (a) the chairman of the board, the
chief executive officer, the chief operating officer, the chief
financial officer, the chief accounting officer or the chief legal
officer of the Company or (b) any other officer of the Company who has
been elected by the Board of Directors of the Company and designated as
an executive officer in any Form 10-K or successor Form filed by the
Company with the SEC.
"Fiscal Quarter" means a fiscal quarter of the Company.
"Fiscal Year" means the fiscal year of the Company.
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<PAGE> 13
"GAAP" means generally accepted accounting principles as in
effect from time to time as set forth in the opinions, statements and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board and such other Persons who shall be approved by a
significant segment of the accounting profession and concurred in by the
Independent Accountants.
"Governmental Authority" means any foreign governmental
authority, the United States of America, any State of the United States
or any political subdivision, agency or instrumentality of any of the
foregoing, and any agency, department, commission, board, bureau, court
or other tribunal having jurisdiction over any Loan Party, the Purchaser
or any other Holder or their respective Property, including the Texas
Consumer Credit Commissioner, the United States Department of the
Treasury, Bureau of Alcohol, Tobacco and Firearms and the Office of Fair
Trading of the United Kingdom and any other governmental authority
charged with the enforcement of the Regulatory Acts or otherwise having
authority with respect to the regulation, supervision and licensing of
pawnshop activities in any jurisdiction in which the Company or any of
the Subsidiaries conducts business.
"Guarantors" means the Subsidiaries listed in Schedule II
(other than Harvey & Thompson Limited, Pantbelaning, Thomas Hjelm and
the Thomas Hjelm Affiliates) and each other Person that becomes bound by
the Guaranty as contemplated by Section 9.20(a).
"Guaranty" has the meaning specified in Section 3.10.
"Harvey & Thompson Indebtedness" means the indebtedness of
Harvey & Thompson Limited for borrowed money in an aggregate amount not
to exceed 5,000,000 pounds sterling incurred under and pursuant to that
certain Loan Agreement, dated August 26, 1993 between Harvey & Thompson
Limited and Barclays Bank PLC as extended by the renewal agreement dated
February 10, 1995.
"Hazardous Materials" means any hazardous substance, hazardous
or toxic waste, pollutant, contaminant, oil, petroleum product or other
substance (a) which is listed, regulated or designated as toxic or
hazardous (or words of similar meaning and regulatory effect), or with
respect to which remedial obligations may be imposed, under any
Environmental Laws or (b) exposure to which may pose a health or safety
hazard.
"Highest Lawful Rate" means the maximum nonusurious rate of
interest permitted to be charged by applicable federal or state law
(whichever shall permit the higher lawful rate) from time to time in
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<PAGE> 14
effect. The parties agree that, insofar as the provisions of Chapter
One of the Texas Credit Code are at any time applicable to the
determination of the Highest Lawful Rate, the Highest Lawful Rate shall
be the "interest rate ceiling" (as defined in such Chapter One) from
time to time in effect, provided that, to the extent permitted by such
Chapter One, each Holder may from time to time by notice to the Company
revise the election of such interest rate ceiling as such ceiling
affects the then current or future amounts outstanding under the Notes
held by such Holder.
"Holder" means (a) the Purchaser so long as it is obligated to
purchase the Notes hereunder or holds any outstanding Note and (b) any
other holder from time to time of any outstanding Note.
"Indebtedness for Money Borrowed" means, with respect to any
Person and without duplication:
(a) the principal amount of all indebtedness of such
Person, current or funded, secured or unsecured, incurred in
connection with borrowings (including the sale of debt
securities),
(b) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement
with respect to any Property acquired by such Person,
(c) all indebtedness of such Person issued, incurred or
assumed in respect of the purchase price of Property or
services except for accounts payable incurred in the ordinary
course of business,
(d) all obligations of such Person evidenced by a note,
bond, debenture or similar instrument,
(e) the present value (determined in accordance with
GAAP) of all obligations of such Person under leases which
shall have been or should be recorded as capitalized leases in
accordance with GAAP,
(f) all Assurances of such Person in respect of
indebtedness of any other Person of any of the types described
in the preceding clauses (a) through (e), provided that, when
calculating the amount of any Person's Indebtedness for Money
Borrowed, no Assurance of such Person of the type described in
this clause (f) shall be included in such calculation unless,
and then only to the extent that, the indebtedness relating to
such Assurance, when aggregated with the total indebtedness
relating to all other outstanding Assurances of the Loan
Parties of the type described in this clause (f), exceeds
$500,000,
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<PAGE> 15
(g) the amount of all sinking fund payments or other
mandatory redemption or payments on any class of capital stock
of such Person,
(h) the maximum stated amount from time to time
available for drawing under any letters of credit issued at the
request of such Person, and
(i) the amount of any reimbursed drawings under letters
of credit issued at the request of such Person.
"Indemnitees" means, collectively, the Purchaser, each
Transferee and each Holder and their respective successors and assigns,
and the officers, trustees, directors and employees of each of the
foregoing.
"Independent Accountants" means Coopers & Lybrand L.L.P. or
another firm of independent public accountants of recognized national
standing selected by the Company.
"Investment" means, as applied to any Person, (i) any direct or
indirect purchase or other acquisition by such Person of stocks, bonds,
notes, debentures or other securities of any other Person, (ii) any
direct or indirect loan, advance, extension of credit or capital
contribution by such Person to any other Person, (iii) any Assurance by
such Person of any indebtedness of any other Person, (iv) the
subordination by such Person of any claim against any other Person to
other indebtedness of such other Person and (v) any other item which
would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP, including any direct or indirect
contribution by such Person of Property to a joint venture, partnership
or other business entity in which such Person retains an interest.
"Legal Requirements" means any and all (a) applicable
constitutional provisions, laws (statutory, administrative, judicial or
otherwise, including those established pursuant to common law or
equity), ordinances, treaties, rules, codes, standards and regulations
(or any interpretation of any of the foregoing), whether foreign or
domestic, (b) judgments, orders, injunctions and decrees, (c) Permits
and (d) contracts with Governmental Authorities relating to compliance
with the items described in (a), (b) or (c) above.
"Lien" means any mortgage, pledge, charge, encumbrance,
security interest, collateral assignment, conditional sale or title
retention arrangement or other lien or restriction of any kind, whether
based on common law, constitutional provision, statute or contract.
-9-
<PAGE> 16
"Loan Documents" means, collectively, this Agreement, the
Notes, the Guaranty, the Subrogation and Contribution Agreement and all
other instruments and documents executed and delivered to the Purchaser
by the Loan Parties, or any of them, pursuant to this Agreement.
"Loan Parties" means, collectively, the Company and the
Guarantors.
"Make-Whole Premium" means, with respect to the Called
Principal of any Note, a premium equal to the excess, if any, of the
Discounted Value of such Called Principal over the sum of (a) such
Called Principal plus (b) interest accrued thereon to the Settlement
Date with respect to such Called Principal. The Make-Whole Premium
shall in no event be less than zero.
"Material Adverse Effect" means any circumstance or event of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) which (a) could
reasonably be expected to have a material adverse effect on the
financial condition, business, operations or Properties of the Company
and the Subsidiaries, taken as a whole, (b) could reasonably be expected
to diminish or impair in any material respect the ability of the Company
to perform any of its obligations under the Loan Documents to which it
is a party, (c) could reasonably be expected to diminish or impair in
any material respect the ability of the Purchaser or any other Holder to
enforce any of the Obligations or to exercise or enforce any of their
rights and remedies under the Loan Documents, (d) causes an Event of
Default, (e) causes a Default which could reasonably be expected to
become an Event of Default or (f) could reasonably be expected to
subject the Purchaser or any other Holder to civil or criminal
liability.
"Material Contract" means any contract, agreement or instrument
to which the Company or any Subsidiary is a party (a) which calls for
payments to or from the Company or such Subsidiary of more than
$1,000,000 during any 12-month period or (b) pursuant to which the
Company or such Subsidiary acquires any right to an interest in Property
or a right to obtain services if the Company's or such Subsidiary's
inability to obtain such interest or services, as the case may be, could
be reasonably be expected to have a Material Adverse Effect, provided
that "Material Contract" shall not include any Loan Document.
"1993 Guaranty" means that certain Joint and Several Guaranty
dated as of May 6, 1993 delivered by the Company and certain of its
Subsidiaries in connection with the issuance and sale of the 1993 Notes.
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<PAGE> 17
"1993 Loan Documents" means the "Loan Documents" as defined in
the 1993 Note Agreement.
"1993 Note Agreement" means that certain Note Agreement dated
as of May 6, 1993 between the Company and Teachers Insurance and Annuity
Association of America, as amended.
"1993 Notes" means those certain 8.33% Senior Notes due May 1,
2003 issued by the Company under and pursuant to the 1993 Note
Agreement.
"Notes" has the meaning specified in Section 1.01.
"Obligations" means all obligations, liabilities and
indebtedness of every nature of the Loan Parties from time to time owing
to the Purchaser and the other Holders under the Loan Documents,
including, without limitation, (a) all obligations of the Company under
the Loan Documents to pay principal, premium and interest in respect of
the Notes, (b) all obligations of the Guarantors in respect of the
Guaranty, (c) all obligations of the Loan Parties under the Loan
Documents to reimburse or indemnify the Purchaser or any other
Indemnitee and (d) all obligations of the Loan Parties to pay fees and
expenses pursuant to Section 11.02 and similar sections of the other
Loan Documents.
"Officers' Certificate" means a certificate executed on behalf
of the Company by at least two of its Responsible Officers (in their
representative capacities and not in their individual capacities).
"Organizational Documents" means (i) with reference to any
Person that is a corporation, its articles or certificate of
incorporation and its bylaws and (ii) with reference to any Person that
is a partnership, its partnership agreement and all other instruments
relating to its formation, existence or governance.
"Overall Transaction" means the Private Placement and the
guarantees and other transactions and activities contemplated by the
Loan Documents.
"Pantbelaning" means CAII Pantbelaning AB, a corporation
organized under the laws of Sweden and a Wholly-Owned Subsidiary.
"Pantbelaning Indebtedness" means indebtedness of Pantbelaning
for borrowed money in the approximate amount of SEK 193,750,000 pursuant
to that certain Loan Agreement, dated as of September 21, 1994, among
Pantbelaning, the Lenders who are a party thereto, and NationsBank of
Texas, National Association, as Administrative Lender.
-11-
<PAGE> 18
"Permits" means any and all permits, authorizations,
certificates, approvals, registrations, variances, licenses, franchises,
exemptions or orders (a) under any Legal Requirement or (b) granted by
any Governmental Authority.
"Permitted Liens" means:
(a) Liens (if any) granted to the Holders to secure the
Obligations;
(b) Liens in existence on the date hereof and
described in Schedule IV;
(c) pledges or deposits made to secure payment of
worker's compensation (or to participate in any fund in
connection with worker's compensation), unemployment insurance,
pensions or social security programs;
(d) Liens imposed by mandatory provisions of law such
as for materialmen's, mechanics, warehousemen's and other like
Liens arising in the ordinary course of business, securing
indebtedness whose payment is not yet due, and landlords liens,
whether arising through contract or by operation by law, but
only if the same are not yet due and payable or if the same are
being contested in good faith and the payment of which is not
at the time required by Section 8.03,
(e) Liens for taxes, assessments and governmental
charges or levies imposed upon a Person or upon such Person's
income or profits or property, but only if the same are not yet
due and payable or if the same are being contested in good
faith and the payment of which is not at the time required by
Section 8.03;
(f) good faith deposits in connection with tenders,
leases, real estate bids or contracts (other than contracts
involving the borrowing of money), pledges or deposits to
secure public or statutory obligations, deposits to secure (or
in lieu of) surety, stay, appeal or customs bonds and deposits
to secure the payment of taxes, assessments, customs duties or
other similar charges;
(g) encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property,
provided that such do not materially impair the use of such
property for the uses intended, and none of which is violated
by existing or proposed structures or land use;
(h) Liens on Property of any Consolidated Subsidiary
securing obligations of such Consolidated Subsidiary owing to
the Company or to any Wholly-Owned Subsidiary;
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(i) Liens created to secure (A) purchase money
indebtedness incurred to finance the purchase price of the
Property acquired in the ordinary course of business, but only
if each such Lien shall secure only the purchase money
indebtedness incurred to purchase the Property so acquired and
shall be confined solely to such Property and (B) the
indebtedness permitted by Section 9.08(b)(11); provided,
however, that the aggregate amount of all indebtedness at any
time secured by all Liens referred to in this clause (i) shall
not exceed $10,000,000; and
(j) Liens on Temporary Cash Investments, but only if
(A) such Liens secure short-term indebtedness owed by the
Company or a Consolidated Subsidiary to the broker or
investment banking firm which is holding such Temporary Cash
Investments for the account of the Company or a Consolidated
Subsidiary and (B) such indebtedness is to be repaid, in the
ordinary course of business, by the collection or liquidation
of such Temporary Cash Investments at the maturity of such
Temporary Cash Investments.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization
and a Governmental Authority.
"Plan" means an employee pension benefit plan (within the
meaning of Section 3(3) of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the
Company, any Subsidiary or any Related Person or as to which the
Company, any Subsidiary or any Related Person would be treated as a
contributing sponsor under Section 4069 of ERISA if such plan were to be
terminated.
"Private Placement" has the meaning specified in Section 1.02.
"Projections" has the meaning specified in Section 6.03(a)(9).
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Purchaser" has the meaning specified in the opening paragraph
of this Agreement.
"Regulatory Acts" means (a) the Texas Pawnshop Act, (b) the
Consumer Credit Act 1974 enacted in the United Kingdom and (c) all other
foreign, Federal or state laws (statutory, administrative, judicial or
other otherwise) relating to pawn shops and activities incidental
thereto.
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"Reinvestment Yield" means with respect to the Called Principal
of any Note, the sum of 50 basis points plus the yield to maturity
implied by (a) the yields reported, as of 10:00 A.M. (New York City
time) two Business Days next preceding the Settlement Date with respect
to such Called Principal, on the display designated as "Page USD" on the
Bloomberg Financial Markets Service (or such other display as may
replace Page USD on the Bloomberg Financial Markets Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or, if such yields shall not be reported as of such time or the
yields reported as of such time shall not be ascertainable, (b) the
Treasury Constant Maturity Series yields reported, for the latest day
for which such yields shall have been so reported as of the Business Day
next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied
yield shall be determined, if necessary, by (i) converting U.S. Treasury
bill quotations to bond equivalent yields in accordance with accepted
financial practice and (ii) interpolating linearly between reported
yields.
"Related Person" means any trade or business, whether or not
incorporated, which, together with the Company, would be treated as a
single employer under Section 414 of the Code.
"Release" has the meaning specified in CERCLA Sections 101(22)
(42 U.S.A. Sections 9601(22)).
"Remaining Average Life" means, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (a) such Called Principal into
(b) the sum of the products obtained by multiplying (i) each Remaining
Scheduled Payment of such Called Principal (but not of interest thereon)
by (ii) the number of years (calculated to the nearest one-twelfth year)
which will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date.
"Required Holders" means, at any time, the Holder or Holders of
at least 60% of the aggregate principal amount of the Notes then
outstanding.
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"Responsible Officer" means, as to any Loan Party, the chairman
of the board, the chief executive officer, the president, the chief
financial officer, the principal accounting officer, the chief legal
officer or the treasurer of such Loan Party.
"Restricted Payment" means as specified in Section 9.07(a).
"SEC" means the Securities and Exchange Commission.
"SEK" means the legal currency of Sweden.
"Securities Act" means the Securities Act of 1933, as amended.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 5.02 or is declared to be or becomes immediately due
and payable pursuant to Article X, as the context requires.
"Stock" means (i) in the case of any corporation, capital
stock of any class of such corporation (however designated) and warrants
or options to purchase such capital stock, (ii) in the case of any
partnership, partnership interests of such partnership (however
designated) and warrants or options to purchase such partnership
interests and (iii) in the case of any other entity, equity interests of
such entity (however designated) and warrants or options to purchase
such equity interests.
"Subrogation and Contribution Agreement" means the Subrogation
and Contribution Agreement dated as of July 7, 1995 among the Company
and the Guarantors substantially in the form of Exhibit F.
"Subsidiary" means, at any time, (a) any corporation 50% or
more of the outstanding Voting Stock of which is owned, directly or
indirectly, by the Company at such time and (b) any partnership,
association, joint venture or other entity in which the Company owns,
directly or indirectly, a 50% or greater equity interest (however
designated) at such time.
"Temporary Cash Investment" mean any of the following
investments: (a) Investments in open market commercial paper maturing
within 180 days after acquisition thereof and rated at least A-1 (or the
equivalent thereof) by Standard & Poor's Ratings Group (or any successor
thereto which is a nationally recognized rating agency) or at least P-1
(or the equivalent thereof) by Moody's Investors Service, Inc. (or any
successor thereto which is a nationally recognized rating agency), (b)
Investments in marketable obligations, maturing within 180 days after
acquisition thereof, issued or unconditionally guaranteed by
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<PAGE> 22
the United States of America or an instrumentality or agency thereof and
entitled to the full faith and credit of the United States of America,
(c) Investments in money market funds that invest solely in the types of
Investments permitted under clauses (a) and (b) above, (d) Investments
in repurchase agreements of any financial institution or brokerage firm
acceptable to the Required Holders which are fully secured by securities
described in clause (b) above, (e) certificates of deposit and time
deposits (including Eurodollar deposits), maturing within 180 days from
the date of deposit thereof, with a domestic office of (i) any national
or state bank or trust company organized under the laws of the United
States of America or any state therein and having capital, surplus and
undivided profits of at least $100,000,000 or (ii) any other national or
state bank so long as all such deposits are federally insured, (f) in
the case of Harvey & Thompson Limited, certificates of deposit and other
instruments substantially equivalent to a certificate of deposit
maturing within 180 days from the date of acquisition and issued by a
bank or trust company organized and located in the United Kingdom having
capital, surplus and undivided profits of at least 65,000,000 pounds
sterling and (g) in the case of Pantbelaning, Thomas Hjelm and Thomas
Hjelm Affiliates, certificates of deposit and other instruments
substantially equivalent to a certificate of deposit maturing within 180
days from the date of acquisition and issued by a bank or trust company
organized and located in Sweden having capital, surplus and undivided
profits of at least SEK 750,000,000.
"Thomas Hjelm" means Murtrum AB, formerly known as Thomas Hjelm
AB, a corporation organized under the laws of Sweden and a Wholly-Owned
Subsidiary.
"Thomas Hjelm Affiliates" means the following corporations,
each of which (i) is organized under the laws of Sweden and (ii) is a
Wholly-Owned Subsidiary: Pantintressenter i Stockholm AB, AB Svensk
Pantbelaning, and Svenska Aktionsgruppen AB.
"Transferee" means any direct or indirect transferee of all or
any part of any Note purchased by the Purchaser under this Agreement.
"Voting Stock" means, when used with respect to any Person, any
Stock of such Person having general voting power under ordinary
circumstances to elect a majority of the board of directors (or other
governing body) of such Person (irrespective of whether at the time any
Stock of such Person shall have or might have voting power by reason of
the happening of any contingency).
"Wholly-Owned Subsidiary" means a Consolidated Subsidiary, all
of the outstanding Stock (other than directors' qualifying shares, if
required by law) of which are at the time owned directly by the Company
or by one or more Wholly-Owned Subsidiaries or by the Company and one or
more Wholly-Owned Subsidiaries.
Section 2.02. Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:
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(1) the singular number includes the plural number and vice
versa;
(2) reference to any gender includes each other gender;
(3) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(4) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, provided that nothing in this clause (4) is intended to
authorize any assignment not otherwise permitted by this Agreement;
(5) reference to any agreement, document, instrument or
report means, unless the context otherwise requires, such agreement,
document, instrument or report as in effect when delivered to the
Purchaser pursuant to this Agreement and as the same may thereafter be
amended, supplemented or modified in accordance with the terms thereof
and hereof, and reference to any Note includes any note issued pursuant
hereto in renewal, rearrangement, reinstatement, enlargement, amendment,
modification, extension, substitution or replacement therefor;
(6) reference to any Article, Section, Schedule or Exhibit
means such Article or Section hereof or such Schedule or Exhibit hereto;
(7) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(8) with respect to the determination of any period of time,
the word "from" means "from and including" and the word "to" means "to
but excluding";
(9) reference to any Legal Requirement means such Legal
Requirement as amended, modified, codified or reenacted, in whole or in
part, and in effect from time to time;
(10) accounting terms used but not defined herein shall be
construed in accordance with GAAP, and whenever the character or amount
of any asset or liability or item of income or expense is required to be
determined, or any consolidation or accounting computation is required
to be made, for purposes hereof, such determination or computation shall
be made in accordance with GAAP;
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(11) the word "knowledge", when used in any representation or
warranty of the Company contained herein, means the actual knowledge of
any Executive Officer or director of the Company;
(12) where any provision of this Agreement refers to action
to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person; and
(13) if any action or failure to act by the Company violates
any covenant or obligation of the Company contained herein, such
violation shall not be excused by the fact that such action or failure
to act is required or permitted by any other covenant or obligation of
the Company contained herein.
(b) Should there be a change in GAAP following the date of this
Agreement and should either (i) the Company determine (in good faith) that the
requirements of one or more of the covenants contained in Article IX are
materially increased or made more severe as a result thereof or (ii) the
Required Holders determine (in good faith) that the requirements of one or more
of the covenants contained in Article IX are materially reduced or relaxed as a
result thereof, then the Company and such Required Holders shall enter into
good faith negotiations with the desired result being that such covenant(s)
shall be amended in such a way that the criteria therein set forth for
evaluating the financial condition of the Company and/or the Subsidiaries shall
be the same after such amendment as if such change in GAAP had not been made.
(c) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
(d) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
ARTICLE III
CONDITIONS OF CLOSING
The obligation of the Purchaser to purchase and pay for the Notes
hereunder is subject to the satisfaction of the following conditions:
Section 3.01. Representations and Warranties. The representations and
warranties of the Loan Parties contained in the following instruments shall be
true and correct at the time of Closing: (i) this Agreement, (ii) the other
Loan Documents and (iii) the instruments delivered by one or more of the Loan
Parties pursuant to this Article III.
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The Loan Parties shall have performed and complied with all agreements
and conditions contained in this Agreement or in the other Loan Documents
required to be performed or complied with by them prior to or at the Closing.
At the time of Closing, no Default shall have occurred and be continuing or
would result from the consummation of the Overall Transaction.
Section 3.03. Compliance Certificate. The Purchaser shall have
received an Officers' Certificate, dated the Closing Date and satisfactory in
form and substance to the Purchaser, certifying that the conditions specified
in Sections 3.01 and 3.02 have been fulfilled. If required by the Purchaser,
such Officers' Certificate will also certify as to such matters of fact as the
Purchaser may reasonably request to enable the Purchaser to determine
compliance with such conditions.
Section 3.04. Opinions of Counsel. The Purchaser shall have received
(a) a favorable opinion from Jenkens & Gilchrist, a Professional Corporation,
counsel for the Company and the Guarantors, in the form of Exhibit B, (b) a
favorable opinion of Hugh A. Simpson, General Counsel to the Company and the
Guarantors, in the form of Exhibit C and (c) a favorable opinion from Chapman
and Cutler, special counsel for the Purchaser, in the form of Exhibit D. Each
such opinion shall (i) be addressed to the Purchaser, (ii) be dated the Closing
Date and (iii) state that all Transferees are entitled to rely thereon as
though it were addressed to them.
Section 3.05. Resolutions, Etc. The Purchaser shall have received (a)
copies of resolutions of the Board of Directors of each Loan Party, certified
as of the Closing Date by the Secretary or an Assistant Secretary of such Loan
Party, duly authorizing the Overall Transaction, (b) a certificate as to the
incumbency and authority of the Person or Persons executing and delivering Loan
Documents on behalf of such Loan Party and (c) such other documents and
evidence as the Purchaser or its special counsel may request with respect to
any Loan Party or the Overall Transaction, including the taking of all
corporate proceedings in connection therewith and compliance with the
conditions set forth herein, in each case in form and substance satisfactory to
the Purchaser.
Section 3.06. Purchase Permitted by Applicable Laws, Etc. The
consummation of the Private Placement on the terms and conditions herein
provided (including the use of the proceeds of such Notes by the Company) shall
(i) not violate any Legal Requirement (including, without limitation, section 5
of the Securities Act or Regulation G, T or X of the Board of Governors of the
Federal Reserve System), (ii) not subject the Purchaser to any tax (other than
routine income taxes), penalty, liability or other onerous condition under or
pursuant to any Legal Requirement and (iii) constitute a legal investment under
the laws and regulations of each jurisdiction to which the Purchaser is
subject, but without resort to provisions (such as Section 1405(a)(8) of the
New York Insurance Law) which permit the making of an investment without
restriction as to the character of the particular investment being made. If
required by the Purchaser, the Purchaser shall have received an Officers'
Certificate, dated the Closing Date, certifying as to such matters of fact as
the Purchaser may reasonably specify to enable the Purchaser to determine
compliance with the conditions set forth in the preceding sentence.
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Section 3.07. Payment of Closing Fees. The Company shall have paid
the fees and disbursements which it is obligated to pay pursuant to Section
11.02 and which have been invoiced to the Company prior to the time of Closing.
Section 3.08. Private Placement Number. The CUSIP Service Bureau of
Standard & Poor's Information Group shall have issued to the Purchaser a
private placement number with respect to the Notes.
Section 3.09. Notes. The Purchaser shall have received the Notes
complying with the requirements of Section 1.03.
Each Guarantor and the Company shall have duly authorized, executed and
delivered to the Purchaser a Joint and Several Guaranty, dated the Closing
Date, in the form of Exhibit E (the "Guaranty") and a Subrogation and
Contribution Agreement.
Section 3.11. Other Loan Documents. Each of the other Loan Documents
shall (a) have been duly authorized, executed, acknowledged (if appropriate)
and delivered by the respective Loan Parties thereto, (b) be dated as of the
Closing Date, (c) be in form and substance satisfactory to the Purchaser and
(d) be in full force and effect on the Closing Date without any default
existing thereunder. A counterpart of each Loan Document executed by the Loan
Parties thereto shall have been delivered to the Purchaser or its special
counsel. Each Loan Document shall constitute the valid and binding obligation
of each Loan Party thereto, enforceable against such Loan Party in accordance
with the terms thereof.
Section 3.12. Proceedings. All proceedings taken or to be taken in
connection with the Overall Transaction prior to or on the Closing Date (and
all documents incident thereto) shall be satisfactory in substance and form to
the Purchaser, and the Purchaser and its special counsel shall have received
all such counterpart originals or certified or other copies of such documents
as the Purchaser may reasonably request.
ARTICLE IV
USE OF PROCEEDS
Section 4.01. Use of Proceeds. The Company will apply the proceeds of
the Private Placement solely to pay the costs and expenses described in Section
11.02 and to repay indebtedness of the Company outstanding under the Bank Loan
Agreement and for no other purpose. Nothing in this Section 4.01 is intended
to prohibit the Company from effecting re-borrowings under the Bank Loan
Agreement.
Section 4.02. Margin Regulations. The Company will not, directly or
indirectly, use any of the proceeds of the Private Placement for the purpose,
whether immediate, incidental or ultimate, of buying a "margin stock" or of
maintaining, reducing or retiring any indebtedness originally incurred to
purchase a stock that is currently a "margin stock", or for any other purpose
which might constitute the private placement of a "purpose credit," in each
case within the meaning of Regulation G (12 C.F.R. 207, as amended) or
Regulation T (12 C.F.R.
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220, as amended) of the Board of Governors of the Federal Reserve System, or
otherwise take or permit to be taken any action which would involve a violation
of such Regulation G or T or of Regulation X (12 C.F.R. 224, as amended) of the
Board of Governors of the Federal Reserve System or any other regulation of
such Board.
ARTICLE V
PREPAYMENTS
Section 5.01. Required Prepayments of the Notes. (a) Unless the
aggregate principal amount of the then outstanding Notes shall have become due
and payable pursuant to Section 10.01, the Company shall apply to the
prepayment of the Notes, without premium, and there shall become due and
payable, the sum of $4,000,000 on July 7 in each of the years 2003 through 2006
(or, in the case of any such prepayment, such lesser principal amount of the
Notes as shall then be outstanding), leaving $4,000,000 principal amount (or
such other principal amount thereof as then remains unpaid) of the Notes for
payment at their stated maturity on July 7, 2007. Each such prepayment shall
be at 100% of the principal amount of the Notes so prepaid, together with all
accrued and unpaid interest thereon to the date of prepayment. No partial
prepayment of the Notes pursuant to Section 5.02 shall relieve the Company from
its obligation to make the required prepayments provided for in this Section
5.01.
(b) Whenever any prepayment to be made under this Section 5.01
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and the amount of
such prepayment shall bear interest at the applicable rate during such
extension.
Section 5.02. Optional Prepayments of the Notes. The Company may, at
its option, upon notice as provided in Section 5.03, at any time or from time
to time, prepay any part (in a principal amount of at least $1,000,000 or an
integral multiple of $100,000 in excess thereof) or all of the Notes at 100% of
the principal amount so prepaid, together with all accrued and unpaid interest
thereon to the date of prepayment, plus a premium equal to the Make-Whole
Premium, if any, on the amount so prepaid, determined as of two Business Days
prior to the date of such prepayment pursuant to this Section 5.02.
The Company shall give each Holder irrevocable written notice of each
optional prepayment of Notes made under Section 5.02 not less than 30 nor more
than 60 days prior to the date fixed for such prepayment (which shall be a
Business Day), in each case specifying (a) such prepayment date, (b) the
aggregate principal amount of the Notes to be prepaid, (c) the aggregate
principal amount of the Notes held by such Holder to be prepaid, (d) that a
Make-Whole Premium may be payable, (e) the date when such Make-Whole Premium
will be calculated, (f) the estimated Make-Whole Premium together with a
reasonably detailed calculation of such Make-Whole Premium and (g) the accrued
interest applicable to the prepayment. The Company will give each Holder, one
Business Day prior to the date scheduled for any such prepayment, an Officers'
Certificate certifying that the conditions of Section 5.02 have been fulfilled
and specifying the particulars of such fulfillment, and, if a Make-Whole
Premium is payable in connection with such prepayment, setting forth the
calculations used in computing the amount of such Make-Whole Premium.
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Section 5.04. Allocation of Partial Prepayments. Any partial
prepayment of the Notes shall be allocated among all Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts of the Notes so outstanding, with adjustments, to the extent
practicable, to compensate for any prior payments not made exactly in such
proportion. All partial prepayments shall be applied to the Notes in
anticipation and satisfaction of the prepayments required to be made by the
provisions of Section 5.01, in inverse order of the maturity thereof.
In the case of any prepayment of the Notes pursuant to this Article V,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Premium, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Premium, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall, after such
payment or prepayment in full, be surrendered to the Company and be cancelled
and shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
Section 5.06. Retirement of Notes. The Company shall not, and shall
not permit any of its Affiliates to, prepay or otherwise retire, in whole or in
part, prior to their stated final maturity (other than by prepayment pursuant
to this Article V or upon acceleration of such final maturity pursuant to
Section 10.01), or purchase or otherwise acquire, directly or indirectly, Notes
held by any Holder unless the Company or such Affiliate shall have offered to
prepay or otherwise retire or purchase or otherwise acquire, as the case may
be, the same proportion of the aggregate principal amount of Notes held by each
other Holder at the time outstanding upon the same terms and conditions. Any
Notes prepaid pursuant to this Article V or Section 10.01 or otherwise retired
or purchased or otherwise acquired by the Company or any of its Affiliates
shall not be deemed to be outstanding for any purpose under this Agreement,
provided that, with respect to each prepayment pursuant to this Article V, all
Notes then held by the Company and its Affiliates shall nonetheless be entitled
to participate in such prepayment the same as if such Notes were deemed
outstanding.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants that:
Section 6.01. Subsidiaries. (a) The Company has no Subsidiaries on
the date hereof except those listed in Schedule II, each of which is a
Consolidated Subsidiary and a Wholly-Owned Subsidiary.
(b) Schedule II sets forth, with respect to each of the
Subsidiaries listed therein, (i) whether such Subsidiary is a corporation or
partnership, (ii) the jurisdiction of its incorporation or formation (as the
case may be) and (iii) each jurisdiction in which it is qualified to do
business as a foreign Person.
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(c) All of the issued and outstanding Stock of each Subsidiary is
validly issued, fully-paid and is nonassessable and, except for directors'
qualifying shares (if any), is owned (beneficially and of record) by the
Company, free and clear of any Lien.
(d) No Subsidiary owns any Stock of the Company.
Section 6.02. Organization, Qualification, Authorization, Etc. (a) The
Company and each Subsidiary (i) is a corporation or partnership (as the case
may be) duly organized or formed (as the case may be) and existing in good
standing under the laws of the jurisdiction of its organization or formation
(as the case may be), (ii) is duly qualified or registered and in good standing
as a foreign Person in each jurisdiction in which the nature of such
qualification or registration is necessary and in which the failure to so
qualify or register could have a Material Adverse Effect and (iii) has the
corporate or partnership (as the case may be) power (A) to own its Properties,
(B) to carry on its business as now being conducted and (C) to consummate the
Overall Transaction. Schedule III sets forth each jurisdiction in which the
Company is qualified or registered to do business as a foreign corporation.
(b) The execution, delivery and performance by each Loan Party of
the Loan Documents to which it is a party have been duly authorized by all
necessary corporate or partnership (as the case may be) action on the part of
such Loan Party. This Agreement constitutes, and the Notes and such other Loan
Documents (when executed and delivered as contemplated hereby) will each
constitute, a legal, valid and binding obligation of each Loan Party thereto,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights.
Section 6.03. Disclosure Documents. (a) The Company has heretofore
furnished the Purchaser with true, correct and complete copies of the following
documents:
(1) the Organizational Documents of the Company and each
Subsidiary as in effect on the date hereof;
(2) the Bank Loan Agreement;
(3) each Material Contract described in Schedule V;
(4) the Company's Annual Reports to Stockholders for the
Fiscal Years ended December 31, 1987 through 1994 (inclusive);
(5) the Company's Annual Reports on Form 10-K for the Fiscal
Years ended December 31, 1988 through 1994 (inclusive), as filed with
the SEC;
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(6) the Company's Quarterly Reports on Form 10-Q for the
Fiscal Quarters ended June 30, 1990, September 30, 1990, March 31, 1991,
June 30, 1991, September 30, 1991, March 31, 1992, June 30, 1992,
September 30, 1992, March 31, 1993, June 30, 1993, September 30, 1993,
March 31, 1994, June 30, 1994, September 30, 1994 and March 31, 1995 as
filed with the SEC;
(7) all proxy statements relating to all meetings of the
Company's stockholders (whether annual or special) since December 31,
1990;
(8) the consolidated financial statements of the Company and
the Consolidated Subsidiaries described in Schedule VI (the "Company
Financials"); and
(9) the projections described in Schedule VII (the
"Projections").
(b) The Company Financials (including any related schedules and/or
notes) (i) were true and correct in all material respects as at the dates
thereof, (ii) were prepared in accordance with GAAP consistently followed
throughout the periods involved and (iii) show all liabilities, direct and
contingent, of the Company and the Consolidated Subsidiaries required to be
shown in accordance with GAAP. The balance sheets included in the Company
Financials fairly present the consolidated financial condition of the Company
and the Consolidated Subsidiaries as at the dates thereof, and the statements
of operations and statements of cash flows included in the Company Financials
fairly present the consolidated results of operations and cash flows of the
Company and the Consolidated Subsidiaries for the periods indicated.
(c) The Projections are based on good faith estimates and
assumptions believed by the Company to be reasonable at the time made, it being
recognized by the Purchaser that the Projections, insofar as they relate to
future events, are not to be viewed as facts and that actual results during the
period or periods covered by the Projections may differ materially from the
projected results. Since the preparation of the Projections, nothing has
occurred to cause the Company to believe that the estimates and assumptions on
which the Projections are based are no longer reasonable.
Section 6.04. Changes, Etc. (a) Since December 31, 1994, (i) neither
the Company nor any Subsidiary has entered into any materially adverse
transactions not in the ordinary course of business, nor incurred any material
liabilities or obligations, direct or contingent, except for the Loan Documents
and (ii) no events have occurred which, individually or in the aggregate, have
had, or in the future could reasonably be expected to have, a Material Adverse
Effect.
(b) Neither the business nor the Properties of the Company or any
of the Subsidiaries are presently affected by any fire, explosion, accident,
labor controversy, strike, lockout or other labor dispute, drought, storm,
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hail, earthquake, embargo, act of God or of the public enemy or other casualty
which could reasonably be expected to have a Material Adverse Effect.
Section 6.05. Tax Returns and Payments. (a) The Company and each
Subsidiary has filed all tax returns required by law to be filed by it (or
obtained extensions with respect thereto) and has paid all taxes, assessments
and other governmental charges levied upon it or any of its Properties, income
or franchises which are shown to be due and payable on such returns and all
other taxes and assessments payable by it, other than (i) those which are not
past due, (ii) those which are presently being contested in good faith by
appropriate proceedings diligently conducted for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP have been made and
(iii) those not reflected on such returns the non-payment of which could not
reasonably be expected to have a Material Adverse Effect. No contest referred
to in the foregoing clause (ii) could reasonably be expected to have a Material
Adverse Effect.
(b) After due inquiry, the Company knows of no proposed tax
assessment against the Company or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect. In the opinion of the Company, all
tax liabilities of the Company and the Subsidiaries are adequately provided for
on their respective books. The Federal income tax returns of the Company and
the Subsidiaries have been audited by the Internal Revenue Service for all
Fiscal Years up to and including the Fiscal Year ended December 31, 1990.
(a) The Company and the Subsidiaries have no outstanding
Indebtedness for Money Borrowed other than (i) the indebtedness evidenced by
the Notes and the Guaranty, (ii) the indebtedness evidenced by the 1993 Notes
and the 1993 Guaranty, (iii) the indebtedness outstanding under the Bank Loan
Agreement, (iv) the indebtedness described in Schedule XIII and (v) other
indebtedness permitted under Section 9.08 which indebtedness does not exceed
$500,000 in the aggregate.
(b) Each of the Loan Parties (i) has, and after giving effect to
the Overall Transaction will have, capital sufficient to carry on its business
and transactions and all the business and transactions in which it is about to
engage, (ii) is, and after giving effect to the Overall Transaction will be,
solvent and able to pay its debts as they mature and (iii) owns, and after
giving effect to the Overall Transaction will own, Property having a value,
both at fair valuation and present fair salable value, greater than the amount
required to pay the probable liability on its debts.
Section 6.07. Permits. The Company and each Subsidiary possess all
Permits that are necessary or desirable in connection with the ownership, use
or operation by it of its Properties and the conduct by it, in the ordinary
course, of its business as now conducted and as currently proposed to be
conducted, except those Permits the absence of which would not have a Material
Adverse Effect. None of such Permits impose any material burden or restriction
on the Company or any Subsidiary. The Company and the Subsidiaries are in
compliance with all terms of such Permits. All such Permits are valid and in
full force and effect and, to the Company's knowledge (after due inquiry), none
are threatened to be revoked, cancelled, suspended or modified for any reason.
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Section 6.08. Material Contracts. Schedule V describes all Material
Contracts existing on the date hereof. Each of such Material Contracts (a) has
been duly executed and delivered by, and constitutes the legal, valid and
binding obligation of, each Loan Party thereto, enforceable against each such
Loan Party in accordance with its terms, (b) is in full force and effect and
(c) except as reflected in Schedule V, has not been amended or modified, nor
any provision thereof waived, in any respect. The Company and each Subsidiary
has, and, to the Company's knowledge, all other parties to such Material
Contracts have, performed and complied in all material respects with all of the
terms and conditions set forth therein. No default by the Company any
Subsidiary or, to the Company's knowledge, any such other party exists under
any such Material Contract.
Section 6.09. Title to Property, Etc. (a) The Company and each
Subsidiary has good and indefeasible fee simple title to its real property and
good and defensible title to all of its other Property, including the Property
reflected in the balance sheets included in the Company Financials (other than
Properties disposed of in the ordinary course of business), subject to no Lien
of any kind except Permitted Liens which do not, individually or in the
aggregate, materially affect or interfere with, or if used or availed of will
not materially affect or interfere with, the occupancy, use or operation of
such item of Property for its intended purpose or the peaceful and quiet use
and enjoyment thereof by the Company or such Subsidiary, as the case may be.
(b) No lease under which the Company or any Subsidiary is the
lessee or is operating contains any provision which individually or in the
aggregate interferes with the ordinary conduct of the business of the Company
or such Subsidiary or otherwise could reasonably be expected to have a Material
Adverse Effect. The Company and each Subsidiary enjoys peaceful and
undisturbed possession under all leases under which it is the lessee or is
operating, except where the absence of such possession would not have a
Material Adverse Effect. All of such leases are valid and subsisting and no
default by the Company, such Subsidiary or, to the Company's knowledge, any
such other party exists thereunder.
Section 6.10. Condition of Property. The facilities of the Company
and the Subsidiaries, taken as a whole, are in a condition and state of repair
which are sufficient and adequate to operate their respective businesses in a
proper and efficient manner.
Section 6.11. Compliance with Applicable Laws, Permits and Contracts.
(a) Neither the Company nor any Subsidiary is in violation of (i) any provision
of its Organizational Documents, (ii) any Applicable Permit or Applicable
Contract (including the Bank Loan Agreement and the 1993 Note Agreement) or
(iii) any instrument evidencing or otherwise relating to Indebtedness for Money
Borrowed (other than, in the case of the foregoing clauses (ii) and (iii),
violations which, individually or collectively, could not reasonably be
expected to have a Material Adverse Effect), and the execution, delivery and
performance of the Loan Documents and the consummation of the Overall
Transaction will not result in any violation of or constitute a default under
any of the foregoing or result in the creation of (or impose any obligation on
the Company or any Subsidiary to create) any Lien upon any Property of the
Company or any Subsidiary.
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(b) Neither the Company nor any Subsidiary is in violation of any
Legal Requirement other than violations which, individually or collectively,
will not have a Material Adverse Effect, and the execution, delivery and
performance of the Loan Documents and the consummation of the Overall
Transaction will not result in a violation of any Legal Requirement.
(c) Except for this Agreement, the Bank Loan Agreement, the 1993
Note Agreement, the agreement evidencing the Pantbelaning Indebtedness and the
agreement evidencing the Harvey & Thompson Indebtedness, neither the Company
nor any Subsidiary is a party to or bound by any Permit, agreement or
instrument (including its Organizational Documents) which contains any
restrictions or limitations on the incurrence by the Company or such Subsidiary
of any Indebtedness for Money Borrowed.
(d) Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness for Money Borrowed of the Company or such
Subsidiary.
Section 6.12. Litigation, Etc. No action, suit, investigation or
proceeding is pending or, to the knowledge of the Company (after due inquiry),
threatened against or affecting the Company or any Subsidiary or any Property
of the Company or any Subsidiary which (a) individually or collectively, could
reasonably be expected to have a Material Adverse Effect or (b) questions the
validity of any Loan Document or any action taken or to be taken pursuant
thereto.
Section 6.13. ERISA. Neither the Company nor any member of its ERISA
Group has ever maintained or contributed to, or had an obligation or liability
to contribute to, any Plan. Each Benefit Arrangement is (and has been)
maintained and operated in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Legal Requirements. Neither
the Company nor any member of the ERISA Group has failed to timely make any
required contribution or payment to or in respect of any Benefit Arrangement.
No Benefit Arrangement provides post employment health benefits except as
required by Part 6 of Subtitle B of ERISA. No litigation, investigation or
claim (other than a routine, undisputed claim for benefits) is pending or, to
the knowledge of the Company (after due inquiry), threatened or anticipated
concerning any Benefit Arrangement. The Company and/or the members of its
ERISA Group may at any time unilaterally, without the consent of any Person,
terminate any and/or all Benefit Arrangement(s) without incurring any material
liability. The execution and delivery of this Agreement and the other Loan
Documents and the issue and sale of the Notes will not involve any transaction
which is subject to the prohibitions of section 406 of ERISA or in connection
with which a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in
reliance upon and subject to the accuracy of the representation of the
Purchaser in Article VII as to the source of the funds to be used to pay the
purchase price of the Notes.
Section 6.14. No Governmental Consents Required for Overall
Transaction. Neither the nature of the Company nor any Subsidiary, nor the
business or Properties of the Company or any Subsidiary, nor any
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relationship between the Company or any Subsidiary and any other Person, nor
any circumstance in connection with the offering, issuance, sale or delivery of
the Notes is such as to require any authorization, consent, approval, exemption
or other action by or notice to or filing with any Governmental Authority in
connection with the execution and delivery of this Agreement, the other Loan
Documents or the consummation of the Overall Transaction other than routine SEC
filings by the Company under the Exchange Act.
Section 6.15. Offering of Notes. Neither the Company nor its
Affiliates nor anyone acting on its or their behalf has, directly or
indirectly, (a) offered the Notes or any similar security of the Company for
sale to, or solicited any offers to buy the Notes or any similar security of
the Company from, or otherwise approached or negotiated with respect thereto
with, any Person other than the Purchaser or (b) taken or will take any action
which would require the issuance or sale of the Notes to be registered pursuant
to the provisions of section 5 of the Securities Act or pursuant to the
provisions of any securities or Blue Sky law of any jurisdiction.
Section 6.16. Use of Proceeds. The Company will apply the proceeds of
the sale of the Notes in accordance with Article IV. No indebtedness being
reduced or retired, directly or indirectly, out of the proceeds of the sale of
the Notes was incurred for the purpose of purchasing or carrying any stock
which is currently a "margin stock" (as defined in Section 4.02), and the
Company neither owns nor has any present intention of acquiring any amount of
"margin stock." None of the proceeds of the sale of the Notes will be used to
acquire any security in any transaction which is subject to section 13 or 14 of
the Exchange Act, including particularly sections 13(d) and 14(d) thereof.
Section 6.17. Foreign Assets Control Regulations, Etc. Neither the
issue and sale of the Notes by the Company nor its use of the proceeds thereof
as contemplated by this Agreement will violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.
Section 6.18. Status Under Certain Federal Statutes. No Loan Party is
(a) an "investment company" or a Person "controlled" by or acting on behalf of
an "investment company," in each case within the meaning of the Investment
Company Act of 1940, as amended, (b) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, (c) a "public utility"
as such term is defined in the Federal Power Act, as amended, (d) a "rail
carrier or a person controlled by or affiliated with a rail carrier", within
the meaning of Title 49, U.S.C., or (e) a "carrier" to which 49 U.S.C. Section
11301(b)(1) is applicable.
Section 6.19. Environmental Matters. (a) The Company and each
Subsidiary has all Environmental Permits necessary for the conduct of its
business and for the ownership, use, maintenance and operation of its assets,
and is in compliance with all material terms thereof. All such Environmental
Permits are valid and in full force and effect and, to the Company's knowledge,
none are threatened to be revoked, cancelled, suspended or
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modified adversely for any reason. As to any such Environmental Permit that is
about to expire or is needed for the proposed conduct of its business, the
Company or such Subsidiary, as the case may be, has timely and properly applied
for renewal or receipt of the same or, if such Permit is not reasonably
expected to be renewed, such nonrenewal will not have a Material Adverse
Effect.
(b) Without in any manner limiting any other representations and
warranties set forth in this Agreement:
(i) neither the Company nor any Subsidiary, nor any real
property or facility presently owned, used, maintained or operated by
the Company or any Subsidiary, nor any of the other assets of the
Company or any Subsidiary is in violation of or is in noncompliance
with, any Environmental Laws, except for violations or noncompliances
which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; and
(ii) without in any manner limiting the generality of clause
(i) above:
(A) no Hazardous Materials have been used, generated,
manufactured, transported, stored or treated, or disposed of,
landfilled or in any other way Released by or on behalf of the
Company or any Subsidiary, except for those of the foregoing
activities which, individually or in the aggregate, could not
have a Material Adverse Effect, and
(B) to the Company's knowledge, no Hazardous Materials
have been used, generated, manufactured, stored or treated, or
disposed of, landfilled or in any other way Released (and no
Release is threatened), by any Person other than the Company or
any Subsidiary on, under, about or from any Property now or
previously owned, used, maintained or operated by the Company
or any Subsidiary or any Property adjacent to any such Property
except for those of the foregoing activities (including
Releases and threatened Releases) which, individually or in the
aggregate, could not have a Material Adverse Effect;
(C) neither the Company nor any Subsidiary is subject,
as a result of the operation or condition of its business or
assets prior to or at Closing, to any (1) contingent liability
in connection with any Release or threatened Release of any
Hazardous Materials into the environment whether on or off any
Property owned, used, maintained or operated by the Company or
such Subsidiary or (2) reclamation or remediation requirements
under Environmental Laws, or any reporting requirements related
thereto, except for liabilities or requirements which,
individually or in the aggregate, could not have a Material
Adverse Effect;
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(D) neither the Company nor any Subsidiary has been
named as a potentially responsible party under, and none of its
Property has been nominated or identified as a facility which
is subject to an existing or potential claim under, CERCLA or
comparable Environmental Laws, and no such Property is subject
to any Lien arising under Environmental Laws;
(E) the Company and each Subsidiary has all
environmental and pollution control equipment necessary for (1)
compliance in all material respects with all Environmental Laws
(including all applicable Permits) and (2) operation of the
business of the Company or such Subsidiary as it is presently
conducted;
(F) no Hazardous Materials have been incorporated into
or contained in any of the personal property or improvements to
real property owned, used, maintained or operated by the
Company or any Subsidiary such that such Hazardous Materials
could reasonably be expected to have a Material Adverse Effect;
(G) none of the locations where Hazardous Materials
have been used, generated, manufactured, stored, treated,
recycled, disposed of or Released by or on behalf of the
Company or any Subsidiary has been nominated or identified as a
facility which may be subject to an existing or potential claim
under CERCLA or comparable Environmental Laws;
(H) to the knowledge of the Company, none of the
offsite locations where Hazardous Materials from any of the
assets of the Company or any Subsidiary have been stored,
treated, recycled, disposed of or Released has been nominated
or identified as a facility which may be subject to an existing
or potential claim under CERCLA or comparable Environmental
Laws;
(I) neither the Company nor any Subsidiary has received
any written notices of (1) any violation of, noncompliance with
or remedial obligation under Environmental Laws relating to the
ownership, use, maintenance, operation of, or conduct of
business related to, any Property of the Company or such
Subsidiary or (2) any Release or threatened Release of
Hazardous Materials, except for violations, noncompliances,
obligations, Releases or threatened Releases which,
individually or in the aggregate, could not have a Material
Adverse Effect;
(J) there are no writs, injunctions, decrees, orders or
judgments outstanding, or lawsuits, claims, proceedings or
investigations pending or, to the knowledge of the Company,
threatened relating to the ownership, use, maintenance,
operation of, or conduct of business
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related to, any Property of the Company or any Subsidiary
arising out of or relating to Environmental Laws, nor does the
Company or any Subsidiary have knowledge (after due inquiry) of
any basis for any of the foregoing, except for writs,
injunctions, decrees, orders, judgments, lawsuits, claims,
proceedings or investigations which, individually or in the
aggregate, could not have a Material Adverse Effect;
(K) no underground or aboveground storage tanks or
surface impoundments are located at any Property owned, used,
maintained or operated by the Company or any Subsidiary other
than those which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; and
(L) there are no material obligations, undertakings or
liabilities arising out of or relating to Environmental Laws
which the Company or any Subsidiary has agreed to, assumed or
retained, by contract or otherwise.
Section 6.20. Books and Records. The Company maintains books, records
and accounts with respect to itself and the Subsidiaries which, in reasonable
detail, accurately and fairly reflect their transactions and dispositions of
their assets, and maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (a) transactions are executed in
accordance with management's general or specific authorization, (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in accordance with GAAP, and (ii) to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Section 6.21. Fiscal Year. The fiscal year of the Company and each
Subsidiary coincides with the calendar year.
Section 6.22. Brokerage. All negotiations relative to this Agreement,
the other Loan Documents and the transactions contemplated hereby have been
carried on by the Company and the other Loan Parties without the intervention
of any Person which might give rise to a valid claim against the Purchaser for
a brokerage commission or other like payment.
Section 6.23. Labor Matters. Schedule IX lists each employment,
consultant or similar agreement and all labor contracts and collective
bargaining agreements to which the Company or any Subsidiary is a party or by
which it is bound. Except as otherwise listed on Schedule IX, no strikes or
other labor disputes are pending or threatened against the Company or any
Subsidiary. All payments due from the Company or any Subsidiary on account of
employee health and welfare insurance have been paid or, if not due, have been
accrued as liabilities on the books of the Company or such Subsidiary.
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Section 6.24. Patents, Trademarks, Etc. The Company and each
Subsidiary owns, or is licensed or otherwise has the lawful right to use, all
patents, trademarks, tradenames, copyrights, technology, know-how and processes
necessary for the conduct of its business as now conducted and as proposed to
be conducted. All tradenames used by the Company or any Subsidiary are listed
on Schedule X. Assumed name certificates have been duly filed of record with
appropriate Governmental Authorities for each of such tradenames.
Section 6.25. Chief Executive Office. The chief executive office of
the Company and the office where it maintains its records is located at 1600
West 7th Street, Fort Worth, Texas 76102-2599.
Section 6.26. Permitted Investments. Schedule XI specifies the
aggregate amount of each investment held by the Company and any of its
Subsidiaries on the date hereof other than those permitted by clauses (a)
through (j) of Section 9.11.
Section 6.27. Liens. None of the Properties of the Company or any
Subsidiary is subject to any Lien other than Permitted Liens.
Section 6.28. Full Disclosure. (a) Neither this Agreement (including
the Schedules and Exhibits hereto), the other Loan Documents, the Company
Financials, the instruments described in Section 6.03(a) nor any document
delivered by the Company or any of its Affiliates pursuant to Article III
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which the same were made.
(b) There is no fact (excluding general economic conditions not
peculiar to the Company or any Subsidiary) which (i) has had a Material Adverse
Effect or, in the opinion of any Responsible Officer of the Company, could
reasonably be expected in the future to have a Material Adverse Effect and (ii)
has not been set forth in this Agreement (including the Schedules and Exhibits
hereto) or in the Company Financials.
ARTICLE VII
PURCHASE FOR INVESTMENT; SOURCE OF FUNDS
Section 7.01. Representations of the Purchaser. (a) The Purchaser
hereby represents to the Company that the Purchaser (i) is purchasing the Notes
for its own account for investment and not with a view to, or for sale in
connection with, the distribution thereof or with any present intention of
distributing or selling any of the Notes, provided that the disposition of the
Purchaser's property shall at all times be within its control, (ii) is an
"accredited investor", as defined in Regulation D under the Securities Act, and
(iii) (x) has knowledge and experience in financial and business matters such
that it is capable of evaluating the merits and risks of the investment in the
Notes and (y) is able to bear the economic risk of such investment. The
Purchaser understands that the Notes have not been registered under the
Securities Act and may not be sold or otherwise transferred by the Purchaser
except pursuant to an effective registration statement under such Act or
pursuant to an available exemption therefrom under such Act.
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(b) The Purchaser further represents to the Company that the source
of funds to be used by the Purchaser to pay the purchase price of the Notes is
an "insurance company general account" within the meaning of proposed
Department of Labor Prohibited Transaction Class Exemption ("PTCE"), DOL
Application No. D-9662, 59 Fed. Reg. 43134 (Aug. 22, 1994), (assuming for the
purpose hereof that such proposed PTCE will be adopted in substantially similar
form to the proposed form) and the Purchaser has identified that there is no
"employee benefit plan" (within the meaning of section 3(3) of ERISA or section
4975(e)(1) of the Code), treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the amount of the
reserves for all contracts held by or on behalf of such plan exceed, ten
percent (10%) of the total liabilities of such general account.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01. Financial Statements, Reports and Documents. The
Company shall deliver to each Holder (in duplicate):
(a) as soon as available, and in any event within 45 days,
after the end of each Fiscal Quarter (other than the last Fiscal Quarter
in any Fiscal Year), a consolidated balance sheet of the Company and the
Consolidated Subsidiaries (in reasonable detail) as of the end of such
Fiscal Quarter and the related consolidated statements of income,
stockholders' equity and cash flows of the Company and the Consolidated
Subsidiaries (in reasonable detail) for such Fiscal Quarter and for the
portion of the current Fiscal Year ending on the last day of such Fiscal
Quarter, in each case (i) prepared in accordance with GAAP and (ii)
setting forth in comparative form the figures for the corresponding
period of the preceding Fiscal Year, which financial statements shall be
certified (subject to normal year-end audit adjustments) as to fairness
of presentation, compliance with GAAP and consistency with prior periods
by a Responsible Officer of the Company, it being understood that no
such statement need be accompanied by complete footnotes;
(b) 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 the Consolidated Subsidiaries (in reasonable detail) as of
the end of such Fiscal Year and the related consolidated statements of
income, stockholders' equity and cash flows of the Company and the
Consolidated Subsidiaries (in reasonable detail) for such Fiscal Year,
in each case (i) prepared in conformity with GAAP and (ii) setting forth
in comparative form the figures for the preceding Fiscal Year, which
financial statements shall be accompanied by an opinion thereon (which
shall not be qualified by reason of any limitation imposed by the
Company) of the Independent Accountants stating that such financial
statements, in the opinion of the Independent Accountants, present
fairly the consolidated financial position of the Company and the
Consolidated Subsidiaries as of the date thereof and the consolidated
results of their operations and cash flows for the period covered
thereby in conformity with GAAP consistently applied (except for changes
in which the Independent Accountants
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concur) and that the examination of the Independent Accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and, accordingly, includes
such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b) above, an
Officers' Certificate (i) setting forth in reasonable detail the
calculations required to establish whether the Company was in compliance
with the requirements of Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06 and
9.07 on the date of such financial statements, (ii) stating that the
signers have reviewed this Agreement and the other Loan Documents and
have made, or caused to be made under their supervision, a review of the
transactions and condition of the Company during the accounting period
covered by such financial statements and (iii) stating that such review
did not disclose the existence during or at the end of such accounting
period of any Default or, if any Default exists, specifying the nature
and period of existence thereof and what action the Company has taken,
is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (b) above, a written
statement by the Independent Accountants giving the opinion thereon
stating (i) that their audit has included a review of the terms of this
Agreement and that such review is sufficient to enable them to make the
statement referred to in clause (iv) of this paragraph (d) (it being
understood that such Independent Accountants shall not be required to
conduct or make any special or additional audit procedures or
examinations for purposes of such written statement, other than those
required by generally accepted auditing standards, and that their audit
will not have been directed primarily toward obtaining knowledge of any
Default), (ii) whether, in the course of their audit, they obtained
knowledge (and whether, as of the date of such written statement, they
have knowledge) of the existence and continuance of any Default and, if
so, specifying the nature and period of existence thereof, (iii) that
they have examined the Officers' Certificate delivered in connection
therewith pursuant to clause (c) above and (iv) that the matters set
forth in such Officers' Certificate pursuant to subclause (i) of clause
(c) above have been properly stated in accordance with this Agreement;
(e) promptly upon receipt thereof, a copy of each management
letter submitted to the Company by the Independent Accountants (and each
response of the Company thereto), it being understood and agreed that
all material items which are furnished to the Holders pursuant to this
clause (e) shall be treated as confidential if such items are not
previously known to any Holder and if, and so long as, such items are
not generally available to the public, but nothing herein contained
shall limit or impair the right of any Holder to (i) disclose such items
to any other Holder, any prospective Transferee, the National
Association of Insurance Commissioners or any Governmental Authority,
(ii) disclose such
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items in connection with any litigation, investigation or similar
proceeding, (iii) use such information to the extent pertinent to an
evaluation of the Obligations or to enforce compliance with the terms
and conditions of this Agreement, (iv) take any action required by law
or (v) take any lawful action which such Holder deems necessary to
protect its interests under this Agreement or any other Loan Document;
(f) promptly upon becoming available, a copy of each
consolidating balance sheet and income statement of the Company and the
Consolidated Subsidiaries prepared by or on behalf of the Company after
the date hereof, including those prepared in connection with any federal
income tax return for the Company or any Subsidiary;
(g) promptly upon transmission thereof, a copy of each (i)
financial statement, proxy statement, notice and report sent or made
available by the Company to its security holders in compliance with the
Exchange Act or any comparable federal or state laws relating to the
disclosure by any Person of information to its security holders, (ii)
regular and periodic report, registration statement (excluding exhibits)
and prospectus filed by the Company with any securities exchange or with
the SEC or any Governmental Authority succeeding to any of its functions
and (iii) press release or other statement made available by the Company
to the public concerning material developments in the business of the
Company;
(h) as soon as practicable, and in any event within two
Business Days, after the Company obtains knowledge of any Default, an
Officers' Certificate specifying the nature and period of existence
thereof and what action the Company has taken, is taking or proposes to
take with respect thereto;
(i) as soon as practicable, and in any event within ten
Business Days, after the Company obtains knowledge of any condition
(excluding general economic conditions not peculiar to the Company or
any Subsidiary), happening or event which, in the opinion of the Board
of Directors or any Responsible Officer of the Company, could reasonably
be expected to have a Material Adverse Effect, an Officers' Certificate
specifying the nature and period of existence thereof and what action
the Company has taken, is taking or proposes to take with respect
thereto;
(j) promptly, a copy of each Material Contract entered into
or assumed by the Company after the date hereof and each amendment,
supplement or modification entered into after the date hereof in respect
of any Material Contract; and
(k) such other information concerning the business,
financial condition, results of operation, prospects or Properties of
the Company or any of any Subsidiary as any Holder shall reasonably
request.
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Section 8.02. Payment of Principal, Interest and Premium. The Company
will duly and punctually pay the principal of, and interest and premium (if
any) on, the Notes in accordance with the terms of the Notes and this
Agreement.
Section 8.03. Payment of Taxes, Claims and Indebtedness. The Company
will, and will cause each Subsidiary to, pay and discharge, as and when due and
payable, (a) all taxes, assessments and governmental charges or levies imposed
upon it or any of its Properties or in respect of any of its franchises,
business, income or profits, (b) all claims (including claims for labor,
services, materials and supplies) for sums which, if unpaid, might become a
Lien upon any of its Property and (c) all of its other indebtedness in excess
of $500,000; provided, however, that no such tax, assessment, charge or levy,
claim or indebtedness (other than the Obligations) need be paid if and so long
as (i) no Default shall be in existence, (ii) the amount, applicability or
validity thereof is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted and (iii) such reserves or other
appropriate provision (if any) as shall be required by GAAP shall have been
made therefor.
The Company will, and will cause each Subsidiary to, (a) preserve and
keep in full force and effect (except as permitted by Section 9.16) its
corporate or partnership, as the case may be, existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, (b) qualify and remain qualified as a foreign Person authorized to do
business in each jurisdiction in which such qualification is required and (c)
carry on and conduct its business (i) in the ordinary course, (ii) in an
orderly and efficient manner consistent with good business practices and (iii)
in accordance, in all material respects, with all Legal Requirements.
Section 8.05. Compliance with Loan Documents. The Company will, and
will cause each Subsidiary to, promptly comply with any and all covenants and
provisions of each Loan Document to which it is a party.
Section 8.06. Compliance with Contracts and Permits. The Company
will, and will cause each Subsidiary to, comply with all of its Applicable
Contracts and Applicable Permits except for noncompliances which, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
Section 8.07. Inspection. (a) The Company will, and will cause each
Subsidiary to, permit any Person designated by any Holder, at all reasonable
times, to (i) visit and inspect any of its Properties, (ii) examine, copy or
make excerpts from, any and all books, records, software, documents and other
information in the possession of the Company or such Subsidiary and relating to
its affairs and (iii) discuss its affairs, finances and accounts with its
directors, officers and independent public accountants; and, by this provision,
the Company (on behalf of itself and each Subsidiary) irrevocably authorizes
such accountants to discuss with such Person the affairs, finances and accounts
of the Company and such Subsidiary. All such visits and inspections shall be
at the expense of such Holder unless a Default shall exist, in which event the
reasonable costs and expenses associated with all such events and inspections
shall be for the account of the Company.
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(b) The Company will keep at its principal executive office a true
copy of this Agreement and each other Loan Document and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any Transferee or prospective Transferee designated by any Holder.
Section 8.08. Books and Records. The Company will, and will cause
each Subsidiary to, (a) maintain (in accordance with good accounting practices
and all Legal Requirements) complete and accurate books, records and accounts
accurately and fairly reflecting its transactions in reasonable detail and (b)
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that:
(i) its transactions are executed in accordance with
management's general or specific authorization;
(ii) its transactions are recorded as necessary (A) to permit
preparation of financial statements in accordance with GAAP and (B) to
maintain accountability for its assets;
(iii) access to its assets is permitted only in accordance
with management's general or specific authorization; and
(iv) the recorded accountability for its assets is compared
with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Section 8.09. Compliance with Legal Requirements. (a) The Company
will, and will cause each Subsidiary to, comply with all Legal
Requirements applicable to it or any of its Properties, business, operations or
transactions except for noncompliances which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the foregoing, the Company will, and will
cause each Subsidiary to, (i) comply in a timely fashion with, or operate
pursuant to valid waiver of the provisions of, all Environmental Laws,
including any such Laws relating to contamination from any Hazardous Materials
except for noncompliances which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, (ii) notify each
Holder promptly in the event of any material violation of any Environmental Law
and (iii) promptly forward to each Holder a copy of any Permit, order, notice,
application or other communication or report in connection with any material
matter relating to the Environmental Laws as they may affect it or any of its
Properties.
Section 8.10. Insurance. The Company will, and will cause each
Subsidiary to, maintain in full force and effect, with sound and reputable
insurers, such insurance on its Properties and business against such
casualties, risks, liabilities and contingencies, and in such types and
amounts, as are consistent with customary practices and standards of companies
engaged in similar businesses; provided, however, except as may be required
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by any Legal Requirement, neither the Company nor any Subsidiary shall be
required to maintain (i) business interruption insurance or (ii) insurance on
its inventories.
Section 8.11. Authorizations and Approvals. The Company will, and
will cause each Subsidiary to, promptly obtain, from time to time at its own
expense, all such Permits as may be required to enable it to comply with its
obligations hereunder and under the other Loan Documents.
Section 8.12. Maintenance of Properties. (a) The Company will, and
will cause each Subsidiary to, protect and maintain (or cause to be protected
or maintained), in good repair, working order and condition (ordinary wear and
tear excepted), all Properties used or intended for use in its business.
(b) From time to time, the Company will, and will cause each
Subsidiary to, make (or cause to be made) all appropriate repairs, renewals and
replacements thereof so that, at all times, it may conduct its business
properly and efficiently and in accordance with all Legal Requirements;
provided that failure to perform this paragraph (b) in accordance with its
terms will not constitute an Event of Default unless such failure could have a
Material Adverse Effect.
(c) The Company will, and will cause each Subsidiary to, comply at
all times with the provisions of all leases to which it is a party as lessee or
under which it occupies Property; provided that nothing in this paragraph (c)
shall require the Company or any Subsidiary to comply with any such provision
unless the noncompliance with such provision could reasonably be expected to
have a Material Adverse Effect.
Section 8.13. Ownership of Subsidiaries. The Company will, at all
times, directly or indirectly own and hold the entire legal title to and
beneficial interest in all outstanding Stock (other than directors' qualifying
shares, if any, to the extent required by applicable law) of each Subsidiary,
in each case free and clear of all Liens.
Section 8.14. Further Assurances. The Company will, and will cause
each Subsidiary to, promptly take all such actions as the Required Holders may,
at any time or from time to time, reasonably request in order to (i) further
carry out and consummate the Overall Transaction or (ii) comply with or
accomplish the covenants and agreements of the Loan Parties in any of the Loan
Documents.
ARTICLE IX
NEGATIVE COVENANTS
Until payment in full of the Notes and all other Obligations, the
Company covenants and agrees as follows:
Section 9.01. Consolidated Indebtedness for Money Borrowed. The
Company will not permit Consolidated Indebtedness for Money Borrowed, as of the
last day of any Fiscal Quarter commencing on or after January 1, 1995, to be
greater than the amount determined by multiplying the Applicable Percentage for
such date
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times the sum of (a) Consolidated Indebtedness for Money Borrowed as of such
date and (b) Consolidated Tangible Net Worth as of such date. As used in this
Section 9.01, "Applicable Percentage" means the following:
<TABLE>
<CAPTION>
For the Fiscal Quarter Ending On Applicable Percentage
-------------------------------- ---------------------
<S> <C>
March 31, 1995 through September 30, 1997 57.5%
December 31, 1997 55%
March 31, 1998 through September 30, 1998 57.5%
December 31, 1998 55%
March 31, 1999 through September 30, 1999 55%
December 31, 1999 52.5%
March 31, 2000 through September 30, 2000 55%
December 31, 2000 52.5%
March 31, 2001 through September 30, 2001 55%
December 31, 2001 52.5%
March 31, 2002 through September 30, 2002 55%
December 31, 2002 52.5%
March 31, 2003 through September 30, 2003 55%
December 31, 2003 52.5%
March 31, 2004 through September 30, 2004 55%
December 31, 2004 52.5%
March 31, 2005 through September 30, 2005 55%
December 31, 2005 52.5%
March 31, 2006 through September 30, 2006 55%
December 31, 2006 52.5%
March 31, 2007 through September 30, 2007 55%
</TABLE>
Section 9.02. Consolidated Tangible Net Worth. The Company will not
permit Consolidated Tangible Net Worth at any time to be less than the sum of
(a) $86,000,000 plus (b) 50% of Consolidated Adjusted Net Income (but only if
positive) for each Fiscal Quarter ending after December 31, 1992.
Section 9.03. Current Assets to Current Liabilities Ratio. The
Company will not permit the ratio of (a) Consolidated Current Assets to (b)
Consolidated Current Liabilities to be less than 3.5 to 1 as of the last day of
any Fiscal Quarter commencing on or after January 1, 1995.
Section 9.04. Current Assets to Total Indebtedness Ratio. The Company
will not permit the ratio of (a) Consolidated Current Assets to (b)
Consolidated Current Liabilities plus Consolidated Funded Debt to be less than
1.25 to 1 as of the last day of any Fiscal Quarter commencing on or after
January 1, 1995. As used in this Section 9.04, "Consolidated Funded Debt"
means, at any time, Consolidated Indebtedness for Money Borrowed at
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such time, provided that in no event shall Consolidated Funded Debt include any
obligation included in Consolidated Current Liabilities.
Section 9.05. Inventory Turnover. The Company will not at any time
permit the ratio of (a) cost of goods sold by the Company and the Consolidated
Subsidiaries for the Computation Period (as shown on the consolidated
statements of income delivered by the Company pursuant to clause (a) or (b) of
Section 8.01 with respect to the Computation Period) to (b) the Average Monthly
Inventory for the Computation Period to be less than 1.65 to 1. As used in
this Section 9.05, (i) "Computation Period" means, at any time, the 12-month
period ended on the date of the most recent balance sheet delivered (or
required to be delivered) by the Company pursuant to clause (a) or (b) of
Section 8.01 and (ii) "Average Monthly Inventory" means, when used with
reference to any Computation Period, the amount determined by dividing (A) the
aggregate amounts of inventory appearing on the books of the Company and the
Consolidated Subsidiaries as of the last day of each calendar month within such
Computation Period by (B) twelve.
Section 9.06. Fixed Charge Coverage. The Company will not at any time
permit the ratio of (a) the sum of Consolidated Adjusted Net Income for the
Computation Period plus the aggregate amount of all taxes, rents, leases and
interest expenses deducted from gross income to obtain such Consolidated
Adjusted Net Income to (b) the aggregate amount of all such rents, leases and
interest expenses so deducted to be less than (i) 1.8 to 1 if the Computation
Period ends on or before December 31, 1995, (ii) 1.85 to 1 if the Computation
Period ends after December 31, 1995 but on or before December 31, 1996, and
(iii) 1.9 to 1 if the Computation Period ends after December 31, 1996. As used
in this Section 9.06, "Computation Period" means, at any time, the period of
four consecutive Fiscal Quarters ended on the date of the most recent balance
sheet delivered (or required to be delivered) by the Company pursuant to clause
(a) or (b) of Section 8.01.
Section 9.07. Restricted Payments. (a) The Company will not, and will
not permit any Subsidiary to, (i) declare or make any dividends or
distributions on any of its Stock (other than dividends payable in shares of
its Stock), (ii) purchase, redeem or acquire for value any of the Company's or
any Subsidiary's Stock, (iii) make any principal payment on (or make any
payment, transfer or deposit for the purpose of canceling, extinguishing,
satisfying or defeasing) any indebtedness of the Company which is subordinate
in right of payment to the Notes or any other Obligation, (iv) set aside funds
for any such purposes or (v) become liable to do any of the foregoing (in each
case, a "Restricted Payment") unless, immediately after giving effect thereto,
(A) no Default shall exist and (B) the aggregate amount of all Restricted
Payments made by the Company and all Subsidiaries since May 1, 1993 does not
exceed 20% of Consolidated Adjusted Net Income for the period commencing on
January 1, 1992.
(b) Notwithstanding the foregoing provisions of this Section 9.07,
the Company may, so long as no Default shall be in existence or shall result
therefrom, purchase, redeem or acquire shares of the Company's capital stock
with the net cash proceeds received by the Company during the immediately
preceding 18-month period from the sale of other shares of the Company's
capital stock, in which event both the receipt and expenditure of such proceeds
shall be excluded from any calculation under paragraph (a) above.
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(c) Nothing in this Section 9.07 shall prohibit any Subsidiary from
making any Restricted Payment to the Company or any Wholly-Owned Subsidiary,
and no such Restricted Payment shall be taken into account in any calculation
under paragraph (a) above.
Section 9.08. Limitation on Indebtedness. (a) The Company will not
incur, create, assume or have outstanding any indebtedness, except:
(1) (A) indebtedness of the Company arising out of this
Agreement and the other Loan Documents and (B) indebtedness of the
Company arising out of the 1993 Note Agreement and the other 1993 Loan
Documents;
(2) indebtedness of the Company arising out of the Bank Loan
Agreement;
(3) purchase money indebtedness (not to exceed $10,000,000
in the aggregate for the Company and all Subsidiaries at any time
outstanding);
(4) current liabilities for taxes and assessments incurred
in the ordinary course of business and not yet due, and other
liabilities for unpaid taxes being contested in good faith by the
obligor the payment of which is not at the time required by Section
8.03;
(5) current indebtedness (other than indebtedness for
borrowed money or purchase money indebtedness) for accounts payable or
other claims (including claims for labor, services, materials and
supplies) incurred in the ordinary course of business, provided that all
such accounts and claims shall be promptly paid and discharged when due
or in conformity with customary trade terms, except for those being
contested in good faith by the obligor and the payment of which is not
at the time required by Section 8.03;
(6) contingent liabilities resulting from the endorsement of
negotiable instruments in the ordinary course of business;
(7) indebtedness constituting Assurances of the Company
permitted by Section 9.09;
(8) indebtedness for borrowed money of the Company owing to
any Subsidiary, but only if permitted by Section 9.11;
(9) indebtedness secured by Liens described in clause (j) of
the definition of "Permitted Liens" in Section 2.01; and
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(10) indebtedness for borrowed money of the Company not
otherwise permitted by the foregoing provisions of this Section 9.08(a)
if (A) immediately after giving effect the incurrence or assumption
thereof by the Company, the Company is in compliance with Sections 9.01,
9.02, 9.03, 9.04, 9.05 and 9.06 and (B) at the time of the incurrence or
assumption thereof by the Company and immediately thereafter, no Default
shall exist.
(b) The Company will not permit any Subsidiary to incur, create,
assume or have outstanding any indebtedness, except:
(1) (A) indebtedness of Subsidiaries arising out of this
Agreement and the other Loan Documents and (B) indebtedness of
Subsidiaries arising out of the 1993 Guaranty;
(2) purchase money indebtedness (not to exceed $10,000,000
in the aggregate for the Company and all Subsidiaries at any time
outstanding);
(3) current liabilities for taxes and assessments incurred
in the ordinary course of business and not yet due, and other
liabilities for unpaid taxes being contested in good faith by the
obligor the payment of which is not at the time required by Section
8.03;
(4) current indebtedness (other than indebtedness for
borrowed money or purchase money indebtedness) for accounts payable or
other claims (including claims for labor, services, materials and
supplies) incurred in the ordinary course of business, provided that all
such accounts and claims shall be promptly paid and discharged when due
or in conformity with customary trade terms, except for those being
contested in good faith by the obligor and the payment of which is not
at the time required by Section 8.03;
(5) contingent liabilities resulting from the endorsement of
negotiable instruments in the ordinary course of business;
(6) indebtedness constituting Assurances of Subsidiaries
permitted by Section 9.09;
(7) indebtedness for borrowed money of any Subsidiary owing
to the Company or to any other Subsidiary, but only if permitted by
Section 9.11;
(8) indebtedness secured by Liens described in clause (j) of
the definition of "Permitted Liens" in Section 2.01;
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(9) other indebtedness of any Subsidiary not otherwise
permitted by the foregoing provisions of this Section 9.08(b), but (A)
only if such indebtedness is outstanding on the date hereof and
described in Schedule VIII and (B) excluding any extensions, renewals
and rearrangements of such indebtedness;
(10) (A) in the case of Pantbelaning, the Pantbelaning
Indebtedness, (B) in the case of Pantbelaning, Thomas Hjelm, and the
Thomas Hjelm Affiliates, Indebtedness for Money Borrowed (not to exceed
SEK 55,000,000 in the aggregate at any time outstanding) incurred after
the date hereof pursuant to a credit facility to be extended by one or
more banks, but only if no Default shall be in existence at the time of
the incurrence of such indebtedness, and (C) in the case of Harvey &
Thompson Limited, the Harvey & Thompson Indebtedness; provided that the
Indebtedness for Money Borrowed described in clauses (A), (B) and (C)
described above may be extended, renewed or refinanced so long as there
is no increase in principal amount of such Indebtedness for Money
Borrowed and so long as no Default shall be in existence or shall occur
upon such extension, renewal or refinancing; and
(11) in the case any Wholly-Owned Subsidiary acquired by the
Company after the date hereof in accordance with Section 9.20(a)(1), all
indebtedness of such Subsidiary outstanding on the date of its
acquisition by the Company, but (i) only if the amount of such
indebtedness, when aggregated with the total amount of all other
indebtedness of all Persons (including such Wholly-Owned Subsidiary)
outstanding pursuant to this clause (11), does not exceed $750,000, (ii)
only if such indebtedness was incurred, created or assumed by such
Subsidiary prior to its acquisition by the Company and not in
anticipation of, or in connection with, such acquisition and (iii)
excluding any extensions, renewals and rearrangements of such
indebtedness.
Section 9.09. Assurances. The Company will not, and will not permit
any Subsidiary to, enter into, assume or become or be liable in respect of any
Assurance, except for (i) Assurances by the Company of indebtedness of
Subsidiaries permitted by Section 9.08(b), (ii) Assurances by one or more
Guarantors of indebtedness (other than the Obligations) of the Company
permitted by Section 9.08(a) but only if and so long as the Guaranty is in full
force and effect, (iii) Assurances of the Guarantors evidenced by the Guaranty,
(iv) Assurances by the Company and the Guarantors of the Pantbelaning
Indebtedness, and (v) other Assurances not otherwise permitted by this Section
9.09 but only to the extent that the aggregate amount of all indebtedness
relating to such Assurances does not exceed $500,000.
Section 9.10. Negative Pledge. The Company will not, and will not
permit any Subsidiary to, assume, create or suffer to exist any Lien upon any
of its Properties (whether now owned hereafter acquired) except Permitted
Liens.
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Section 9.11. Limitation on Investments. The Company will not, and
will not permit any Subsidiary to, make or have outstanding any Investments in
any Person, except for:
(a) pawn transactions and pawn loans made in the ordinary
course of business;
(b) travel advances and other similar advances made to
employees in the ordinary course of business;
(c) advances and extensions of credit (in the form of
accounts receivable) made to customers in the ordinary course of
business;
(d) advances and deposits made by the Company or any
Subsidiary in the ordinary course of business to contractors performing
services for the Company or such Subsidiary, as the case may be;
(e) in the case of the Company, Investments in Wholly-Owned
Subsidiaries (including Wholly-Owned Subsidiaries acquired after the
date hereof in accordance with Section 9.20(a)(1)) resulting from its
acquisition or ownership of Stock of, or capital contributions to, such
Subsidiaries but, in each case, only to the extent not prohibited by
Section 9.20;
(f) in the case of any Subsidiary, Investments in the
Company;
(g) in the case of any Subsidiary, Investments in
Wholly-Owned Subsidiaries (including Wholly-Owned Subsidiaries acquired
after the date hereof in accordance with Section 9.20(a)(1)) resulting
from its acquisition or ownership of Stock of, or capital contributions
to, such Wholly-Owned Subsidiaries but, in each case, only to the extent
not prohibited by Section 9.20;
(h) loans and advances by the Company to any Wholly-Owned
Subsidiary, provided that, in the case of any such loan or advance made
after the date hereof, no Default shall exist either immediately before
or after giving effect thereto;
(i) loans and advances made by any Subsidiary to the Company
or to any Wholly-Owned Subsidiary;
(j) Temporary Cash Investments;
(k) other Investments not otherwise permitted by this
Section 9.11, but only if owned by the Company and/or any Subsidiary on
the date hereof and described in Schedule XI; and
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(l) other Investments made after the date hereof and not
otherwise permitted by this Section 9.11, provided that neither the
Company nor any Subsidiary shall make any Investment under this clause
(l) if a Default shall be in existence immediately before or after such
Investment or if the amount of such Investment, when aggregated with the
total amount of all other Investments then outstanding under this clause
(l), exceeds 7.5% of Consolidated Tangible Net Worth as of the date of
such Investment.
Section 9.12. Alteration of Contracts, Etc. The Company will not, and
will not permit any Subsidiary to, (a) cancel, terminate, surrender, release,
alter, amend, modify or supplement any Applicable Contract or Applicable
Permit, (b) waive timely performance of any of the provisions of any Applicable
Contract or Applicable Permit or (c) consent or agree to, or permit, any of the
foregoing, provided that any such action may be taken if the Company shall
determine in good faith that such action could not reasonably be expected to
have a Material Adverse Effect.
Section 9.13. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into any transaction with, or pay any
management fees to, any of its Affiliates except in the ordinary course of
business and then only upon terms that are no less favorable to Company or such
Subsidiary, as the case may be, than would be obtainable at the time in
arms'-length transactions with Persons which are not Affiliates of the Company
or such Subsidiary, as the case may be, provided that this Section 9.13 shall
not apply to transactions between the Company and any Wholly-Owned Subsidiary
or to any management fees payable by any Subsidiary to the Company or any
Wholly-Owned Subsidiary.
Section 9.14. Limitation on Sale or Issuance of Subsidiary Stock. (a)
The Company will not permit any Subsidiary to issue or sell any shares of Stock
(or any securities convertible into or exchangeable for or carrying rights to
subscribe for shares of Stock) of such Subsidiary to any Person other than the
Company or a Wholly-Owned Subsidiary.
(b) The Company will not (i) sell, transfer or otherwise dispose of
any shares of Stock (or any securities convertible into or exchangeable for or
carrying rights to subscribe for shares of Stock) of any Subsidiary or (ii)
permit any Subsidiary to sell, transfer or otherwise dispose of any shares of
Stock (or any securities, convertible into or exchangeable for or carrying
rights to subscribe for shares of Stock) of any other Subsidiary.
Section 9.15. Limitation on Sale of Properties. (a) The Company will
not, and will not permit any Subsidiary to, sell, assign, convey, exchange,
lease or otherwise dispose of any of its Properties (including accounts
receivable and pawn loans), whether now owned or hereafter acquired, except in
the ordinary course of its business; provided, however, that the Company and
the Subsidiaries may sell Properties having an aggregate net book value (at the
time of the disposition thereof) not in excess of $5,000,000 during any Fiscal
Year and, provided further, that this Section 9.15 shall not operate to prevent
the transactions permitted by Section 9.14 or Section 9.16 or any sale,
transfer or lease of Property by a Wholly-Owned Subsidiary to the Company or to
another Wholly-Owned Subsidiary and, provided further, that the Company will
not, and will not permit any Subsidiary to,
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sell, assign, discount or otherwise dispose of any accounts receivable, except
in the ordinary course of business consistent with the Company's collection
practices as in effect from time to time and not a part of a financing.
(b) Nothing in this Section 9.15 shall prohibit the Company, so
long as no Default shall have occurred and be continuing, from selling the real
estate (including improvements thereon) currently owned by the Company at 500
Franklin Avenue, 209 South Fifth Street and 225 South Fifth Street, Waco,
Texas, and in no event shall the net book value of such Property be taken into
account in any computation under this Section 9.15.
The Company will not, and will not permit any Subsidiary to, dissolve or
liquidate or consolidate or merge with, or sell, assign, convey, exchange,
lease or otherwise dispose of its Properties as an entirety or substantially as
an entirety to, any other Person except that:
(a) any corporation may consolidate with or merge into the
Company if (i) the Company shall be the surviving corporation, (ii)
immediately after giving effect to such transaction, (A) no Default or
Event of Default shall have occurred and be continuing, (B) the Company
is solvent and no less creditworthy than immediately prior to the
consummation of such transaction and (C) the consummation of such
transaction did not have, and could not reasonably be expected to have,
a Material Adverse Effect and (iii) each Holder shall have received an
Officers' Certificate, dated not more than 10 days prior to the
effective date of such transaction, describing such transaction and
stating that such transaction is permitted by this Section 9.16;
(b) the Company may consolidate with or merge into, or sell,
assign, convey, exchange, lease or otherwise dispose of its Properties
as an entirety or substantially as an entirety to, any Person if (i)
such Person shall be a solvent corporation organized under the laws of
any state of the United States of America, (ii) such Person shall, by
written instrument in form and substance acceptable to the Required
Holders, expressly and unconditionally assume, agree to pay and perform
all the Obligations and to be bound by this Agreement and the other Loan
Documents the same as if such Person had originally executed this
Agreement in place of the Company and had been the original maker of the
Notes, (iii) immediately after giving effect to such transaction, (A) no
Default or Event of Default shall have occurred and be continuing, (B)
such Person is no less creditworthy than was the Company immediately
prior to the consummation of such transaction and (C) the consummation
of such transaction did not have, and could not be reasonably expected
to have, a Material Adverse Effect and (iv) each Holder shall have
received an Officers' Certificate, dated not more than ten days prior to
the effective date of such transaction, describing such transaction and
stating that such transaction is permitted by this Section 9.16;
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(c) any Wholly-Owned Subsidiary may consolidate with or
merge into, or sell, assign, convey, exchange, lease or otherwise
dispose of its Properties as an entirety or substantially as an entirety
to, the Company or any other Wholly-Owned Subsidiary; and
(d) any Wholly-Owned Subsidiary may consolidate or merge
with any Person solely for the purpose of the Company's acquisition of
such Person in accordance with Section 9.20(a)(1).
Section 9.17. Change of Name, Fiscal Year and Method of Accounting.
The Company will not, and will not permit any Subsidiary to, (i) change its
name, (ii) change its fiscal year, (iii) change its principal accounting firm
to an accounting firm other than the Independent Accountants or (iv) change its
method of accounting unless required under GAAP.
Section 9.18. Lines of Business. The Company will not, and will not
permit any Subsidiary to, engage in any business other than the pawn shop
business and related activities.
Section 9.19. Amendment of Organizational Documents. The Company will
not, and will not permit any Subsidiary to, amend its Organizational Documents
if such action could reasonably be expected to have a Material Adverse Effect.
Section 9.20. Limitation on Acquisition of New Subsidiaries. (a) The
Company will not, and will not permit any Subsidiary to, (i) acquire any Stock
of any Person, (ii) enter into any partnership or joint venture or (iii) take
any action which would result in the Company having any Subsidiary other than
those listed in Schedule II except that, from time to time, the Company may:
(1) acquire (whether by purchase, merger or other similar
transaction) any Person, but only if:
(A) immediately after giving effect to such acquisition,
such Person shall constitute a Wholly-Owned Subsidiary;
(B) immediately after giving effect to such acquisition, no
Default shall be in existence, and the consummation of
such acquisition did not have, and could not be
reasonably expected to have, a Material Adverse Effect;
(C) each Holder shall have received an Officers'
Certificate, dated not more than ten days prior to the
effective date of such acquisition, describing such
acquisition (including the name of such Person and the
business conducted by it) and stating that such
acquisition is permitted by this Section 9.20, which
Officers' Certificate shall be accompanied by complete
and accurate copies of the Organizational Documents of
such Person; and
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(D) promptly (and in any event within 15 days) after the
consummation of such acquisition, such Person shall duly
authorize, execute and deliver to each Holder an
instrument in writing pursuant to which such Person
agrees to become a Guarantor under, and to be bound as a
Guarantor by the terms of, the Guaranty and the
Subrogation and Contribution Agreement; and
(2) create or form a new corporation or limited partnership
(the "New Entity") and thereupon cause the New Entity to become a
Wholly-Owned Subsidiary, but only if:
(A) no Default shall exist immediately after the New Entity
becomes a Subsidiary;
(B) subject to paragraph (b) below, promptly (and in any
event within 15 days) after its creation or formation,
the New Entity shall duly authorize, execute and deliver
to each Holder an instrument in writing pursuant to
which the New Entity agrees to become a Guarantor under,
and to be bound as a Guarantor by the terms of, the
Guaranty and the Subrogation and Contribution Agreement;
(C) except as required by clause (B) above, the New Entity
shall not conduct any business prior to becoming a
Subsidiary; and
(D) subject to paragraph (b) below, promptly (and in any
event within 15 days) after the creation or formation of
the New Entity, the Company shall deliver to each Holder
an Officers' Certificate notifying the Holders of the
formation or creation of the New Entity, which Officers'
Certificate shall (i) specify the name of the New Entity
and the jurisdiction of its incorporation or formation,
(ii) describe, in reasonable detail, the business
proposed to be conducted by the New Entity, (iii) state
that the Company is authorized to form or create the New
Entity and to cause it to become a Subsidiary in
accordance with this Section 9.20 and (iv) be
accompanied by complete and accurate copies of the
Organizational Documents of the New Entity.
(b) In no event shall any New Entity created or formed pursuant to
paragraph (a)(2) above be required to execute and deliver a written instrument
with respect to the Guaranty as contemplated by clause (B) thereof nor shall
the Company be required to deliver the documents described with respect to such
New Entity in clause (D) thereof until the earlier of (i) the date on which the
Company makes an Investment in such New Entity (other than the incurrence of
routine organizational expenses and other than capital contributions totalling
less than $5,000) and (ii) the date on which such New Entity first conducts
business.
(c) Nothing in this Section 9.20 shall operate to prevent any
transaction permitted by Section 9.11 or Section 9.16.
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(d) If any Person becomes a Subsidiary at any time after the date
hereof, such Person shall be deemed to have incurred or made, as the case may
be, at the time it becomes a Subsidiary (i) all Assurances, indebtedness,
loans, advances and Investments of such Person which are outstanding at such
time and (ii) all Liens then in effect with respect to any of its Properties.
Section 9.21. ERISA. The Company will not, and will not permit any
Subsidiary or Related Person to,
(a) engage in any transaction in connection with which the
Company or any Subsidiary could be subject to either a civil penalty
assessed pursuant to section 502(i) of ERISA or a tax imposed by section
4975 of the Code, terminate any Plan (other than a multiemployer plan)
in a manner, or take any other action with respect to any such Plan,
which could result in any liability of the Company or any Subsidiary to
the Pension Benefit Guaranty Corporation, fail to make full payment when
due of all amounts which, under the provisions of applicable law, or the
terms of any Plan or collective bargaining agreement, the Company or any
Subsidiary is required to pay as contributions thereto, or permit to
exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan (other than a multiemployer plan), if, in any such
case, such penalty or tax or such liability, or the failure to make such
payment, or the existence of such deficiency, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(b) permit the aggregate present value of all benefit
liabilities under all Plans maintained at such time by the Company, any
Subsidiary and any Related Persons (other than multiemployer plans) that
are subject to Title IV of ERISA to exceed the aggregate current value
of the assets of such Plans allocable to such benefit liabilities by
more than $500,000; or
(c) permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to multiemployer plans
incurred by the Company, the Subsidiaries and Related Persons to exceed
$250,000.
As used in this Section 9.21, (i) the term "accumulated funding deficiency" has
the meaning specified in section 302 of ERISA and section 412 of the Code, (ii)
the terms "present value," "benefit liabilities" and "current value" have the
respective meanings specified in sections 3 and 4001 of ERISA and (iii)
"multiemployer plan" means a Plan which is a "multiemployer plan" as defined in
section 4001(a)(3) of ERISA.
Section 9.22. No Inconsistent Agreements. The Company will not enter
into, assume or otherwise become obligated under any agreement or instrument
which restricts the ability of the Company to consummate the Private Placement
or perform its obligations under any Loan Document.
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Section 9.23. Incorporation of More Restrictive Covenants. In the
event the Bank Loan Agreement or any renewal, modification, or replacement
thereof at any time includes a financial covenant or restriction similar to the
covenants and restrictions set forth in Section 9.01, 9.05 or 9.06 that is more
restrictive than the levels set forth in said Section 9.01, 9.05 and 9.06 (the
"More Restrictive Covenant"), the Company shall, immediately upon such
inclusion of the More Restrictive Covenant, notify the Purchaser and furnish a
verbatim statement of the More Restrictive Covenant. Such notification shall
also inform the Purchaser of its right to elect in writing to substitute such
More Restrictive Covenant as described below and shall state the date by which
such election must be made in accordance with this Section 9.23. The Purchaser
may elect to substitute the More Restrictive Covenant for the corresponding
Section 9.01, 9.05 or 9.06 by notifying the Company in writing within sixty
(60) days after receipt of the notice referred to in the preceding sentence.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. Events of Default. If any of the following events (each
such event being an "Event of Default") shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise):
(a) the Company shall fail to pay when due under this
Agreement any principal of or premium, if any, on any Note;
(b) any Loan Party shall fail to pay any interest, premium
or other Obligation when due under any Loan Document, and such failure
shall have continued for five days; or
(c) any representation or warranty made by or on behalf of
any Loan Party in any Loan Document shall prove to be untrue or
inaccurate as of the date hereof or as of the Closing Date; or
(d) any representation or warranty made by or on behalf of
any Loan Party in any certificate, statement or other writing furnished
to any Holder after the date hereof in connection with or pursuant to
any Loan Document shall prove to be untrue or inaccurate in any material
respect as of the date on which such representation or warranty is made;
or
(e) the Company shall fail to perform or observe any
covenant or agreement contained in Section 8.01(h), Sections 9.01
through 9.07 or Section 9.14; or
(f) the Company shall fail to perform or observe any other
covenant, agreement, term or condition contained in any Loan Document
and such failure shall not be remedied within 30 consecutive days after
the earlier of (i) the date on which such failure became known to any
Responsible Officer of the
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Company and (ii) the date on which written notice thereof shall have
been received by the Company from any Holder; or
(g) any Guarantor shall fail to perform or observe any
agreement contained in its Guaranty; or
(h) any Loan Party, Harvey & Thompson Limited, Pantbelaning,
Thomas Hjelm or any Thomas Hjelm Affiliate shall (i) default in any
payment of principal of or interest on any other indebtedness in excess
of $500,000 beyond any period of grace provided with respect thereto or
(ii) fail to perform or observe any other covenant or agreement
contained in any agreement under which any such indebtedness is created
or outstanding within any applicable grace period provided therein (or
if any other event thereunder or under any such agreement shall occur
and be continuing) and the effect of such failure or other event is (A)
to cause such indebtedness to become due prior to its stated maturity or
(B) to permit the holder or holders of such indebtedness (or any Person
acting on behalf of such holder or holders) to cause such indebtedness
to become due prior to its stated maturity; or
(i) the Company or any Subsidiary shall make an assignment
for the benefit of creditors or shall fail to generally pay its debts as
such debts become due; or
(j) any decree or order for relief in respect of the Company
or any Subsidiary shall be entered under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law, whether now or hereafter in effect, of
any jurisdiction (herein called the "Bankruptcy Law") and such decree or
order remains unstayed and in effect for more than 60 days; or
(k) the Company or any Subsidiary petitions or applies to
any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or similar
official of such Person, or of any substantial part of the assets of
such Person, or commences a voluntary case under the federal Bankruptcy
Law or any proceedings relating to such Person under the Bankruptcy Law
of any other jurisdiction; or
(l) any such petition or application is filed, or any such
proceedings as described in clause (k) above are commenced, against the
Company or any Subsidiary and such Person by any act indicates its
approval thereof, consent thereto or acquiescence therein; or
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(m) an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order, judgment
or decree remains unstayed and in effect for more than 60 consecutive
days; or
(n) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing the
dissolution, winding-up or liquidation of such Person and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(o) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of such Person which requires the divestiture of assets and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(p) any final judgment or final judgments for the payment of
money in excess of the sum of $500,000 in the aggregate shall be
rendered against the Company or any Subsidiary and such judgment or
judgments shall not be satisfied, discharged or stayed (with sufficient
reserves having been set aside by the Company or such Subsidiary to pay
such judgment or judgments) at least ten days prior to the date on which
any of its assets could be lawfully sold to satisfy such judgment; or
(q) this Agreement or any other Loan Document shall at any
time, for any reason, cease to be in full force and effect or shall be
declared to be null and void in whole or in any material part by the
final judgment of any court or other Governmental Authority having
jurisdiction in respect thereof, or the validity or the enforceability
of this Agreement or any other Loan Document shall be contested by or on
behalf of any Loan Party, or any Loan Party shall renounce this
Agreement or any other Loan Document, or deny that it is bound by the
terms hereof or thereof or has any further liability hereunder or
thereunder; or
(r) the Company or any Subsidiary shall have (i) concealed
or removed, or permitted to be concealed or removed, any part of its
Property with the intent to hinder, delay or defraud its creditors or
any of them or (ii) made or suffered a transfer under any bankruptcy,
fraudulent conveyance or similar law;
then (i) if such event is an Event of Default specified in clauses (i), (j),
(k) (l) or (m) of this Section 10.01, all of the Notes shall thereupon be and
become automatically due and payable together with interest accrued thereon and
together with the Make-Whole Premium, if any, with respect to each Note,
without presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived by
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the Company, (ii) if such event is an Event of Default specified in clause (a)
or clause (b) (but only with respect to the failure of any Loan Party to pay
interest) of this Section 10.01, any Holder may at its option, by notice in
writing to the Company, declare all of the Notes held by such Holder to be, and
all of such Notes shall thereupon be and become, immediately due and payable
together with interest accrued thereon and together with the Make-Whole
Premium, if any, with respect to each such Note, without presentment, demand,
protest, notice of intent to accelerate or other notice of any kind, all of
which are hereby waived by the Company, and (iii) if such event is any other
continuing Event of Default, the Required Holders may at their option, by
notice in writing to the Company, declare all of the Notes to be, and all of
the Notes shall thereupon be and become, immediately due and payable together
with interest accrued thereon and together with the Make-Whole Premium, if any,
with respect to each Note, without presentment, demand, protest, notice of
intent to accelerate or other notice of any kind, all of which are hereby
waived by the Company; provided that in the case of each acceleration of the
Notes solely on account of any Default (other than a payment default) described
in clause (c), (d), (e), (f), (g), (h) or (p) of this Section 10.01, the
Make-Whole Premium, if any, with respect to each Note shall be due and payable
upon such acceleration only if such Default is the result of an intentional or
willful act of the Company or any Affiliate of the Company.
At any time after the principal of, and interest accrued on, any or all of
the Notes are declared due and payable, the Holders of at least 66-2/3% of the
aggregate principal amount of the Notes at the time outstanding may at their
option, by written notice to the Company, rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, the principal of and premium, if any, on any Notes which
have become due otherwise than by reason of such declaration, and interest on
such overdue principal and premium and (to the extent permitted by applicable
law) any overdue interest in respect of such Notes at a rate per annum from
time to time equal to the Default Rate, (b) the Company has paid all sums paid
or advanced by any Holder under any Loan Document (other than the loans
evidenced by the Notes), (c) all Defaults, other than nonpayment of amounts
which have become due solely by reason of such declaration, have been cured or
waived pursuant to Section 11.03, and (d) no judgment or decree has been
entered for the payment of any monies due pursuant to the Notes or any other
Loan Document; but no such rescission and annulment shall extend to or affect
any subsequent Default or impair any right consequent thereon.
Section 10.02. Other Remedies. If any Event of Default shall occur and
be continuing, any Holder may proceed to protect and enforce its rights under
this Agreement and the other Loan Documents by exercising such remedies as are
available to such Holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or any other
Loan Document or in aid of the exercise of any power granted in this Agreement
or in any other Loan Document, or such Holder may proceed to enforce the
payment of all Obligations or to enforce any other legal or equitable right of
such Holder.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Note Payments. (a) The Company agrees that, so long as
the Purchaser or its nominee shall hold any Note, it will make payments of
principal thereof (and premium if any, and interest thereon) which comply with
the terms of this Agreement, by electronic funds transfer to the account or
accounts of the Purchaser as specified in Schedule I or such other account or
accounts in the United States of America as the Purchaser may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment.
(b) The Purchaser agrees that, before disposing of any Note, it
will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest
thereon has been paid, provided that the failure to so endorse or any error in
so endorsing any such amount on such schedule (or on a continuation thereof)
shall not limit or otherwise affect the obligation of the Company or any other
Loan Party to pay the Obligations.
(c) The Company agrees to afford the benefits of paragraph (a) of
this Section 11.01 to any Transferee which shall have made the same agreement
as the Purchaser has made in paragraph (b) of this Section 11.01.
Section 11.02. Expenses. (a) Whether or not the transactions
contemplated by this Agreement shall be consummated, the Company will pay and
will indemnify and hold harmless the Purchaser and each other Indemnitee in
respect of all reasonable expenses in connection with such transactions and in
connection with any amendments or waivers (whether or not the same become
effective) under or in respect of this Agreement, the Notes or any other Loan
Document, including: (i) the reasonable costs and expenses of preparing and
reproducing this Agreement, the Notes and the other Loan Documents, of
furnishing all opinions of counsel referred to herein and all certificates on
behalf of the Company and the Subsidiaries, and of the performance of and
compliance with all agreements and conditions contained herein and in the other
Loan Documents on the part of the Company and the Subsidiaries to be performed
or complied with, (ii) the cost of delivering to the principal office of the
Purchaser, insured to the satisfaction of the Purchaser, the Notes originally
issued to the Purchaser hereunder and any Notes delivered to the Purchaser upon
any substitution of such Notes and of the Purchaser delivering any Notes,
insured to the satisfaction of the Purchaser, upon any such substitution, (iii)
the reasonable fees, expenses and disbursements of special counsel to the
Purchaser in connection with such transactions (including the costs and
expenses incurred in connection with obtaining a private placement number) and
any such amendments or waivers (whether or not such amendments or waivers
become effective) and (iv) the reasonable costs and expenses, including
attorneys' fees, incurred by the Purchaser or any Transferee in enforcing any
rights under this Agreement or the other Loan Documents or in responding to any
subpoena or any other legal process issued in connection with this Agreement,
the other Loan Documents or the Overall Transaction or by reason of the
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Purchaser's or any Transferee's having acquired any Note, including reasonable
costs and expenses incurred in any bankruptcy case.
(b) The Company also will pay, and will indemnify, and hold the
Purchaser and each other Indemnitee harmless from, all claims in respect of the
fees, if any, of brokers and finders engaged by or on behalf of the Company.
(c) In furtherance of the foregoing, at the Closing the Company
will pay the reasonable fees and disbursements of Chapman and Cutler, special
counsel to the Purchaser, which are reflected as unpaid in the statement of
special counsel to the Purchaser delivered to the Company at or prior to the
time of Closing.
(d) The obligations of the Company under this Section 11.02 shall
survive the transfer of any Note or portion thereof or interest therein by the
Purchaser or any Transferee and the payment of the Notes.
(e) In the event any Holder proposes to engage special counsel in
connection with any amendments or waivers requested by the Company under or in
respect of this Agreement or any other Loan Document, such Holder agrees to use
reasonable efforts to cause such special counsel to furnish the Company with an
estimate of the total fees, expenses and disbursements to be incurred by such
special counsel in connection with such engagement, provided that the failure
(for any reason) of such special counsel to provide such an estimate (nor any
error therein or deviation therefrom) shall not relieve the Company of any of
its obligations under this Section 11.02.
Section 11.03. Consent to Waivers and Amendments. (a) This Agreement
and the other Loan Documents may be amended, and the Company may take any
action herein or therein prohibited, or omit to perform any act herein or
therein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holders
except that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement or any other Loan
Document shall change the maturity of any Note, or change the principal of, or
the rate or time of payment of interest or any premium payable with respect to
any Note, or affect the time, amount or allocation of any required prepayments,
or alter or amend the right of any Holder to declare all of the Notes held by
such Holder to be due and payable in accordance with the provisions of Section
10.01 or change or modify any of the provisions of this Section 11.03. Each
Holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this Section 11.03, whether or not such Note shall have
been marked to indicate such consent, but any Notes issued thereafter may bear
a notation referring to any such consent.
(b) Executed or true and correct copies of any consent, waiver and
amendment effected pursuant to the provisions of this Section 11.03 shall be
delivered by the Company to each Holder forthwith following the date on which
the same shall have been executed and delivered by the Required Holders.
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(c) No course of dealing between the Company and the Holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any Holder of such Note.
Section 11.04. Solicitation of Holders. The Company will not solicit,
request or negotiate for or with respect to any proposed consent, waiver or
amendment of any of the provisions of this Agreement or any other Loan Document
unless each Holder shall concurrently be informed thereof in writing by the
Company and shall be afforded the opportunity to consider the same and shall be
supplied by the Company with sufficient information to enable it to make an
informed decision with respect thereto. The Company will not pay or cause to
be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Holder as consideration for or as an
inducement to the entering into by any such Holder of any waiver or amendment
of any of the terms and provisions of this Agreement or any other Loan Document
unless such remuneration is concurrently paid, on the same terms, ratably to
each Holder.
(a) The Notes are issuable as registered notes without coupons in
minimum denominations equal to $2,000,000 (except as may be necessary to
reflect any principal amount not evenly divisible by $2,000,000). The Company
shall keep at its principal executive office a register in which the Company
shall provide for the registration of Notes and of transfers of Notes. Subject
to paragraph (d) below, upon surrender for registration of transfer of any Note
at the principal executive office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of the designated Transferee
or Transferees. Every Note surrendered for registration of transfer shall be
duly endorsed, or be accompanied by a written instrument of transfer duly
executed, by the Holder of such Note, or such Holder's attorney, duly
authorized in writing.
(b) At the option of any Holder, any Note held by such Holder may
be exchanged for other Notes of like tenor and of any authorized denominations,
of a like aggregate principal amount, upon surrender of the Note to be
exchanged at the principal office of the Company. Whenever any Notes are so
surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the Holder making the exchange is entitled to receive.
(c) Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were called by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the Holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any
such loss, theft or destruction, upon receipt of such Holder's unsecured
indemnity agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of
like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
(d) The Purchaser agrees, to the extent permitted by applicable
law, that it will not transfer any Notes except as follows:
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(i) the Purchaser may transfer some (but not all) of the
Notes to not more than two Transferees,
(ii) the Purchaser may at any time transfer all of the Notes
then held by it to any single Transferee, and
(iii) the Purchaser may at any time transfer all or a part of
the Notes then held by it to one or more Affiliates of the Purchaser;
provided, however, that it shall be a condition to any transfer pursuant to
clause (i) or (ii) above, as well as any subsequent transfer of a Note by a
Transferee, that each Transferee executes and delivers to the Company an
instrument in writing whereby such Transferee agrees that it will not transfer
to any Person (other than an Affiliate of such Transferee) less than all of the
Notes held by such Transferee and, provided further, that it shall be a
condition to any transfer to an Affiliate of the Purchaser pursuant to clause
(iii) above that such Affiliate executes and delivers to the Company an
instrument in writing whereby such Affiliate agrees that the transfer
restrictions contained in this paragraph (d) shall be applicable to such
Affiliate the same as if such Affiliate were the Purchaser.
Section 11.06. Persons Deemed Owners. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered in accordance with Section 11.05 as the owner and Holder of
such Note for the purpose of receiving payment of principal of and premium, if
any, and interest on such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be affected by
notice to the contrary.
Section 11.07. Reliance on and Survival of Representations and
Warranties. (a) All of the representations and warranties of the Loan Parties
contained in the Loan Documents or in any certificates or other instruments
delivered by any Loan Party at or after the Closing pursuant to any Loan
Document shall (i) survive the execution and delivery of this Agreement, the
Notes and the other Loan Documents, the transfer by the Purchaser of any Note
or portion thereof or interest therein and the payment of any Note, and may be
relied upon by the Purchaser or any Transferee, regardless of any investigation
made at any time by or on behalf of the Purchaser, any Transferee or any other
Person and (ii) be deemed to be material and to have been relied upon by each
Holder, notwithstanding any investigation heretofore or hereafter made by or on
behalf of any Holder.
(b) All representations, warranties and covenants contained herein
made by the Purchaser or any Holder shall survive the execution and delivery of
this Agreement, the Notes and the other Loan Documents, and may be relied upon
by the Company and its successors and assigns. No Holder (including the
Purchaser) shall be responsible for the truth, correctness or performance of
the representations or warranties of the Company, the Guarantors or any other
Holder (including any Transferee).
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Section 11.08. Successors and Assigns. All covenants and other
agreements in this Agreement contained by or on behalf of either of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto (including, without limitation, any Transferee)
whether so expressed or not. Each Transferee, by taking any Note, shall be
deemed to have made the representation contained in Part 1 of Schedule XII and
at least one of the representations contained in Part 2 of Schedule XII and to
have agreed to be bound by the terms and conditions of this Agreement.
Section 11.09. Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (a) if to the Purchaser, addressed to it at
the address specified for such communications in Schedule I, or at such other
address as the Purchaser shall have specified to the Company in writing, (b) if
to any other Holder, addressed to such other Holder at such address as such
other Holder shall have specified to the Company in writing or, if any such
other Holder shall not have so specified an address to the Company, then
addressed to such other Holder in care of the last holder of such Note which
shall have so specified an address to the Company and (c) if to the Company,
addressed to it at 1600 West 7th Street, Fort Worth, Texas 76102-2599,
Attention: President, or at such other address as the Company shall have
specified to each Holder in writing.
Section 11.10. Substitution of Purchaser. The Purchaser shall have the
right, by written notice to the Company, to substitute any one of its
Affiliates as the purchaser of the Notes, which notice shall be signed by both
the Purchaser and such Affiliate and shall contain such Affiliate's agreement
to be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representation contained in
Part 1 of Schedule XII and of at least one of the representations set forth in
Part 2 of Schedule XII. Upon receipt of such notice, wherever the word
"Purchaser" is used in this Agreement (other than in this Section 11.10) or any
other Loan Document or certificate, opinion or other instrument delivered or to
be delivered pursuant hereto or thereto, such word shall be deemed to refer to
such Affiliate in lieu of the Purchaser. In the event such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
the Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "Purchaser" is used in
this Agreement or any other Loan Document or certificate, opinion or other
instrument delivered or to be delivered pursuant hereto or thereto, such word
shall no longer be deemed to refer to such Affiliate, but shall refer to the
Purchaser, and the Purchaser shall have all the rights of an original Holder of
the Notes under this Agreement.
Section 11.11. Satisfaction Requirement. If any agreement, certificate
or other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchaser or to the Required
Holders, the determination of such satisfaction shall be made by the Purchaser
or the Required Holders, as the case may be, in the sole and exclusive judgment
of the Person or Persons making such determination unless, by the terms of this
Agreement, such matter is required to be reasonably satisfactory to the
Purchaser or to the Required Holders, as the case may be, in which event the
determination of such satisfaction shall be made by the Purchaser or the
Required Holders, as the case may be, in the reasonable judgment of the Person
or Persons making such determination.
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<PAGE> 65
Section 11.12. Independence of Covenants. All covenants contained in
this Agreement shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that such
action or condition would be permitted by an exception to, or otherwise be
within the limitations of, another covenant shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
Section 11.13. Remedies Cumulative. No right, power or remedy granted
under any Loan Document is intended to be exclusive, but each shall be
cumulative and in addition to any other rights, powers or remedies referred to
in such Loan Document or otherwise available at law or in equity and the
exercise or beginning of exercise by any party hereto of any one or more of
such rights, powers or remedies shall not preclude the simultaneous or later
exercise by such party of any or all such other rights, powers or remedies.
Section 11.14. Reproduction of Documents. This Agreement, the Notes,
the other Loan Documents and all documents relating hereto and thereto,
including (a) consents, waivers and notifications which may hereafter be
executed, (b) documents received by the Purchaser at the Closing and (c)
financial statements, certificates and other information previously or
hereafter furnished to any Holder of a Note, may be reproduced by such Holder
or the Company by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and any original document so
reproduced may be destroyed. The Company and the Purchaser agree and stipulate
that, to the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
Section 11.15. Notes as Securities. The Company and the Purchaser
agree that the Notes are securities as defined in each of the Securities Act
and the Exchange Act.
Section 11.16. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 11.17. Interest. (a) Each provision in this Agreement, the
Notes and the other Loan Documents is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid, to any Holder
for the use, forbearance or detention of the indebtedness evidenced by the
Notes or any other Loan Document or otherwise (including any sums paid as
required by any covenant or obligation contained herein or in any other Loan
Document which is for the use, forbearance or detention of such money), exceed
that amount of money which would cause the effective rate of interest to exceed
the Highest Lawful Rate, and all amounts owed under this Agreement, the Notes
and each other Loan Document shall be held to be subject to reduction to the
effect that such amounts so paid or agreed to be paid which are for the use,
forbearance or detention of money
-59-
<PAGE> 66
under this Agreement, the Notes or any other Loan Documents shall in no event
exceed that amount of money which would cause the effective rate of interest to
exceed the Highest Lawful Rate.
(b) Anything in this Agreement, any Note or any other Loan Document
to the contrary notwithstanding, the Company shall never be required to pay
unearned interest on any Note or ever be required to pay interest on such Note
at a rate in excess of the Highest Lawful Rate, and if the effective rate of
interest which would otherwise be payable under this Agreement, such Note or
any other Loan Document would exceed the Highest Lawful Rate, or if the Holder
of such Note shall receive any unearned interest or shall receive monies that
are deemed to constitute interest which would increase the effective rate of
interest payable by the Company under this Agreement, such Note and the other
Loan Documents to a rate in excess of the Highest Lawful Rate, then (i) the
amount of interest which would otherwise be payable by the Company under this
Agreement, such Note and the other Loan Documents shall be reduced to the
amount allowed under applicable law and (ii) any unearned interest paid by the
Company or any interest paid by the Company in excess of the Highest Lawful
Rate shall be in the first instance credited on the principal of such Note with
the excess thereof, if any, refunded to the Company.
(c) It is further agreed that, without limitation of the foregoing,
all calculations of the rate of interest contracted for, charged or received by
any Holder under the Notes held by it, or under this Agreement or the other
Loan Documents, which are made for the purpose of determining whether such rate
exceeds the Highest Lawful Rate shall be made, to the extent permitted by usury
laws applicable to such Notes (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the period of the full stated
term of the loans evidenced by said Notes all interest at any time contracted
for, charged or received by such Holder in connection therewith.
(d) If, at any time and from time to time, (i) the amount of
interest payable to any Holder on any date shall be computed at the Highest
Lawful Rate and (ii) in respect of any subsequent interest computation period
the amount of interest otherwise payable to such holder would be less than the
Highest Lawful Rate, then the amount of interest payable to such Holder in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate until the total amount of interest payable
to such Holder shall equal the total amount of interest which would have been
payable to such Holder if the total amount of interest had been computed
without giving effect to this Section 11.17.
Section 11.18. Representations, etc. Cumulative. All representations,
covenants, agreements and indemnities contained in this Agreement shall be in
addition to and cumulative of the representations, covenants, agreements and
indemnities contained in the other Loan Documents.
Section 11.19. Submission to Jurisdiction. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN NEW YORK, NEW YORK OVER ANY
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<PAGE> 67
ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS AGREEMENT OR
UNDER ANY OTHER LOAN DOCUMENT OR (B) ARISING FROM OR RELATING TO ANY FINANCING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND THE LOAN DOCUMENTS,
AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL
COURT. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL POSTAGE PREPAID, TO
THE COMPANY AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 11.09, SUCH SERVICE
TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING. EACH SUCH SERVICE IS HEREBY
ACKNOWLEDGED BY THE COMPANY TO BE SUFFICIENT, EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. IF ANY AGENT APPOINTED BY THE COMPANY REFUSES TO ACCEPT
SERVICE, THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM OR VENUE TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. THE
COMPANY HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION 11.19
SHALL AFFECT THE RIGHT OF ANY HOLDER OR ANY OTHER PERSON TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING ANY ACTION OR
PROCEEDING AGAINST THE COMPANY OR THE PROPERTY OF THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
Section 11.20. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAW.
Section 11.21. Indemnification. The Company hereby waives any claim
for contribution against any Indemnitee and agrees to indemnify, exonerate and
hold each Indemnitee free and harmless from and against any and all actions,
causes of action, suits, citations, directives, demands, assessments, losses,
liabilities, damages and expenses, including (without limitation) reasonable
attorneys' fees and disbursements and, in the case of clause (e) below, fees
and disbursements of environmental consultants (collectively, the "Indemnified
Liabilities"), incurred, suffered, sustained or required to be paid by the
Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any transaction financed in whole or in part directly or indirectly with
the proceeds of any of the Notes, (b) the exercise, protection or enforcement
of any Holder's rights, remedies, powers or privileges under this Agreement or
any other Loan Document, (c) the breach of any representation or warranty of
any Loan Party contained herein or in any other Loan Document, (d) the
nonfulfillment by any Loan Party of, or its failure to perform, any of its
covenants or agreements contained in this Agreement or any of the other Loan
Documents or (e) the presence of Hazardous Materials on, or the escape,
seepage, leakage, spillage, discharge, emission or release of Hazardous
Materials from, any of the real Properties of the Company or any Subsidiary or
any site, facility or location to which any material, products, waste or other
substances from or attributable to the business or operations of the Company or
any Subsidiary have been transported for treatment, disposal, storage or
deposit, the operation or violation of any Environmental Law at any such
Property, site, facility or location, any Environmental Claim in connection
with the Company or any Property of the Company, except, in each case, for any
of such
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<PAGE> 68
Indemnified Liabilities arising on account of such Indemnitee's gross
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of the
Indemnified Liabilities that is permissible under applicable law. The
obligations of the Company under this Section 11.21 shall survive the transfer
and payment of the Notes.
Section 11.22. Survival of Indemnities, Etc. (a) The indemnities
contained in this Agreement are cumulative and in addition to the indemnities
contained in the other Loan Documents and shall survive the termination of this
Agreement and the transfer and payment of the Notes.
(b) THE INDEMNITIES CONTAINED IN THIS AGREEMENT SHALL COVER AND
INCLUDE LOSSES, COSTS, EXPENSES, CLAIMS, DAMAGES, PENALTIES AND OBLIGATIONS
ARISING OUT OF OR RESULTING FROM THE NEGLIGENCE OF ANY INDEMNITEE, REGARDLESS
OF WHETHER SUCH NEGLIGENCE BE ORDINARY OR SOLE.
Section 11.23. Judgment Currency. (a) The obligation of the Company
hereunder and under the other Loan Documents to make payments in Dollars shall
not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any currency other than Dollars, except
to the extent that such tender or recovery results in the effective receipt by
each Holder of the full amount of Dollars expressed to be payable to such
Holder under this Agreement or any other Loan Documents. If for the purpose of
obtaining or enforcing judgment against the Company in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than Dollars (such other currency being referred to in this Section 11.23 as
the "Judgment Currency") an amount due in Dollars, the conversion shall be
made, at the Dollar Equivalent, as of the Business Day immediately preceding
the day on which the judgment is given (such Business Day being referred to in
this Section 11.23 as the "Judgment Currency Conversion Date"). For purposes
of this Section 11.23, the term "Dollar Equivalent" shall mean, with respect to
any monetary amount in a currency other than Dollars, at any time for the
determination thereof, the amount of Dollars obtained by converting such
foreign currency involved in such computation into Dollars at the spot rate for
the purchase of Dollars with the applicable foreign currency as quoted to such
Holder at approximately 10:00 A.M. (New York City time) on the date of
determination thereof specified herein.
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Company covenants and agrees to pay, or cause to be paid, such
additional amounts, if any (but in any event not a lesser amount), as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of Dollars which could have been purchased with the amount
of Judgment Currency stipulated in the judgment or judicial award at the rate
of exchange prevailing on the Judgment Currency Conversion Date.
-62-
<PAGE> 69
(c) For purposes of determining the Dollar Equivalent for this
Section 11.23, such amounts shall include any premium and costs payable in
connection with the purchase of the Dollars.
Section 11.24. Liabilities of Holders. Neither this Agreement nor any
other Loan Documents nor any disposition of the Notes shall be deemed to create
any liability or obligation of any Holder to enforce any provision hereof or of
any other Loan Document for the benefit or on behalf of any other Person who
may be the holder of any Note.
Section 11.25. Taxes. The Company will (a) pay all taxes (including
interest and penalties) that may be payable in connection with the execution
and delivery of this Agreement or any other Loan Document or any amendment of,
or waiver or consent under or with respect to, this Agreement or any other Loan
Document and (b) indemnify and hold the Purchaser and each other Holder
harmless from and against any loss or liability resulting from nonpayment or
delay in payment of any such tax. The obligations of the Company under this
Section 11.25 shall survive the transfer and payment of the Notes.
Section 11.26. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
Section 11.27. Entire Agreement. This Agreement and the other Loan
Documents to which the Company is a party constitute the entire contract
between the parties relative to the subject matter hereof. Any previous
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the other Loan Documents. Subject to Section
11.08, nothing in this Agreement or in the other Loan Documents, expressed or
implied, is intended to confer upon any Person other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
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<PAGE> 70
The Purchaser should indicate its agreement with the foregoing by signing
the form of acceptance on the enclosed counterpart of this letter and return
the same to the Company, whereupon this letter shall become a binding agreement
between the Purchaser and the Company.
Very truly yours,
CASH AMERICA INTERNATIONAL, INC.
By
Thomas A. Bessant, Jr., Vice
President-Finance and Treasurer
The foregoing Agreement is
hereby accepted as of the date
first above written.
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
By__________________________
Nancy F. Heller, Director,
Private Placements
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<PAGE> 71
NAME AND ADDRESS PRINCIPAL AMOUNT
OF PURCHASER OF NOTES TO BE PURCHASED
TEACHERS INSURANCE AND ANNUITY $20,000,000
ASSOCIATION OF AMERICA
730 Third Avenue
New York, New York 10017
Payments
All payments on or in respect of the Notes shall be made in immediately
available funds at the opening of business on the due date by electronic funds
transfer (identifying each as "Cash America International, Inc., PPN 14754# AB
1, $20,000,000 8.14% Senior Notes Due July 7, 2007, (principal or interest)"),
through the Automated Clearing House System to:
Morgan Guaranty Trust Company
of New York
ABA No. 021000238
23 Wall Street
New York, New York 10015
Account of: Teachers Insurance and Annuity Association of America
Account Number: 121-85-001
On Order of: Cash America International, Inc.
Notices
Contemporaneous with the above electronic funds transfer, mail or send
by facsimile the following information setting forth: (1) the full name,
private placement number, interest rate and maturity date of the Notes or other
obligations; (2) the allocation of payment between principal, interest, premium
and any special payment; and (3) the name and address of the bank from which
such electronic funds transfer was sent, to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017
Attention: Securities Accounting Division
Phone: (212) 916-4188
Facsimile: (212) 916-6199
SCHEDULE I
<PAGE> 72
All other communications shall delivered or mailed to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017
Attention: Securities Division
Phone: (212) 916-4327 (Nancy Heller) or (212) 490-9000 (general number)
Facsimile: (212) 916-6583
I-2
<PAGE> 73
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF OTHER JURISDICTIONS WHERE
INCORPORATION/ QUALIFIED TO DO BUSINESS
NAME FORMATION
<S> <C> <C>
Cash America, Inc. Delaware None
Cash America, Inc. of Tennessee Tennessee None
Cash America, Inc. of Oklahoma Oklahoma None
Cash America, Inc. of Kentucky Kentucky None
Cash America, Inc. of South Carolina South Carolina None
Florida Cash America, Inc. Florida None
Georgia Cash America, Inc. Georgia None
Cash America, Inc. of North Carolina North Carolina None
Cash America Pawn, Inc. of Ohio Ohio None
Cash America, Inc. of Alabama Alabama None
Cash America, Inc. of Colorado Colorado None
Cash America, Inc. of Indiana Indiana None
Cash America, Inc. of Louisiana Delaware Louisiana
Cash America Pawn L.P.* Delaware Texas
Cash America Management L.P.* Delaware Texas
Cash America Holding, Inc. Delaware Texas
Harvey & Thompson Limited England None
Express Cash International Corporation Delaware None
CAII Pantbelaning AB Sweden None
Cash America of Missouri, Inc. Missouri None
Murtrum AB Sweden None
Pantintressenter i Stockholm AB Sweden None
</TABLE>
_______________
* Denotes a limited partnership. All other Subsidiaries are corporations.
SCHEDULE II
<PAGE> 74
<TABLE>
<S> <C> <C>
AB Svensk Pantbelaning Sweden None
Svenska Aktionsgruppen AB Sweden None
Vincent's Jewelers and Loan, Inc. Missouri None
</TABLE>
II-2
<PAGE> 75
LIST OF JURISDICTIONS IN WHICH THE
COMPANY IS QUALIFIED TO DO BUSINESS AS FOREIGN CORPORATION
NONE
SCHEDULE III
<PAGE> 76
PERMITTED LIENS
NONE
SCHEDULE IV
<PAGE> 77
MATERIAL CONTRACTS
1. The Bank Loan Agreement.
2. The 1993 Note Agreement and the 1993 Guaranty.
3. Executive Employment Agreement dated as of April 25, 1990 between the
Company and Jack R. Daugherty.
4. Executive Employment Agreement dated as of April 25, 1990 between the
Company and Daniel R. Feehan.
5. That certain Loan Agreement dated September 21, 1994 evidencing the
Pantbelaning Indebtedness.
6. That certain loan letter agreement dated February 10, 1995 evidencing
the Harvey & Thompson Indebtedness.
SCHEDULE V
<PAGE> 78
DESCRIPTION OF COMPANY FINANCIALS
1. Audited consolidated balance sheets of the Company as of December 31,
1988, 1989, 1990, 1991, 1992, 1993 and 1994.
2. Audited income statements of the Company for the years ended December
31, 1988, 1989, 1990, 1991, 1992, 1993 and 1994.
3. Audited statements of stockholders' equity of the Company for the years
ended December 31, 1988, 1989, 1990, 1991, 1992, 1993 and 1994.
4. Audited statements of cash flows of the Company for the years ended
December 31, 1988, 1989, 1990, 1991, 1992, 1993 and 1994.
SCHEDULE VI
<PAGE> 79
DESCRIPTION OF PROJECTIONS
Those certain projections attached to the Company's letter of April 11,
1995 addressed and delivered to the Purchaser.
SCHEDULE VII
<PAGE> 80
INDEBTEDNESS
NONE
SCHEDULE VIII
<PAGE> 81
LABOR CONTRACTS
1. Executive Employment Agreement dated as of April 25, 1990 between the
Company and Jack R. Daugherty.
2. Executive Employment Agreement dated as of April 25, 1990 between the
Company and Daniel R. Feehan.
3. Executive Employment Agreement dated as of March 30, 1992 between the
Company and Gregory W. Trees.
4. Executive Employment Agreement dated as of January 3, 1993 between the
Company and William S. Ewing.
5. Consultation Agreement dated as of April 25, 1990 between the Company
and A. R. Dike.
6. Consultation Agreement dated as of April 25, 1990 between the Company
and James H. Greer.
7. Consultation Agreement dated as of April 25, 1990 between the Company
and B. D. Hunter.
8. Consultation Agreement dated as of April 25, 1990 between the Company
and Clifton H. Morris, Jr.
9. Consultation Agreement dated as of April 25, 1990 between the Company
and Carl P. Motheral.
10. Consultation Agreement dated as of April 25, 1990 between the Company
and Samuel W. Rizzo.
11. Consultation Agreement dated as of April 25, 1990 between the Company
and Morton A. Cohn.
12. Consultation Agreement dated as of April 25, 1990 between the Company
and R. L. Waltrip.
SCHEDULE IX
<PAGE> 82
TRADENAMES
1. Cash America (1)
2. Cash America Pawn (17)
3. Cash America Pawn of Abilene (2)
4. Cash America Pawn of Atlanta (3)
5. Cash America Pawn and Bargain Center of Atlanta (3)
6. Cash America Pawn of Austin (2)
7. Cash America Pawn of Baton Rouge (4)
8. Cash America Pawn of Bossier City (4)
9. Cash America Pawn of Brodenton (5)
10. Cash America Pawn of Brownsville (2)
11. Cash America Pawn of Bryan (2)
12. Cash America Pawn of Ohio (6)
13. Cash America Pawn of Charleston (7)
14. Cash America Pawn of Charlotte (8)
15. Dan's Cash America Pawn of Clarksville (9)
16. Herb's Cash America Pawn of Columbus (3)
17. Cash America Pawn of Corpus Christi (2)
18. Cash America Pawn of DFW (2)
19. Cash America Jewelry & Loan of DFW (2)
20. Cash America Pawn & Bargain Outlet (2)
21. Cash America Pawn of Daytona Beach (5)
22. Cash America Pawn of Denver (10)
23. Cash America Pawn of Edinburg (2)
24. Cash America Pawn of El Paso (2)
25. Cash America Pawn of Fort Lauderdale (5)
26. Cash America Pawn of Fort Pierce (5)
27. Cash America Pawn of Fort Wayne (9)
28. Cash America Pawn of Greensboro (8)
29. Cash America Pawn of Greenville (7)
30. Cash America Pawn of Houston (2)
31. Cash America Pawn of Indianapolis (9)
SCHEDULE X
<PAGE> 83
32. Cash America Pawn of Jacksonville (5)
33. Cash America Pawn of Kansas City (11)
34. Cash America Pawn of Lafayette (4)
35. Cash America Pawn of Lake Charles (4)
36. Cash America Pawn of Lakeland (5)
37. Cash America Pawn of Laredo (2)
38. Cash America Pawn of Longview (2)
39. Dan's Cash America Pawn of Louisville (12)
40. Cash America Pawn of Lubbock (2)
41. Cash America Pawn of Marshall (2)
42. Cash America Pawn of McAlester (13)
43. Cash America Pawn of McAllen (2)
44. Cash America Pawn of Memphis (14)
45. Cash America Pawn and Bargain Center of Memphis (14)
46. Cash America Pawn and Bargain Center of Midland (2)
47. Cash America Pawn of Mission (2)
48. Cash America Pawn of Mobile (15)
49. Cash America Pawn of Birmingham (15)
50. Cash America Pawn of Monroe (4)
51. Cash America Pawn of Nashville (14)
52. Cash America Pawn of New Orleans (4)
53. Cash America Pawn and Bargain Center of New Orleans (4)
54. Cash America Pawn and Bargain Center of Odessa (2)
55. Cash America Pawn of Oklahoma City (13)
56. Cash America Pawn and Bargain Center of Oklahoma City (13)
57. Cash America Pawn of Orlando (5)
58. Cash America Pawn of Pensacola (5)
59. Cash America Pawn of Pharr (2)
60. Cash America Pawn of San Antonio (2)
61. Cash America Pawn of Savannah (3)
62. Cash America Pawn of Shreveport (4)
63. Cash America Pawn of St. Louis (11)
64. Cash America Pawn of St. Petersburg (5)
X-2
<PAGE> 84
65. Cash America Pawn of Tallahassee (5)
66. Cash America Pawn of Tampa (5)
67. Cash America Pawn and Bargain Center of Tampa (5)
68. Cash America Pawn of Tulsa (13)
69. Cash America Pawn of Tyler (2)
70. Cash America Pawn of Waco (2)
71. Cash America Pawn of West Palm Beach (5)
72. CATCO (Cash America Trading Company) (2)
73. Cash America Credit (16)
74. Cash America Diamond Liquidators (2)
75. Gold'N Gems (4)
76. Pawnmasters (11)
Tradename Owned By:
(1) Cash America International, Inc.
(2) Cash America Pawn LP.
(3) Georgia Cash America, Inc.
(4) Cash America, Inc. of Louisiana
(5) Florida Cash America, Inc.
(6) Cash America Pawn, Inc. of Ohio
(7) Cash America, Inc. of South Carolina
(8) Cash America, Inc. of North Carolina
(9) Cash America, Inc. of Indiana
(10) Cash America, Inc. of Colorado
(11) Cash America of Missouri, Inc.
(12) Cash America, Inc. of Kentucky
(13) Cash America, Inc. of Oklahoma
(14) Cash America, Inc. of Tennessee
(15) Cash America, Inc. of Alabama
(16) Cash America Management L.P.
(17) All of the above.
X-3
<PAGE> 85
INVESTMENTS
1. 612 shares of common stock of Mr. Payroll Corporation, a Texas
corporation, held by Cash America Holding, Inc. (This represents 49% of
the issued and outstanding capital stock of Mr. Payroll Corporation.)
SCHEDULE XI
<PAGE> 86
PART 1
The Transferee is purchasing the Notes to be acquired by it for its own
account or for one or more separate accounts maintained by the Transferee or
for the account of one or more pension or trust funds, in each case for
investment and not with a view to or for sale in connection with the
distribution thereof or with any present intention of distributing or selling
any of such Notes, provided that the disposition of the Transferee's property
shall at all times be within its control.
If the Transferee is acquiring Notes for its own account, the Transferee
(i) is an "accredited investor", as defined in Regulation D under the
Securities Act, and (ii)(x) either alone or together with its purchaser
representative(s), as defined in such Regulation D, has knowledge and
experience in financial and business matters such that it is capable of
evaluating the merits and risks of the investment in the Notes and (y) is able
to bear the economic risk of such investment.
If the Transferee is acquiring Notes for the account of one or more
pension or trust funds or for any account maintained by it, the Transferee has
sole investment discretion with respect to the acquisition of such Notes and
the determination and decision on behalf of the Transferee to acquire such
Notes for such pension or trust funds is being made by the same individual or
group of individuals who customarily passes on such investments.
PART 2
At least one of the following statements accurately describes the source
of funds to be used by the Transferee to pay the purchase price of the Notes to
be acquired by it:
(i) if the Transferee is an insurance company, the source of
funds to be used by the Transferee to pay the purchase price of the
Notes is an "insurance company general account" within the meaning of
proposed Department of Labor Prohibited Transaction Class Exemption
("PTCE"), DOL Application No. D-9662, 59 Fed. Reg. 43134 (August 22,
1994), (assuming for the purpose hereof that such proposed PTCE will be
adopted in substantially similar form to the proposed form) and the
Transferee has identified that there is no "employee benefit plan",
treating as a single plan, all plans maintained by the same employer or
employee organization, with respect to which the amount of the reserves
for all contracts held by or on behalf of such plan exceed, ten percent
(10%) of the total liabilities of such general account; or
Schedule XII
<PAGE> 87
(ii) if the Transferee is an insurance company, to the extent
that any of such funds constitutes assets allocated to any separate
account maintained by the Transferee, (A) such separate account is a
"pooled separate account" within the meaning of PTCE 90-1, in which case
the Transferee has disclosed to the Company the names of each employee
benefit plan whose assets in such separate account exceed 10% of the
total assets or are expected to exceed 10% of the total assets of such
account as of the date of such purchase (and for the purposes of this
clause (ii), all employee benefit plans maintained by the same employer
or employee organization are deemed to be a single plan), or (B) such
separate account contains only the assets of a specific employee benefit
plan, complete and accurate information as to the identity of which such
Transferee has delivered to the Company; or
(iii) if the Transferee is an insurance company, the source of
such funds is an "investment fund" managed by a "qualified professional
asset manager" or "QPAM" (as defined in Part V of PTCE 84-14, issued
March 13, 1984), and the purchase is exempt under FTCE 84-14, provided
that no other party to the transactions described in this Agreement and
no "affiliate" of such other party (as defined in section V(c) of PTCE
84-14) has at this time, and during the immediately preceding one year
has exercised, the authority to appoint or terminate such QPAM as
manager of the assets of any plan identified in writing to the Company
or to negotiate the terms of said QPAM's management agreement (including
renewals or modifications thereof) on behalf of any such identified
plans; or
(iv) if the Transferee is an insurance company, no part of
such funds constitutes the assets of any separate account maintained by
the Transferee, the application of which assets to such purchase would
cause such purchase to constitute a prohibited transaction under section
406(a) of ERISA; or
(v) if the Transferee is a "bank" (as defined in the
Securities Act), to the extent that any part of such funds constitutes
assets allocated to any bank collective investment vehicle maintained by
the Transferee, the Transferee has heretofore disclosed to the Company
the names of each employee benefit plan whose assets in such vehicle
exceed 10% of the total assets or are expected to exceed 10% of the
total assets of such vehicle as of the date of purchase of the Notes
(and for the purposes of this clause (v), all employee benefit plans
maintained by the same employer or employee organization are deemed to
be a single plan); or
(vi) the Transferee is a registered investment company
subject to the Investment Company Act of 1940; or
XII-II-2
<PAGE> 88
(vii) if the Transferee is other than an insurance company or
a bank covered by clause (v) above, all or a portion of such funds
consists of funds which do not constitute assets of any employee benefit
plan (other than a governmental plan exempt from the coverage of ERISA)
and the remaining portion, if any, of such funds consists of funds which
may be deemed to constitute assets of one or more specific employee
benefit plans, complete and accurate information as to the identity of
each of which the Transferee has delivered to the Company in writing; or
(viii) if such funds constitute assets of a specific
employee benefit plan, the Transferee has heretofore delivered to the
Company complete and correct information as to the identity of such
employee benefit plan.
As used in this Schedule XII, the terms "employee benefit plan,"
"governmental plan" and "separate account" shall have the respective meanings
assigned to such terms in section 3 of ERISA. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Note
Agreement to which this Schedule XII is attached.
XII-3
<PAGE> 89
OUTSTANDING INDEBTEDNESS FOR MONEY BORROWED
1. The Pantbelaning Indebtedness
2. The Harvey & Thompson Indebtedness
SCHEDULE XIII
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0
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