<PAGE>
File No. 333-_________
As filed with the Securities and Exchange Commission on February 4, 1999.
============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
VISTA EYECARE, INC.
--------------------------------------------------
(Exact name of issuer as specified in its charter)
Georgia 5990 58-1910859
- ------------------------------- ------------------- ---------------------
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification Number)
Classification Code
Number)
296 Grayson Highway, Lawrenceville, Georgia 30045
(770) 822-3600
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of issuer's principal executive offices)
Mitchell Goodman, Esquire
Senior Vice President and General Counsel
Vista Eyecare, Inc.
296 Grayson Highway, Lawrenceville, Georgia 30045
(770) 822-3600
- ------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
David A. Stockton, Esquire
Kilpatrick Stockton LLP
1100 Peachtree Street, Atlanta, Georgia 30309-4530
Telephone: (404) 815-6500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box: / /
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: / /
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
registration statement for the same offering: / /
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<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Proposed Maximum Proposed Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of each class of securities to be registered Registered per Unit <F1> Price registration fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 3/4% Senior Notes Due 2005, Series B $125,000,000 100% $125,000,000 $ 36,875
- ----------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees(2) <F3> <F3> <F3> <F3>
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<FN>
<F1> Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457.
<F2> The Company's wholly-owned domestic subsidiaries, Midwest Vision,
Inc., NVAL Healthcare Systems, Inc., International Vision Associates,
Ltd., Frame-N-Lens Optical, Inc., Vision Administrators, Inc., Family
Vision Centers, Inc. New West Eyeworks, Inc., Alexis Holdings Company,
Inc., and Vista Eyecare Network, LLC (collectively, the "Guarantors"),
have guaranteed on a senior unsecured basis, jointly and severally, the
payment of the principal of, premium, if any, and interest on the 12 3/4%
Senior Notes, Series B, being registered hereby (the "Subsidiary
Guarantees"). The Guarantors are registering the Subsidiary Guarantees.
Pursuant to Rule 457(n), no registration fee is required with respect
to the Subsidiary Guarantees.
<F3> Not applicable.
(/TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
<PAGE>
PROSPECTUS February __, 1999
[LOGO]
VISTA EYECARE, INC.
OFFER TO EXCHANGE
12 3/4% SENIOR NOTES DUE 2005, SERIES B
FOR
12 3/4% SENIOR NOTES DUE 2005, SERIES A
- ------------------------------------------------------------ -------------------------------------------------------------
| Terms of Exchange Offer | | Terms of Exchange Notes |
- ------------------------------------------------------------ -------------------------------------------------------------|
| | | |
|* Offer | | THE TERMS OF THE EXCHANGE NOTES AND THE OUTSTANDING |
| ----- | | NOTES ARE IDENTICAL IN ALL MATERIAL RESPECTS, EXCEPT FOR |
| We are offering to exchange up[ to $125 million in | | CERTAIN TRANSFER RESTRICTIONS, REGISTRATION RIGHTS AND |
| principal amount of our: | | PENALTY INTEREST PROVISIONS RELATING TO THE OUTSTANDING |
| | | NOTES. |
| 12 3/4% SENIOR NOTES DUE 2005, SERIES B | | |
| | | * Maturity |
| for the same principal amount of our outstanding: | | -------- |
| | | October 15, 2005. |
| 12 3/4% SENIOR NOTES DUE 2005, SERIES A. | | |
| | | * Redemption |
| We are making this offer pursuant to a Registration | | ---------- |
| Rights Agreement, dated October 8, 1998, relating | | Before October 15, 2001, we may redeem up to 35% |
| to the original issuance of the outstanding notes. | | of the aggregate principal of the notes with the |
| | | proceeds of certain equity offerings. |
|* Procedures | | After October 15, 2003, we may redeem the notes at |
| ---------- | | ant time. |
| To tender, you must submit a signed letter of | | |
| transmittal and your outstanding notes to State | | * Mandatory Offer to Repurchase |
| Street Bank and Trust Company, our exchange | | ----------------------------- |
| agent. Special procedures apply in some cases. | | If we sell certain assets or experience specific kinds of |
| You must tender outstanding notes if $1,000 | | changes in control, we must offer to repurchase the |
| multiples. | | notes. |
| | | |
|* Withdrawal | | * Security |
| ---------- | | -------- |
| You may withdraw tendered notes until the offer | | These notes will be general unsecured obligations. |
| expires. | | |
| | | * Guarantees |
|* Expiration | | ---------- |
| ---------- | | Some of our subsidiaries will guarantee the notes. |
| This offer expires at 5:00 p.m., Atlanta, Georgia | | |
| time on ___________________, 1999, unless extended. | | * Ranking |
| | | ------- |
|* Unaccepted Tenders | | These notes and the subsidiary guarantees are |
| ------------------ | | subordinated to all of our and the guarantors': |
| We will return any tendered outstanding notes that | | |
| we do not accept for exchange for any reason. | | + current and future unsubordinated debt, and, |
| | | + current and future secured debt, to the extent of |
|* Proceeds and Expenses | | the assets securing such debt. |
| --------------------- | | |
| We will not receive any proceeds from the issuance | | * Interest |
| of the exchange notes. | | -------- |
| We have agreed to pay the expenses associated with | | Fixed annual rate of 12 3/4%. |
| this exchange offer. | | Paid every six months on April 15 and October 15. |
- ------------------------------------------------------------ -------------------------------------------------------------
This investment involves risks. See the Risk Factors section
beginning on page 14.
Neither the Securities and Exchange Commission nor any state<PAGE>
securities commission has approved or disapproved of the exchange
notes or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
<PAGE>
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TABLE OF CONTENTS
Page
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . 14
The New West Acquisition . . . . . . . . . . . . . . . . . 28
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 29
Capitalization . . . . . . . . . . . . . . . . . . . . . . 29
The Exchange Offer . . . . . . . . . . . . . . . . . . . . 30
Unaudited Pro Forma Condensed
Consolidated Financial Data . . . . . . . . . . . . . . . 40
Selected Consolidated Financial and
Other Data . . . . . . . . . . . . . . . . . . . . . . . 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . 50
Business . . . . . . . . . . . . . . . . . . . . . . . . . 59
Management . . . . . . . . . . . . . . . . . . . . . . . . 73
Principal Shareholders . . . . . . . . . . . . . . . . . . 79
Description of New Credit Facility . . . . . . . . . . . . 80
Description of the Notes . . . . . . . . . . . . . . . . . 81
Registration Rights . . . . . . . . . . . . . . . . . . . 116
Certain U.S. Federal Income Tax Considerations . . . . . . 119
Plan of Distribution . . . . . . . . . . . . . . . . . . . 122
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 123
Independent Auditors . . . . . . . . . . . . . . . . . . . 123
Available Information . . . . . . . . . . . . . . . . . . . 123
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . . . . . 125
Index to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . F-1
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2
<PAGE>
SUMMARY
The following summary contains basic information about this
exchange offering. It likely does not contain all the information that
is important to you. For a more complete understanding of this
offering, we encourage you to read this entire document and the
documents to which we have referred you.
On the cover page, in this summary and in the "Risk Factors"
section, the words "Company," "we," "our," "ours," and "us" refer to
Vista Eyecare, Inc., formerly known as National Vision Associates,
Ltd., and our subsidiaries, including Frame-n-Lens Optical, Inc.,
which we acquired on July 28, 1998, and New West Eyeworks, Inc., which
we acquired on October 23, 1998. The words "exchange notes" or
"notes" refer to our 12 3/4% Senior Notes due 2005, Series B, which we
are offering to issue in exchange for our 12 3/4% Senior Notes due
2005, Series A, which we refer to as the "outstanding notes." The
words "this offer," "the exchange offering" and "the exchange offer"
refer to our offer, described in this Prospectus, to issue exchange
notes in exchange for outstanding notes.
Unless the context otherwise indicates, (1) references to "Vista"
refer to Vista Eyecare, Inc. prior to the acquisitions of Frame-n-Lens
and New West, (2) all store information is as of October 3, 1998, and
(3) the source of all industry information and data are industry
publications.
THE COMPANY
We are the second largest retail optical company in the United
States by number of locations. We operate 915 vision centers, of
which 889 are in 44 states and Puerto Rico, and the remaining 26 are
in Mexico. Our product line includes a broad selection of
prescription eyeglasses, contact lenses and accessories. The
following charts present historical information on our net sales and
earnings before interest, taxes, depreciation and amortization
(EBITDA):
Compound
Since 1993 (Vista Only) Annual Growth
---------------------- -------------
Net Sales 20.5%
EBIDTA 54.8%
Of our 915 vision centers:
* 331 are free-standing vision centers (151 in California), and
* 584 are located inside host stores.
Our free-standing vision centers are located in regional shopping centers,
power centers, strip shopping centers, and free-standing sites. Our
host vision centers are located in the host stores as illustrated in the
following table:
3
<PAGE>
Name of Host Number of Vision Centers
------------ ------------------------
Wal-Mart Stores, Inc. 372
Sam's Club 121
Fred Meyer, Inc. 52
Wal-Mart de Mexico, S.A. de C.V. 26
United States Military Exchanges 13
---
Total 584
Our merchandising philosophy is to provide excellent value and
superior customer service at all of our vision centers. Free-standing
vision centers typically range in size from 700 to 1,500 square feet,
with separate areas for merchandise display, customer service, and
contact lens fitting. Host vision centers use a similar format except
that they carry more inventory than free-standing stores. In addition,
each Wal-Mart host vision center has a laboratory that enables us to
provide one-hour service on single vision eyeglasses. Of our 915 vision
centers, 639 offer the services of independent optometrists in or adjacent
to the vision center. We are currently adding optometrists to many of the
vision centers that do not have them. We anticipate that the additional
optometric services will increase retail sales in those vision centers.
We currently operate four manufacturing facilities, which also
serve as distribution facilities. Our 66,000 square foot facility in
Lawrenceville, Georgia houses our headquarters, an optical laboratory
and a distribution center that uses modern equipment and systems. We
also operate a 45,000 square foot manufacturing and distribution
facility in Fullerton, California, and a smaller optical laboratory in
St. Cloud, Minnesota. In 1998, we consolidated two other
manufacturing facilities, located in Los Angeles, California and
Portland, Oregon, into our Fullerton location. We intend to
consolidate our Tempe, Arizona facility with the Fullerton facility
during 1999. We believe that our manufacturing facilities will
accommodate our current growth plans over the next five years.
RECENT ACQUISITIONS
MIDWEST VISION. In October 1997, we acquired Midwest Vision,
Inc. for approximately $4.7 million, including the assumption of
certain indebtedness. Based in St. Cloud, Minnesota, before the
acquisition Midwest Vision operated 51 free-standing vision centers in
the midwest United States.
FRAME-N-LENS. In July 1998, we acquired Frame-n-Lens for
approximately $32.3 million, including the assumption of certain
indebtedness. Based in Fullerton, California, before the acquisition
Frame-n-Lens operated 286 vision centers, mainly in the western United
States. These centers included 156 free-standing vision centers, 123
host vision centers in Sam's Club stores, and seven host vision
centers in Wal-Mart stores.
NEW WEST. On October 23, 1998, we purchased approximately 98% of
the outstanding capital stock of New West in a tender offer. On the
same day, we caused New West to merge with our wholly-owned subsidiary
NW Acquisition Corp. As a result, we now hold all of the shares of
New West. We paid approximately $68.3 million, including the
assumption of certain indebtedness, to acquire New West. See "The New
West Acquisition." Based in Tempe, Arizona, New West operated 178 vision
centers in 13 states, including 126 free-standing vision centers and 52
host vision centers in Fred Meyer stores. New West also operates a managed
care business, Vista Eyecare Network.
4<PAGE>
For a complete discussion of the Company's key strengths, the
optical industry, and the Company's business strategies, you should
read the "Business" section of this prospectus.
The Company was incorporated in Georgia in 1990.
Executive Offices: Telephone number:
------------------ -----------------
296 Grayson Highway (770) 822-3600
Lawrenceville, Georgia 30045
5
<PAGE>
The Exchange Offer
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<S> <C>
The Exchange Offer........................ We are offering to exchange up to $125,000,000 in principal amount of our
12 3/4% Senior Notes due 2005, Series B for up to $125,000,000 in principal
amount of our outstanding 12 3/4% Senior Notes due 2005.
The Exchange Notes........................ The notes we will issue in this exchange offer are identical in all
material respects to the outstanding notes, except for certain transfer
restrictions, registration rights and interest provisions relating to the
outstanding notes. We will issue the exchange notes without legends
restricting their transfer. See "Description of the Notes," beginning on
page 81.
Expiration Date; Withdrawal
of Tender................................ The exchange offer will expire at 5:00 p.m., Atlanta, Georgia time, on
______________, 1999, unless we extend the offer. Until the offer
expires, you may withdraw any notes that you previously tendered. If we
do not accept your outstanding notes for exchange for any reason, we will
return them to you at our cost, as soon as possible after the exchange
offer.
Certain Conditions to the Exchange
Offer.................................... The exchange offer is subject to certain customary conditions, which
we may waive. See "The Exchange Offer -- Certain Conditions to the Exchange
Offer," beginning on page 32.
Procedures for Tendering Outstanding
Notes.................................... If you hold outstanding notes and wish to accept the exchange offer, you
must:
* complete, sign and date the letter of transmittal and
* mail or deliver the letter of transmittal to State Street Bank and
Trust Company, our exchange agent.
Be sure to include the outstanding notes you wish to exchange and any
other required documentation. You must tender outstanding notes for
exchange in $1,000 multiples.
By executing the letter of transmittal, you will represent to us that,
among other things,
(1) you will acquire the exchange notes in the ordinary course of your
business,
(2) you have no arrangement with any person to participate in the
distribution of the exchange notes, and
(/TABLE>
6
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<CAPTION>
<S> <C>
(3) (A) you are not our "affiliate," as defined in Rule
405 of the Securities Act, or,
(B) if you are our affiliate, you will comply with
the registration and prospectus delivery requirements of the
Securities Act.
Special Procedures for Beneficial
Owners.................................. This paragraph applies to the beneficial owners of outstanding notes
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee. If you are a beneficial owner and wish to
tender your outstanding notes in the exchange offer, please contact the
registered holder and instruct it to tender on your behalf. If you wish
to tender on your own behalf, you must either re-register the outstanding
notes in your name or obtain a properly completed bond power from the
registered holder. You may not be able to re-register your outstanding
notes in time to participate in the exchange offer.
Guaranteed Delivery
Procedures.............................. If you wish to tender your outstanding notes, but they are not
immediately available, or you cannot deliver your outstanding notes, the
letter of transmittal, or any other required documents to State Street
Bank and Trust Company before the offer expires, you must tender your
outstanding notes using the guaranteed delivery procedures described in
"The Exchange Offer -- Guaranteed Delivery Procedures," beginning on page
36.
Registration Requirements............... We will use our best efforts to complete the registered exchange offer to
allow you an opportunity to exchange your outstanding notes for the
exchange notes. In the event that applicable interpretations of the
staff of the Commission do not permit us to effect the exchange offer or
in certain other circumstances, we have agreed to file a shelf
registration statement covering resales of the outstanding notes. In
such event, we will use our best efforts to cause the shelf registration
statement to be declared effective under the Securities Act and, subject
to certain exceptions, to keep the shelf registration statement effective
until October 8, 2000.
Certain U.S. Federal Income Tax We discuss certain federal income tax considerations relating to the
Considerations.......................... exchange notes in "Certain U.S. Federal Income Tax Consequences,"
beginning on page 119.
Use of Proceeds......................... We will not receive any proceeds from the exchange of notes in this
exchange offer.
Exchange Agent.......................... State Street Bank and Trust Company is our exchange agent. Its address
and telephone number are listed in "The Exchange Offer -- Exchange Agent,"
on page 37.
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7
<PAGE>
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<TABLE>
<CAPTION>
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
<S> <C>
Exchange Notes Offered.................. $125,000,000 in principal amount of 12 3/4% Senior Notes due 2005, Series
B.
Maturity................................ October 15, 2005.
Interest Payment Dates.................. April 15 and October 15 of each year, commencing April 15, 1999.
Ranking................................. These exchange notes will be general, unsecured senior obligations of the
Company. They will rank equally with all of our existing and future
unsubordinated indebtedness. They will rank senior to all of our
subordinated indebtedness.
The notes will be effectively subordinated to all of our secured
indebtedness to the extent of the assets securing such indebtedness.
As of October 3, 1998, on a pro forma basis after giving effect to our
recent acquisitions, the issuance of the outstanding notes, and our new
credit facility, we and our subsidiaries would have had:
* $130.5 million of unsecured indebtedness, and
* $6.3 million of secured indebtedness.
These numbers exclude $20.0 million of unused commitments under our new
credit facility. The indenture permits us and our subsidiaries to incur
additional indebtedness, subject to certain limitations.
Optional Redemption..................... Beginning October 15, 2003, we may redeem some or all of these notes at any
time at the cash redemption prices described in this prospectus, together
with interest to the date of redemption. See "Description of the Notes --
Redemption," beginning on page 82.
Before October 15, 2001, we may use the proceeds of certain equity
offerings to redeem up to 35% of the sum of (1) $125,000,000 plus (2) the
initial aggregate principal amount of any notes issued under the indenture
after October 8, 1998. The redemption price will be 112.75% of the
principal amount redeemed, plus interest to the redemption date.
Immediately after such redemption, however, there must remain outstanding
at least 65% of the sum of (1) $125,000,000 plus (2) the initial aggregate
principal amount of the any notes issued under the indenture after October 8,
1998. See "Description of the Notes -- Redemption," beginning on page 82.
Change of Control ...................... Upon a change of control, we are required to offer to repurchase the
exchange notes at a purchase price equal to 101% of their principal amount,
plus interest to the date of repurchase. See "Description of the Notes --
Change of Control," beginning on page 83.
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8
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<S> <C>
Guarantees ............................. The exchange notes will be unconditionally guaranteed on an unsecured
senior basis by some of our current domestic and future subsidiaries. Each
guarantee will rank equally with all of the guarantor's existing and future
unsubordinated indebtedness. It will rank senior to all of the guarantor's
subordinated indebtedness.
Each guarantee will be effectively subordinated to all of the guarantor's
secured indebtedness to the extent of the assets securing such
indebtedness. See "Description of the Notes -- Guarantees," beginning on page
83.
Certain Covenants....................... We will issue the exchange notes under an indenture with State Street Bank
and Trust Company, as trustee. The indenture contains certain covenants
with respect to the Company and some of our subsidiaries, which will
restrict, among other things, our ability to:
* incur additional debt,
* pay dividends and make other restricted payments,
* create certain liens,
* make certain payments affecting subsidiaries,
* enter into transactions with affiliates, and
* sell certain assets or merge with or into other companies.
These restrictions and requirements are subject to a number of important
qualifications and exceptions. See "Description of the Notes -- Certain
Covenants," beginning on page 84.
Risk Factors ........................... You should carefully consider the "Risk Factors" described on pages 14 to
27 before making an investment decision about the exchange notes.
9
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OTHER DATA
The following table sets forth summary consolidated historical
financial and other data of Vista as of and for each of the years in
the five-year period ended January 3, 1998 and the nine-month periods
ended September 27, 1997 and October 3, 1998. The summary
consolidated historical financial data as of and for each of the years
in the five-year period ended January 3, 1998 were derived from the
audited consolidated financial statements of Vista included elsewhere
in this Offering Memorandum. The summary consolidated historical
financial data as of and for the nine-month periods ended September
27, 1997 and October 3, 1998 were derived from the unaudited
consolidated financial statements of Vista included elsewhere in this
Offering Memorandum. In the opinion of management, such unaudited
consolidated financial statements include all adjustments, consisting
of only normal recurring items, necessary for a fair presentation of
the financial condition and results of operations of Vista for such
periods. Operating results for the nine-month periods ended September 27,
1997 and October 3, 1998 are not necessarily indicative of the
results that may be expected for the full year. The information
contained in this table should be read in conjunction with "Selected
Consolidated Financial and Other Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Vista's
historical consolidated financial statements, including the notes
thereto, included elsewhere in this Offering Memorandum.
</TABLE>
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
-------------------------------------------------------- --------------------
December December December December January September October
31, 31, 31, 28, 3, 27, 3,
1993 1994 1995(a) 1996 1998 1997 1998
-------- -------- -------- -------- ------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................................... $ 88,340 $ 119,395 $ 145,573 $ 160,376 $ 186,354 $ 134,736 $173,099
Gross profit.................................. 46,895 65,497 77,607 83,684 99,991 73,013 93,987
Selling, general and
administrative expense..................... 48,602 63,911 74,390 76,920 89,156 63,323 81,838
Other nonrecurring charges(b)................. 11,311 2,011
--------- --------- --------- --------- --------- --------- --------
Operating income (loss)....................... (13,018) 1,586 1,206 6,764 10,835 9,690 12,149
Interest expense, net......................... 83 1,322 2,639 2,072 1,568 1,202 1,257
Other expense (income),
net........................................ (237) (127) (13) 12 (14) (9) (9)
--------- --------- --------- --------- --------- --------- --------
Income (loss) before
income taxes............................... (12,864) 391 (1,420) 4,680 9,281 8,497 10,901
Provision (benefit) for
income taxes............................... (900) 40 100 1,200 3,708 3,365 4,454
--------- --------- --------- --------- --------- --------- --------
Net income (loss)............................. $(11,964) $ 351 $ (1,520) $ 3,480 $ 5,573 $ 5,132 $ 6,447
======== ========= ======== ========= ========= ========= ========
OTHER FINANCIAL DATA:
Depreciation and
amortization.............................. $ 5,512 $ 7,567 $ 10,378 $ 10,058 $ 11,035 $ 7,876 $ 9,227
Capital expenditures(c)...................... 16,858 15,963 13,175 2,713 8,049 6,029 7,198
EBITDA(d) ................................... 3,805 9,153 13,595 16,822 21,870 17,566 21,376
EBITDA margin................................ 4.3% 7.7% 9.3% 10.5% 11.7% 13.0% 12.3%
STORE DATA:
End of period stores......................... 245 298 355 341 443 378 737
Wal-Mart comparable
store sales growth(e)....................... -- -- (0.5%) 4.0% 7.0% 6.0% 3.5%
Sales per store(f)........................... $ 495 $ 456 $ 443 $ 484 $ 505 $ 356 $ 235
BALANCE SHEET DATA (END
OF PERIOD):
Cash and cash equivalents.................... $ 2,002 $ 2,400 $ 1,307 $ 1,110 $ 2,559 $ 2,218 $ 2,408
Working capital.............................. 6,954 8,723 14,556 13,502 12,171 11,806 11,716
Total assets................................. 66,172 77,612 81,237 74,564 83,250 79,928 137,565
Total debt .................................. 15,761 31,129 38,480 26,500 24,203 22,100 59,579
Shareholders' equity ........................ 31,577 29,613 26,326 29,906 36,368 35,076 46,413
(/TABLE>
See accompanying notes to Summary Consolidated Historical Financial and Other Data.
10
<PAGE>
NOTES TO SUMMARY CONSOLIDATED HISTORICAL FINANCIAL AND OTHER DATA
(a) Effective January 1, 1995, Vista changed its year end to a 52/53
week retail calendar with the fiscal year ending on the Saturday
closest to December 31.
(b) Other nonrecurring charges consists of (i) provisions for the
disposition of assets ($7,727 in fiscal 1993 and $958 in fiscal 1995),
(ii) stock option compensation expense ($834 in fiscal 1993) and (iii)
other charges ($2,750 in fiscal 1993 and $1,053 in fiscal 1995).
(c) Capital expenditures exclude assets acquired in the Midwest,
Frame-n-Lens and New West acquisitions.
(d) EBITDA represents the sum of operating income (loss) plus
depreciation and amortization (excluding amortization of deferred
financing costs, which is included in interest expense, net), and
other nonrecurring charges. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service or
incur indebtedness. However, EBITDA does not represent cash flow from
operations as defined by generally accepted accounting principles("GAAP"),
is not necessarily indicative of cash available to fund all
cash flow needs, should not be considered an alternative to net
income, or to cash flows from operations (as determined in accordance
with GAAP) and should not be considered as an indication of the
Company's operating performance or as a measure of liquidity. EBITDA
is not necessarily comparable to similarly titled measures for other
companies.
(e) Wal-Mart comparable store sales growth is based on Vista's
domestic Wal-Mart business and is calculated by comparing net sales
for the period to net sales of the prior period for all stores open at
least twelve months prior to the later period. This information is
not available for 1993 and 1994.
(f) Sales per store is calculated on a quarterly basis by dividing
total net sales by the total number of stores open during the period.
Annual and semi-annual net sales per store is the sum of the
applicable quarterly calculations.
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA
The following summary unaudited pro forma condensed consolidated
financial and other data as of October 3, 1998, for the year ended
January 3, 1998 and for the nine-month period ended October 3, 1998
has been derived by the application of pro forma adjustments to the
historical financial statements of Vista, Frame-n-Lens, and New West
included elsewhere in this prospectus. The unaudited pro forma
condensed consolidated balance sheet data has been prepared to give
effect to the New West acquisition, the closing of our new credit
facility and the sale of the outstanding notes as if each occurred on
October 3, 1998. The unaudited pro forma condensed consolidated
income statement data for the year ended January 3, 1998 and the nine-
month period ended October 3, 1998 has been prepared to give effect to
the Frame-n-Lens acquisition, the New West acquisition (using the
financial data for the corresponding fiscal periods of the respective
companies), the closing of our new credit facility, and the sale of
the outstanding notes as if each occurred at the beginning of the
respective periods.
The Pro Forma Financial Statements include pro forma data relative
to the Frame-n-Lens acquisition completed July 28, 1998. Such data is
incorporated in the pro forma financial statements to provide a more
complete representation of the pro forma condensed consolidated
statement of operations of Vista.
The summary unaudited pro forma condensed consolidated financial
data do not purport to represent what the Company's results would have
been if the Frame-n-Lens acquisition, the New West acquisition, the
closing of the New Credit Facility, and the Offering had occurred on
the date or for the periods indicated, or to project what the
Company's results of operations or financial position for any future
period or date will be. The unaudited summary pro forma condensed
consolidated financial data should be read in conjunction with
"Unaudited Pro Forma Condensed Consolidated Financial Data" and the
Consolidated Financial Statements, including the notes thereto.
Year Ended Nine Months Ended
January 3, October 3,
1998 1998
----------- ------------------
(dollars in thousands)
INCOME STATEMENT DATA:
Net sales .............................. $ 313,937 $ 253,438
Gross profit ........................... 171,630 139,988
Selling, general and administrative
expense.............................. 153,205 122,997
Operating income........................ 18,425 16,991
Interest expense, net .................. 18,593 12,487
Net income (loss)....................... (568) 223
OTHER FINANCIAL DATA:
Depreciation and amortization .......... $ 18,567 $ 13,943
Capital expenditures.................... 14,187 10,920
EBITDA(a)............................... 36,992 29,478
EBITDA margin........................... 11.8% 11.6%
STORE DATA:
End of period stores ................... 894 915
Comparable store sales growth(b)........ 4.7% (0.1%)
Sales per store(c) ..................... $ 351 $ 235
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
As of October 3,
1998
----------------
<S> <C>
Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,207
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,169
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,273
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,768
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,413
(/TABLE>
See accompanying notes to Summary Unaudited Pro Forma
Condensed Consolidated Financial and Other Data.
12
<PAGE>
NOTES TO SUMMARY UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
AND OTHER DATA
(a) EBITDA represents the sum of operating income plus depreciation
and amortization (excluding amortization of deferred financing costs,
which is included in interest expense, net), and other nonrecurring
charges. For the pro forma periods, there were no other nonrecurring
charges. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service or incur
indebtedness. However, EBITDA does not represent cash flow from
operations as defined by GAAP, is not necessarily indicative of cash
available to fund all cash flow needs, should not be considered an
alternative to net income, or to cash flows from operations as
determined in accordance with GAAP and should not be considered as an
indication of the Company's operating performance or as a measure of
liquidity. EBITDA is not necessarily comparable to similarly titled
measures for other companies.
Pro forma EBITDA represents EBITDA as defined above, with the
following pro forma adjustments:
</TABLE>
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 3,1998 October 3, 1998
-------------- -----------------
(dollars in thousands)
<S> <C> <C>
Elimination of duplicate expenses
through the consolidation of
certain
manufacturing facilities <F1> $ 2,648 $ 2,471
Elimination of duplicate expenses
through the consolidation of
certain
administrative facilities <F2> 6,649 5,070
__________
<FN>
<F1> In connection with the Frame-n-Lens Acquisition and the New
West Acquisition, the Company will consolidate three manufacturing
facilities (located in Los Angeles, California, Tempe, Arizona, and
Portland, Oregon) into the Frame-n-Lens operations located in
Fullerton, California. Amounts shown represent the savings for
payroll related costs and reduced occupancy expense.
<F2> In connection with the Frame-n-Lens Acquisition and the New
West Acquisition, the Company will (i) close the existing home office
for New West, (ii) substantially reduce the number of employees at the
home office of Frame-n-Lens and (iii) consolidate operations with the
Company's home office in Lawrenceville, Georgia.
</FN>
(/TABLE>
(b) Comparable store sales growth is calculated by comparing net
sales for the period to net sales of the prior period for all stores
open at least twelve months prior to the later period. For Vista, the
calculation is based on Vista's domestic Wal-Mart business.
<PAGE>
(c) Pro forma sales per store is calculated by dividing total net
sales by the total number of stores open during the period.
13
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN THESE
NOTES. ANY OR ALL OF THE RISK FACTORS DISCUSSED BELOW COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND PROSPECTS. THIS PROSPECTUS INCLUDES
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT INCLUDING, IN
PARTICULAR, THE STATEMENTS ABOUT THE COMPANY'S PLANS, STRATEGIES, AND
PROSPECTS UNDER THE HEADINGS "PROSPECTUS SUMMARY," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," AND "BUSINESS."
ALTHOUGH WE BELIEVE THAT OUR PLANS, INTENTIONS AND EXPECTATIONS
REFLECTED IN OR SUGGESTED BY SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, WE CAN GIVE NO ASSURANCE THAT WE WILL ACHIEVE THEM.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE FORWARD-LOOKING STATEMENTS WE MAKE IN THIS PROSPECTUS ARE SET
FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. ALL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON OUR BEHALF
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE FOLLOWING CAUTIONARY
STATEMENTS.
SUBSTANTIAL LEVERAGE - OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY
AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THESE NOTES.
As a result of the sale of the outstanding notes, we are highly
leveraged. As of October 3, 1998, assuming we had completed the sale
of the outstanding notes and after giving effect to our recent
acquisitions and the establishment of our new credit facility, we had:
* total indebtedness of $136.8 million, including $123.6 million
of which is the outstanding notes, and
* total availability of $20.0 million under our new credit
facility, subject to certain borrowing limitations.
See "Capitalization" and "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Description of the Notes."
Our ability to pay or refinance our indebtedness, including under
these notes, or to fund our planned capital expenditures will depend
on our future performance. This, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control.
Based upon our current level of operations and anticipated revenue
growth, we believe that our cash flow from operations, available cash,
and available borrowings under our credit facility, will be adequate
to meet our future liquidity needs for at least the next several
years. A decrease in revenues, coupled with the borrowing base limits
contained in our new credit facility, could require us to postpone or put
off planned capital expenditures, including new store openings.
We may, however, need to refinance all or a portion of the principal
of these notes on or before maturity. We cannot assure you that our
business will generate sufficient cash flow from operations, that
anticipated revenue growth will be realized or that future borrowings
will be available under our credit facility in an amount sufficient to
enable us to pay our indebtedness, including these notes, or to fund
<PAGE>
our other liquidity needs. In addition, we cannot assure you that we
will be able to refinance our indebtedness on commercially reasonable
terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
14
<PAGE>
Our substantial indebtedness could have important consequences to
you. For example, it could:
* make it more difficult for us to satisfy our obligations under
these notes,
* increase our vulnerability to general adverse economic and
industry conditions,
* limit our ability to obtain additional financing to fund
future working capital, capital expenditures and other general
corporate requirements,
* require us to dedicate a substantial portion of our cash flow
from operations to the payment of our indebtedness, thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures or other general corporate
purposes,
* limit our flexibility in planning for, or reacting to, changes
in our business and our industry,
* place us at a competitive disadvantage compared to competitors
that have less debt, and
* limit, along with the financial and other restrictive
covenants in our indebtedness, our ability to borrow
additional funds. Our failure to comply with these covenants
could result in an event of default which, if not cured or
waived, could have a material adverse effect on us.
See "Description of New Credit Facility."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS - THE TERMS OF OUR CREDIT
FACILITY AND THE INDENTURE RESTRICT OUR CORPORATE ACTIVITIES.
Our credit facility contains various restrictive covenants and
requires us to maintain specified financial ratios and satisfy certain
financial tests, such as:
* minimum EBITDA requirements,
* minimum fixed charge ratios, and
* maximum leverage ratios.
Our ability to meet these financial ratios and tests may be affected
by events beyond our control, and we cannot assure you we will meet
such tests. Our credit facility also limits our:
* capital expenditures,
* investments,
* indebtedness,
* liens,
* dividends,
* guarantee obligations,
* prepayments of other indebtedness,
* mergers,
* acquisitions or sales of assets,
* changes in business activities,
* transactions with affiliates, and
* issuance of equity.
Our breach of any of these covenants could result in an event of
default under our credit facility. If a default occurs, our lenders
can declare our indebtedness, both principal and interest, immediately
due and payable, and could terminate their commitments to make future
advances. We have pledged substantially all of the assets that we
finance under our credit facility. If we fail to repay all amounts
declared due and payable, our lenders could proceed against the
collateral granted to them to satisfy our obligations. It is likely
15<PAGE>
that our assets would be insufficient to repay in full that
indebtedness and our other indebtedness, including these notes.
The indenture also restricts our ability and that of our
subsidiaries, among other things, to:
* incur additional indebtedness,
* incur liens,
* pay dividends or make certain other restricted payments or
investments,
* make certain asset sales, and
* enter into certain transactions with affiliates.
See "Description of New Credit Facility" and "Description of the
Notes - Certain Covenants."
EXPANSION STRATEGY
We cannot control our expansion in our host stores, including Wal-
Mart, beyond those currently under contract. Although we periodically
discuss expansion opportunities with each host, we cannot assure you
that any host will offer to extend our current agreements or offer us
additional vision centers. Nor can we assure you that any renewal or
new store offer will be on terms similar to those in our current
agreements. Wal-Mart operates its own optical division. As of
October 3, 1998, Wal-Mart operated approximately [680] vision centers.
After we have opened 400 locations pursuant to our Wal-Mart agreement,
Wal-Mart may allocate future vision centers to its own optical
division.
Our agreement with Wal-Mart provides for a nine-year base term at
each vision center that begins at opening and includes a three-year
option. We opened six vision centers in 1990 under our Wal-Mart
agreement and another 54 in 1991. We have opened additional vision
centers in subsequent years. Beginning in 1999, we will determine
whether to exercise our three-year extension options for our Wal-Mart
vision centers. We will make those decisions based upon various
factors, including, for example:
* the sales levels of each vision center,
* the estimated future profitability of each vision center, and
* the increased minimum license fees charged by Wal-Mart during
the option period.
We must exercise our extension option for any Wal-Mart vision center
at least six months before its initial license expires. We expect to
extend the licenses for a substantial majority of these vision
centers. We cannot assure you, however, how many licenses we will
actually extend. Additionally, the leases for our 121 Sam's Club
vision centers will expire at various dates through 2003. See
"Business - Relationship with Host Companies."
Our continued growth depends in large part on our ability to open
profitable new stores in existing and new markets. To a lesser
extent, our continued growth depends on increasing comparable store
sales. In recent years, we have opened the following new stores:
New Store Openings Fiscal Year
------------------ -----------
86 1995
38 1996
129 1997
44 1998
16<PAGE>
We cannot assure you that we will be able to :
* open new stores in a timely manner,
* hire, train and integrate employees at new stores,
* locate and obtain favorable store sites, or
* adapt our distribution, information management and other
operating systems as necessary.
New stores may not achieve the same sales level or profitability
that our existing stores achieve. A significant economic downturn and
a resulting decrease in eyewear purchases could adversely affect our
expansion plans. We expect our quarterly results of operations to
fluctuate depending on
* the timing and amount of revenue contributed by new stores,
and
* the timing of costs associated with opening new stores.
See "Business."
DEPENDENCE ON HOST COMPANIES - A SUBSTANTIAL NUMBER OF OUR VISION
CENTERS ARE LOCATED IN DEPARTMENT STORES, PARTICULARLY WAL-MART.
We are substantially dependent on Wal-Mart and its affiliates for
our current operations. The following chart shows, as of October 3,
1998, certain information about our vision centers in Wal-Mart and
Sam's Club host stores:
Category Number
-------- -------
Total Vision Centers 915
Total Host Vision Centers 584
Wal-Mart Locations 372
Wal-Mart Mexico 26
Sam's Club 121
In addition, including the net sales of the companies we recently
acquired, we derived 67% of our net sales for the fiscal year ended
January 3, 1998 from vision centers located in Wal-Mart and Sam's Club
stores. Vision centers in Wal-Mart stores rely largely on customer
traffic generated by the Wal-Mart host store. Our agreement with Wal-
Mart does not require Wal-Mart to maintain any existing Wal-Mart store
or to open new ones.
ABILITY TO ACHIEVE ANTICIPATED COST SAVINGS OR REVENUE GROWTH - IF WE
FAIL TO ACHIEVE THE COST SAVINGS OR REVENUE GROWTH DESCRIBED IN THIS
PROSPECTUS, OUR ACTUAL FINANCIAL RESULTS COULD DIFFER SUBSTANTIALLY
FROM OUR PROJECTIONS.
The following important factors, among others, could cause us not to
achieve the results contemplated in this Prospectus or otherwise
adversely affect our future business, financial condition or results
of operations:
17
<PAGE>
* loss of managed vision care arrangements,
* loss or retirement of key members of management,
* increased competitive pressures,
* increased interest rates or cost of borrowing,
* changes in customer spending levels,
* changes in environmental or other government regulations,
* changes in general economic conditions,
* unanticipated costs related to our recent acquisitions and the
integration of the acquired companies, or
* default under any material debt agreement.
See "Business - Business Strategy" and "Business - Key Business
Strengths".
Our Frame-n-Lens subsidiary has experienced significant negative
comparable store sales at many locations. We believe that we can
reverse that trend through application of our business strengths and
growth strategies. Nonetheless, these measures may be insufficient to
reverse the trend and this would adversely affect our future business
and cash flow generated from operations.
Additionally, references in this document to pro forma EBITDA
reflect our estimates of annualized synergies from our acquisitions of
Frame-n-Lens and New West. We expect to realize these synergies
through:
* eliminating duplicate expenses through consolidation of
manufacturing and administrative facilities, and
* reducing our purchasing costs.
We estimate our cost savings and reductions to be $7.5 million on a pro forma
basis for the nine-month period ended October 3, 1998. These synergies do
not, however, include anticipated cost savings from our expected reduced
purchasing costs. As of the date of this Prospectus, we have begun to realize
a portion of the possible cost-savings through consolidated purchasing contracts
and the closing of the Portland, Oregon facility. We cannot assure you,
however, that we will be able to achieve all of our estimated costs savings or
reductions within our estimated time frame, if at all. You should therefore
not place undue reliance on these estimates. Moreover, the costs of
achieving these synergies may exceed our estimates.
LACK OF COMBINED OPERATING HISTORY AND INTEGRATION OF ACQUISITIONS - OUR
FUTURE PROSPECTS DEPEND IN LARGE PART ON OUR ABILITY TO INTEGRATE
THREE FORMERLY SEPARATE BUSINESS.
Vista, Frame-n-Lens and New West do not have a consolidated
operating history. Our future operating results will depend in large
part on our ability to integrate the acquired businesses with our
existing business. Even though we intend to operate as an integrated
entity, we cannot assure you that our integration of Frame-n-Lens and
New West or future acquisitions will be successful or that we will
realize the anticipated strategic benefits of these acquisitions. Our
failure successfully to integrate acquired companies may adversely
affect our business, results of operations or financial condition.
The assimilation of acquired businesses, including Frame-n-Lens and
New West, requires us to incur certain non-recurring expenditures. We
cannot assure you that the acquired operations will be sufficiently
profitable to offset these costs, or that the acquisitions will not
adversely affect the operations of the acquired companies or our own
historical business.
18
<PAGE>
EFFECTIVE AND STRUCTURAL SUBORDINATION OF NOTES - THE NOTES WILL BE
UNSECURED. YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES WILL RANK
EQUALLY WITH CLAIMS OF OUR OTHER UNSECURED, UNSUBORDINATED CREDITORS,
AND WILL BE JUNIOR TO OUR BORROWINGS UNDER OUR CREDIT FACILITY AND
POSSIBLY ALL OF OUR FUTURE BORROWINGS.
These notes will be our general unsecured obligations, and will not
be secured by any of our or our subsidiaries' assets. Your right of
payment under these notes will rank equally with all of our
unsubordinated indebtedness, and will rank senior to all of our
subordinated indebtedness. These notes will also be effectively
subordinated to all of our secured indebtedness to the extent of the
assets securing that indebtedness.
Our indebtedness under our new credit facility is secured by liens
against substantially all of our assets. In the event of a default on
our secured indebtedness, or a bankruptcy, liquidation or
reorganization of the Company and our subsidiaries, these assets will
be available to satisfy obligations with respect to the secured
indebtedness before they can be used to satisfy our obligations under
the notes.
EFFECTIVE AND STRUCTURAL - SUBORDINATION OF GUARANTEES THE GUARANTEES
WILL BE UNSECURED. YOUR RIGHT TO PAYMENT UNDER THE GUARANTEES WILL
RANK EQUALLY WITH CLAIMS OF THE GUARANTORS' OTHER UNSECURED,
UNSUBORDINATED CREDITORS, AND WILL BE JUNIOR TO THEIR EXISTING SECURED
BORROWINGS, INCLUDING UNDER OUR CREDIT FACILITY, AND POSSIBLY TO ALL
OF THEIR FUTURE BORROWINGS.
These notes will be unconditionally guaranteed by some of our
current and future subsidiaries. The guarantees will be general
unsecured obligations of the guarantors, and will not be secured by
any of their assets. Your right of payment under the guarantees will
rank equally with all unsubordinated indebtedness of the guarantors
and will rank senior to their subordinated indebtedness. The
guarantees will also be effectively subordinated to all of the
guarantors' secured indebtedness to the extent of the assets securing
that indebtedness.
COMPETITION - OUR INDUSTRY IS HIGHLY COMPETITIVE.
We compete with department stores and other optical chains and
retail stores, some of which have greater financial resources than we.
Wal-Mart has an in-house optical division that also operates vision
centers in Wal-Mart stores. We believe these Wal-Mart operated vision
centers are generally located in trading areas where we do not
operate.
19
<PAGE>
DEPENDENCE ON KEY PERSONNEL - WE DO NOT HAVE EMPLOYMENT AGREEMENTS WITH
KEY MANAGEMENT. THE DEPARTURE OF KEY EXECUTIVES COULD ADVERSELY
AFFECT OUR BUSINESS.
We depend on the continuing efforts of our executive officers and
senior management, including individuals who have joined us as a
result of our recent acquisitions. The departure of these individuals
in significant numbers could adversely affect our business and
prospects if we are unable to attract and retain qualified
replacements. As a matter of policy, we do not enter into employment
agreements with any personnel, including key executive officers and
management. However, we offer our executives and management bonus and
stock-based incentives related to our performance.
AVAILABILITY OF OPTOMETRISTS AND OPTICAL PROFESSIONALS - FAILURE TO HAVE
INDEPENDENT VISION CARE PROFESSIONALS AVAILABLE IN OR NEAR OUR VISION
CENTERS WOULD ADVERSELY AFFECT OUR ABILITY TO WIN MANAGED CARE AND
HOST STORE CONTRACTS, AND COULD PREVENT US FROM OPERATING IN SOME
STATES.
Our business and marketing strategies emphasize the availability of
independent optometrists in close proximity to our vision centers.
Typically, a licensed optometrist occupies a space in or adjacent to
each of our stores. Additionally, our agreement with Wal-Mart
requires us to make optometrists available at least 48 hours per week
if permitted by law. Some states require that licensed opticians be
present when eyeglasses or contact lenses are fitted or dispensed.
Any difficulties or delays in securing the services of such optical
professionals could adversely affect our business and our relationship
with our host stores. Consequences of difficulty or delay could
include:
* termination of our host store licenses for those vision
centers, and
* imposition of legal sanctions against us, including closure of
vision centers without licensed professionals.
See "Business - Optometrists."
REGULATION - FEDERAL AND STATE GOVERNMENTS EXTENSIVELY REGULATE THE
HEALTH CARE AND INSURANCE INDUSTRIES. A FINDING THAT WE HAVE VIOLATED
EXISTING REGULATIONS, OR FUTURE ADVERSE CHANGES IN THOSE REGULATIONS,
COULD NEGATIVELY AFFECT OUR BUSINESS AND ITS PROSPECTS.
Both federal and state governments extensively regulate the delivery
of health care, including relationships among health care providers
such as optometrists and eyewear providers like us. Many states
prohibit business corporations from practicing medicine or controlling
the medical judgments or decisions of physicians. States often also
prohibit certain financial arrangements, such as splitting fees with
physicians. The legality of our relationships with opticians and
independent optometrists has been and may continue to be challenged
from time to time. Regulations vary from state to state and are
enforced by both courts and regulatory authorities, each with broad
discretion. A ruling that we have violated these laws could, for
example, result in:
* censure,
* delicensing of optometrists,
* civil or criminal penalties, including large civil monetary
penalties,
* invalidation or modification of our agreements with
optometrists and opticians, or
* an order requiring us to change our business practices.
20<PAGE>
These consequences could have an adverse effect on our business.
Also, changes in our relationships with independent optometrists and
opticians could adversely affect our relationship with Wal-Mart or our
other host stores.
The fraud and abuse provisions of the Social Security Act and anti-
kickback laws and regulations adopted in many states prohibit
soliciting, paying, receiving or offering any compensation for making,
or to cause someone to make, certain referrals of patients, items or
services. The Social Security Act also imposes significant penalties
for false or improper Medicare and Medicaid billings. Many states
have adopted similar laws applicable to any payor of health care
services. In addition, the Stark Self-Referral Law restricts
referrals for Medicare or Medicaid covered services where the
referring physician has a financial relationship with the service
provider. In some cases, the rental of space constitutes a financial
relationship under this law. Many states have adopted similar self-
referral laws which are not limited to Medicare or Medicaid reimbursed
services. Violations of these laws may result in:
* substantial civil or criminal penalties, including double and
treble civil monetary penalties, and
* in the case of federal laws, exclusion from the Medicare and
Medicaid programs.
Such exclusions and penalties, if applied to us, could have a
material adverse effect on our business. See "Business - Government
Regulation."
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS - OUR SUCCESS INCREASINGLY
DEPENDS ON OUR ABILITY TO DEVELOP AND MAINTAIN RELATIONSHIP WITH
MANAGED VISION CARE PROVIDERS.
An increasing percentage of patients receive health care coverage
through managed care payors. As this trend continues, our success
will increasingly depend on our ability to negotiate contracts with
health maintenance organizations ("HMOs"), employer groups and other
private third party payors. We cannot assure you that we will be able
to establish or maintain satisfactory relationships with managed care
and other third party payors. Many managed care payors have existing
provider structures in place that they may be unable or unwilling to
change. Our inability to enter into such arrangements in the future
could materially adversely affect our business.
We have established a network of optometrists and other providers
located in or adjacent to our stores in order to enhance our ability
to contract with managed care payors for both professional services
and retail eyewear supplies. Managed care contracts include a variety
of reimbursement methods, such as capitation (or risk basis) and fee
for service. Our contracts with managed care companies on the one
hand, and with networks of optometrists and other providers on the
other, are subject to federal and state regulations, for example:
INSURANCE LICENSURE. Most states impose strict licensure
requirements on companies that engage in the business of insurance,
including health insurance companies and HMOs. Many licensing laws
mandate strict financial and other requirements which we may not be
able to meet, were we deemed to be an engaging in the business of
insurance. Additionally, the licensure process can be lengthy and
time consuming.
<PAGE>
ANY WILLING PROVIDER LAWS. Some states require managed care payors
to include any provider who is willing to abide by the terms of the
payor's contracts. Some states also prohibit termination of providers
21
<PAGE>
without cause. Other states are considering similar requirements.
Such laws limit our ability to develop effective managed care provider
networks.
ANTITRUST LAWS. A range of antitrust laws apply to us and our
provider network. These laws prohibit anti-competitive conduct,
including:
* price-fixing,
* concerted refusals to deal, and
* divisions of markets.
We cannot assure you that our operations will not be challenged on
antitrust grounds in the future. See "Business - Government
Regulation."
UNCERTAINTIES REGARDING HEALTHCARE REFORM - PROPOSED REFORMS MAY AFFECT
OUR BUSINESS.
There have been numerous reform initiatives at the federal and state
levels relating to the payment for and availability of healthcare
services. We believe that such initiatives will continue for the
foreseeable future. If adopted, some of these reforms could adversely
affect our business.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT - WE RELY ON THIRD PARTIES TO
PAY MANY OF OUR CUSTOMER'S COSTS.
A significant portion of medical care in the United States is
funded by government and private insurance programs, such as Medicare,
Medicaid and corporate health insurance plans. According to
government projections, more medical beneficiaries who are significant
consumers of eye care services will enroll in managed care
organizations. Governmental and private third party payors are trying
to contain medical costs by:
* lowering reimbursements,
* imposing use restrictions and risk-based compensation
arrangements,
* redesigning benefits, and
* exploring more cost-effective methods of health care delivery.
These cost containment efforts may lead to limitations or reductions
in reimbursement for eye care services, which would adversely affect
our future sales. Additionally, some reimbursement programs require
collection of amounts by the Company. Our inability to fully collect
reimbursable amounts could adversely affect cash flow generated from
operations.
MEDICAL AND TECHNOLOGICAL CHANGES - NEW ADVANCES MAY REDUCE THE NEED FOR
OUR PRODUCTS OR ALLOW OTHER MANUFACTURERS TO PRODUCE EYEWEAR AT LOWER
COST THAN WE CAN.
Corneal refractive surgery procedures such as radial-keratotomy and
photo-refractive keratectomy may change the demand for our products.
The development of new drugs may have a similar effect. Technological
advances such as wafer technology and lens casting may make our
current lens manufacturing method uncompetitive or obsolete. Such
medical and technological advances may have a material adverse effect
on our operations.
22
<PAGE>
ACQUISITIONS - FAILURE TO IDENTIFY SUITABLE ACQUISITION TARGETS, OR THE
COSTS AND DIFFICULTIES OF ACQUIRING AND INTEGRATING EXISTING
BUSINESSES COULD ADVERSELY AFFECT OUR FUTURE GROWTH AND
COMPETITIVENESS.
From time to time we may consider growth through opportunistic
acquisitions. We will evaluate possible acquisitions on a case-by-
case basis. We cannot assure you that we will successfully identify
or conclude any acquisitions. Even if we acquire another business,
the integration of that business into our operations may create
substantial costs, delays, or other problems. Acquisitions may also
expose us to particular risks, for example:
* diversion of management attention,
* assumption of liabilities, and
* amortization of goodwill and other acquired intangible assets.
These impacts could materially and adversely affect our financial
condition or results of operations. Depending on the value and nature
of the consideration we pay, acquisitions may adversely affect our
liquidity. In making acquisitions, we may compete with other bidders,
some of which will have greater financial resources than we do. We
anticipate that we will finance future acquisitions through cash on
hand, issuance of common stock, and borrowings under our new credit
facility. The indenture and our new credit facility limit our ability
to issue equity or incur indebtedness to finance acquisitions. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources," "Business,"
"Description of New Credit Facility" and "Description of the Notes
Certain Covenants."
MEXICAN AND FOREIGN OPERATIONS - OPERATING IN OTHER COUNTRIES PRESENTS
SPECIAL RISKS THAT MAY AFFECT OUR RESULTS OF OPERATIONS.
Our Mexican operations face risks substantially similar to those we
face in our Wal-Mart stores, including dependence on the host store
and limits on expansion. We cannot assure you that our Mexican
operations will be able to attain profitability.
Our foreign operations expose us to all of the risks of investing
and operating in foreign countries generally, including:
* differing regulatory, political and governmental environments,
* currency fluctuations,
* high inflation,
* price controls,
* restrictions on profit repatriation,
* generally lower per capita income and spending levels,
* import duties and value-added taxes, and
* difficulties of cross-cultural marketing.
See "Business - Mexican Operations."
23
<PAGE>
ANTI-TAKEOVER PROVISIONS - OUR ARTICLES OF INCORPORATION AND BY-LAWS
CONTAIN PROVISIONS WHICH MAKE IT MORE DIFFICULT TO EFFECT A CHANGE IN
CONTROL OF THE COMPANY.
These include provisions:
* authorizing the issuance of preferred stock without
shareholder approval,
* requiring a supermajority shareholder vote in certain
circumstances,
* restricting who may call a special meeting of shareholders,
* permitting our Board of Directors to consider constituencies
in addition to the shareholders, and
* requiring shareholders to comply with certain procedures in
connection with any shareholder proposals or director
nominations.
In addition, our Board of Directors has adopted a Shareholders'
Rights Agreement which entitles common stockholders to purchase our
Series A Participating Cumulative Preferred Stock if a third party
acquires beneficial ownership of 15% or more of our common stock. Our
stockholders may also purchase the stock of an acquiring person (as
defined in the agreement) at a discount upon the occurrence of certain
triggering events. These provisions of our Articles of Incorporation
and By-Laws, and the Shareholders' Rights Agreement, could discourage
tender offers or other transactions that would result in shareholders
receiving a premium over the market price for our common stock.
YEAR 2000 COMPLIANCE - OUR COMPUTER SYSTEMS ARE BEING UPGRADED, BUT THE
YEAR 2000 PROBLEM MAY PRESENT RISKS THAT WE HAVE NOT YET IDENTIFIED.
The majority of our internal information systems are currently Year
2000 compliant or being replaced with fully compliant new systems. We
have identified approximately 300 point of sale systems that require
hardware upgrades to be Year 2000 compliant, of which we had replaced
280 as of October 3, 1998. We expect to complete our new system
modifications by the end of the third quarter of 1999. We will use
internal and external resources to reprogram, replace, and test
software for Year 2000 compliance. We expect to spend approximately
$1.1 million on Year 2000 compliance projects, including software and
hardware changes. Our estimate is based on numerous assumptions about
the continued availability of certain resources, third party
modification plans and other factors. We cannot guarantee that these
assumptions will hold, and the actual costs and results of our Year
2000 compliance efforts could differ materially. Hardware and new
software purchases will be capitalized as incurred and amortized over
three years.
We deal with many vendors, financial institutions and managed care
organizations that use information systems to capture and transmit
transactions. We are coordinating our Year 2000 compliance efforts
with these organizations. The estimated future cost of this
transition is minimal. We cannot assure you that these organizations
will make their systems Year 2000 compliant. The failure of these
organizations, particularly any managed care payors, to become Year
2000 compliant could have a material adverse effect on us.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL - WE MAY NOT
HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF
CONTROL REPURCHASE CONTEMPLATED BY THE INDENTURE.
<PAGE>
Upon certain changes of control, holders of the notes have the right
to require us to repurchase all or a portion of the notes. See
"Description of the Notes - Change of Control." If a change of control
occurs, we cannot assure you that we will have sufficient funds to
repurchase all of the notes tendered. Our failure to repurchase
tendered notes would be an event of default under the indenture.
24<PAGE>
Changes of control are also restricted by, and constitute a default
under, our credit facility, as well as under other loan, credit and
security agreements. If the lenders under our credit facility or any
other secured lenders accelerate our obligations due to a default,
they would have a priority claim to the proceeds from the sale of our
assets securing such indebtedness.
FRAUDULENT CONVEYANCE - FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO
RETURN PAYMENTS RECEIVED FROM THE GUARANTORS.
If any guarantor receives less than reasonably equivalent value in
exchange for its guarantees, any liabilities or payments under its
guarantee could be avoided under federal or applicable state
fraudulent transfer laws, regardless of whether it was subject to any
bankruptcy or insolvency proceedings. In particular, to the extent
that any guarantor becomes liable for any of our obligations, the
relevant guarantee could be voided if the guarantor, at the time it
incurred the indebtedness evidenced by the guarantee,
* received less than reasonably equivalent value or fair
consideration for the incurrence of the guarantee,
* was or became insolvent by reason of such incurrence,
* was engaged in a business or transaction for which the
guarantor's remaining assets constituted unreasonably small
capital, or
* intended to incur, or believed it would incur, debts beyond
its ability to pay such debts as they matured.
If any guarantees are avoided, the noteholders could lose the
benefit of the guarantees, and could also be required to return to the
guarantors the amount of any payment or other property received in
respect of the notes.
The indenture requires that certain of our future subsidiaries
guarantee the notes. If certain bankruptcy or insolvency proceedings
are initiated by or against these new subsidiaries within 90 days (or,
possibly, one year) after they issue a guaranty or if any guarantor
incurs obligations under its guarantees in anticipation of insolvency,
all or a portion of the affected guarantees could be avoided as a
preferential transfer under federal bankruptcy or applicable state
law. In addition, a court could require holders to return all
payments made under any such guarantees within such 90 day period (or,
possibly, one year) as preferential transfers.
The measures of insolvency under these fraudulent transfer laws will
depend upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a guarantor
would be considered insolvent if:
* the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all of its assets,
* the present fair saleable value of its assets was less than
the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature, or
* it could not pay its debts as they become due.
We do not believe that any guarantor, as a result of the issuance of
the guarantees,
25<PAGE>
* will be insolvent or rendered insolvent under the standards
described above,
* will be engaged in a business or transaction for which its
remaining assets constitute unreasonably small capital, or
* will have debts beyond its ability to pay such debts as they
mature.
These beliefs are based on the guarantors' operating history and net
worth, as well as our analysis of their internal cash flow projections
and estimated assets and liabilities at the time of this offering. A
court could, however, decide these issues differently.
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON
TRADING MARKET FOR OUTSTANDING NOTES - YOU MAY NOT BE ABLE TO SELL THE
NOTES YOU HOLD IF YOU DO NOT EXCHANGE THEM IN THIS OFFER.
If you hold outstanding notes and do not exchange them in this
offer, you will remain subject to the transfer restrictions applicable
to the outstanding notes and reflected in their legend. We issued the
outstanding notes under exemptions from the registration requirements
of the Securities Act and applicable state securities laws. In
general, holders of the outstanding notes may not offer or sell them
unless they are exempt from registration or registered under the
Securities Act and applicable state laws. We have agreed, in certain
circumstances, to file a shelf registration statement covering resales
of the outstanding notes. Except in those circumstances, we do not
intend to register the outstanding notes under the Securities Act.
After consummation of this exchange offering, we will have no further
obligation to do so.
If you tender outstanding notes in this exchange offer for the
purpose of participating in a distribution of the exchange notes, you
may be deemed to have received restricted securities. If so, you will
be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. Additionally, as a result of the exchange offer, it is
expected that the aggregate principal amount of the outstanding notes
will decrease substantially. As a result, it is unlikely that a
liquid trading market will exist for the outstanding notes at any
time. This lack of liquidity will make transactions more difficult
and may reduce the trading price of the outstanding notes. See "The
Exchange Offer" and "Description of the Exchange Notes - Registration
Rights Agreement; Penalty Interest".
ABSENCE OF PUBLIC MARKET FOR THE NOTES - YOU CANNOT BE SURE THAT AN
ACTIVE TRADING MARKET WILL DEVELOP FOR THESE NOTES.
There is no existing market for the exchange notes. We cannot
assure you that any market that may develop for the notes will be
liquid or that you will be able to sell your exchange notes. In
addition, we cannot offer assurances as to the price at which you
would be able to sell the notes. Future trading prices of the
exchange notes will depend on many factors, including, for example:
* prevailing interest rates,
* our operating results, and
* the market for similar securities.
We do not intend to list the exchange notes on any securities
exchange or the NASDAQ National Market. The initial purchasers have
informed us that they currently intend to make a market in these notes
26<PAGE>
after this exchange offering is completed. However, the initial
purchasers may discontinue their market-making activities at any time
without notice. The Securities Act and the Exchange Act will limit
this market-making activity. The outstanding notes are eligible for
trading in the Private Offerings, Resale and Trading through Automated
Linkages (PORTAL) market. Although we intend to have them designated
for trading in the PORTAL market, the exchange notes offered by this
prospectus will constitute a new issue of securities with no
established trading market. If a trading market does not develop, you
may experience difficulty in reselling these exchange notes or may be
unable to sell them.
27
<PAGE>
THE NEW WEST ACQUISITION
On July 13, 1998, Vista and NW Acquisition Corp. entered into the
Merger Agreement with New West, which was amended on October 5, 1998.
Pursuant to the merger agreement, Vista acquired all of the
outstanding common stock, and options and warrants to acquire common
stock, of New West for $11.50 per share, or approximately $68.3
million in the aggregate (including the assumption of approximately
$2.5 million of indebtedness). To effect the New West Acquisition,
Vista commenced a cash tender offer for all of the shares of common
stock of New West on July 20, 1998 (as amended from time to time, the
"Tender Offer"). The Tender Offer was conditioned upon, among other
things, there being validly tendered and not withdrawn prior to the
expiration of the Tender Offer at least 51% of the outstanding shares
of common stock of New West.
The Tender Offer closed on October 23, 1998. After the closing of
Tender Offer, Vista caused New West to be merged with its acquisition
subsidiary and for each remaining share of common stock of New West to
be converted into $11.50 in cash as a result thereof. This merger was
approved under the Delaware General Corporation Law by the directors
of Vista without a separate vote of the stockholders of New West
because Vista held 90% or more of the outstanding common stock of New
West as a result of the Tender Offer.
Control of New West was acquired upon the closing of the Tender
Offer, which occurred on October 23, 1998. Accordingly, all
information regarding the Company contained herein assumes completion
of the acquisition of New West. See "Risk Factors - Possible Non-
Consummation of the New West Acquisition" and "Description of the
Notes - Special Redemption."
28
<PAGE>
USE OF PROCEEDS
This exchange offer is intended to satisfy certain of our
obligations under the Registration Rights Agreement. We will not
receive any proceeds from the issuance of the exchange notes. In
consideration for issuing the notes, we will receive outstanding notes
in like principal amount. The form and terms of the exchange notes
are identical in all material respects to the form and terms of the
outstanding notes, except as described in "The Exchange Offer Terms of
the Exchange Offer". The outstanding notes surrendered in exchange
for the exchange notes will be retired and cancelled and cannot be
reissued. Therefore, issuance of the exchange notes will not result
in any increase in our outstanding debt.
CAPITALIZATION
The following table sets forth our capitalization as of October 3,
1998, on an actual basis and on a pro forma basis to reflect the sale
of the outstanding notes, the Frame-n-Lens acquisition, the New West
acquisition, and the new credit facility and the application of the
net proceeds therefrom. This table should be read in conjunction with
the "Selected Consolidated Financial and Other Data," the "Unaudited
Pro Forma Condensed Consolidated Financial Data" and the Consolidated
Financial Statements, including the notes thereto.
</TABLE>
<TABLE>
<CAPTION>
As of October 3, 1998
---------------------
Actual Pro Forma
-------- ---------
(in thousands)
<S> <C> <C>
Long-term debt, including current maturities:
Existing Credit Facility................................... $ 52,000 $
New Credit Facility ....................................... 5,000
Notes offered hereby, net of discount...................... 123,580
Other debt(a) ............................................. 7,579 8,188
-------- --------
Total long-term debt, including current maturities .... 59,579 136,768
-------- --------
Shareholders' equity:
Preferred Stock ..........................................
Common Stock ............................................. 212 212
Additional paid-in capital................................ 46,634 46,634
Retained earnings ........................................ 3,640 3,640
Cumulative foreign currency exchange rate translation..... (4,073) (4,073)
-------- --------
Total shareholders' equity ............................ 46,413 46,413
-------- --------
Total capitalization ............................ $105,992 $183,181
======== ========
</TABLE>
__________
(a) Other debt consists of deferred purchase price obligations and
other amounts due to shareholders in connection with the Frame-n-Lens
acquisition, as well as fixed payment amounts related to the ELI
transaction (as defined) and capital leases. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations" and Note 6 to Vista Consolidated
Financial Statements.
29<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On October 8, 1998, we sold the outstanding notes to Schroder &
Co., Inc., First Union Capital Markets and NationsBanc Montgomery
Securities LLC. These initial purchasers sold the outstanding notes to
certain institutional investors in reliance on Rule 144A and
Regulation D promulgated by the SEC under the Securities Act. When we
sold the outstanding notes, we and our subsidiary guarantors signed a
Registration Rights Agreement for the benefit of holders of
outstanding notes. Under that agreement we agreed:
(1) to file a registration statement with respect to
an offer to exchange the outstanding notes for senior debt
securities with substantially identical terms within 120
days after we originally issued the outstanding notes, and
(2) to use our best efforts to cause the registration
statement to become effective under the Securities Act
within 180 days after the issue date.
We also agreed that if:
* applicable law or SEC staff interpretations do not permit us
to effect the exchange offer,
* the exchange offer is not consummated within 210 days after
the date we initially issued the outstanding notes,
* the initial purchasers request, with respect to outstanding
notes not eligible for exchange in the exchange offer,
* any holder of outstanding notes is not eligible to participate
in the exchange offer, or
* any holder of outstanding notes would not receive freely
tradable exchange notes in the exchange offer,
then, we and our subsidiary guarantors would, at our expense:
(1) promptly file a shelf registration statement
permitting periodic resales of the outstanding notes,
(2) use our best efforts to cause the shelf
registration statement to become effective, and
(3) use our best efforts to keep the shelf
registration statement current and effective until the
second anniversary of the date we initially issued the
outstanding notes, unless all the notes are sold under the
shelf registration statement in a shorter timeframe.
The interest rate on the outstanding notes will increase under certain
circumstances if we do not comply with our obligations under the
Registration Rights Agreement. See "Registration Rights."
Each holder of outstanding notes who wishes to exchange them in the
exchange offer will be required to make certain representations to us.
These include representations that the holder:
(1) will acquire the exchange notes in the ordinary course of
its business,
(2) has no arrangement with any person to participate
in the distribution of the exchange notes, and
(3) (a) is not our "affiliate," as defined in Rule 405 of the
Securities Act, or,
30
<PAGE>
(b) if the holder is our affiliate, it will
comply with the registration and prospectus delivery
requirements of the Securities Act.
See "Description of the Exchange Notes -- Registration Rights
Agreement; Penalty Interest."
Resale of Exchange Notes
We believe that holders of exchange notes issued in the exchange offer
may generally offer them for resale, resell and otherwise transfer
them without compliance with the registration and prospectus delivery
provisions of the Securities Act. Our belief is based on existing SEC
staff interpretations and is subject to the exceptions and
qualifications described in "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
We will accept for exchange all outstanding notes properly tendered
and not withdrawn prior to 5:00 p.m., Atlanta, Georgia time, on the
date this offer expires. The initial expiration date will be
______________, 1999. We may extend the exchange offer in our
discretion. We will only accept outstanding notes that are tendered in
compliance with this Prospectus and the terms of the letter of
transmittal. You must tender outstanding notes in $1,000 multiples. We
will issue $1,000 in principal amount of exchange notes in exchange
for each $1,000 in principal amount of outstanding notes tendered and
accepted for exchange.
The form and terms of the exchange notes will be substantially the
same as those of the outstanding notes, except that the exchange notes
will be registered under the Securities Act. Accordingly, the exchange
notes will not bear legends restricting their transfer. The terms of
the exchange notes will also not include certain registration rights
and penalty interest provisions applicable to the outstanding notes.
The exchange notes will evidence the same debt as the outstanding
notes. We will issue the exchange notes under the same indenture as
the outstanding notes. The indenture treats the exchange notes and the
outstanding notes as a single class of debt securities. The exchange
notes and the outstanding notes will be entitled to the same benefits
under the indenture.
We are not conditioning this exchange offer upon any minimum
aggregate principal amount of outstanding notes being tendered for
exchange. Holders of outstanding notes will not have any appraisal or
dissenters' rights in connection with the exchange offer.
As of the date of this Prospectus, we have issued $125,000,000 in
principal amount of the outstanding notes, all of which remain
outstanding. We are sending this Prospectus, together with the letter
of transmittal, to all registered holders of outstanding notes. We
will not fix a record date for determining registered holders of
outstanding notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the
Registration Rights Agreement, the applicable requirements of the
Securities and Exchange Act, and the rules and regulations of the SEC.
Any outstanding notes not exchanged in the exchange offer will remain
valid and continue to accrue interest. Holders of such notes will
remain entitled to the rights and benefits of the indenture and the
Registration Rights Agreement.
We will be deemed to have accepted tendered outstanding notes for
exchange only when, as, and if we so notify State Street Bank and
31<PAGE>
Trust Company, the exchange agent, and have complied with the
Registration Rights Agreement. We will deliver the exchange notes to
State Street Bank and Trust Company, as agent for the tendering
holders.
Except for certain taxes, we will generally pay all charges and
expenses in connection with the exchange offer. Tendering note holders
will not be required to pay brokerage commissions or fees or, in most
cases, transfer taxes, with respect to the exchange of their
outstanding notes in the exchange offer. See "The Exchange Offer --
Fees and Expenses."
If, for any reason, we do not accept any tendered outstanding notes
for exchange, we will return them, without expense to the tendering
holder, as soon as practical after the expiration or termination of
the exchange offer.
EXTENSIONS; AMENDMENTS; TERMINATION
We may extend the exchange offer by notice to the exchange agent.
If we extend the exchange offer, we will notify the registered holders
of outstanding notes. We may extend the offer until 9:00 a.m.,
Atlanta, Georgia time, on the business day after the offer is
scheduled to end. During any extension, we may continue to accept for
exchange any previously tendered outstanding notes that have not been
withdrawn.
We reserve the right, in our sole discretion to:
(1) delay our acceptance for exchange of any outstanding notes,
(2) extend the exchange offer,
(3) terminate the exchange offer if any of the
conditions described in "The Exchange Offer -- Conditions"
are not satisfied, or
(4) amend the terms of the exchange offer in any manner.
We may delay acceptance, extend or terminate the exchange offer by
notice to the exchange agent. We will also notify the registered
holders of outstanding notes of any delay in acceptance, extension,
termination, or amendment as promptly as practicable. If we amend the
exchange offer in a way we consider material, we will distribute a
prospectus supplement to the registered holders. Depending upon the
significance of the amendment and the means we choose to notify
registered holders, we may extend the exchange offer, if we deem
necessary, to allow registered holders time to consider the effect of
the amendment.
INTEREST ON THE EXCHANGE NOTES
As with the outstanding notes, we will pay interest on the exchange
notes at an annual rate of 12 3/4%. We will pay accrued interest semi-
annually, on April 15 and October 15. We will make our first interest
payment on April 15, 1999. The first payment will include interest
from the date we initially issue the exchange notes, plus any accrued
interest on the outstanding notes for the period from their initial
issue through the date of exchange. Once we issue the exchange notes,
interest will no longer accrue on outstanding notes accepted for
exchange.<PAGE>
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept any outstanding notes for exchange,
or to issue any exchange notes, and we may terminate the exchange
offer before we accept any outstanding notes for exchange, if:
32<PAGE>
(1) any person sues, or threatens to sue, in any forum
with respect to the exchange offer and, in our sole
judgment, the suit might materially impair our ability to
proceed with the exchange offer,
(2) a government proposes, adopts or enacts any law,
statute, rule or regulation, or the SEC staff interprets any
existing law, statute, rule or regulation in a way that, we
believe, in our sole judgment, might materially impair our
ability to proceed with the exchange offer, or
(3) we do not receive any governmental approval that
we, in our sole discretion, deem necessary to complete the
exchange offer.
These conditions are for our sole benefit. We may assert or waive
them as, when, and if we choose, in our sole discretion. Our exercise
or delay in exercising any of these rights does not mean we have
waived any of them. Each of these rights is an ongoing right which we
may assert at any time and from time to time.
In addition, we will not accept any outstanding notes for exchange,
and we will not issue any exchange notes, if the SEC has threatened or
issued a stop order with respect to:
* the Registration Statement of which this Prospectus is a part,
or
* the qualification of the indenture under the Trust Indenture
Act of 1939.
PROCEDURES FOR TENDERING
You may only tender outstanding notes held by you in the exchange
offer. To tender in the exchange offer, you must complete, sign, and
date the letter of transmittal or a facsimile of the letter of
transmittal. Under certain circumstances described in the letter of
transmittal, you must have your signature guaranteed. You must mail or
deliver the letter of transmittal to the exchange agent before 5:00
p.m., Atlanta, Georgia time, on the day the offer expires. In
addition, either
(1) you must deliver your outstanding notes to the
exchange agent with your letter of transmittal,
(2) the Depository Trust Company must confirm to the
exchange agent that the outstanding notes have been
transferred by book entry into the exchange agent's account
with Depository Trust Company, or
(3) you must comply with the guaranteed delivery
procedures.
We discuss the procedures for book entry transfer and
guaranteed delivery below.
THE EXCHANGE AGENT MUST RECEIVE THE LETTER OF TRANSMITTAL AND OTHER
REQUIRED DOCUMENTS BEFORE 5:00 P.M., ATLANTA, GEORGIA TIME, ON THE
DATE THE OFFER EXPIRES. OTHERWISE, WE WILL NOT CONSIDER YOUR NOTES TO
BE PROPERLY TENDERED AND WE WILL NOT ACCEPT THEM FOR EXCHANGE. The
exchange agent's address is printed on page 37 of this Prospectus.
By tendering and not withdrawing outstanding notes before the
exchange offer expires, you agree to the terms and conditions
described in this Prospectus and the letter of transmittal.
33
<PAGE>
YOU ARE RESPONSIBLE FOR CHOOSING HOW TO DELIVER YOUR OUTSTANDING
NOTES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE EXCHANGE AGENT. YOU ALONE BEAR THE RISK OF NON-DELIVERY OR LATE
DELIVERY. DO NOT SEND YOUR LETTER OF TRANSMITTAL OR ANY OUTSTANDING
NOTES TO US.
We recommend that you use an overnight or hand delivery service
instead of regular mail. In all cases, you should allow sufficient
time for your tender materials to be delivered to the exchange agent
before the offer expires. You may ask your broker, dealer, commercial
bank, trust company or other nominee to handle these formalities for
you.
If you wish to tender any outstanding notes of which you are the
beneficial owner but that are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee, you should
contact the registered holder as soon as possible and instruct it to
tender on your behalf. If you wish to tender on your own behalf, you
must first either:
* arrange to re-register the outstanding notes in your name, or
* obtain a properly completed bond power from the registered
holder of the outstanding notes.
Please note that the transfer of registered ownership may take
considerable time. We cannot assure you that you will be able to re-
register your outstanding notes before the exchange offer expires.
Signatures on a letter of transmittal or a notice of withdrawal
must be guaranteed by:
* a member firm of a registered national securities exchange,
* a member firm of the National Association of Securities
Dealers, Inc.,
* a commercial bank or trust company having an office or
correspondent in the United States, or
* an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act and which is a member of a
recognized signature guarantee program identified in the
letter of transmittal.
The signature guarantee requirement does not apply to you if:
* you do not check the "Special Issuance Instructions" or
"Special Delivery Instructions" boxes on the letter of
transmittal, or
* you are tendering for the account of an eligible institution.
If the letter of transmittal is signed by anyone other than the
registered holder of the tendered outstanding notes, we will only
accept the notes for exchange if:
(1) the registered holder:
(a) endorses the outstanding notes, or
(b) executes a properly completed bond power, and
(2) an eligible guarantor institution guarantees the registered
holder's signature.
If you sign a letter of transmittal or any outstanding notes or
bond powers in your capacity as a trustee, executor, administrator,
guardian, attorney-in-fact, corporate officer or other fiduciary or
representative, you should indicate your capacity when signing. You
must provide evidence satisfactory to us of your authority to act with
the letter of transmittal.
34<PAGE>
We will resolve all questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered
outstanding notes in our sole discretion. Our determinations on these
issues and our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. We reserve the
right to reject:
* any outstanding notes that are not properly tendered, or
* any outstanding notes where our acceptance would, in the
opinion of our counsel, be unlawful.
We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular outstanding notes. We may, in
our discretion, allow tendering note holders an opportunity to cure
any defects or irregularities with respect to particular outstanding
notes. Although we intend to notify holders of any defects or
irregularities affecting their tenders, neither we, the exchange agent
nor any other person shall be liable for any failure to give such
notice. We will not consider a holder to have tendered outstanding
notes until the holder cures or we waive any defects or
irregularities. Unless the holder instructs differently in the letter
of transmittal, the exchange agent will return improperly tendered
outstanding notes to the tendering holder as soon as practical after
the exchange offer expires.
We will issue exchange notes only after the exchange agent timely
receives:
(1) (a) the tendered outstanding notes, or
(b) confirmation that they have been transferred
by book entry into the exchange agent's account at the
Depository Trust Company,
(2) a properly completed, duly executed letter of transmittal,
and
(3) all other required documents.
If we do not accept your tendered outstanding notes for exchange for
any reason, or if you submit more outstanding notes than your letter
of transmittal indicates you wish to exchange, we will return the
unaccepted or excess outstanding notes to you, without cost, as soon
as practical after the expiration or termination of the exchange
offer. If you tendered the outstanding notes by book-entry transfer,
we will have the unaccepted or excess outstanding notes credited to an
account maintained with the Depository Trust Company.
BOOK-ENTRY TRANSFER
Within two days after the date of this Prospectus, the exchange
agent will ask the Depository Trust Company to establish an account
for purposes of receiving outstanding notes tendered in connection
with the exchange offer. Any financial institution that participates
in the Depository Trust Company system may deliver outstanding notes
by having the Depository Trust Company transfer them by book-entry in
the exchange agent's account.
IF YOU DELIVER OUTSTANDING NOTES BY BOOK-ENTRY TRANSFER, YOU STILL
MUST DELIVER THE LETTER OF TRANSMITTAL, WITH ANY REQUIRED SIGNATURE
GUARANTEES, AND ANY OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT
BEFORE THE EXCHANGE OFFER EXPIRES. PLEASE NOTE THAT DELIVERY OF
DOCUMENTS TO THE DEPOSITORY TRUST COMPANY DOES NOT CONSTITUTE DELIVERY
---
TO THE EXCHANGE AGENT.
35<PAGE>
GUARANTEED DELIVERY PROCEDURES
You may use the guaranteed delivery procedures we describe in this
section if you wish to tender your outstanding notes and either:
* you do not have immediate access to your outstanding notes, or
* you cannot deliver your outstanding notes, the letter of
transmittal or any other required document to the exchange
agent before the offer expires.
You may still tender if:
(1) the tender is made through an eligible institution, or
(2) before the exchange offer expires, an eligible
institution delivers a notice of guaranteed delivery (by
fax, mail or hand delivery) to the exchange agent. This
notice must:
* identify the name and address of the holder,
* identify the registered number(s) and principal amount of
the outstanding notes tendered,
* state that the outstanding notes are being tendered, and
* guarantee that the eligible institution will deliver the
letter of transmittal, the outstanding notes, and any
other required documents to the exchange agent within
three (3) New York Stock Exchange trading days after the
offer expires, and
(3) the exchange agent actually receives the letter of
transmittal, the tendered outstanding notes, and all other
required documents within three (3) New York Stock Exchange
trading days after the offer expires. The eligible
institution may deliver the outstanding notes by book-entry
transfer as described in the preceding section.
Upon request, the exchange agent will send a notice of guaranteed
delivery to holders who wish to use these guaranteed delivery
procedures. If you use the guaranteed delivery procedures, you must
comply with them within the time period described in this section.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this Prospectus, you may withdraw
your tender of outstanding notes at any time before 5:00 p.m.,
Atlanta, Georgia time, on the day the exchange offer expires.
For your withdrawal to be effective, the exchange agent must
receive a timely written notice of withdrawal at one of the addresses
listed in the "Exchange Agent" section below. The notice of withdrawal
must:
* identify the person who tendered the outstanding notes,
* identify the outstanding notes to be withdrawn, including
their principal amount(s), and
* where certificates for outstanding notes have been
transmitted, specify the name of the registered holder of the
outstanding notes if different from the name of the
withdrawing holder.
If the exchange agent receives certificates for outstanding notes,
then, before it will release the certificates, the withdrawing holder
must also provide:
36<PAGE>
(1) the serial numbers of the particular certificates to be
withdrawn, and
(2) a signed notice of withdrawal with signatures
guaranteed by an eligible institution, unless the
withdrawing holder is itself an eligible institution.
If you tendered outstanding notes using the book-entry transfer
procedures, we will have the outstanding notes credited to an account
maintained with the Depository Trust Company. Your notice of
withdrawal must specify the name and number of the account at the
Depository Trust Company to which you want the withdrawn outstanding
notes credited. Your notice of withdrawal must also comply with any
procedures of the Depository Trust Company.
As mentioned earlier, we reserve the right to resolve all questions
as to the validity, form and eligibility, including time of receipt,
of notices of withdrawal. Our determination on these issues will be
final and binding on all parties.
We will treat any withdrawn outstanding notes as not validly
tendered, and will return them to their holder without cost, as soon
as practical after withdrawal. You may re-tender any properly
withdrawn outstanding notes by again following the tender procedures
described in this Prospectus before the offer expires.
EXCHANGE AGENT
We have appointed State Street Bank and Trust Company as our
exchange agent for this exchange offer. You should contact the
exchange agent with any questions or requests for:
* assistance,
* additional copies of this Prospectus,
* additional copies of the letter of transmittal, or
* copies of the notice of guaranteed delivery.
HOW TO CONTACT THE EXCHANGE AGENT:
By Overnight Courier or Hand Delivery: By Registered or Certified Mail:
------------------------------------- -------------------------------
Corporate Trust Division Corporate Trust Division
Attn: Kelly Mullen Attn: Kelly Mullen
Two International Place Two International Place
Boston, MA 02110 Boston, MA 02110
By Facsimile:
------------
(617) 664-5290
(For eligible institutions only)
Confirm by Telephone:
(617) 664-5587
37<PAGE>
FEES AND EXPENSES
We will pay the expenses of soliciting tenders. We will make the
principal solicitation by mail. We may make additional solicitations
by telegraph or telephone. We may also have our officers and regular
employees make in-person solicitations.
We have not retained any dealer-manager in connection with the
exchange offer. We will not pay any broker-dealers or others to
solicit acceptances of the exchange offer. We will pay the exchange
agent reasonable and customary fees for its services and will
reimburse its reasonable out-of-pocket expenses in connection with the
exchange offer.
We estimate that we will incur and pay $95,000 in cash expenses
in connection with the exchange offer. These expenses include:
* registration fees,
* fees and expenses of the exchange agent and trustee,
* accounting and legal fees,
* printing costs, and
* related fees and expenses.
TRANSFER TAXES
We will pay any transfer taxes imposed on the exchange of notes in
the exchange offer. We will not, however, pay any transfer taxes
arising for any other reason. The tendering holder will be required to
pay such taxes, whether imposed on the registered holder or any other
person. For example, we will not pay taxes imposed on:
* the transfer, issuance or delivery of unexchanged outstanding
notes to any person other than their registered holder, or
* the registration of any outstanding notes or exchange notes in
the name of any person other than the tendering registered
holder.
If the tendering holder does not provide satisfactory evidence that it
has paid or is exempt from these transfer taxes with the letter of
transmittal, such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding notes in the exchange
offer, your notes will continue to be subject to transfer
restrictions, as reflected in their restrictive legends. These
restrictions apply because we issued the outstanding notes under
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities
laws. In general, you may not offer or sell the outstanding notes
unless they are registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws.
We do not plan to register the outstanding notes under the
Securities Act. Based on current SEC staff interpretations, you may
generally offer for resale, resell or otherwise transfer exchange
notes issued in the exchange offer without compliance with the
registration and prospectus delivery provisions of the Securities Act.
This exception to the registration and delivery requirements is
38<PAGE>
subject to the qualifications and limitations described in the "Plan
of Distribution" section, which you should review carefully.
The securities laws of certain states and other jurisdictions also
prohibit the offer or sale of the outstanding notes and exchange notes
unless they have been registered under those laws or are exempt from
their registration requirements. We have agreed in the Registration
Rights Agreement, subject to certain limitations, to register or
qualify the exchange notes for offer or sale under the securities or
blue sky laws of such jurisdictions if a holder of exchange notes
reasonably requests in writing. We do not intend to register or
qualify the outstanding notes under any such laws.
39
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
data ("Pro Forma Financial Statements") as of October 3, 1998, for the
year ended January 3, 1998, and for the nine-month period ended
October 3, 1998 have been derived by the application of pro forma
adjustments to the historical financial statements of Vista, Frame-n-
Lens, and New West. The unaudited pro forma condensed consolidated
balance sheet has been prepared to give effect to the New West
acquisition, the closing of our new credit facility, and the sale of
the outstanding notes as if each had occurred on October 3, 1998. The
unaudited pro forma condensed consolidated statements of operations
for the year ended January 3, 1998 and the nine-month period ended
October 3, 1998 have been presented to give effect to the Frame-n-Lens
acquisition, the New West acquisition (using the financial data for
the corresponding fiscal periods of the respective companies), the
closing of our new credit facility, and the sale of the outstanding
notes as if each occurred at the beginning of the respective periods.
The Pro Forma Financial Statements include pro forma data relative
to the Frame-n-Lens acquisition completed July 28, 1998. Such data is
incorporated in the pro forma financial statements to provide a more
complete presentation of the pro forma condensed consolidated
statement of operations of Vista.
The pro forma adjustments are described in the accompanying notes
and are based upon available information and certain assumptions that
the Company believes are reasonable, including assumptions relating to
the preliminary allocation of the consideration paid in connection
with the acquisitions of Frame-n-Lens and New West to the respective
assets and liabilities based on estimates of their respective fair
values.
The Pro Forma Financial Statements do not purport to represent what
the Company's results would have been if the Frame-n-Lens acquisition,
the New West acquisition, the closing of our new credit facility, and
the sale of the outstanding notes had occurred on the date or for the
periods indicated, or to project what the Company's results of
operations or financial position for any future period or date will
be. The Pro Forma Financial Statements should be read in conjunction
with the Consolidated Financial Statements, including the notes
thereto.
40
<PAGE>
<TABLE>
<CAPTION>
VISTA EYECARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 3, 1998
Pro forma
Vista New West Acquisition Financing October 3,
Historical Eyeworks Adjustments Adjustments 1998
---------- --------- ------------ ------------ -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................$ 2,408 $ 397 $ (72,145) (a) $ 123,547 (c) $ 2,207
(52,000) (d)
Accounts receivable (net)........................ 8,583 2,483 (255) (a) 10,811
Inventories (net)................................ 28,248 4,466 (445) (a) 32,269
Other current assets............................. 2,347 777 (180) (a) 2,944
--------- -------- --------- --------- ---------
Total current assets.......................... 41,586 8,123 (73,025) 71,547 48,231
--------- -------- --------- --------- ---------
Net property and equipment........................... 48,191 11,550 (358) (a) 59,383
Other assets and deferred costs (net)................ 6,032 14 5,033 (c) 11,079
Intangible assets (net).............................. 41,756 348 63,476 (a) 105,580
--------- -------- --------- --------- ---------
Total assets................................. $ 137,565 $ 20,035 $ (9,907) $ 76,580 $ 224,573
========= ======== ========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 11,624 $ 5,256 $ $ $ 16,880
Accrued expenses and other current liabilities.. 17,354 2,195 2,068 (a) 21,617
Current portion of long-term debt............... 892 1,215 (542) (a) 1,565
--------- -------- ---------- --------- ---------
Total current liabilities.................... 29,870 8,666 1,526 40,062
Revolving credit facility ---long-term.............. 52,000 5,000 (c) 5,000
(52,000)(d)
Long-term notes payable, net of debt discount, less
current portion................................ 6,687 1,936 (2,000) (a) 123,580 (c) 130,203
Deferred income tax liabilities.................... 2,595 2,595
Shareholders' equity:
Preferred Stock................................ 5,460 (5,460) (b)
Common Stock................................... 212 49 (49) (b) 212
Additional paid-in-capital..................... 46,634 15,746 (15,746) (b) 46,634
Retained Earnings (deficit).................... 3,640 (11,822) 11,822 (b) 3,640
Cumulative foreign currency exchange rate
translation.................................. (4,073) (4,073)
---------- -------- --------- --------- ---------
Total shareholders' equity.................. 46,413 9,433 (9,433) 46,413
---------- -------- --------- --------- ---------
Total liabilities and shareholders' equity.. $ 137,565 $ 20,035 $ (9,907) $ 76,580 $ 224,273
========= ======== ========= ========= =========
</TABLE>
41
<PAGE>
<PAGE>
VISTA EYECARE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(a) The Pro Forma Financial Statements include information concerning
the following acquisitions:
NEW WEST ACQUISITION. On October 23, 1998, the Company acquired all
the outstanding common stock and common stock equivalents of New West.
The New West Acquisition will be accounted for as a purchase, with the
excess purchase price over the fair value of the net assets acquired
allocated to goodwill. Goodwill has been estimated to be $63,476 and
will be amortized over 30 years. A summary of the purchase price and
the related purchase allocation follows:
AGGREGATE PURCHASE PRICE
Cash paid at closing .............................. $ 65,778
Financial, accounting, legal and other direct
acquisition costs ................................ 3,825
Cash paid to extinguish line of credit ............. 2,542
--------
Aggregate purchase price.................. $ 72,145
========
PRELIMINARY ALLOCATION OF PURCHASE PRICE
Aggregate purchase price: .......................... $ 72,145
Less net book value of assets acquired............ (11,975)
--------
Excess of cost over the net book value of assets
acquired ........................................ 60,170
Adjustments to record assets and liabilities at
fair market value:
Accounts receivable .............................. 255
Inventory ........................................ 445
Other Current Assets.............................. 180
Property, Plant and Equipment..................... 358
Current Liabilities, including severance costs.... 2,068
--------
Total adjustments ........................ 3,306
--------
Goodwill ........................................ $ 63,476
========
FRAME-N-LENS ACQUISITION. On July 28, 1998, the Company
acquired all the outstanding capital stock of Frame-n-Lens.
The Frame-n-Lens Acquisition is being accounted for as a purchase,
with the excess of the purchase price over the fair value of the
net assets acquired to be allocated to goodwill. Goodwill is $25,961
and will be amortized over 30 years.
The results of operations for Frame-n-Lens after the date of
acquisition are included in the consolidated results of operations
for Vista. Financial information for Frame-n-Lens included in the
unaudited pro forma condensed consolidated statements of operations
as of October 3, 1998 reflects only the periods prior to the Frame-n-Lens
acquisition.
42<PAGE>
<PAGE>
VISTA EYECARE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(dollars in thousands)
(b) Represents elimination of historical equity balances of
New West.
(c) Reflects the issuance of the outstanding notes and the new credit facility:
Issuance of the outstanding notes, net of discount... $ 123,580
New Credit Facility ................................. 5,000
Fees and expenses ................................... (5,033)
---------
$ 123,547
=========
(d) Reflects the repayment of outstanding balances under, and
termination of, the existing credit facility.
43<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VISTA EYECARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1998
Frame-n- New West Acquisition Financing
Vista Lens Eyeworks Adjustments Adjustments Pro Forma
---------- ---------- -------- ------------ ------------ ---------
(dollars in thousands)
<C> <C> <C> <C> <C> <C> <C>
Net sales........................................... $ 186,354 $ 78,371 $ 49,212 $ $ $ 313,937
Cost of goods sold.................................. 86,363 28,632 24,253 5,707 (a)
(2,648) (b) 142,307
-------- -------- -------- -------- --------- ---------
Gross Profit........................................ 99,991 49,739 24,959 (3,059) 171,630
Selling, general, and administrative
expenses......................................... 89,156 49,783 23,641 (5,707) (a) 153,205
(6,649) (c)
2,981 (d)
-------- -------- -------- ------- -------- ---------
Operating Income (loss)............................. 10,835 (44) 1,318 6,316 18,425
Interest expense, net............................... 1,568 804 56 (533) (e) 16,475 (g) 18,593
223 (f)
Other expense (Income), net......................... (14) (14)
-------- -------- -------- ------- --------- ---------
Income (loss) before income taxes 9,281 (848) 1,262 6,626 (16,475) (154)
Provision (benefit) for income taxes................ 3,708 (547) 3,843 (h) (6,590) (h) 414
-------- -------- -------- ------- --------- ---------
Net Income (loss)................................... $ 5,573 $ (848) $ 1,809 $ 2,783 $ (9,885) $ (568)
======== ======== ======== ======= ========= =========
Ratio of earnings to fixed charges (i).............. [1.0x]
</TABLE>
44<PAGE>
<PAGE>
<TABLE>
<CAPTION>
VISTA EYECARE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998
Frame-n- New West Acquisition Financing
Vista Lens Eyeworks Adjustments Adjustments Pro Forma
-----------------------------------------------------------------------
(dollars in thousands)
<C> <C> <C> <C> <C> <C> <C>
Net sales..................................... $173,099 $38,890 $41,449 $ $253,438
Cost of goods sold............................ 79,112 13,837 20,556 $ 2,416 (a) 113,450
(2,471) (b)
--------------------------------------- ----------- --------
Gross Profit.................................. 93,987 25,053 20,893 55 139,988
Selling, general, and administrative
expenses................................... 81,838 26,336 20,290 (2,416) (a) 122,997
(5,070) (c)
2,019 (d)
--------------------------------------- ----------- --------
Operating income (loss)....................... 12,149 (1,283) 603 5,522 16,991
Interest expense, net......................... 465 154 (453) (e) 12,154 (g) 12,487
167 (f)
Other expense (income), net................... 1,248 270 1,518
--------------------------------------- ------- --------
Income (loss) before income taxes............. 10,901 (1,748) 179 5,808 (12,154) 2,986
Provision (benefit) for income taxes.......... 4,454 (31) 71 3,131 (h) (4,862) (h) 2,763
--------------------------------------- ------- --------
Net Income (loss)............................. $ 6,447 $(1,717) $ 108 $ 2,677 $ (7,292) $ 223
======================================= ======== ========
Ratio of earnings to fixed charges (i)........ [1.2x]
</TABLE>
45
<PAGE>
<PAGE>
VISTA EYECARE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(a) Primarily represents the reclassification of other miscellaneous
store expense and store rent for New West and Frame-n-Lens,
respectively, to conform with Vista's historical presentation.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ---------------
<S> <C> <C>
NEW WEST
COGS .................... $(1,430) $(1,423)
SG&A .................... 1,430 1,423
FRAME-N-LENS
COGS .................... $ 7,137 $ 3,839
SG&A .................... (7,137) (3,839)
COMBINED
COGS .................... $ 5,707 $ 2,416
SG&A .................... (5,707) (2,416)
</TABLE>
(b) In connection with the Frame-n-Lens acquisition and the New West
acquisition, the Company initiated a plan to consolidate three
manufacturing facilities (located in Los Angeles, California;
Tempe, Arizona; and Portland, Oregon) into the Frame-n-Lens
operations located in Fullerton, California. Amounts shown
below represent estimated savings for payroll related costs and
reduced occupancy expense for the applicable periods:
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- -----------------
$ 2,648 $ 2,471
(c) In connection with the Frame-n-Lens acquisition and the New West
acquisition, the Company initiated a plan to (i) close the
corporate support office for Frame-n-Lens and New West, and (ii)
consolidate operations with the Company's corporate support office in
Lawrenceville, Georgia. Amounts shown below represent the savings
resulting from the elimination of duplicative expenses for the
applicable periods:
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ---------------
$ 6,649 $ 5,070
(d) Reflects additional amortization of goodwill over 30 years.
(e) Reflects elimination of interest expense on debt repaid upon the
Frame-n-Lens and New West acquisitions.
(f) Reflects amortization of the discount on deferred purchase price
obligation related to the Frame-n-Lens acquisition.
46<PAGE>
<PAGE>
VISTA EYECARE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
(dollars in thousands)
(g) Reflects the following:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
January 3, 1998 October 3, 1998
--------------- ------------------
<S> <C> <C>
Interest expense on the Notes.......... $ 15,938 $ 11,953
Interest expense on the New Credit
Facility ............................ 688 516
-------- --------
Total cash interest
expense ................... 16,626 12,469
Amortization of deferred financing
costs and debt discount ............. 1,609 1,207
-------- --------
Total interest expense ...... 18,235 13,676
Less: Interest expense on the
Existing Credit Facility............. (1,524) (1,420)
Amortization of deferred financing
fees on the Existing Credit
Facility .......................... (236) (102)
-------- --------
$ 16,475 $ 12,154
======== ========
</TABLE>
(h) Represents the net additional income tax expense (benefit)
as a result of the acquisitions and financing adjustments
at an effective rate of 40%.
(i) For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of earnings before provision for income taxes
plus fixed charges. "Fixed charges" consists of interest expense,
including amortization of debt issue costs and the interest portion
of the Company's rent expense.
47
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated financial
and other data of Vista as of and for each of the years in the five-
year period ended January 3, 1998 and the nine-month periods ended
September 27, 1997 and October 3, 1998. The selected consolidated
financial data as of and for each of the years in the five-year period
ended January 3, 1998 were derived from the audited consolidated
financial statements of Vista included elsewhere in this Offering
Memorandum. The selected consolidated financial data as of and for
the nine-month periods ended September 27, 1997 and October 3, 1998
were derived from the unaudited consolidated financial statements of
Vista included elsewhere in this Offering Memorandum. In the opinion
of management, such unaudited consolidated financial statements
include all adjustments, consisting of only normal recurring items,
necessary for a fair presentation of the financial condition and
results of operations of Vista for such periods. Operating results
for the nine-month periods ended September 27, 1997 and October 3,
1998 are not necessarily indicative of the results that may be
expected for the full year. The information contained in this table
should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Vista's
historical consolidated financial statements, including the notes
thereto, included elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
----------------------------------------------------------- ---------------------
December December December December January September October
31, 31, 31, 28, 3, 27, 3,
1993 1994 1995(a) 1996 1998 1997 1998
----------- -------- -------- -------- ------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales ............................. $ 88,340 $ 119,395 $ 145,573 $ 160,376 $ 186,354 $ 134,736 $ 173,099
Gross profit........................... 46,895 65,497 77,607 83,684 99,991 73,013 93,987
Selling, general and
administrative expense............... 48,602 63,911 74,390 76,920 89,156 63,323 81,838
Other nonrecurring
charges(b)........................... 11,311 2,011
---------- ---------- -------- -------- --------- --------- ---------
Operating income (loss)................ (13,018) 1,586 1,206 6,764 10,835 9,690 12,149
Interest expense, net.................. 83 1,322 2,639 2,072 1,568 1,202 1,257
Other expense (income),
net.................................. (237) (127) (13) 12 (14) (9) (9)
---------- ---------- -------- -------- --------- --------- ---------
Income (loss) before income
taxes ............................... (12,864) 391 (1,420) 4,680 9,281 8,497 10,901
Provision (benefit) for
income taxes......................... (900) 40 100 1,200 3,708 3,365 4,454
---------- ---------- -------- -------- --------- --------- ---------
Net income (loss)...................... $ (11,964) $ 351 $ (1,520) $ 3,480 $ 5,573 $ 5,132 $ 6,447
========== ========== ======== ======== ========= ========= =========
OTHER FINANCIAL DATA:
Depreciation and
amortization......................... $ 5,512 $ 7,567 $ 10,378 $ 10,058 $ 11,035 $ 7,876 $ 9,227
Capital expenditures(c)................ 16,858 15,963 13,175 2,713 8,049 6,029 7,198
EBITDA(d).............................. 3,805 9,153 13,595 16,822 21,870 17,566 21,376
EBITDA margin.......................... 4.3% 7.7% 9.3% 10.5% 11.7% 13.0% 12.3%
Ratio of earnings to fixed
charges(e)........................... --- 1.3x 0.5x 2.9x 5.4x 6.3x 7.5x
<PAGE>
STORE DATA:
End of period stores................... 245 298 355 341 443 378 737
Wal-Mart comparable store
sales growth(f)...................... --- --- (0.5%) 4.0% 7.0% 6.0% 3.5%
Sales per store(g)..................... $ 495 $ 456 $ 443 $ 484 $ 505 $ 356 $ 235
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash
equivalents ......................... $ 2,002 $ 2,400 $ 1,307 $ 1,110 $ 2,559 $ 2,218 $ 2,408
Working capital........................ 6,954 8,723 14,556 13,502 12,171 11,806 11,716
Total assets........................... 66,172 77,612 81,237 74,564 83,250 79,928 137,565
Total debt............................. 15,761 31,129 38,480 26,500 24,203 22,100 59,579
Shareholders' equity................... 31,577 29,613 26,326 29,906 36,368 35,076 46,413
See accompanying notes to Selected Consolidated Financial and Other Data.
</TABLE>
48<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(dollars in thousands)
(a) Effective January 1, 1995, Vista changed its year end to a 52/53
week retail calendar with the fiscal year ending on the Saturday
closest to December 31.
(b) Other nonrecurring charges consists of (i) provisions for the
disposition of assets ($7,727 in fiscal 1993 and $958 in fiscal 1995),
(ii) stock option compensation expense ($834 in fiscal 1993) and (iii)
other charges ($2,750 in fiscal 1993 and $1,053 in fiscal 1995).
(c) Capital expenditures exclude assets acquired in the Midwest,
Frame-n-Lens and New West acquisitions.
(d) EBITDA represents the sum of operating income (loss) plus
depreciation and amortization (excluding amortization of deferred
financing costs, which is included in interest expense, net), and
other nonrecurring charges. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service
or incur indebtedness. However, EBITDA does not represent cash flow
from operations as defined by GAAP, is not necessarily indicative of
cash available to fund all cash flow needs, should not be considered
an alternative to net income, or to cash flows from operations as
determined in accordance with GAAP and should not be considered as an
indication of the Company's operating performance or as a measure of
liquidity. EBITDA is not necessarily comparable to similarly titled
measures for other companies in accordance with GAAP.
(e) For the purpose of computing the ratio of earnings to fixed
charges, "earnings" consists of earnings before provision for income
taxes plus fixed charges. "Fixed charges" consists of interest
expense, including amortization of debt issue costs and the interest
portion of the Company's rent expense. The ratio for the year ended
December 31, 1993 is not presented as earnings were inadequate to
cover fixed charges by approximately $12,400.
(f) Wal-Mart comparable store sales growth is based on Vista's
domestic Wal-Mart business and is calculated by comparing net sales
for the period to net sales of the prior period for all stores open at
least twelve months prior to the later period. This information is
not available for 1993 and 1994.
(g) Sales per store is calculated on a quarterly basis by dividing
total net sales by the total number of stores open during the period.
Annual and semi-annual net sales per store is the sum of the
applicable quarterly calculations.
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company has experienced substantial growth since its formation
in 1990, primarily due to the opening of new vision centers within
Wal-Mart stores and more recently due to recent acquisitions. Vista
operated 245 vision centers at year end 1993 and 443 vision centers at
year end 1997, 383 of which were located within Wal-Mart stores.
After giving effect to the Frame-n-Lens Acquisition and the New West
Acquisition, the Company operates 915 vision centers as of October 3,
1998.
RESULTS OF OPERATIONS
The Company's results of operations in any period are significantly
affected by the number and mix of vision centers opened and operating
during such period. Given the Company's rapid expansion through
recent acquisitions and dispositions of significant operating units
(both domestic and foreign), period-to-period comparisons may not be
meaningful and the results of operations for historical periods may
not be indicative of future results.
Effective January 1, 1995, Vista changed its year end to a 52/53
week retail calendar with the fiscal year ending on the Saturday
closest to December 31. Fiscal 1997 consisted of 53 weeks. Sales for
the 53rd week approximated $3.5 million in fiscal 1997. International
operations are reported using a fiscal year ended November 30.
COMPARISON OF THE NINE MONTHS ENDED OCTOBER 3, 1998 TO THE NINE MONTHS
ENDED SEPTEMBER 27, 1997
NET SALES. Net sales during the nine month period ended October 3,
1998 increased to $173.1 million from $134.7 million for the nine
month period ended September 27, 1997. Average weekly net sales per
vision center decreased from $9,800 during the nine month period ended
September 27, 1997 to $8,500 during the nine month period ended
October 3, 1998. The decrease is due primarily to averaging the
effect of Midwest Vision and Frame-n-Lens stores, which have a lower
average weekly net sales per store. The domestic host store business
achieved a comparable store sales increase of 3.5% during the nine
month period ended October 3, 1998. In addition, sales under managed
care programs increased from the nine month period ended September 27,
1997.
Net sales from international operations declined slightly in the
nine-month period ended August 31, 1998 at $2.9 million, due in part
to the disposition of the Czech operations at the end of the first
quarter 1998.
GROSS PROFIT. For the nine month period ended October 3, 1998,
gross profit increased to $94.0 million from $73.0 million in the nine
month period ended September 27, 1997. This increase was primarily
due to the increased net sales described above. Gross profit as a
percentage of sales was 54.3% in the nine month period ended October
3, 1998 slightly up from 54.2% in the nine month period ended
September 27, 1997. The Company has achieved cost reductions for its
contact lens disposable products; consequently, the price
repositioning on the contact lens disposable business has not had a
significant impact on gross profit margins.
50<PAGE>
SELLING, GENERAL, AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A
expense (which includes both store operating expenses and home office
overhead) increased to $81.8 million in the nine month period ended
October 3, 1998 from $63.3 million for the nine month period ended
September 27, 1997, reflecting operating expenses of the additional
vision centers. As a percentage of net sales, SG&A expense was 47.3%
in the nine month period ended October 3, 1998, compared to 47.0% for
the nine month period ended September 27, 1997. The percentage
increase was due primarily to the averaging effect of the Frame-n-Lens
acquisition, with SG&A expense as a percent of sales slightly higher
than the domestic host business.
OPERATING INCOME. Operating income for the nine month period ended
October 3, 1998 increased to $12.1 million, a 25.4% increase over $9.7
million in the nine month period ended September 27, 1997.
International operations generated an operating loss (which excludes
allocated corporate overhead, interest, and taxes) of $51,000 for the
nine months ended August 31, 1998 as opposed to an operating profit of
$37,000 in the comparable period a year ago.
OTHER EXPENSE. Interest expense was $1.2 million in each of the
nine month period ended October 3, 1998 and the nine month period
ended September 27, 1997.
PROVISION FOR INCOME TAXES. The effective income tax rate on
consolidated pre-tax income in the nine month period ended October 3,
1998 is 40.9%. Due to the Company's current tax net operating loss
carryforward position, current year earnings will not be subject to
regular Federal Income Tax. However, the Company will be subject to
Federal Alternative Minimum Tax and state income tax, which will
result in the Company making cash payments approximating 30% of
consolidated pre-tax earnings.
NET INCOME. Net income was $6.4 million, or $0.31 basic earnings
per common share, as compared to net income of $5.1 million, or $0.25
basic earnings per common share, in the nine month period ended
September 27, 1997.
COMPARISON OF THE YEAR ENDED JANUARY 3, 1998 TO THE YEAR ENDED
DECEMBER 28, 1996
NET SALES. Net sales during fiscal 1997 increased to $186.4 million
from $160.4 million for the prior year. Such increase was due to a
6.8% increase in comparable store sales for domestic vision centers as
well as an increase in the number of domestic vision centers.
Consolidated average weekly net sales per vision center increased 1.1%
from $9,300 during fiscal 1996 to $9,400 during fiscal 1997. Such
improvement was due primarily to the increase in comparable store
sales on the domestic business, offset in part by the acquisition in
the fourth quarter of 1997 of Midwest Vision, a retail optical company
with annual sales in 1997 of approximately $14.4 million. Average
weekly net sales for vision centers open less than one year were lower
than the average for vision centers open less than one year in fiscal
1996.
Continued success of "life style" selling programs, improved
merchandising and product presentation, as well as continued focus on
customer service, contributed to the sales improvement. In stores open
for more than one year, average spectacle unit sales per week and the
average spectacle transaction value increased over that attained in
fiscal 1996. In addition, sales under managed care programs increased
from the prior year.
Net sales from international operations increased from $3.8 million
in the 12-month period ending November 30, 1996 to $4.0 million in the<PAGE>
comparable period ending November 30, 1997. The increase is
attributable primarily to new store openings.
51
<PAGE>
GROSS PROFIT. For fiscal 1997, gross profit increased to $100.0
million from $83.7 million in the prior year. This increase was due to
the increase in net sales described above. Gross profit percentage
increased from 52.2% in 1996 to 53.7% in 1997. Gross profit percentage
was positively affected primarily by increased receipts of occupancy
fees from independent optometrists as a result of the EyeCare Leasing,
Inc. ("ELI") and Stewart-Phillips, Inc. ("SPI") transactions which
closed in January 1997. Additionally, a focus on lifestyle selling
contributed to the improvement in gross profit percentage. See
"Business - The Industry."
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. SG&A expense (which
includes both store operating expenses and home office overhead)
increased to $89.2 million in fiscal 1997 from $77.0 million in 1996.
As a percentage of net sales, SG&A expense was 47.8% in 1997, compared
to 48.0% for 1996. The decrease was due primarily to improved
efficiencies at the store level partially offset by increases in
administrative expenses related to responsibilities assumed in
connection with the ELI and SPI transactions and transition costs
resulting from the acquisition of Midwest Vision.
OPERATING INCOME. Operating income for fiscal 1997 increased to
$10.8 million from $6.8 million in 1996 representing an increase in
operating margin from 4.2% in 1996 to 5.8% in 1997. In addition,
Vista's international operations (29 vision centers at November 30,
1997) generated an operating loss of $28,000 in fiscal 1997, as
opposed to an operating loss of $612,000 in the comparable period a
year ago. International operating results do not include allocated
corporate overhead, interest, and taxes.
OTHER EXPENSE. The decrease in other expense to $1.6 million,
compared to $2.1 million in 1996, is due, for the most part, to
reduced interest expense, resulting from the reduction of outstanding
borrowings under the Existing Credit Facility.
PROVISION FOR INCOME TAXES. The effective income tax rate on
consolidated pre-tax income is 40%, which represents a tax provision
of 39% on domestic earnings. Due to Vista's tax net operating loss
carry forward position, current year earnings will not be subject to
regular Federal Income Tax. However, Vista will be subject to Federal
Alternative Minimum Tax and state income tax, which will result in
Vista making cash payments approximating 24% of consolidated pre-tax earnings.
NET INCOME. Net income for fiscal 1997 was $5.6 million, or $0.27
per share, as compared to net income of $3.5 million, or $0.17 per
share, in 1996. The increase in net income of $2.1 million over fiscal
1996 represents a 60% increase in net income on a sales increase of 16%.
COMPARISON OF THE YEAR ENDED DECEMBER 28, 1996 TO THE YEAR ENDED
DECEMBER 30, 1995
NET SALES. Net sales during 1996 increased to $160.4 million from
$145.6 million for the prior year, due to the net effect of the
following: (i) an increase in the number of domestic vision centers;
(ii) a 4% increase in comparable sales for domestic vision centers
(those open for at least one year); and (iii) a reduction in revenues
resulting from the disposition and closure of businesses in the fourth
quarter 1995 and the first quarter 1996. Consolidated average weekly
net sales per vision center increased from approximately $8,700 in
1995 to $9,300 in 1996 due primarily to the disposition of under
performing vision centers in certain domestic operations and Mexican
operations. The improvement in average weekly net sales for comparable
domestic stores was partially offset by a reduction in average weekly
net sales for vision centers opened in 1996.
52<PAGE>
In the first quarter of 1996, Vista implemented a new merchandising
program for spectacles. Initially, the new program served to increase
the average number of sales transactions per vision center (market
share) over the prior year, but at a lower dollar value per
transaction. Vista experienced an increase in average number of
transactions per vision center for the remainder of the year. In the
latter part of 1996, the average transaction value increased. For the
year, the improvement in sales resulting from market share increases
more than offset the effect on sales resulting from the decline in the
average transaction value.
Consistent with the trend experienced in 1994 and 1995, average
weekly sales volumes for new domestic vision centers opened in 1996
were lower than vision centers opened in the previous year. The effect
of lower new store results in 1996, which had a negative impact on
consolidated average weekly sales, was offset by an increase in
average weekly sales for stores opened in 1995 and 1994.
GROSS PROFIT. For fiscal 1996, gross profit increased to $83.7
million from $77.6 million in 1995, primarily because of increased net
sales. Gross profit as a percentage of sales declined from 53.3% in
1995 to 52.2% in 1996. Vista maintained margins from product sales at
store level, but margins were negatively affected by a reduction in
promotional monies from vendors (because of fewer store openings) and
increased freight costs related to the reset of store inventory
planograms.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. SG&A expenses
(which include both vision center operating expenses and home office
overhead) increased to $77.0 million in 1996 from $74.4 million in
1995, reflecting the addition of new vision centers in 1996. Average
weekly store expense per vision center remained constant. As a
percentage of sales, SG&A expenses decreased from 51.1% in 1995 to
48.0% in 1996. The decrease was attributable to comparable store sales
increases achieved during 1996 and to continued improved efficiencies
in the operation of administrative offices.
OTHER EXPENSE. Other expense decreased from $2.6 million in
fiscal 1995 to $2.1 million in 1996 due to a decrease in average
borrowings by Vista under its Existing Credit Facility, in addition to
a reduction in the effective interest rate paid by Vista in 1996 versus 1995.
PROVISION FOR INCOME TAXES. The effective income tax rate in 1996 was 26%.
NET INCOME. In fiscal 1996, Vista achieved net income of $3.5
million, or $0.17 per share, as compared to a net loss of $1.5
million, or $0.07 per share, in fiscal 1995. Results of operations for
1995 included charges approximating $2.0 million.
INTERNATIONAL RESULTS IN FISCAL 1996
At November 30, 1996, Vista operated 21 vision centers
internationally versus 36 vision centers at November 30, 1995.
International locations included 18 in Mexico and two and one in the
Czech Republic and Slovakia, respectively. Financial results for
international operations during 1996 are based on the 12 months ended
November 30.
NET INTERNATIONAL SALES. Net international sales for the 12
months ended November 30, 1996 were $3.8 million, a decrease from $8.9
million during the 12 months ended November 30, 1995. Such decrease
was principally due to closure of vision centers in France and in
Mexico.
53<PAGE>
GROSS PROFIT. Gross profit decreased to $1.6 million from $4.4
million in 1995, primarily the result of decreased sales. Gross profit
as a percentage of sales declined from 49% in 1995 to 43% in 1996, due
primarily to the effect of selling the French operation, which
realized a higher gross profit percentage than the average for the
international business.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES EXCLUDING
INTERCOMPANY ALLOCATIONS. SG&A expense decreased from $5.8 million
for the 12 months ended 1995 to $2.0 million for the 12 months ended
November 30, 1996, as a result of the dispositions mentioned above.
SG&A expense as a percentage of sales decreased to 53% for the 12
months ended November 30, 1996 from 65% of sales for the 12 months
ended November 30, 1995. Reductions in selected expenses at store
level coupled with favorable leveraging of administrative expense
reduced SG&A expense as a percentage of sales.
OPERATING LOSS. The operating loss for international operations
does not include allocated corporate overhead, interest or taxes.
International operations generated a net operating loss of $612,000 in
the 12 months ended November 30, 1996, as opposed to net operating
loss of $1.3 million in the 12 months ended November 30, 1995. Mexican
operations generated an operating loss of $294,000 in the 12 months
ended November 30, 1996.
INFLATION
Although the Company cannot determine the precise effects of
inflation, it does not believe that inflation has had a material
effect on its domestic sales or results of operations. The Company
cannot determine whether inflation will have a material long-term
effect on its sales or results of operations. Continued inflation in
Mexico may cause consumers to reduce discretionary purchases such as
eyeglasses.
As a result of inflation in prior years, the Company has in the
past adjusted its retail pricing. Further pricing adjustments are
contingent upon competitive pricing levels in the marketplace.
Management monitors the continuing impact of these inflationary
trends.
LIQUIDITY AND CAPITAL RESOURCES
The Company's historical capital requirements have been primarily
for working capital, capital expenditures, and acquisitions. The
Company's primary sources of capital to finance such needs have been
cash flow from operations and borrowing under bank credit facilities.
In July 1997, Vista entered into a two-year $45.0 million revolving
credit facility (the "Existing Credit Facility"). The Existing Credit
Facility contains, among other covenants, a material adverse change
clause and certain minimum net worth and other requirements. At
October 3, 1998, Vista had borrowed $52 million under the Existing
Credit Facility versus outstanding borrowings of $19.5 million as of
January 3, 1998. In July 1998, the Existing Credit Facility was
expanded to $60.0 million and the Company borrowed $28.9 million to
fund the acquisition of Frame-n-Lens.
54<PAGE>
As of October 3, 1998, the Company planned to open between 15 and
20 domestic Host Vision Centers during the next 15 months. Consistent with
prior years, the number of ultimate openings is dependent on the construction
schedules of the host store. In addition, the Company plans to open between
25 and 30 Free Standing Vision Centers during the next 15 months. Average
costs for opening domestic Host Vision Centers have approximated $140,000
for fixed assets and $25,000 for inventory, whereas the costs for opening
Free-Standing Vision Centers range from $80,000 to $120,000 for fixed
assets and $20,000 for inventory. The Company incurs approximately
$20,000 for pre-opening expenses for each opening of a domestic vision
center. Prior to 1998, such costs were capitalized and amortized over
12 months. Effective in 1998, such costs will be expensed as incurred
in accordance with proposed AICPA Statement of Position, "Reporting on
the Costs of Start-Up Activities." Capital for leasehold improvements
and other fixed assets in Mexican vision centers is approximately
$75,000 per vision center.
In June 1998, Vista announced that it had executed an agreement
to acquire Frame-n-Lens. This transaction closed on July 28, 1998.
On July 14, 1998, Vista announced that it had agreed to acquire
New West. This transaction, which closed on October 22, 1998, was
financed through the sale of the Notes. In connection with this
financing, Vista entered into a new revolving debt facility for an
additional amount of $25.0 million. The Company utilized funds from
the sale of the Notes and the New Credit Facility to consummate the
New West Acquisition, to repay all amounts outstanding under the
Existing Credit Facility and to pay certain expenses associated with
the acquisitions of Frame-n-Lens and New West and the New Credit
Facility.
In the remainder of 1998, the Company focused its efforts on the
integration of the Frame-n-Lens Acquisition and the New West
Acquisition. Consequently, a majority of the cash expenditures during
1998 related to new store openings and capital improvements related to
Vista's existing businesses and the Frame-n-Lens Acquisition and the
New West Acquisition.
During 1997, store openings and other capital requirements as
well as the acquisition of Midwest Vision were funded through internal
cash flow. The acquisition of Midwest Vision included a cash payment
of $1.9 million, issuance of a debt instrument in the principal amount
of $620,000 payable over five years, and issuance of 110,795 shares of
common stock. Additionally, Vista made cash payments of $239,000
related to investment advisory fees and other costs directly related
to such acquisition. Subsequent to the consummation of the
acquisition, Vista paid off long-term debt of $1.4 million assumed in
the transaction.
Vista issued unsecured promissory notes relative to various
transactions completed with ELI and SPI and to the Midwest Vision
acquisition. The notes are fixed rate instruments, with annual
interest rates ranging from 6.4% to 8.5%. The promissory notes
payable to ELI and SPI require quarterly payments through January 2009
whereas the Midwest Vision note requires monthly payments through
October 2002. The fair market value of the promissory notes is
approximately $80,000 less than book value at July 4, 1998.
55
<PAGE>
Vista has entered into rate swap agreements which effectively
convert underlying variable rate debt based on S to fixed rate debt.
The agreements extend through February 20, 2000. The notional
principal amount on one agreement was $20 million, with an effective
fixed annual rate of 6.93%, which expired on February 20, 1998. At
that date, two separate agreements commenced with an aggregate
notional principal amount of $10 million and an effective fixed annual
rate which averages 7.52%. At July 4, 1998, the fair market value of
the fixed rate hedges approximated book value. Under existing
accounting standards, this activity is accounted for as a hedging
activity. The swaps are settled every 90 days.
In anticipation of the Offering, Vista entered into three
anticipatory hedging transactions with a notional amount of $100
million. See "--Derivative Financial Instruments---Interest Rate Risk."
The Company anticipates that internally generated funds, as well
as funds available under the New Credit Facility, will be sufficient
to fund ongoing operating costs associated with its current vision
centers and vision centers currently scheduled to be opened during
1999. In light of the borrowing base limitations contained in the new
credit facility, a downturn in revenues could require the Company to
postpone or put off planned capital expenditures, including new store
openings. See "Description of New Credit Facility."
YEAR 2000 COMPLIANCE
The majority of the Company's internal information systems are
currently Year 2000 compliant or in the process of being replaced with
new fully-compliant systems. The Company has identified approximately
300 point of sale systems that require hardware upgrades to be Year
2000 compliant, of which 280 have been replaced as of October 3, 1998.
The total cost of software changes, hardware changes, and
implementation for Year 2000 compliance projects is estimated to be
approximately $1.1 million. The Company has currently spent approximately
$0.7 million for its Year 2000 project. The remaining planned expenditures
of $0.4 million consist primarily of software application upgrades and
remediation costs. Costs related to hardware and new software
purchases will be capitalized as incurred and amortized over three
years. These new system modifications have been initiated and are
expected to be completed by the end of the third quarter of 1999.
The Company is in the process of developing an enhanced point of
sale software system which is scheduled to be in the retail stores by
the fourth quarter of 1999. The primary purpose of the system is to
upgrade data processing, broaden in-store capabilities, and improve
the accuracy of processing managed care sales transactions. In addition to
the above improvements, the system will be designed to be Year 2000 compliant.
Some of the Company's vendors, financial institutions, and
managed care organizations utilize equipment to capture and transmit
transactions. The Company is in the process of coordinating its Year
2000 compliance efforts with those of such organizations. The future
cost of this transition is estimated by the Company to be minimal. No
assurance can be given that such organizations will make their systems
Year 2000 compliant. The failure of such organizations, particularly
any managed care payor organizations, to become Year 2000 compliant
could have a material adverse affect on the Company.
In November 1998, as part of its Year 2000 compliance efforts, the
Company engaged an independent consulting firm to perform a risk assessment
of its Year 2000 compliance project. The consulting firm's evaluation included
both hardware infrastructure and software applications. Although the firm can
make no guarantees, its findings confirmed that the Company is proceeding in
accordance with its Year 2000 plan.
56<PAGE>
The Company will utilize both internal and external resources to
reprogram, or replace, and test software for Year 2000 compliance.
The costs of the Year 2000 project and the date on which the Company
plans to complete Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of
future events including the continued availability of certain
resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be realized and
actual results could differ materially from those plans.
DERIVATIVE FINANCIAL INSTRUMENTS
MARKET RISK
Market risk is the potential change in an instrument's value
caused by, for example, fluctuations in interest and currency exchange
rates. The Company's primary market risk exposures are interest rate
risk and the risk of unfavorable movements in exchange rates between
the U.S. dollar and the Mexican peso. Monitoring and managing these
risks is a continual process carried out by senior management, which
reviews and approves the Company's risk management policies. Market
risk is managed based on an ongoing assessment of trends in interest
rates, foreign exchange rates, and economic developments, giving
consideration to possible effects on both total return and reported
earnings. The Company's financial advisors, both internal and
external, provide ongoing advice regarding trends that affect
management's assessment.
INTEREST RATE RISK
The Company borrows long-term debt under the New Credit Facility
at variable interest rates indexed to LIBOR which exposes it to the
risk of increased interest costs if interest rates rise. To reduce
the risk related to unfavorable interest rate movements, the Company
enters into interest rate swap contracts to pay a fixed rate and
receive a variable rate that is indexed to LIBOR. The ratio of the
swap notional amount to the principal amount of variable rate debt
issued changes periodically based on management's ongoing assessment
of the future trend in interest rate movements. The Company's
financial advisors, both internal and external, provide ongoing advice
regarding trends that affect management's assessment. The notional
amount of fixed interest rate swaps in place at October 3, 1998
represents approximately 19.0% of Vista's variable rate debt.
In anticipation of the sale of the Notes, Vista entered into
three anticipatory hedging transactions with a notional amount of $100
million. The interest rates on these instruments were tied to U.S.
Treasury securities and ranged from 5.43% to 5.62%. The Company
settled these transactions for approximately $4.6 million in September
1998 with $0.6 million cash and additional borrowings of $4.0 million
on the Existing Credit Facility. The settlement costs will be treated
as deferred financing costs amortized over the life of the Notes.
FOREIGN EXCHANGE RATE RISK
The Securities and Exchange Commission has qualified Mexico as a
highly inflationary economy under the provisions of SFAS No. 52
Foreign Currency Translation. Consequently, in 1997, the financial
statements of the Mexico operation were remeasured with the U.S.
dollar as the functional currency. During 1997 and 1998, an immaterial
<PAGE>
loss resulted from changes in foreign currency rates between the peso
and the U.S. dollar, as calculated in the remeasurement process, and was
recorded in Vista's statement of operations. Continued increases in
the conversion rate for the peso will generate further losses in
future years.
57<PAGE>
OPTION TO EXTEND LICENSE AGREEMENT
The Wal-Mart Agreement provides for a nine-year base term and a
three-year option for each vision center, with the base term beginning
on the date of opening. Vista opened six vision centers in 1990 under
the Wal-Mart Agreement and 54 such vision centers in 1991, with
additional vision centers being opened in subsequent years.
Accordingly, beginning in 1999, the Company will determine whether to
exercise options to extend the licenses for such vision centers. The
Company will make such decisions based upon various factors,
including, without limitation, the sales levels of each vision center,
its estimated future profitability, increased minimum license fees
charged by Wal-Mart during the option period, and other relevant
factors. Each option must be exercised at least six months prior to
the expiration of the license for each vision center. Although the
Company expects that it will extend the licenses of a substantial
majority of these vision centers, no assurance can be given as to the
number of vision centers the licenses of which will be extended.
58
<PAGE>
BUSINESS
THE COMPANY
The Company is the second largest retail optical company in the
United States based on number of locations. The Company operates a
total of 915 vision centers, 889 of which are in 44 states and Puerto
Rico and 26 of which are in Mexico. The Company's product line
includes a broad selection of prescription eyeglasses, contact lenses
and accessories.
Of the Company's 915 vision centers, a total of 331 are free-
standing vision centers located in regional shopping centers, power
centers, strip shopping centers, and Free-Standing Vision Centers of
which 151 are located in California. In addition, 584 of the
Company's vision centers are Host Vision Centers, with 372 in Wal-Mart
stores, 121 in Sam's Club stores, 52 in Fred Meyer stores, 26 in Wal-
Mart Mexico stores and 13 in United States Military Exchanges.
The Company's merchandising philosophy is to provide excellent
value and superior customer service. The Free-Standing Vision Centers
typically range in size from 700 to 1,500 square feet, with separate
areas for merchandise display, customer service, and contact lens
fitting. The Company's Host Vision Centers operate in a similar
format except that they carry more inventory than do Free-Standing
Vision Centers. In addition, each Wal-Mart vision center has a
laboratory that permits the Company to provide one-hour service on
single vision eyeglasses. Of the Company's 915 vision centers, 639
offer the services of independent optometrists in or adjacent to the
vision center. The Company is in the process of adding optometrists
to many of its vision centers that do not have optometrists, and
anticipates that the addition of optometric services will increase
retail sales in those vision centers.
The Company currently operates four manufacturing facilities,
three of which also serve as distribution facilities. The Company's
66,000 square foot facility in Lawrenceville, Georgia houses, along
with the Company's administrative headquarters, an optical laboratory
and a distribution center that utilizes modern equipment and systems.
The Company also operates a 45,000 square foot manufacturing and
distribution facility in Fullerton, California and a smaller optical
laboratory in St. Cloud, Minnesota. The Company currently operates
one other manufacturing facility, located in Tempe, Arizona, that the
Company intends to consolidate into its Fullerton, California
facility. The Company believes that the manufacturing facilities will
accommodate the Company's current growth plans over the next five
years.
KEY BUSINESS STRENGTHS
STRONG OPERATIONAL FOCUS. Since the beginning of fiscal year
1994, the year in which James W. Krause became Chief Executive Officer
of Vista, Vista added 299 new store locations and has disposed of 91
unprofitable store locations, including 65 international locations.
Since fiscal 1994, Vista's sales and EBITDA increased at compound
annual growth rates of 16.0% and 33.7%, respectively. In addition,
Vista delivered consistent comparable store sales growth since early
1996. Under Barry J. Feld (Chief Executive Officer of New West since
1994), New West achieved 26 consecutive quarters of positive
comparable store sales growth. Since fiscal 1995, comparable store
sales growth has been 5.9%, 8.8%, and 8.6%, respectively.
59<PAGE>
Mr. Krause and his management team place a premium on controlling
costs and have successfully implemented cost controls at the
administrative offices and the retail locations. Selling, general and
administrative expense for Vista (which includes both administrative
and retail level expense) declined as a percentage of sales from 51.1%
in fiscal 1995 to 47.8% in fiscal 1997. The Company employs a payroll
matrix system that allows it to adjust staffing at retail locations in
accordance with increases and decreases of sales volume. Vista's
store payroll as a percentage of sales decreased from 21.7% in fiscal
1995 to 21.0% in fiscal 1997.
SCALE EFFICIENCIES. Combined with the operational focus
discussed above, the addition of Frame-n-Lens and New West creates
substantial cost savings opportunities at the administrative and
manufacturing levels. The administrative offices of Frame-n-Lens now
serve as the Western Regional office of the Company but at sharply
reduced employment levels. The New West administrative headquarters
located in Tempe, Arizona will be closed. Management estimates that,
for the year ended January 3, 1998 total pro forma administrative
costs would have been reduced by approximately $6.6 million as the
result of these consolidations. In addition, management plans to
consolidate one manufacturing facility in addition to the
consolidation of facilities in Los Angeles, California and Portland,
Oregon into its Fullerton, California facility, which, for the year
ended January 3, 1998, would have resulted in pro forma cost savings
of approximately $2.6 million. As a consequence of these
consolidations, the Company will increase its utilization of the
remaining manufacturing facilities, which it expects will reduce the
manufacturing costs of each individual pair of eyeglasses.
PURCHASING POWER. The Company is the second largest optical
retailer in the United States in terms of number of retail units and
third in terms of overall revenues. The Company is therefore one of
the largest purchasers of optical goods in the United States.
Management believes that the size of the Company will enhance the
Company's buying power and generate additional cost savings. For the
year ended January 3, 1998, based upon discussions with vendors,
management estimates that pro forma purchasing costs would have been
reduced by approximately $1.1 million as the result of this purchasing
power. At this time, the Company has entered into purchasing contracts
with many of its vendors, resulting in a decrease in the cost of ophthalmic
lenses and frames.
POSITIONED TO CAPITALIZE ON MANAGED VISION CARE OPPORTUNITY.
Managed vision care represents the fastest growing segment of the
optical industry. As a result of its expanded nationwide distribution
network and its low-cost strategy, the Company believes that it is
well positioned to compete for future managed vision care contracts.
In addition, several key members of senior management, including Barry
J. Feld, the Company's President and Chief Operating Officer, have
significant expertise in managed vision care. Under the leadership of
Mr. Feld, New West's managed care operation increased its revenues by
a compound annual growth rate of 42% since 1993 and represented
approximately 29% of New West's net sales for fiscal 1997. The
Company anticipates that its improved managed care platform will
enable it to significantly increase managed care sales from Vista's
level of 7% prior to the acquisition of New West.
EXPERIENCED MANAGEMENT TEAM. James W. Krause, President and
Chief Executive Officer of the Company since 1994, has 14 years of
experience in retail and manufacturing operations with Sherwin-
Williams Company and most recently was President of its automotive and
international divisions prior to joining the Company. Barry J. Feld,
formerly Chief Executive Officer of New West, became President and
Chief Operating Officer of the Company upon the consummation of the<PAGE>
New West Acquisition. Prior to joining New West, Mr. Feld was Chief
Executive Officer of Frame-n-Lens, which was acquired by the Company
on July 28, 1998. Messrs. Krause and Feld jointly have experience
managing all three of the Company's major operating platforms and lead
60
<PAGE>
a team of 13 senior executives with an average of over 13 years of
optical and/or retailing experience.
THE INDUSTRY
Retail optical sales in the U.S. totaled approximately $15
billion in 1997, exclusive of revenue from eye examinations. Since
1987, the retail optical market has grown at an average annual rate of
approximately 5%. Management believes that the market will continue
to grow at a similar rate over the next several years due in part to
the favorable trends discussed below.
FAVORABLE DEMOGRAPHICS. Approximately 60% of the U.S. population
and approximately 90% of people over the age of 45 require some form
of corrective eyewear. In 1997, 51% of total eyewear retail dollar
sales in the U.S. came from the population segment of persons 45 years
of age and older; it is estimated that by the year 2000, this figure
will reach 57%. In addition to its high utilization of corrective
eyewear, the older segment of the population spends more per pair of
glasses purchased than other age segments. This is due to the older
segment's need for premium priced products such as bifocals and
progressive lenses ("no-line bifocals") as well as this segment's
higher levels of discretionary income relative to other age segments.
In addition, as the "baby boom" generation ages and life expectancies
increase, management believes the number of eyewear customers and the
average price per purchase is likely to increase.
INCREASING ROLE OF MANAGED VISION CARE. Management expects that
retail optical sales through managed vision care programs will
increase substantially over the next several years as a percentage of
overall retail optical sales. Under managed vision care programs,
participants fulfill their eyecare and eyewear needs at specific
locations designated by the program sponsor. Management believes that
large retail optical chains are likely to benefit from this managed
vision care trend because program sponsors will seek to contract with
organizations that: (1) offer competitive prices; (2) provide a
nationwide network of convenient locations with flexible hours of
operation; (3) possess sophisticated information, management and
billing systems; and (4) deliver superior customer service.
CONSOLIDATION. The retail optical industry in the U.S. is highly
fragmented and consists of retail optical chains, independent
practitioners (including opticians, optometrists and
ophthalmologists), and warehouse clubs and mass merchandisers.
Although the retail optical market is highly fragmented, the industry
is experiencing increasing consolidation. Management believes that
the following factors are likely to drive further consolidation: (1)
the importance of scale to managed care programs because such programs
require providers to offer favorable price terms, operational
efficiency, and multiple convenient locations and (2) efficiencies of
scale in merchandising, marketing, manufacturing and sourcing of
products. Management believes that, as the second largest optical
retail company as measured by number of locations, the Company should
benefit from this consolidation trend.
LIFESTYLE DISPENSING. Both consumers and opticians have come to
expect and accept "lifestyle dispensing," the dispensing of eyewear
for different occasions and circumstances. Consumers purchase
multiple eyewear products for distinct uses, such as work, casual,
fashion, and sports activities. In 1997, the frequency of eyewear
purchases averaged once every 1.5 years.
<PAGE>
BUSINESS STRATEGY
The Company's strategy is to capitalize on the favorable industry
trends described above and its significant experience as a value
merchandiser by creating a national chain of retail optical units, both in
61
<PAGE>
host and free-standing locations, that emphasizes value merchandising and
marketing programs and excellent customer service. The Company also intends
to generate increased managed care sales through its vision center density
and broad network, its operating efficiency, and the competitiveness of its
price and benefit offerings. The Company further believes that its host and
free-standing vision centers are well positioned to capitalize on the value
segment of the retail optical market, which the Company believes is
significantly under-served.
CREATE A NATIONAL BRANDED RETAIL OPTICAL CHAIN. Utilizing its
significant experience as a value merchandiser gained through eight
years of operating in a discount host environment, the Company plans
to create a national branded value oriented retail optical chain using
its 331 Free-Standing Vision Centers as a platform. All existing
Free-Standing Vision Centers will be re-branded as "Vista Optical,"
which will also become the corporate name of the Company. The Company
also intends to increase its number of Free-Standing Vision Centers by
opening locations in new markets. The Company currently plans to open
or acquire up to 35 new Free-Standing Vision Centers per year over the
next five years. Management believes that the Company has sufficient
systems and infrastructure to execute this new store opening plan.
New West uses a system of modular construction for its Free-Standing
Vision Centers. For such vision centers, capital expenditures,
inventory, and pre-opening costs total approximately $120,000 to $160,000.
Because of the speed of construction associated with this format, the Company
intends to use this format for its Free-Standing Vision Centers.
UTILIZE SCALE AND EXPERIENCE TO EXPAND MANAGED VISION CARE. The
Company believes its network of 915 vision centers, combined with the
convenience of their locations, and the Company's ability to use its
low-cost centralized manufacturing strategy, should enable the Company
to make competitive bids for managed care contracts. As part of the
New West Acquisition, the Company acquired considerable management
expertise in the managed vision care business. The managed vision
care business generated approximately 29% of New West's fiscal 1997
net sales, a 23% increase from fiscal 1996. In contrast, 7% of
Vista's net sales were derived from managed vision care in fiscal 1997.
The Company believes that this difference presents it with a significant
opportunity that is a key component of the Company's business strategy.
The Company operates 237 vision centers in California, where a
high percentage of the population relative to the rest of the United
States is currently covered by managed care programs. The Company
believes that, as a low cost provider with operational scale, it will
be better positioned than other optical retailers to compete for
managed vision care contracts in California. The Company currently
operates two separate single service health maintenance organizations
in California, giving it an additional competitive advantage in the
bidding for managed vision care contracts. The Company also has
obtained a comparable license in North Carolina, permitting it to
solicit directly managed vision care contracts in that state.
SELECTIVELY EXPAND HOST OPERATIONS. The Company operates 584
Host Vision Centers. Because of the volume of business typically
generated by the host store, the Company benefits from substantial
customer traffic that drives sales. The average Host Vision Center
located in a Wal-Mart store generates approximately $500,000 in annual
sales. The Company believes that it can continue to generate strong
sales levels and cash flow from these locations. Additionally, a
number of the Wal-Mart stores in which the Company operates vision
centers have been converted to Wal-Mart Super Centers. The Company
has benefited from this trend because, with each conversion, the
Company receives a new license with a nine-year term. See "Business--
Relationships with Host Companies."
62<PAGE>
Although expansion of its host operations is outside its control,
the Company believes that it will have opportunities to expand certain
of its current host operations. The Company will evaluate such
opportunities on a case by case basis. The Company operates 52 vision
stores in Fred Meyer stores in the Northwest and believes that it will
have the opportunity to open additional vision centers in Fred Meyer
stores. The Company will also consider, on a case by case basis,
opportunities to open vision centers in new host environments.
CONSOLIDATE MANUFACTURING FACILITIES. A primary component of the
Company's low cost strategy is to consolidate its laboratory
operations in order to capitalize on efficiencies associated with
large-scale, centralized eyeglass manufacturing. The Company believes
that centralized laboratories offer substantial advantages over in-
store ("one-hour") manufacturing facilities. Through its centralized
laboratories, which process a large number of jobs in a repetitive
fashion, the Company can achieve cost efficiencies and consistent
product quality, while producing a variety of eyeglass offerings,
including scratch-resistant and anti-reflective lenses. The Company
has begun implementing this consolidation strategy by reducing the
number of laboratories it operates from four to three. The Company
intends to complete this strategy by the consolidation of the Tempe,
Arizona facility into the Fullerton, California facility by the end of
1999. The Company believes that its remaining centralized
laboratories, located in Georgia, Minnesota and California, will be
positioned to meet the supply requirements of the Company's broadly
distributed vision centers in a cost effective manner.
MARKETING STRATEGY
As a result of the expansion of the Company's Free-Standing
Vision Centers, the Company's marketing strategy will become more
focused on increasing consumer visits at Free-Standing Vision Centers.
The Company actively supports its vision centers by aggressive local
advertising in individual geographical markets. The Company utilizes
a variety of advertising media and promotions in order to establish
the Company's image as a high quality, value eyewear provider with a
broad product offering. In addition, the Company's strategy of
clustering Free-Standing Vision Centers in each targeted market area
allows it to maximize the benefit of its advertising expenditures.
Brand awareness of the Company's "Vista Optical" tradename will be
increased through the use of mass media, including television, radio
and print, and direct mail. Marketing efforts will also be directed
towards obtaining managed care contracts through in-store point of
purchase materials, plan information brochures and various selling
materials targeted towards plan administrators, HMOs and employee
benefit managers. As managed care becomes a larger part of the
Company's business in certain local markets, advertising expenditures
as a percentage of sales are likely to decrease in those markets,
since managed care programs tend to reduce the need for marketing
expenditures to attract customers to shop the Company's vision
centers.
VISION CENTER OPERATIONS
OVERVIEW. The location of the Company's vision centers is an
essential element of its strategy to compete effectively in the retail
optical market. The Company's Host Vision Centers, particularly those
located in Wal-Mart, have premium retail locations within a high
traffic host environment. All the Company's Host Vision Centers in
Wal-Mart are located in front of the host store near the cash
registers, and thereby benefit from high visibility and heavy traffic
counts. The Company's Free-Standing Vision Centers are typically
located in regional shopping centers, power centers, strip shopping
centers and free-standing sites. The Company generally targets retail<PAGE>
space that is close to high volume retail anchor stores frequented by
clientele which seeks value and low prices. To generate economies of
scale in advertising, management and field overhead expenses, the
63<PAGE>
Company attempts to cluster its Free-Standing Vision Centers within a
direct marketing area.
STORE MANAGEMENT. Each vision center has a strategic operating
plan, which generates appropriate staffing levels to maximize
profitability. Each vision center is run by a manager who is
responsible for its day to day operations. Sales personnel are
trained to assist customers effectively in making purchasing
decisions. A significant portion of each manager's compensation is
based on sales and profitability at that particular vision center.
Vision centers are open during normal retail hours, typically 10:00
a.m. to 9:00 p.m. six days a week, and typically 12:00 p.m. to 6:00
p.m. on Sundays.
FIELD MANAGEMENT. The Company's field management includes
regional vice presidents and district managers. Each district manager
is responsible for approximately 12 vision centers and each regional
vice president is responsible for approximately ten districts. The
compensation of all field managers is significantly based on sales and
profitability.
MERCHANDISING. The Company's merchandising strategy is to offer
its customers a wide selection of quality and fashionable frames at
value price points, with particular emphasis on branded frames. The
Company's product offering is supported by strong customer service and
advertising. The key elements of the Company's merchandising strategy
are described below.
BREADTH AND DEPTH OF SELECTION. The Company offers its customers
high quality frames, lenses, accessories and sunglasses, including
designer and private label frames. On average, each vision center
contains between 750 and 1,100 frames. The Company believes that a
broad selection of high-quality, lower-priced private label frames
allows it to offer more value to customers while improving the
Company's gross margin. The Company also offers customers a wide
variety of value-added eyewear features and services on which it
realizes a higher gross margin. These include thinner and lighter
lenses, progressive lenses, and custom lens features, such as tinting,
anti-reflecting coatings, scratch-resistant coatings, ultra-violet
protection and edge polishing.
VALUE/PROMOTIONAL STRATEGY. In keeping with its value
merchandising strategy, the Company's retail prices are generally
lower than those of its direct competitors. The Company employs an
everyday low price strategy in its Host Vision Centers and its
Free-Standing Vision Centers, which is complemented with a comprehensive
promotional strategy on a wide selection of frames and/or lenses options.
The promotions are highly effective at attracting customers to shop the
Company's vision centers.
EFFECTIVE PRODUCT DISPLAY. The Company employs an "easy-to-shop"
store layout. Merchandise in each store is organized by gender
suitability, frame style and brand. Price points are highlighted.
Sales personnel are trained to assist customers in selecting frames
which complement an individual's attributes such as facial features,
face shape and skin tone.
<PAGE>
EMPLOYEE TRAINING. The Company believes that its dedication to
employee training improves customer service, increases morale among
its employees, and contributes to the Company's increased productivity
levels. All new retail employees participate in a twelve week
optician training program. Eligible employees participate in a
manager-in-training program of approximately four months. Employees
typically receive approximately 50 hours of training annually.
Managers participate in approximately 70 hours of annual training.
Employee training emphasizes customer service, product and service
64
<PAGE>
knowledge, optical knowledge, selling techniques, and the use of store
performance data to better manage day to day operations.
VISION CENTER LAYOUT. Each of the Company's existing Host vision
centers occupies between 400 and 1,000 square feet in the front of the
host store, with separate areas for merchandise display, customer
service and contact lens fitting. Services of independent optometrists
are generally available from offices that are approximately 500 square feet
and located in, adjacent to, or nearby the vision center, depending upon
regulatory requirements.
Free-standing vision centers are located in malls and strip shopping
centers. In general, these locations offer the services of independent
optometrists in or nearby the vision centers. The mall locations range in
size from 700 to 1,500 square feet while stores located in strip shopping
centers range from 700 to 1,200 square feet.
OPTOMETRISTS
A key element of the Company's business strategy is the
availability of independent optometrists at clinics in, adjacent to,
or nearby the Company's vision centers. These optometrists, whose
activities and relationships with entities such as the Company are
subject to state and local regulation, are typically not employed by
the Company. See "--Government Regulation." Such independent
optometrists sublicense the eye examination facilities and equipment
from the Company. The services of optometrists are available at
virtually all of the Company's vision centers, except the Frame-n-Lens
locations (where the Company is in the process of refixturing many of
the vision centers to install optometric facilities) and the Sam's
Club locations (where the Company is evaluating whether to install
optometric facilities on a case by case basis). In connection with
the Sam's Club vision centers, the Company will base its decision on
various factors, including the length of the relevant lease and any
requests or proposals made by representatives of Sam's Club. See
"--Relationships with Host Companies." Historically, the Company has
had little difficulty recruiting optometrists, although there can be no
assurance that this trend will continue.
MANAGEMENT INFORMATION AND FINANCIAL SYSTEMS
In 1996, the Company completed the installation of a new point of
sale system and a new perpetual inventory system in all domestic store
locations. The system facilitates the processing of customer sales
information and replenishment of store inventory by passing such
information, including customer specific orders, to the Company's home
office and Company in-house lens laboratory for further processing.
The Company is in the process of developing an enhanced point of
sale software system which is currently being implemented in the
retail stores. The primary purpose of the system is to upgrade data
processing, broaden in-store capabilities, and improve the processing
of managed care sales transactions. In addition to the above
improvements, the system will be designed to be Year 2000 compliant.
See "Risk Factors---Year 2000 Compliance" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations---Year
2000 Compliance."
65<PAGE>
RELATIONSHIP WITH HOST COMPANIES
WAL-MART
The Company operates 372 Host Vision Centers in Wal-Mart stores
and 26 in Wal-Mart Mexico stores. The Company's relationship with
each of Wal-Mart and Wal-Mart Mexico is governed by a master license
agreement which grants a separate license to the Company for each
vision center. Each agreement provides for the payment of minimum and
percentage license fees and contains other customary terms and
conditions. Certain terms are described below:
Term of Company
Each License Options Other
------------ -------------------- -----
Wal-Mart Agreement 9 years one for three years <F1>
Mexico Agreement 5 years two for two years; <F2>
one for one year
__________
[FN]
<F1> The Wal-Mart Agreement, as amended, provides that Wal-Mart
is to offer the Company the opportunity to open, no later
than April 30, 2000, at least 400 vision centers (including
those currently open). In January 1995, the Company made a
lump sum payment in exchange for such commitment. Such
payment is being amortized over the initial term of vision
centers opened after January 1, 1995. In 1997, the Wal-Mart
Agreement was amended to provide that, with one exception,
all new vision centers opened after 1997 will be located in
California and North Carolina. Because seven of the Host
Vision Centers located in Wal-Mart stores were acquired as
part of the Frame-n-Lens Acquisition, these stores are not
covered by the Wal-Mart Agreement. These leases expire at
various times between now and 2003.
<F2> The Company has a right of first refusal in Mexico for any
store in which Wal-Mart Mexico proposes to open a vision
center. The Mexico Agreement contains a mutual non-
competition agreement preventing each party from dealing
with other parties (excluding affiliates of the Company and
Wal-Mart Mexico) in Mexico for the operation of vision
centers in a host environment. The Mexico Agreement also
contains provisions which entitle each party to terminate
the license for each vision center if such vision center
fails to meet certain minimum sales requirements.
The Company opened six vision centers in 1990 under the Wal-Mart
Agreement and 54 such vision centers in 1991, with additional vision
centers being opened in subsequent years. Accordingly, beginning in
1999, the Company will determine whether to exercise the three-year
options to extend the licenses for vision centers reaching the ninth
year of operation. The Company will make such decisions based upon
various factors, including, without limitation, the sales levels of
each vision center, its estimated future profitability and cash flow,
increased minimum license fees charged by Wal-Mart during the option
period, and other relevant factors. Each option must be exercised at
least six months prior to the expiration of the license for each
vision center. The Company's Wal-Mart licenses for existing vision
centers will become eligible for renewal in the years 1999 to 2007,
and, if extended by the Company, will expire during the years 2002 to
2010. Although the Company expects that it will extend the licenses
of a substantial majority of these vision centers, no assurance can be
given as to the number of vision centers the licenses of which will be
extended. Recently, Wal-Mart has begun to implement a plan to convert<PAGE>
or relocate many of its existing stores to a larger "supercenter"
format. Where the converted or relocated store contains a vision
center operated by the Company, the Wal-Mart Agreement provides that,
upon relocation of the Company's vision center, the term of the
license of such vision center begins again.
66<PAGE>
SAM'S CLUB
The Company also operates 121 Host Vision Centers in Sam's Club
stores in 21 states. Each such vision center is subject to a separate
lease, which provides for payment of percentage and minimum rent and
other customary terms and conditions. The leases for these vision
centers began expiring in 1998 and the term for the remaining leases
will expire at various times through 2003. The Company has no option
or right to extend the term of such leases. The Sam's Club vision
centers generated approximately $32 million and $5.0 million in
revenues and EBITDA, respectively, in 1997.
FRED MEYER
The Company operates 52 Host Vision Centers in stores owned by
Fred Meyer. Each such vision center is subject to a separate lease,
which provides for minimum and percentage rent and other customary
terms and conditions. Generally, the term of each lease is for five
years, with a five year option. The Company believes that it will
have the opportunity to expand these operations, should it wish to do
so. The Company is in the process of renegotiating its agreement with
Fred Meyer.
The following table sets forth the number of leases for existing
domestic Host Vision Centers that expire in each year, assuming that
the Company exercises all available options to extend the terms of the
leases:
<TABLE>
<CAPTION>
Number of Leases Expiring In
------------------------------------------------------------------
Host Company 1999 2000 2001 2002 2003 2004 2005 2006 and After
---- ---- ---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wal-Mart....... 1 2 4 4 51 63 49 198
Sam's Club..... 8 35 21 56 1 0 0 0
Fred Meyer..... 17 9 1 2 3 8 7 5
-- -- -- -- -- -- -- ---
26 46 26 62 55 71 56 203
== == == == == == == ===
</TABLE>
MANUFACTURING AND DISTRIBUTION
The Company currently utilizes four in-house lens laboratories
and one independent laboratory to manufacture prescription eyeglasses
for its vision centers. Substantially all prescription spectacle
requirements of the Company's domestic vision centers opened in the
future will be supplied from Company-owned laboratories. The Company
has a modern coating facility in its Lawrenceville headquarters,
capable of coating lenses with anti-reflective and mirror surfaces.
Each vision center in Wal-Mart stores has its own finishing laboratory
which manufactures lenses for approximately half of all customers
purchasing spectacle lenses.
The Company's centralized distribution center in its
Lawrenceville, Georgia headquarters facility provides lens blanks,
frames, sunglasses and contact lenses to all vision centers. The
Company's central distribution center and all laboratories are
interfaced with the Company's management information system. The
Company's central distribution center ships completed customer orders
and inventory replenishment requirements, including frames and
spectacle and contact lenses, to the Company's vision centers
<PAGE>
throughout the United States by overnight delivery services. The
Company also maintains distribution centers in Fullerton, California
(which was acquired as a part of the Frame-n-Lens Acquisition) and St.
Cloud, Minnesota. As part of the New West Acquisition, the Company
acquired two additional laboratory and distribution facilities located
in Tempe, Arizona and Portland, Oregon. The Company has already
consolidated the Portland facility, along with its Los Angeles,
67<PAGE>
California facility, into its Fullerton, California facility. The
Company intends to consolidate the Tempe facility into the Fullerton
facility by the end of 1999.
STORE EXPANSION
The Company's business strategy is to continue to grow through
the opening of additional locations. The Company plans to open up to
35 new stores per year over the next five years. Management expects
to focus on Florida, Minnesota and California markets in its new store
expansion plan. The new stores are expected to have an on-site
optometrist and to be serviced by the Company's centralized
laboratories. In connection with its Free-Standing Vision Centers,
the Company will employ a modular construction format, which permits
the Company to open new locations quickly at an approximate capital
expenditure of $80,000 to $120,000 per vision center. In addition,
pre-opening costs average $20,000 and initial inventory requirements
for new stores average $20,000, of which a majority is supplied by
vendors at a reduced cost.
The Company regularly explores opportunities to expand outside of
its existing host environments and continues to consider various
options, such as opening Free-Standing Vision Centers, acquiring
optical companies, and expanding in another host environment.
Management currently believes that the Company's most likely avenue of
additional expansion will be through the development and acquisition
of free-standing locations.
GOVERNMENT REGULATION
The Company is subject to a variety of federal, state, and local
laws, regulations, and ordinances, including state and local laws and
regulations regarding advertising, qualifications and practices of the
opticians employed by the Company, relations between independent
optometrists and optical firms such as the Company, and various trade
practices such as country of origin product labeling. In addition,
certain of the Company's products, specifically contact lenses and
contact lens solutions, must comply with quality control standards set
by the United States Food and Drug Administration. Through its
participation in Medicare and in managed care programs, the Company is
also subject to a variety of other laws, such as the Federal Anti-
Kickback Statute and the Health Insurance Portability Act of 1996.
Although government regulation has increased the cost to the
Company of commencing operations and decreased its flexibility in
managing its business, government regulation has not, to date, had a
material adverse effect on the Company's overall operations or
financial performance, or on its overall relationships with
independent optometrists. It is nevertheless possible that new
regulations or new interpretations of current regulations could
materially increase the Company's cost of doing business or have a
material adverse impact on the Company's sales by restricting or
eliminating the services of opticians or optometrists in, adjacent to,
or nearby the Company's vision centers. This risk is enhanced since
the Company's competitors often serve as, or exert influence on, local
regulators of the eyecare industry as independent optometrists and
opticians often serve on these local regulatory boards. Additional
risk is created because of the Company's increasing involvement in
managed care plans and general increased oversight by federal and
state governments of managed care relationships and operations.
The Company believes it is in substantial compliance with all
material governmental regulations applicable to its operations.
68<PAGE>
COMPETITION
The retail eyecare industry in the United States is highly
competitive. In addition to optical chains such as Cole Vision and
LensCrafters, there are numerous retail optical stores, individual
retail outlets and individual opticians, optometrists, and
ophthalmologists providing the public all or some of the goods and
services the Company sells or makes available through its vision
centers. Optical retailers generally serve individual, local or
regional markets, and, as a result, competition is fragmented and
varies substantially among locations and geographic areas. Several of
the Company's competitors have financial resources substantially
greater than those of the Company.
The Company believes that its primary competitive advantages are
its quality products and value at low prices, and its customer-driven
service philosophy. Additionally, the Company competes on the basis
of the quality and consistency of service, convenience, speed of
delivery, and selection.
In addition to competition for individual patients, there is
increasing competition in the eyecare industry for managed vision care
contracts with insurance companies, employers, and other groups. The
Company believes that the competitive advantages described above will
help the Company compete for managed care contracts. The density and
size of a vision care network are also a significant competitive
aspect, however. Several other optical chains, as well as other
organizations of vision care providers, have more service locations
and cover more geographical areas than does the Company.
MEXICAN OPERATIONS
RISKS
The Company's Mexican operations face risks substantially similar
to those faced by the Company in connection with its domestic
operations, including dependence on the host store and expansion
requirements. There can be no assurance that such operations will be
able to attain profitability. In addition, such operations expose the
Company to all of the risks arising from investing and operating in
foreign countries generally, including a different regulatory,
political, and governmental environment, currency fluctuations,
currency devaluations, inflation, price controls, restrictions on
profit repatriation, lower per capita income and spending levels,
import duties and other impediments to the delivery of inventory and
equipment to vision center locations, value-added taxes, and
difficulties of cross-cultural marketing.
ECONOMIC AND POLITICAL ENVIRONMENT
Regulations in Mexico do not currently include currency controls,
restrictions on profit repatriation, limitations on foreign ownership,
or restrictions on sourcing of products that would adversely affect
the Company's operations. The cumulative translation adjustment in
shareholders' equity for operations in foreign countries at January 3,
1998 was $4.1 million. As a result of inflation in prior years, the
Company has in the past adjusted its retail pricing. Further pricing
adjustments are contingent upon competitive pricing levels in the
marketplace. Management is monitoring the continuing impact of these
inflationary trends.
The Securities and Exchange Commission has qualified Mexico as a
highly inflationary economy under the provisions of SFAS No. 52,
69<PAGE>
"Foreign Currency Translation." Consequently, in 1997, the financial
statements of the Mexico operation were remeasured with the U.S.
dollar as the functional currency. During 1997, an immaterial loss
resulted from changes in foreign currency rates between the peso and
the U.S. dollar, as calculated in the remeasurement process, and was
recorded in the Company's statement of operations.
TRADE NAMES AND TRADEMARKS
The Wal-Mart Agreement provides that, in connection with its Wal-
Mart vision centers, the Company must use the tradename "Vision Center
located in Wal-Mart" and indicate that the vision centers are operated
by the Company. Vision centers in stores owned by Wal-Mart Mexico do
business under the name "Centro de Vision." The Company also has
licensed the right to use the "Guy Laroche" trademark in its domestic
vision centers pursuant to a license agreement providing for royalty
payments and containing other customary terms and conditions. The Guy
Laroche agreement expires December 31, 2001.
"Vista Optical" and "Lee Optical" are federally registered
trademarks that were acquired as a part of the New West Acquisition.
In addition, New West applied to the United States Patent and
Trademark Office to register "Vista Eyecare Network." Finally "Frame-
n-Lens" is a federally registered trademark acquired as part of the
Frame-n-Lens Acquisition.
EMPLOYEES
As of October 3, 1998, the Company employed approximately 3,780
associates on a full-time basis and 1,030 associates on a part-time
basis. As of that date, the Company employed 3,960 associates in retail
sales, 510 in laboratory and distribution operations, and 340 in management
and administration. Apart from its Mexican employees, none of the
associates employed by the Company are covered by any collective
bargaining agreements. All associates (with the exception of home
office personnel) employed in the Company's Mexican operations are
covered by collective bargaining agreements. The Company considers
its employment relations to be good, and to date the Company has not
experienced any significant difficulties in staffing its vision
centers.
PROPERTIES
The Company's 889 domestic vision centers are located in the
following 44 states and Puerto Rico:
Alabama....................................... 12
Alaska........................................ 16
Arizona....................................... 44
Arkansas...................................... 5
California.................................... 237
Colorado...................................... 27
Connecticut................................... 9
Florida....................................... 39
Georgia....................................... 40
Hawaii........................................ 4
Idaho......................................... 11
Illinois...................................... 8
Indiana....................................... 4
Iowa.......................................... 17
Kansas........................................ 13
Kentucky...................................... 3
Louisiana..................................... 3
70<PAGE>
Maine......................................... 1
Maryland...................................... 4
Massachusetts................................. 5
Michigan...................................... 4
Minnesota..................................... 34
Missouri...................................... 9
Montana....................................... 5
Nevada........................................ 11
New Hampshire................................. 4
New Jersey.................................... 12
New Mexico.................................... 13
New York...................................... 29
North Carolina................................ 40
North Dakota.................................. 10
Ohio.......................................... 3
Oregon........................................ 40
Pennsylvania.................................. 22
Puerto Rico................................... 1
South Carolina................................ 14
South Dakota.................................. 1
Tennessee..................................... 7
Texas......................................... 42
Utah.......................................... 1
Virginia...................................... 25
Washington.................................... 46
West Virginia................................. 7
Wisconsin..................................... 4
Wyoming....................................... 3
The Company also has 26 vision centers in Mexico.
The Company's home office is located in an approximately 66,000
square foot facility in Lawrenceville, Georgia and is subleased from
Wal-Mart through the year 2001 (with a renewal option for seven
additional years). The Company's central distribution center, an
anti-reflective and mirror coating facility, and a lens laboratory are
located in the Company's Lawrenceville headquarters.
The Company has regional headquarters located in St. Cloud,
Minnesota, which is subject to a lease with a term expiring on October
1, 2007. This facility also contains a full-service optical
laboratory.
The Company's Fullerton, California operation is located in an
approximately 45,000 square foot facility, which is subject to a lease
with a term expiring on August 31, 2006. The Company has an option to
extend the lease for five years. The Company has consolidated other
recently acquired manufacturing facilities into this facility.
The Company's facility in Tempe, Arizona is owned by Alexis
Holdings, Inc. a wholly-owned subsidiary of New West.
71<PAGE>
ENVIRONMENTAL MATTERS
Under certain environmental laws, a current or previous owner of
real property, and parties that generate or transport hazardous
substances that are disposed of at real property, may be liable for
the costs of investigating and remediating such substances on or under
the property. The federal Comprehensive Environmental Response,
Compensation & Liability Act, as amended ("CERCLA"), and similar state
laws, impose liability on a joint and several basis, regardless of
whether the owner, operator, or other responsible party was at fault
for the presence of such hazardous or toxic substances. Environmental
laws also may impose restrictions on the manner in which property may
be used or businesses may be operated, and these restrictions may
require expenditures for compliance. In connection with the ownership
or operation of its facilities, the Company could be liable for such
costs in the future.
The Company currently is not aware of any material environmental
claims pending or threatened against it and does not believe it is
subject to any material environmental compliance obligations.
However, no assurance can be given that a material environmental claim
or compliance obligation will not arise in the future. The cost of
defending against any claims of liability, of remediating a
contaminated property, or of complying with future environmental
requirements could impose material costs on the Company.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings the
result of which management believes could have a material adverse
effect upon its business or financial condition. The Company is
currently the defendant in a lawsuit (Commercial Court of Paris, Case
No. RG 95 108253) in France arising out of the Company's sale of its
French operations. The suit was initiated on December 6, 1995 by
Grand Optical Photoservice, S.A. ("GPS") to block the Company's sale
of its French operations to a third party. GPS claims that, in
selling its French operations to a third party, the Company breached a
letter of intent it had previously signed with GPS. By a decision
dated December 14, 1995, the trial court rejected the plaintiff's
claims and fined the plaintiff for filing a frivolous claim. The
plaintiff has filed an appeal. The Company believes that the
plaintiff's claims are without merit.
72
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, AND KEY EMPLOYEES
Certain information regarding the directors, executive officers,
and key employees of the Company is set forth in the table below.
<TABLE>
<CAPTION>
Name Age Position
--- --- --------
<S> <C> <C>
James W. Krause 54 Chairman of the Board and Chief Executive Officer
Barry J. Feld 42 President and Chief Operating Officer
Richard Anderson 40 Senior Vice President, Real Estate
Michael J. Boden 51 Senior Vice President, Leased Retail Operations
Eduardo Egusquiza 46 Senior Vice President, Information Technology
Mitchell Goodman 45 Senior Vice President, General Counsel and Secretary
Charles M. Johnson 49 Senior Vice President, Manufacturing and Distribution
Angus C. Morrison 42 Senior Vice President, Chief Financial Officer and Treasurer
James W. Swanson 51 Senior Vice President, Vista Retail Operations and Managed Care
Myles S. Lewis 30 Vice President, Managed Care
Timothy Ranney 46 Vice President, Corporate Controller
Robert W. Stein 43 Vice President, Human Resources
Patric L. Welch 48 Vice President, Professional Services
David I. Fuente 53 Director
Ronald J. Green 51 Director
James E. Kanaley 57 Director
Campbell B. Lanier, III 48 Director
J. Smith Lanier, II 70 Director
</TABLE>
JAMES W. KRAUSE joined the Company in April 1994 as President and
Chief Executive Officer and a director. He was named Chairman of the
Company in June 1995. From 1980 until joining the Company, he was
President and General Manager of the automotive and international
divisions of Sherwin-Williams Company.
BARRY J. FELD joined the Company in October 1998 as President and
Chief Operating Officer as a result of the New West Acquisition. Mr.
Feld served as President and a member of the Board of Directors of New
West since joining New West in May 1991, and as Chief Executive
Officer of New West since February 1994.
RICHARD ANDERSON joined the Company in January 1999 and was named
Senior Vice President, Real Estate in February 1999. From 1987 until
joining the Company, he was employed W.H. Smith, PLC where he served
as Vice President, Real Estate and Vice President, Development and
Construction.
MICHAEL J. BODEN joined the Company in June 1995 as Vice
President, Sales and Marketing and was named a Senior Vice President
in February 1998. He was named Senior Vice President, Leased Retail
Operations in February 1999. From 1992 until joining the Company, he
served as Vice President Store Operations of This End Up Furniture
Company.
EDUARDO EGUSQUIZA joined the Company in March 1998 as Senior Vice
President, Information Technology. From 1982 until joining the
Company, he was employed by Musicland Stores Corporation, Inc. where
he served as Vice President of Information Systems and Services.
MITCHELL GOODMAN joined the Company as General Counsel and
Secretary in September 1992 and was named a Vice President in November
1993 and Senior Vice President in May 1998.
73<PAGE>
CHARLES M. JOHNSON joined the Company in October 1997 as Senior
Vice President, Manufacturing and Distribution. From 1988 until
joining the Company, he was employed by the Sherwin-Williams Company,
where he served as Vice President and Director of Research and
Development.
ANGUS C. MORRISON joined the Company in February of 1995 as Vice
President, Corporate Controller. He was appointed Senior Vice
President, Finance, and Treasurer in March 1998. From 1993 until
joining the Company, he was Controller and Senior Financial Officer of
the Soap Division of The Dial Corp. He was Controller and Senior
Financial Officer of the Food Division of the same company from 1989
through 1992.
JAMES W. SWANSON joined the Company in October 1998 as a result
of the New West Acquisition and was named Senior Vice President, Vista
Retail Operations and Managed Care in February 1999. He joined New
West in July 1991 and served as Chief Operating Officer and Executive
Vice President since September 1997.
MYLES S. LEWIS joined the Company in October 1998 as a result of
the New West Acquisition. He was appointed Vice President, Managed
Care Sales and Marketing in February 1999. He was employed by New
West from 1993 until joining the Company. At New West, he served as
Vice President, Sales and Marketing.
TIMOTHY RANNEY joined the Company in September 1998 and was named
Vice President, Corporate Controller in October 1998. From 1991 until
joining the Company, he was employed by CVS Corporation where he
served as Store Controller and then as Director of Financial Systems.
ROBERT W. STEIN joined the Company as Director of Human Resources
in May 1992. In January 1993, he was appointed Vice President, Human
Resources.
PATRIC L. WELCH joined the Company as Director Eastern Region in
November 1994 and was appointed Vice President, Professional Services
in February 1997. He was District Manager of D.O.C. Optics Corp. from
1993 until joining the Company. Previously, he was Regional Vice
President of NuVision, Inc., where he was employed from 1986 until
1993.
DAVID I. FUENTE has been Chairman of the Board and Chief
Executive Officer of Office Depot, Inc. since 1987 and has been a
director of the Company since April 1992.
RONALD J. GREEN has been a partner in the accounting firm of
Stephen M. Berman & Associates, Atlanta, Georgia, since 1980 and has
been a director of the Company since 1990.
JAMES E. KANALEY was employed at the Bausch and Lomb Corporation
from 1978 until his retirement in 1997. From 1990 until 1993, he
served as Senior Vice President and Group President Contact Lens Care,
and from 1993 until his retirement he served as Senior Vice President
and President, North American Healthcare.
CAMPBELL B. LANIER, III is Chairman of the Board and Chief
Executive Officer of ITC Holding Company, a telecommunications
services company located in West Point, Georgia. He is also Chairman,
Chief Executive Officer and director of Powertel, Inc. He also serves
as a director of each of Mindspring Enterprises, Inc., K&G Men's
Center, Inc., and Innotrac Corporation.
74<PAGE>
J. SMITH LANIER, II is Chairman and Chief Executive Officer of J.
Smith Lanier & Co., an insurance sales company. He is also a director
of Interface, Inc. and has been a director of the Company since
October 1990. Mr. Lanier is the uncle of Campbell B. Lanier, III.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
The Audit Committee consists of two directors: Campbell B.
Lanier, III (Chairman) and J. Smith Lanier, II. The Audit Committee
is responsible for recommending the appointment of independent
auditors, reviewing with the independent auditors the scope and
results of the audit engagement, establishing and monitoring the
Company's financial policies and control procedures, reviewing and
approving related party transactions and reviewing and monitoring the
provision of non-audit services by the Company's auditors.
COMPENSATION COMMITTEE
The Compensation Committee consists of three directors: David I.
Fuente (Chairman), Ronald J. Green and Campbell B. Lanier, III. The
committee is responsible for establishing salaries, bonuses, and other
compensation for the Company's officers and making awards under the
Company's Restated Stock Option and Incentive Award Plan.
75
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table discloses compensation received from the
Company by the Company's President and Chief Executive Officer, and
the Company's four most highly compensated officers other than the
President and Chief Executive Officer (all such individuals,
collectively, the "named executive officers") as of January 2, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
---------------------------------- ---------------------------------
Name and Restricted Securities
Principal Fiscal Other Annual Stock Underlying All Other
Position Year Salary($) Bonus($) Compensation($) Awards($)<F1> Options/SARs(#) Compensation($)
------------------------- ------ --------- -------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
James W.
Krause................... 1998 368,000 79,688<F2> 250,000 20,000<F3>
Chairman of 1997 338,000 247,000 72,000 50,000 20,000<F3>
the Board, 1996 307,000 177,000 143,000<F4> 50,000 20,000<F3>
President and
Chief Executive
Officer
Michael J.
Boden.................... 1998 193,000 26,563<F5> 15,000 ---
Senior Vice 1997 185,000 135,000 24,000 15,000 ---
President, Retail 1996 178,000 97,000 15,000 ---
Operations and
Merchandising
Mitchell
Goodman.................... 1998 148,000 26,563<F5> 15,000 ---
Senior Vice 1997 141,000 99,000 17,000<F6> 24,000 15,000 ---
President, 1996 135,000 75,000 17,000<F6> 15,000 ---
General Counsel
and Secretary
Charles M.
Johnson................... 1998 197,000 26,563<F7> 15,000 ---
Senior Vice 1997(8) 41,000 75,000 ---
President,
Manufacturing and
Distribution
Angus C.
Morrison.................. 1998 160,000 28,155<F9> 25,000 ---
Senior Vice 1997 107,000 49,000 14,438 10,000 ---
President, Chief 1996 98,000 37,000 10,000 ---
Financial Officer and Treasurer
__________
<FN>
<F1> Restricted Stock Awards vest and restrictions lapse after five-
year performance period to the extent and depending upon
achievement by the Company of return on asset goals relative to a
comparison group of companies. Vesting is accelerated
automatically upon a change of control (as defined). Dividends
(if any are declared) will be paid on restricted stock.
<F2> As of January 2, 1999, Mr. Krause had restricted stock holdings
representing 30,000 shares of Common Stock with a value of
$161,250.
<F3> The Company has executed a "split dollar" insurance agreement
with Mr. Krause. The annual premium (payable by the Company) is
$20,000. The term life portion of this premium is $2,500; the<PAGE>
non-term life portion is $17,500.
<F4> $83,000 represents reimbursement of relocation expenses; $60,000
represents tax reimbursement payments on the foregoing.
<F5> As of January 2, 1999, this executive had restricted stock
holdings representing 10,000 shares of Common Stock with a value
of $53,750.
<F6> Represents partial forgiveness of $50,000 loan made in 1992.
<F7> As of January 2, 1999, Mr. Johnson had restricted stock holdings
representing 5,000 shares of Common Stock with a value of
$26,875.
<F8> Mr. Johnson joined the Company in October 1997.
<F9> As of January 2, 1999, Mr. Morrison had restricted stock holdings
representing 8,000 shares of Common Stock with a value of
$43,000.
</TABLE>
76<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants to the
named executive officers by the Company in 1998. In accordance with
rules of the Commission, there are shown the hypothetical gains or
"option spreads" that would exist for the respective options. These
gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over
the full option term.
<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Assumed
No. of % of Total Annual Rates of Stock
Securities Options/SARs Price Appreciation
Underlying Granted to for Option Terms($)<F2>
Option/SARs Employees in Exercise or Expiration ----------------------
Granted Fiscal Year<F1> Base Price($) Date 5% 10%
----------- -------------- ------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
James W. Krause.......... 200,000 <F3> 17.2% 5.3125 2/17/08 667,500 1,693,500
50,000 <F4> 4.3% 5.3125 2/17/08 166,875 423,375
Michael J. Boden......... 15,000 <F4> 1.3% 5.3125 2/17/08 50,063 127,013
Mitchell Goodman......... 15,000 <F4> 1.3% 5.3125 2/17/08 50,063 127,013
Charles M. Johnson....... 15,000 <F4> 1.3% 5.3125 2/17/08 50,063 127,013
Angus C. Morrison........ 15,000 <F4> 1.3% 5.3125 2/17/08 50,063 127,013
__________
<FN>
<F1> The Company granted options covering 1,163,000 shares to
employees in 1998.
<F2> These amounts represent assumed rates of appreciation only.
Actual gains, if any, on stock option exercises and holdings of
Common Stock are dependent on the future performance of Common
Stock and overall stock market conditions. There can be no
assurance that the amounts reflected in this table will be
achieved.
<F3> Grant under the Company's Restated Stock Option and Incentive
Award Plan. Option vests 50% on each of eighth and ninth
anniversaries of grant date, subject to (a) continued employment
and (b) accelerated vesting if Company attains defined earnings
per share goals. Expiration date is 10th anniversary of grant
date.
<F4> Grants under the Company's Restated Stock Option and Incentive
Award Plan. Options vest 50% on second anniversary of grant date
and 25% on each of the third and fourth anniversary, subject to
continued employment. Expiration date is 10th anniversary of
grant date.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
AND OPTION VALUES
The following table provides information, as of January 2, 1999,
regarding each exercise of stock options during the last fiscal year
by each of the named executive officers and the number and value of
options held by the named executive officers.
<PAGE>
<TABLE>
<CAPTION>
No. of Securities Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options
Acquired on Value Fiscal Year End At Fiscal Year End($)
Exercise Realized -------------------------------- -----------------------------
(#) ($) Exercisable Unexercisable <F1> Exercisable Unexercisable
----------- --------- ----------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James W. Krause..... 150,000 28,200 362,500 337,500 65,625 103,125
Michael J. Boden.... --- --- 45,000 50,000 66,094 42,657
Mitchell Goodman.... --- --- 31,978 41,250 19,688 27,189
Charles M. Johnson.. --- --- 0 90,000 0 938
Angus C. Morrison... --- --- 31,250 48,750 17,813 19,688
__________
<FN>
<F1> Shares represented were not exercisable as of January 2, 1999,
and future exercisability is subject to the executive's remaining
employed by the Company for up to four years from grant date of
options.
</FN>
</TABLE>
77<PAGE>
CHANGE IN CONTROL ARRANGEMENTS
There are agreements between the Company and the named executive
officers which provide severance benefits in the event of termination
of employment under certain circumstances following a change in
control of the Company. The circumstances are termination by the
Company (other than because of death or disability commencing prior to
a threatened change in control, or for cause), or by an officer as the
result of a voluntary termination. Following any such termination, in
addition to compensation and benefits already earned, the officer will
be entitled to receive a lump sum severance payment equal to up to
three times the officer's annual rate of base salary.
Cause for termination by the Company is the: (1) any act that
constitutes, on the part of the officer, (a) fraud, dishonesty, gross
negligence, or willful misconduct and (b) that directly results in
material injury to the Company, or (2) the officer's material breach
of the agreement, or (3) the officer's conviction of a felony or crime
involving moral turpitude.
Circumstances which would entitle the officer to terminate as a
result of voluntary termination following a change in control include,
among other things: (1) the assignment to the officer of any duties
inconsistent with the officer's title and status in effect prior to
the change in control or threatened change in control; (2) a reduction
by the Company of the officer's base salary; (3) the Company's
requiring the officer to be based anywhere other than the Company's
principal executive offices; (4) the failure by the Company, without
the officer's consent, to pay to the officer any portion of the
officer's then current compensation; (5) the failure by the Company to
continue in effect any material compensation plan in which the officer
participates immediately prior to the change in control or threatened
change in control; or (6) the failure by the Company to continue to
provide the officer with benefits substantially similar to those
enjoyed by the officer under any of the Company's life insurance,
medical, or other plans. The term of each agreement is for a rolling
three years unless the Company gives notice that it does not wish to
extend such term, in which case the term of the agreement would expire
three years from the date of the notice.
78<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock by (i) each director of the
Company; (ii) each executive officer of the Company; (iii) all
directors and executive officers of the Company as a group and (iv)
each person known to the Company to beneficially own more than 5.0% of
the outstanding Common Stock. Unless otherwise indicated, all shares
are owned directly and the indicated person has sole voting and
investment power. Unless otherwise indicated, the number of shares
represents the number of shares of Common Stock the person holds as of
December 31, 1998.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
Name and Address of Beneficial Owner <F1> Beneficially Owned Common Stock
- --------------------------------------- ------------------- ------------
<S> <C> <C>
Campbell B. Lanier, III 2,197,668(2)(3) 10.4%
James W. Krause 639,378(4) 3.0%
J. Smith Lanier, II 271,610(3)(5) 1.3%
Ronald J. Green 105,875(3)(6) *
Barry J. Feld 100,000 *
David I. Fuente 69,875(3)(7) *
James E. Kanaley 0 *
Mitchell Goodman 59,706(8) *
Robert W. Stein 78,352(9) *
Michael J. Boden 81,827(10) *
Angus C. Morrison 71,000(11) *
Eduardo A. Egusquiza 5,000(12) *
Charles M. Johnson 5,000(12) *
Richard Anderson 0 *
Timothy Ranney 0 *
James W. Swanson 0 *
Rayna Casey 1,808,152(13) 8.5%
Edward G. Weiner 1,505,800(14) 7.1%
All directors and executive officers as a group (seventeen
persons) 3,685,291 16.8%
__________
* Represents less than one percent of the outstanding Common Stock.
<F1> Unless otherwise indicated below, the address of the persons named is 296 Grayson Highway,
Lawrenceville, GA 30045.
<F2> Includes shares owned by the following individuals and entities, who may be deemed a "group"
within the meaning of the beneficial ownership provisions of the federal securities laws: Mr. Lanier
(136,957 shares); Mr. Lanier's wife (750 shares); Campbell B. Lanier, IV (25,550 shares); ITC Service
Company (1,110,448 shares); the Campbell B. Lanier, III Grantor Retained Annuity Trust (the "Trust")
(700,000 shares); William H. Scott, III (782,782 shares, inclusive of 700,000 shares owned by the Trust,
of which Mr. Scott is the sole trustee); Martha J. Scott (28,000 shares); William H. Scott, III
Irrevocable Trust F/B/O Martha Scott (10,000 shares); Bryan W. Adams (8,000 shares); J. Douglas Cox
(48,406 shares); and Sandy Cox (29,900 shares).
<F3> Includes 16,875 shares which this individual has the right to acquire under the Company's Non-
Employee Director Stock Option Plan.
<F4> Includes 412,500 shares which Mr. Krause has the right to acquire under the Company's Restated
Stock Option and Incentive Award Plan (the "Plan"). Also includes 30,000 shares of restricted stock
awarded under the Plan.
<F5> Includes 1,800 shares owned by Mr. Lanier's wife, as to which he disclaims beneficial ownership.
<F6> Includes 9,000 shares owned by Mr. Green's children, as to which he disclaims beneficial
ownership.
<F7> Includes 25,000 shares which Mr. Fuente has the right to acquire from Mr. Weiner pursuant to a
stock option agreement.<PAGE>
<F8> Includes 46,978 shares which Mr. Goodman has the right to acquire pursuant to the Plan, and 2,728
shares owned by Mr. Goodman's wife, as to which he disclaims beneficial ownership. Also includes 10,000
shares of restricted stock awarded under the Plan.
<F9> Includes 64,661 shares which Mr. Stein has the right to acquire pursuant to the Plan. Also
includes 10,000 shares of restricted stock awarded under the Plan.
<F10> Includes 68,750 shares which Mr. Boden has the right to acquire pursuant to the Plan. Also
includes 10,000 shares of restricted stock awarded under the Plan.
<F11> Includes 7,200 shares held as custodian for his children, 47,500 shares which Mr. Morrison has
the right to acquire pursuant to the Plan, and 8,000 shares of restricted stock under the Plan.
<F12> Represents 5,000 shares of restricted stock awarded under the Plan.
<F13> Includes 159,948 shares owned by a trust of which Ms. Casey is the trustee and her daughter the
beneficiary. Ms. Casey's address is 712 West Paces Ferry Road, Atlanta, Georgia.
<F14> Includes 25,000 shares that Mr. Weiner owns but which he may be obligated to transfer to a
director of the Company. Mr. Weiner's address is 500 Southeast Mizner Boulevard, Boca Raton, Florida
33432.
</FN>
</TABLE>
79
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
Concurrent with the closing of the sale of the outstanding notes,
the Company entered into a credit agreement with First Union National
Bank ("First Union"), Bank of America, FSB and certain other financial
institutions (collectively, the "Banks"). This agreement provides for
a new three-year, $25.0 million revolving credit facility. The new credit
facility will include a sub-limit of up to $10.0 million for standby letters
of credit. The availability under the new credit facility is limited to
certain percentages of accounts receivable, inventory and twelve-month
trailing EBITDA. Given the Company's current accounts receivable and inventory,
the Company has availability under the credit facility of up to $20.0 million.
The amount available will be reduced by outstanding letters of credit issued
under the standby letter of credit facility.
The proceeds of the new credit facility have been or will be
available for financing a portion of the New West acquisition, refinancing
existing debt, working capital, acquisitions subsequent to the closing of the
sale of the outstanding notes, if any, and general corporate purposes. All of
our obligations under the new credit facility are unconditionally and
irrevocably guaranteed jointly and severally by certain of our subsidiaries.
SECURITY. Borrowings under the new credit facility are
secured by substantially all assets of the Company and our
subsidiaries. The new credit facility contains a negative covenant
limiting our right to grant security interests or other liens on our
assets and our subsidiaries' other assets.
INTEREST RATES AND FEES. The new credit facility bears
interest at rates per annum equal to, at our option, either (1) First
Union's Reference Rate plus the applicable margin or (2) the LIBOR
rate plus the applicable margin. The applicable margin is a maximum
of 2.00% for the Reference Rate and 3.25% for the LIBOR rate, which
may be reduced depending on our ratio of total debt to EBITDA. We
pays a fee of 0.50% per annum on the unused portion of the new credit
facility, which may be reduced depending on our ratio of total debt to
EBITDA. In addition, we will pay fees on any letters of credit issued
under the new credit facility, which are calculated based on the daily
average of the amount of outstanding letters of credit.
COVENANTS. The new credit facility contains covenants with
which we and our subsidiaries must comply that are customary for a
secured revolving credit facility, including, among others:
* covenants restricting the incurrence of indebtedness,
* the creation or existence of liens,
* the guarantee of other indebtedness,
* acquisitions,
* certain investments,
* the declaration or payment of dividends,
* the repurchase or redemption of debt and equity securities of the
Company,
* change in business activities, affiliate transactions, and
certain corporate transactions, such as sales and purchases of
assets, mergers, or consolidations, and
* and delivery of financial and other information to the Banks and
other matters.
The new credit facility also contains certain financial covenants relating
to:
* minimum EBITDA requirements,
* minimum fixed charge ratios,
* minimum interest and rent coverage ratios,
* maximum leverage ratios, and
80<PAGE>
* limitations on capital expenditures.
EVENTS OF DEFAULT. The New Credit Facility contains certain
events of default customary for a secured revolving credit facility,
including, among others:
* payment events of default,
* breach of representations or warranties,
* covenant defaults,
* an event of default based on a change in control of the Company,
* cross-defaults to other indebtedness of, and bankruptcy and
judgment defaults against, the Company,
* ERISA events of default,
* material adverse change events of default, and
* certain adverse government action events of default.
DESCRIPTION OF THE NOTES
You can find the definitions of certain terms used in this
description under the subheading "Certain Definitions." In this
description, the word "Company" refers only to Vista Eyecare, Inc. and
not to any of its subsidiaries.
The Company issued the outstanding notes under an Indenture
(the "Indenture") among itself, the Guarantors and State Street Bank
and Trust Company, as trustee (the "Trustee"). The terms of the notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act").
The following description is a summary of the material
provisions of the Indenture. It does not restate that agreement in
its entirety. We urge you to read the Indenture because it, and not
this description, define your rights as holders of these notes. We
have filed copies of the Indenture as an exhibit to the registration
statement which includes this prospectus.
BRIEF DESCRIPTION OF THE NOTES
These notes:
* are general unsecured obligations of the Company;
* rank equally in right of payment with all existing and future
unsubordinated Indebtedness of the Company;
* are senior in right of payment to all subordinated Indebtedness
of the Company;
* are effectively subordinated to all secured Indebtedness of the
Company to the extent of assets securing such Indebtedness; and
* are unconditionally guaranteed by certain of our domestic
subsidiaries and certain of our future subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
The outstanding notes are limited to $125,000,000 in
aggregate principal amount. The notes will be issued in fully
registered form only, without coupons, in denominations of $1,000 and
integral multiples thereof. The notes will mature on October 15,
2005.
81<PAGE>
Interest on the notes will accrue at the rate of 12 3/4% per
annum and will be payable semiannually in cash on each April 15 and
October 15 commencing on April 15, 1999, to the persons who are
registered Holders at the close of business on the April 1 and October 1
immediately preceding the applicable interest payment date.
Interest on the notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from
and including the date of issuance.
PAYING AGENT AND REGISTRAR FOR THE NOTES
Initially, the Trustee will act as Paying Agent and
Registrar for the notes.
TRANSFER AND EXCHANGE
The notes may be presented for registration or transfer and
exchange at the offices of the Registrar, which initially will be the
Trustee's corporate trust office. The Company may change any Paying
Agent and Registrar without notice to holders of the notes (the
"Holders"). Any outstanding notes that remain outstanding after the
completion of the exchange offer, together with the exchange notes
issued in connection with the exchange offer, will be treated as a
single class of securities under the Indenture.
METHODS OF PAYMENTS
The Company will pay principal (and premium, if any) on the
notes at the Trustee's corporate office in New York, New York. At the
Company's option, interest may be paid at the Trustee's corporate
trust office or by check mailed to the registered address of Holders.
REDEMPTION
MANDATORY REDEMPTION. The notes are not subject to any
mandatory sinking fund redemption prior to maturity.
OPTIONAL REDEMPTION. The notes will be redeemable, at the
Company's option, in whole or in part. After October 15, 2003, the
Company may redeem all or a part of the notes upon not less than 30
nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on October 15 of the year
set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003..................................... 105.000%
2004 and thereafter...................... 100.000%
OPTIONAL REDEMPTION UPON EQUITY OFFERINGS. Prior to October 15,
2001, the Company may redeem up to 35% of the initial aggregate
principal amount of the notes issued under the Indenture with the net
cash proceeds of one or more Equity Offerings at a redemption price
equal to 112.75% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the redemption date; provided, however,
that
(1) at least 65% of the initial aggregate principal amount
of the notes issued under the Indenture remain outstanding
(other than any notes owned by the Company or any of its
Affiliates); and <PAGE>
(2) the redemption must occur within 120 days after the
closing of any such Equity Offering.
"Equity Offering" means a sale of Qualified Capital Stock of
the Company other than Indebtedness or Disqualified Capital Stock
convertible or exchangeable into Capital Stock of the Company.
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SELECTION AND NOTICE OF REDEMPTION. In the event that less
than all of the notes are to be redeemed at any time, the Trustee will
select notes for redemption as follows:
(1) if the notes are listed, in compliance with the
requirements of the principal national securities exchange
on which such notes are listed; or
(2) if such notes are not listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and
appropriate.
No notes of $1,000 or less shall be redeemed in part. If a
partial redemption is made with the proceeds of an Equity Offering,
selection of the notes or portions thereof for redemption shall be
made by the Trustee only on a pro rata basis or on as nearly a pro
rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each
Holder of notes to be redeemed at its registered address. If any Note
is to be redeemed in part only, the notice of redemption that relates
to such Note shall state the portion of the principal amount thereof
to be redeemed.
A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date,
interest ceases to accrue on notes or portions thereof called for
redemption.
GUARANTEES
Each Guarantor unconditionally guarantees, jointly and
severally, the Company's obligations under the Indenture and the
notes. The obligations of each Guarantor are limited as necessary to
prevent that Guarantee from constituting a fraudulent conveyance under
applicable law. Each Guarantor that makes a payment or distribution
under a Guarantee shall be entitled to a contribution from each other
Guarantor in an amount pro rata, based on the net assets of each
Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell
its assets to the Company or another Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company without limitation, or with other
Persons upon the terms and conditions set forth in the Indenture. See
"--Certain Covenants-- Merger, Consolidation and Sale of Assets." In
the event all of the Capital Stock of a Guarantor is sold by the
Company and the sale complies with the provisions set forth in
"--Certain Covenants--Limitation on Asset Sales," the Guarantor's
Guarantee will be released.
The notes are guaranteed by certain of the Company's
operating subsidiaries, including Frame-n-Lens Optical, Inc. and New
West Eyeworks, Inc., and separate financial information of Frame-n-
Lens Optical, Inc. and New West Eyeworks, Inc. is included elsewhere
herein. The Company has certain other subsidiaries which have also
guaranteed the notes. Separate financial information for these
Guarantors has not been presented as the information is not material.
The Company's Mexican subsidiaries are not Guarantors of the notes.
<PAGE>
CHANGE OF CONTROL
If a Change of Control occurs, each Holder will have the
right to require that the Company purchase all or a portion of such
Holder's notes pursuant to the Change of Control Offer, at a purchase
price equal to 101% of the principal amount of notes repurchased plus
accrued and unpaid interest to the date of purchase.
Within 30 days following any Change of Control, the Company
will mail a notice to each Holder, with a copy to the Trustee, which
notice shall govern the terms of the Change of Control Offer. The
notice will state, among other things, the purchase date, which must
be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law. Holders
83<PAGE>
electing to have a Note purchased pursuant to a Change of Control
Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the
purchase date.
If a Change of Control occurs, there can be no assurance
that the Company will have available funds sufficient to pay the
Change of Control purchase price for all the notes that might be
delivered by Holders seeking to accept the Change of Control Offer.
If the Company is required to purchase outstanding notes as a result
of a Change of Control, the Company expects that it would seek third
party financing to the extent it does not have available funds to meet
its purchase obligations. However, there can be no assurance that the
Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the
Trustee may waive the covenant relating to a Holder's right to
repurchase upon a Change of Control. Restrictions in the Indenture on
the ability of the Company and its Restricted Subsidiaries to incur
additional Indebtedness, to grant Liens on its property, to make
Restricted Payments and to make Asset Sales may also make more
difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or
repurchase of the notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial
resources to effect such redemption or repurchase. Such restrictions
and the restrictions on transactions with Affiliates may, in certain
circumstances, make more difficult or discourage any leveraged buyout
of the Company or any of its Subsidiaries by the management of the
Company. While such restrictions cover a wide variety of arrangements
which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of notes
protection in all circumstances from the adverse aspects of a highly
leveraged transaction, reorganization, restructuring, merger or
similar transaction.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the
Indenture, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under the "Change of Control" provisions of the Indenture
by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of
(collectively, "incur") any Indebtedness (other than Permitted
Indebtedness). If no Default or Event of Default has occurred and is
continuing at the time of or as a consequence of the incurrence of any
such Indebtedness, the Company and the Guarantors may incur<PAGE>
Indebtedness (including, without limitation, Acquired Indebtedness) if
on the date of the incurrence, after giving effect to the incurrence
thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.0 to 1.0 if such incurrence is on or prior to
October 15, 2000 and 2.25 to 1.0 if such incurrence is thereafter.
The first paragraph of this covenant will not apply to the
incurrence of any of the following (collectively, "Permitted
Indebtedness"):
(1) Indebtedness under the notes, the Indenture and the
Guarantees not to exceed $125,000,000 in aggregate principal
amount;
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(2) Indebtedness incurred pursuant to or in connection with the
New Credit Facility in an aggregate principal amount at any time
outstanding not to exceed the greater of (x) $30,000,000 and (y) the
sum, at such time, of (I) 85% of the consolidated book value of
accounts receivable of the Company and its Restricted Subsidiaries and
(II) 60% of the consolidated book value of inventory of the Company
and its Restricted Subsidiaries;
(3) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments, when
actually paid (except to the extent paid from the proceeds of
Refinancing Indebtedness);
(4) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of the Company
covering Indebtedness of such Restricted Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to
protect the Company and its Restricted Subsidiaries from fluctuations
in interest rates on Indebtedness incurred in accordance with the
Indenture;
(5) Indebtedness under Currency Agreements; provided that in the
case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company
and its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(6) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of
the Company for so long as such Indebtedness is held by the Company or
a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien other than Liens permitted under the Indenture;
provided that if as of any date any Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness
other than a Lien permitted under the Indenture, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(7) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by
a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien other than a Lien permitted under the Indenture;
provided that
(a) any Indebtedness of the Company to any Wholly
Owned Restricted Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the
Company's obligations under the Indenture and the notes
(including any Indebtedness that is pari passu with the
Indenture and the notes), and
(b) if as of any date any Person other than a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such
Indebtedness other than a Lien permitted under the Indenture,
such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
<PAGE>
(8) Indebtedness arising from the honoring by a bank or other
financial institution of a daylight overdraft or Indebtedness arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(9) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by reimbursement obligations in respect of
letters of credit for the account of the Company or such Restricted
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<PAGE>
Subsidiary, as the case may be, which letters of credit were issued in
order to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or similar requirements
in the ordinary course of business;
(10) Indebtedness in respect of trade letters of credit, standby
letters of credit or performance, surety or appeal bonds, in each
case incurred in the ordinary course of business and securing
obligations not constituting Indebtedness;
(11) Indebtedness represented by Capitalized Lease Obligations
and Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries not to exceed the greater of (i) $7,500,000 and (ii) 5%
of Consolidated Tangible Assets of the Company and its Restricted
Subsidiaries at any one time outstanding;
(12) Refinancing Indebtedness; and
(13) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $7,500,000
at any one time outstanding (which amount may, but need not, be
incurred in whole or in part under the New Credit Facility).
For purposes of determining any particular amount of Indebtedness
under this covenant, guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included.
Indebtedness of any Person which is outstanding at the time such
Person becomes a Restricted Subsidiary or is merged with or into or
consolidated with the Company or a Restricted Subsidiary will be
deemed to have been incurred at the time such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with
the Company or a Restricted Subsidiary. Indebtedness which is assumed
at the time of the acquisition of any asset will be deemed to have
been incurred at the time of such acquisition.
The Company will not, and will not permit any Guarantor to, incur
any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to
any other Indebtedness of the Company or such Guarantor, as the case
may be, unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the notes or the Guarantee of such
Guarantor, as the case may be, pursuant to subordination provisions
that are substantially identical to the subordination provisions of
such Indebtedness (or such agreement) that are most favorable to the
holders of any other Indebtedness of the Company or such Guarantor, as
the case may be.
LIMITATION ON RESTRICTED PAYMENTS
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly,
(1) declare or pay any dividend or make any distribution (other
than dividends or distributions payable in Qualified Capital Stock of
the Company) on or in respect of shares of the Company's Capital Stock
to holders of such Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock;
<PAGE>
(3) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to
any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the notes; or
86<PAGE>
(4) make any Investment (other than Permitted Investments) (each
of the foregoing actions set forth in clauses (1), (2) (3) and (4)
being referred to as a "Restricted Payment"),
if at the time of such Restricted Payment or immediately after
giving effect thereto,
(1) a Default or an Event of Default shall have occurred and be
continuing; or
(2) the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant; or
(3) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the
amount expended for such purposes, if other than in cash, being the
fair market value of such property as determined reasonably and in
good faith by the Board of Directors of the Company) shall exceed the
sum of:
(a) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs
(the "Reference Date") (treating such period as a single
accounting period), plus
(b) 100% of the aggregate net cash proceeds received by the
Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital Stock of
the Company, plus
(c) without duplication of any amounts included in clause (b)
above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (b)
and (c), any net cash proceeds from an Equity Offering to the
extent used to redeem the notes), plus
(d) without duplication, the sum of (i) the aggregate amount
returned in cash on or with respect to Investments (other than
Permitted Investments) made subsequent to the Issue Date whether
through interest payments, principal payments, dividends or other
distributions or payments, (ii) the net cash proceeds received
by the Company or any of its Restricted Subsidiaries from the
disposition of all or any portion of such Investments (other
than to a Subsidiary of the Company) and (iii) upon redesigna-
tion of an Unrestricted Subsidiary as a Restricted Subsidiary,
the fair market value of such Subsidiary; provided, however,
that the sum of clauses (i), (ii) and (iii) above shall not
exceed the aggregate amount of all such Investments made
subsequent to the Issue Date.
The preceding provisions do not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been
permitted on the date of declaration;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of
the Company, either <PAGE>
(a) solely in exchange for shares of Qualified Capital Stock of
the Company, or
(b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the
Company;
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<PAGE>
(3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company
that is subordinate or junior in right of payment to the notes
either
(a) solely in exchange for shares of Qualified Capital Stock of
the Company, or
(b) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the
Company) of (i) shares of Qualified Capital Stock of the
Company or (ii) Refinancing Indebtedness;
(4) so long as no Default or Event of Default shall have
occurred and be continuing, repurchases by the Company of
Common Stock of the Company from employees of the Company or
any of its Subsidiaries or their authorized representatives
or successors upon the death, disability or termination of
employment of such employees, in an aggregate amount not to
exceed $1,000,000 in any calendar year; and
(5) the repurchase by the Company of Common Stock of the Company
pursuant to the terms of the Put Option Agreement in an aggregate
amount not to exceed $900,000.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause 3 above,
amounts expended pursuant to clauses (1), (2)(a), 3(b)(i), (4) and (5)
shall be included in such calculation.
No later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an officers' certificate stating
that such Restricted Payment complies with the Indenture and setting
forth in reasonable detail the basis upon which the required
calculations were computed, which may be based upon the Company's
latest available internal quarterly financial statements.
LIMITATION ON ASSET SALES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless
(1) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by the
Company's Board of Directors);
(2) at least 75% of the consideration received by the Company or
the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of Qualified Proceeds and shall be
received at the time of such disposition; and
(3) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 360 days of receipt
thereof either
(a) to prepay any Indebtedness ranking at least pari passu with
the notes (including Indebtedness under the New Credit
Facility) and, in the case of any such Indebtedness under
any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility, or
<PAGE>
(b) to make an investment in properties and assets that replace
the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in
the business of the Company and its Restricted Subsidiaries
as existing on the Issue Date or in businesses reasonably
related or complementary thereto ("Replacement Assets"), it
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<PAGE>
being understood that the receipt of Qualified Proceeds
(other than cash or Cash Equivalents) is deemed to be a valid
application of such Qualified Proceeds pursuant to this
clause (3)(b), or (c) a combination of repayment and
investment permitted by the foregoing clauses (3)(a)
and (3)(b).
On the 361st day after an Asset Sale or such earlier date, if
any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (3)(a), (3)(b) and (3)(c)
above, such aggregate amount of Net Cash Proceeds which have not been
applied on or before such date shall be applied by the Company or such
Restricted Subsidiary to make a Net Proceeds Offer, from all Holders,
on a pro rata basis, that amount of notes that may be purchased out of
the New Cash Proceeds. The offer price will be equal to 100% of the
principal amount of the notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however,
that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any
such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash
Proceeds thereof shall be applied in accordance with this covenant.
The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess
of $5,000,000 resulting from one or more Asset Sales (at which time,
the entire unutilized Net Proceeds Offer Amount, and not just the
amount in excess of $5,000,000, shall be applied as required pursuant
to this paragraph). Upon completion of a Net Proceeds Offer, the
amount of Net Cash Proceeds and the amount of aggregate unutilized Net
Proceeds Offer Amount will be reset to zero. Accordingly, to the
extent that any Net Cash Proceeds remain after consummation of a Net
Proceeds Offer, the Company may use such Net Cash Proceeds for any
purpose not prohibited by the Indenture and no Net Proceeds Offer will
be required until the Net Proceeds Offer amount again accumulates to
$5,000,000.
In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Restricted
Subsidiaries as an entirety to a Person in a transaction permitted
under " Merger, Consolidation and Sale of Assets," the surviving
entity shall be deemed to have sold the properties and assets of the
Company and its Restricted Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions of
this covenant with respect to such deemed sale as if it were an Asset
Sale. In addition, the fair market value of such properties and
assets of the Company or its Restricted Subsidiaries deemed to be sold
shall be for cash in an Asset Sale for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net
Proceeds Offer Trigger Date, with a copy to the Trustee, and shall
comply with the procedures set forth in the Indenture. Upon receiving
notice of the Net Proceeds Offer, Holders may elect to tender their
notes in whole or in part in integral multiples of $1,000 in exchange
for cash. To the extent Holders properly tender notes in an amount
exceeding the Net Proceeds Offer Amount, notes of tendering Holders
will be purchased on a pro rata basis (based on amounts tendered). A
Net Proceeds Offer shall remain open for a period of 20 business days
or such longer period as may be required by law.<PAGE>
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of notes pursuant to a Net Proceeds
Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Asset Sale" provisions of the
Indenture, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
89<PAGE>
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary of the
Company to
(1) pay dividends or make any other distributions on or in
respect of its Capital Stock;
(2) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary
of the Company; or
(3) transfer any of its property or assets to the Company or any
other Restricted Subsidiary of the Company.
The preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) applicable law;
(2) the Indenture;
(3) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person
or the properties or assets of the Person so acquired;
(4) agreements existing on the Issue Date to the extent and in
the manner such agreements are in effect on the Issue Date;
(5) any security or pledge agreements, leases or options (or
similar agreements) containing customary restrictions on transfers
of the assets encumbered thereby or leased or subject to option or
on the transfer or subletting of the leasehold interest represented
thereby to the extent such agreements, leases or options are not
otherwise prohibited under the Indenture;
(6) restrictions on cash or other deposits or net worth and
prohibitions on assignment imposed by leases that are permitted
under the Indenture;
(7) customary provisions in joint venture agreements and other
similar agreements;
(8) the New Credit Facility and any instruments issued pursuant
thereto;
(9) any agreement or instrument governing Capital Stock of any
Person that is acquired after the Issue Date;
(10) Liens permitted to be incurred pursuant to the provisions of
the covenant described under the caption "--Limitation on Liens";
(11) any restrictions on a Managed Care Entity pursuant to the
applicable rules or regulations of, or undertakings made to, any
regulatory entity having jurisdiction and authority over such Managed
Care Entity ; or
(12) an agreement governing Indebtedness incurred to Refinance
the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clauses (2) through (11) above; provided, however, that
<PAGE>
the provisions relating to such encumbrance or restriction contained
in any such Indebtedness are no less favorable to the Company in any
material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the
90<PAGE>
provisions relating to such encumbrance or restriction contained in
agreements referred to in such clauses (2) through (11).
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES
The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly
Owned Restricted Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company) to own any Preferred Stock of any Restricted Subsidiary of
the Company.
LIMITATION ON LIENS
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or
upon any property or assets of the Company or any of its Restricted
Subsidiaries whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey
any right to receive income or profits therefrom unless:
(1) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes, the notes
are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens; and
(2) in all other cases, the notes are equally and ratably secured
and the Trustee, at the reasonable request of the Company,
shall enter into an intercreditor agreement to effectuate such
equal and ratable security, except for
(a) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date,
(b) Liens securing Indebtedness and other obligations under
the New Credit Facility,
(c) Liens securing the notes and the Guarantees,
(d) Liens of the Company or a Wholly Owned Restricted Subsidiary
of the Company on assets of any Subsidiary of the Company,
(e) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in
accordance with the provisions of the Indenture; provided,
however, that such Liens (i) are no less favorable to the
Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (ii) do not extend to or
cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so
Refinanced, and
(f) Permitted Liens.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Company's assets (determined on a<PAGE>
consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless:
(1) either
91<PAGE>
(a) the Company shall be the surviving or continuing
corporation, or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and
assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety
(i) shall be a corporation organized and validly existing
under the laws of the United States or any State
thereof or the District of Columbia, and
(ii) shall expressly assume, by supplemental indenture (in
form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and
punctual payment of the principal of, and premium, if any,
and interest on all of the notes and the performance
of every covenant of the notes, the Indenture and the
Registration Rights Agreement on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(b)(i) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may
be,
(a) shall have a Consolidated Net Worth equal to or greater than
the Consolidated Net Worth of the Company immediately prior to
such transaction, and
(b) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation
on Incurrence of Additional Indebtedness" covenant;
(3) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (1)(b)(i)
above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and
(4) the Company or the Surviving Entity shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply in all material respects with the
applicable provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been
satisfied.
Notwithstanding the immediately foregoing clauses (2) and (3),
(1) any Restricted Subsidiary may consolidate with, merge into
or transfer all or part of its properties and assets to the Company or
to another Restricted Subsidiary and
<PAGE>
(2) the Company may merge with or transfer all of its properties
and assets to an Affiliate incorporated or formed solely for the
purpose of either reincorporating or reforming the Company in another
State of the United States so long as the amount of Indebtedness of
the Company and its Restricted Subsidiaries is not increased thereby.
92<PAGE>
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions but excluding the creation of any Lien permitted under
the "--Limitation on Liens" covenant) of all or substantially all of
the properties or assets of one or more Restricted Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company, shall be deemed to be
the transfer of all or substantially all of the properties and assets
of the Company.
The Indenture provides that upon any consolidation, combination
or merger or any transfer of all or substantially all of the assets of
the Company in accordance with the foregoing, in which the Company is
not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the
Company under the Indenture and the notes with the same effect as if
such surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and the
Indenture in connection with any transaction complying with the
provisions of " Limitation on Asset Sales") will not, and the Company
will not cause or permit any Guarantor to, consolidate with or merge
with or into or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to any Person other
than the Company or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or
merger (if other than the Guarantor) or to which such sale, lease,
conveyance or other disposition shall have been made is a corporation
organized and existing under the laws of the United States or any
State thereof or the District of Columbia;
(2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee;
(3) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and
(4) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company
could satisfy the provisions of clause (2) of the first paragraph of
this covenant.
Any merger or consolidation of a Guarantor with and into the
Company (with the Company being the surviving entity) or another
Guarantor that is a Wholly Owned Restricted Subsidiary of the Company
need only comply with clause (4) of the first paragraph of this
covenant.
The creation of a Lien permitted under the " Limitations on
Liens" covenant shall not constitute a disposition for the purposes of
this covenant.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist
any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or
the rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction"), other than
<PAGE>
(1) Affiliate Transactions permitted below; and
(2) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary.
93<PAGE>
All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving
aggregate payments or other property with a fair market value in
excess of $250,000 shall be approved by a majority of non-interested
directors of the Board of Directors or a majority of non-interested
directors of a committee of the Board of Directors of the Company or
such Restricted Subsidiary, as the case may be. Such approval will be
evidenced by a Board Resolution stating that such majority of non-
interested directors of the Board of Directors or such majority of
non-interested directors of the committee of the Board of Directors,
as the case may be, have determined that such transaction complies
with the foregoing provisions.
If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair
market value of more than $5,000,000, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial
point of view, from an independent nationally recognized investment
banking firm and file the same with the Trustee.
The restrictions set forth above shall not apply to
(1) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees or consultants
of the Company or any Restricted Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or a
committee thereof or senior management;
(2) transactions exclusively between or among the Company and
any of its Wholly Owned Restricted Subsidiaries or exclusively between
or among such Wholly Owned Restricted Subsidiaries, provided such
transactions are not otherwise prohibited by the Indenture;
(3) any agreement as in effect as of the Issue Date or any
amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not
more disadvantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date;
(4) Restricted Payments permitted by the Indenture;
(5) any payment, issuance of securities or other payments,
awards or grants, in cash or otherwise, pursuant to, or the funding
of, employment arrangements and stock option and stock ownership plans
approved by the Board of Directors, or the appropriate committee of
the Board of Directors, of the Company; and
(6) loans or advances to officers, directors or employees of the
Company or its Restricted Subsidiaries not in excess of $1,000,000 at
any one time outstanding.
94<PAGE>
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES
The Company will not permit any of its Restricted Subsidiaries
that is not a Guarantor (whether formed or acquired before or after
the Issue Date), directly or indirectly, to guarantee the payment of
any Indebtedness under the New Credit Facility, unless such Restricted
Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted Subsidiary's
Guarantee of the notes pursuant to the terms of the Indenture, such
Guarantee of the notes to be a senior unsecured obligation of such
Subsidiary; provided that if any such Restricted Subsidiary who
becomes a Guarantor as described above is released from its guarantee
with respect to Indebtedness and obligations outstanding under the New
Credit Facility, such Restricted Subsidiary who becomes a Guarantor as
described above shall automatically be released from its obligations
as a Guarantor. Nothing in this covenant shall be construed to permit
any Restricted Subsidiary of the Company to incur Indebtedness
otherwise prohibited by the "Limitation on Incurrence of Additional
Indebtedness" covenant.
ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any domestic Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted
Subsidiaries shall organize, acquire or otherwise invest in another
domestic Restricted Subsidiary having total assets with a book value
in excess of $500,000, then such transferee or acquired or other
Restricted Subsidiary shall
(1) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the notes and the Indenture on the terms
set forth in the Indenture; and
(2) deliver to the Trustee an opinion of counsel, subject to
customary exceptions, that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and
constitutes a legal, valid, binding and enforceable obligation of such
Restricted Subsidiary.
Thereafter, such Restricted Subsidiary shall be a Guarantor for
all purposes of the Indenture. Any Restricted Subsidiary of the
Company which is or seeks to become a Managed Care Entity shall be a
Guarantor only at such time as and then only to the extent provided in
the definition of Guarantor.
CONDUCT OF BUSINESS
The Company and its Restricted Subsidiaries will not engage in
any businesses which are not the same, similar or reasonably related
to the businesses in which the Company and its Restricted Subsidiaries
are engaged on the Issue Date.
<PAGE>
REPORTS TO HOLDERS
The Company shall deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if
any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture
further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the Commission after the
consummation of the exchange offer, to the extent permitted, and
provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and
15(d) of the Exchange Act. The Company will also comply with the
other provisions of TIA Section 314(a).
95
<PAGE>
ADDITIONAL COVENANTS
The Indenture also contains covenants with respect to the
following matters:
(1) payment of principal, premium and interest;
(2) maintenance of an office or agency in The City of New York;
(3) maintenance of corporate existence;
(4) payment of taxes and other claims;
(5) maintenance of properties; and
(6) maintenance of insurance.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of
Default":
(1) the failure to pay interest on any notes when the same
becomes due and payable and the default continues for a period of 30
days;
(2) the failure to pay the principal on any notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase notes
tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer);
(3) a default in the observance or performance of any other
covenant or agreement contained in the Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the notes (except in the case of a
default with respect to the "Merger, Consolidation and Sale of Assets"
covenant, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary
of the Company, or the acceleration of the final stated maturity of
any such Indebtedness (which acceleration is not rescinded, annulled
or otherwise cured within 20 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated,
aggregates $5,000,000 or more at any time;
(5) one or more judgments in an aggregate amount in excess of
$5,000,000 shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid
or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable;
(6) certain events of bankruptcy affecting the Company or any of
its Significant Subsidiaries; or
<PAGE>
(7) any of the Guarantees ceases to be in full force and effect
or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid or any
96
<PAGE>
of the Guarantors denies its liability under its Guarantee (other than
by reason of release of a Guarantor in accordance with the terms of
the Indenture).
If an Event of Default (other than an Event of Default specified
in clause (6) above) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of outstanding notes may
declare the principal of and accrued interest on all the notes to be
due and payable. If an Event of Default specified in clause (6) above
occurs and is continuing, then all unpaid principal of, and premium,
if any, and accrued and unpaid interest on all of the outstanding
notes will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding
paragraph, the Holders of a majority in principal amount of the notes
may rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or
decree;
(2) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration;
(3) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of
acceleration, has been paid;
(4) if the Company has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and
advances; and
(5) in the event of the cure or waiver of an Event of Default of the
type described in clause (6)of the description above of Events of
Default, the Trustee shall have received an officers' certificate and
an opinion of counsel that such Event of Default has been cured or
waived.
No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
The Holders of a majority in principal amount of the notes may
waive any existing Default or Event of Default under the Indenture,
and its consequences, except a default in the payment of the principal
of or interest on any notes.
Holders of the notes may not enforce the Indenture or the notes
except as provided in the Indenture and under the TIA. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the
Trustee is under no obligation to exercise any of its rights or powers
under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the Indenture and applicable
law, the Holders of a majority in aggregate principal amount of the
then outstanding notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee.
<PAGE>
Under the Indenture, the Company is required to provide an
officers' certificate to the Trustee promptly upon any such officer
obtaining knowledge of any Default or Event of Default (provided that
such officers shall provide such certification at least annually
whether or not they know of any Default or Event of Default) that has
occurred and, if applicable, describe such Default or Event of Default
and the status thereof.
97<PAGE>
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with
respect to the outstanding notes ("Legal Defeasance"). Such Legal
Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding
notes, except for
(1) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when
such payments are due;
(2) the Company's obligations with respect to the notes
concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the
Trustee and the Company's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with
respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to
the notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance,
(1) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders cash in U.S. dollars, non-
callable U.S. government obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the notes on the
stated date for payment thereof or on the applicable redemption
date, as the case may be;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee (which may be counsel to the
Company) confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b)
since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel shall confirm that, the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee (which may be counsel to the
Company) confirming that the Holders will not recognize income, gain<PAGE>
or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default with respect to the Indenture resulting from the incurrence
of Indebtedness, all or a portion of which will be used to defease the
notes concurrently with such incurrence) or insofar as Events of
98
<PAGE>
Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others;
(7) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with;
(8) the Company shall have delivered to the Trustee an opinion
of counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and
(9) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by
clause (2) above with respect to a Legal Defeasance need not be
delivered if all notes not theretofore delivered to the Trustee for
cancellation
(1) have become due and payable;
(2) will become due and payable on the maturity date within one
year; or
(3) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or
exchange of the notes, as expressly provided for in the Indenture) as
to all outstanding notes when
(1) either
(a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been
replaced or paid and notes for whose payment money has
theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the
Trustee for cancellation, or
(b) all notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire
99<PAGE>
Indebtedness on the notes not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, and
interest on the notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee
to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(2) the Company has paid all other sums payable under the
Indenture by the Company; and
(3) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
MODIFICATION OF THE INDENTURE
The Company, the Guarantors and the Trustee, without the consent
of the Holders, may amend the Indenture for certain specified
purposes, including curing ambiguities, defects or inconsistencies, so
long as such change does not, in the opinion of the Trustee, adversely
affect the rights of any of the Holders in any material respect. In
formulating its opinion on such matters, the Trustee will be entitled
to rely conclusively on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel (which
may be counsel to the Company) or an officers' certificate.
Other modifications and amendments of the Indenture may be made
with the consent of the Holders of a majority in principal amount of
the then outstanding notes issued under the Indenture, except that,
without the consent of each Holder affected thereby, no amendment may:
(1) reduce the amount of notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing
the time for payment of interest, including defaulted interest,
on any notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any notes, or change the date on
which any notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor;
(4) make any notes payable in money other than that stated in
the notes;
(5) make any change in provisions of the Indenture protecting
the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount of notes to waive Defaults or Events of Default;
(6) after the Company's obligation to purchase notes arises
thereunder, amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control or make and consummate a Net
Proceeds Offer with respect to any Asset Sale that has been
consummated or, after such Change of Control has occurred or such
Asset Sale has been consummated, modify any of the provisions or
definitions with respect thereto;
<PAGE>
(7) modify or change any provision of the Indenture or the
related definitions affecting the ranking of the notes or the ranking
of any Guarantee in a manner which adversely affects the Holders; or
(8) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the terms
of the Indenture.
100<PAGE>
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the
principal of, premium, if any, interest on or Additional Interest, if
any, with respect to any of the notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or
in any of the notes or because of the creation of any Indebtedness
represented thereby, shall be had against any director, officer,
employee or stockholder, as such, of the Company or any Guarantor, as
such. Each Holder, by accepting the notes, waives and releases all
such liability.
GOVERNING LAW
The Indenture provides that it, the notes and the Guarantees are
governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an
Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers
vested in it by the Indenture, and use the same degree of care and
skill in its exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain
limitations on the rights of the Trustee, should it become a creditor
of the Company, to obtain payments of claims in certain cases or to
realize on certain property received in respect of any such claim as
security or otherwise. Subject to the TIA, the Trustee will be
permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it
must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used
in the Indenture. Reference is made to the Indenture for the full
definition of all such terms, as well as any other terms used herein
for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates
with the Company or any of its Subsidiaries or assumed by the Company
or any of its Subsidiaries in connection with the acquisition of
assets from such Person and in each case not incurred by such Person
in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such
acquisition, merger or consolidation.
"Additional Interest" has the meaning set forth in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such specified Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause<PAGE>
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
of the foregoing.
"Asset Acquisition" means
(1) an Investment by the Company or any Restricted Subsidiary of
the Company in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company
or any Restricted Subsidiary of the Company; or
101<PAGE>
(2) the acquisition by the Company or any Restricted Subsidiary
of the Company of the assets of any Person (other than a Restricted
Subsidiary of the Company) which constitute all or substantially all
of the assets of such Person or comprises any division or line of
business of such Person or any other properties or assets of such
Person other than any such acquisition made in the ordinary course of
the Company or such Restricted Subsidiary's business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into
in the ordinary course of business), assignment or other transfer for
value by the Company or any of its Restricted Subsidiaries (including
any Sale and Leaseback Transaction) to any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company of
(1) any Capital Stock of any Restricted Subsidiary of the
Company; or
(2) any other property or assets of the Company (other than
Capital Stock of the Company) or any Restricted Subsidiary of the
Company other than in the ordinary course of business.
Asset sales or other dispositions shall not include:
(1) a transaction or series of related transactions for which
the Company or its Restricted Subsidiaries receive aggregate
consideration of less than $750,000;
(2) the sale, lease, conveyance, disposition or other transfer
of all or substantially all of the assets of the Company as permitted
under " Certain Covenants Merger, Consolidation and Sale of
Assets;"
(3) the sale, lease, conveyance, disposition or other transfer
by the Company or any Restricted Subsidiary of assets or property in
transactions constituting Investments that are not prohibited under
the "Limitation on Restricted Payments" covenant;
(4) leases or subleases to third persons not interfering in any
material respect with the business of the Company or any of its
Restricted Subsidiaries; or
(5) the creation of any Lien not prohibited by the Indenture.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of
such Person to have been duly adopted by the Board of Directors of
such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP
and, for purposes of this definition, the amount of such obligations
at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
<PAGE>
"Capital Stock" means
(1) with respect to any Person that is a corporation, any and
all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate
stock, including each class of Common Stock and Preferred Stock
of such Person; and
102<PAGE>
(2) with respect to any Person that is not a corporation, any
and all partnership, membership or other equity interests of
such Person.
"Cash Equivalents" means
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the
date of acquisition thereof;
(2) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one
year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable
from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's");
(3) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having
a rating of at least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by
any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than
$500,000,000 and a Thompson or Keefe Bank Watch Rating of "B"
or better;
(5) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause
(1) above entered into with any bank meeting the qualifications
specified in clause (4) above;
(6) in the case of any foreign Restricted Subsidiary,
Investments:
(a) in direct obligations of the sovereign nation (or any agency
thereof) in which such foreign Restricted Subsidiary is
organized or is conducting a substantial amount of business
or in obligations fully and unconditionally guaranteed by
such sovereign nation (or any agency thereof);
(b) of the type and maturity described in clauses (1) through
(5) above of foreign obligors, which Investments or obligors
(or the parents of such obligors) have ratings described in
such clauses or equivalent ratings from comparable foreign
rating agencies; or
(c) of the type and maturity described in clauses (1) through
(5) above of foreign obligors (or the parents of such
obligors), which Investments or obligors (or the parents of
such obligors), are not rated as provided in such clauses or
in clause (6)(b) but which are, in the reasonable judgment of
the Company, comparable in investment quality to such
Investments and obligors (or the parents of such obligors);
and
(7) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (1)
through (6) above.
<PAGE>
"Change of Control" means the occurrence of one or more of the
following events:
(1) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company to any Person or group
of related Persons for purposes of Section 13(d) of the Exchange Act
103<PAGE>
(a "Group"), together with any Affiliates thereof (whether or not
otherwise in compliance with the provisions of the Indenture) other
than the creation of a Lien permitted pursuant to the Indenture;
(2) the approval by the holders of Capital Stock of the Company
of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the provisions of
the Indenture);
(3) any Person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more
than 50% of the aggregate ordinary voting power represented by the
issued and outstanding Capital Stock of the Company; or
(4) the replacement of a majority of the Board of Directors of
the Company over a two-year period from the directors who constituted
the Board of Directors of the Company at the beginning of such period,
and such replacement shall not have been approved by a vote of at
least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board
of Directors was previously so approved.
Notwithstanding anything to the contrary contained in the
foregoing, a "Change of Control" shall not be deemed to occur upon the
consummation of the merger of the Company with an Affiliate
incorporated solely for the purpose of reincorporating the Company in
another jurisdiction or the transfer of assets to a Restricted
Subsidiary of the Company who is or will become concurrently with such
transfer a Guarantor.
"Change of Control Offer" has the meaning set forth under "
Change of Control."
"Change of Control Payment Date" has the meaning set forth under
" Change of Control."
"Common Stock" of any Person means any and all shares, interests
or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock,
whether outstanding on the Issue Date or issued after the Issue Date,
and includes, without limitation, all series and classes of such
common stock.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of
(1) Consolidated Net Income; and
(2) to the extent Consolidated Net Income has been reduced
thereby
(a) all income taxes of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for
such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or
taxes attributable to sales or dispositions outside the
ordinary course of business),
(b) Consolidated Interest Expense,
(c) Consolidated Non-cash Charges less any non-cash items
increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP, and <PAGE>
(d) after-tax losses from Asset Sales or abandonments or
reserves relating thereto.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the
four full fiscal quarters for which financial statements are
reasonably available (the "Four Quarter Period") most recently ending
on or prior to the date of the transaction giving rise to the need to
104<PAGE>
calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period as determined from an officers' certificate
delivered to the Trustee at the time that such calculation is required
to be made.
In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated
Fixed Charges" shall be calculated after giving effect on a pro forma
basis for the period of such calculation to
(1) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness
(and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of
business for working capital purposes pursuant to working capital
facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period; and
(2) any asset sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of such Person or one
of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including
any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Exchange Act) attributable
to the assets which are the subject of the Asset Acquisition or
asset sale or other disposition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent
to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such asset sale or other disposition or
Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first
day of the Four Quarter Period.
If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise assumed such guaranteed
Indebtedness; provided that if such guarantee is limited to a
principal amount that is less than the amount of such Indebtedness,
such effect shall be limited to the incurrence of such Indebtedness in
such limited amount.
Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio,"
(1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date;
<PAGE>
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations,
shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
105<PAGE>
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of
(1) Consolidated Interest Expense; plus
(2) the product of (x) the amount of all dividend payments on
any series of Preferred Stock of such Person (other than
dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as
a decimal.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of, without duplication:
(1) the aggregate of the interest expense of such Person and its
Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including without
limitation,
(a) any amortization of debt discount and amortization or
write-off of deferred financing costs,
(b) the net costs under Interest Swap Obligations,
(c) all capitalized interest, and
(d) the interest portion of any deferred payment obligation; and
(2) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for
any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP. The following are excluded from
Consolidated Net Income
(1) after-tax gains from Asset Sales or abandonments or reserves
relating thereto;
(2) after-tax items classified as extraordinary or nonrecurring
gains;
(3) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted
Subsidiary of the referent Person;
(4) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by a contract,
operation of law or otherwise;
(5) the net income of any Person, other than a Restricted
Subsidiary of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a
Wholly Owned Restricted Subsidiary of the referent Person by
such Person;<PAGE>
(6) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue
Date;
106<PAGE>
(7) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during
such period whether or not such operations were classified as
discontinued); and
(8) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent
Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts
attributable to Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and
other non-cash expenses of such Person and its Restricted Subsidiaries
reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Consolidated Tangible Assets" means, with respect to any Person,
as of any date of determination, the total assets, less goodwill,
deferred financing costs and other intangibles and less accumulated
amortization, shown on the most recent balance sheet of such Person,
determined on a consolidated basis in accordance with GAAP.
"Covenant Defeasance" has the meaning set forth under " Legal
Defeasance and Covenant Defeasance."
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Company or any Restricted Subsidiary of the
Company against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is,
or with the lapse of time or the giving of notice or both would be, an
Event of Default.
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the
sole option of the holder thereof on or prior to the final maturity
date of the notes.
"Dollars" and "$" means lawful money of the United States of
America.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Fair market value shall be determined by
the Board of Directors of the Company acting reasonably and in good
faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
<PAGE>
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the
United States, which are in effect as of the Issue Date and
consistently applied.
107<PAGE>
"Guarantor" means
(1) each domestic Subsidiary of the Company on the Issue Date
other than any Managed Care Entity; and
(2) each of the Company's domestic Restricted Subsidiaries that
in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of the
Indenture as a Guarantor.
For each of clauses (1) and (2), with regard to any domestic
Restricted Subsidiary of the Company formed after the Issue Date which
is or seeks to become a Managed Care Entity such Restricted
Subsidiary's obligations under the Guarantee shall only become
effective if
(1) the approval of the requisite regulatory entity is obtained
(if such approval is required) and
(2) the granting of the Guarantee by such Restricted Subsidiary
shall not have a material adverse effect upon the business,
operations, assets, condition (financial or otherwise) or prospects
of such Restricted Subsidiary (a "material adverse effect").
If a Guarantee is not issued by such Restricted Subsidiary in
reliance on the provisions of clause (2) the Company shall deliver an
officers' certificate to the Trustee stating that the granting of such
Guarantee would have a material adverse effect.
Obligation under the Guarantees shall be limited to the maximum
amount which such Restricted Subsidiary would be permitted to declare
or pay a dividend in compliance with the applicable rules or
regulations of, or undertakings made to, any regulatory entity having
jurisdiction and authority over such Restricted Subsidiary.
Each Managed Care Entity existing on the Issue Date shall use its
reasonable efforts to issue a Guarantee as promptly as practicable
after the Issue Date. Any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms of the
Indenture. The documentation evidencing a Guarantee given by a
Managed Care Entity shall be permitted to contain the text of the
restrictions imposed on such Guarantee.
"Indebtedness" means with respect to any Person, without
duplication,
(1) all Obligations of such Person for borrowed money;
(2) all Obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all Obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of
business that are not overdue by 90 days or more or are being
contested in good faith by appropriate action promptly
instituted and diligently conducted);
<PAGE>
(5) all Obligations for the reimbursement of any obligor on any
letter of credit (other than a letter of credit relating to a
trade account payable that is not considered Indebtedness
pursuant to clause (4) above), banker's acceptance or similar
credit transaction;
(6) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (1) through (5) above and
clause (8) below;
108<PAGE>
(7) all Obligations of any other Person of the type referred to
in clauses (1) through (6) which are secured by any lien on any
property or asset of such Person, the amount of such Obligation
being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured;
(8) all net Obligations of such Person under currency agreements
and interest swap agreements; and
(9) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed
repurchase price, but excluding accrued dividends, if any.
For purposes of this definition, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of
such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness will be required to
be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably
and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"Interest Swap Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar
agreements, and (ii) other agreements or arrangements designed to
protect such Person against fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without
limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any
purchase or acquisition by such Person of any Capital Stock, bonds,
notes, debentures or other securities or evidences of Indebtedness
issued by, any Person.
This investment excludes extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be.
For the purposes of the "Limitation on Restricted Payments"
covenant,
(1) "Investment" shall include and be valued at the fair market
value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market
value of the net assets of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary; and
(2) the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment,
reduced by the payment of dividends or distributions in
connection with such Investment or any other amounts received
in respect of such Investment.<PAGE>
No payment of dividends or distributions or receipt of any such
other amounts shall reduce the amount of any Investment if such
payment of dividends or distributions or receipt of any such amounts
would be included in Consolidated Net Income.
If the Company or any Restricted Subsidiary of the Company sells
or otherwise disposes of any Common Stock of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, the Company no longer owns, directly or
109<PAGE>
indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the
fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means the date of original issuance of the notes.
"Legal Defeasance" has the meaning set forth under " Legal
Defeasance and Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest).
"Managed Care Entity" means
(1) NVAL VisionCare Systems of California, Inc., ProCare Eye
Exam, Inc. and NVAL VisionCare Systems of North Carolina, Inc.;
and
(2) any other Subsidiary of the Company whose financial
condition or activities are regulated under the laws of any
state in connection with the provision of health or vision care
products or services (or related administrative services) and
shall include, without limitation, a health maintenance
organization (whether single or multi service), third party
administrator, or any entity similar to any of the foregoing.
"Merger Agreement" means the Agreement and Plan of Merger, dated
as of July 13, 1998, by and among National Vision Associates, Ltd., NW
Acquisition Corp. and New West, as amended and in effect as of the
Issue Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of
cash or Cash Equivalents (other than the portion of any such deferred
payment constituting interest) received by the Company or any of its
Restricted Subsidiaries from such Asset Sale net of
(1) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements;
(3) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale; and
(4) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with
such Asset Sale or the assets sold pursuant to such Asset Sale
and retained by the Company or any Restricted Subsidiary, as
the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated
with such Asset Sale.
<PAGE>
"Net Proceeds Offer" has the meaning set forth under "--Certain
Covenants---Limitations on Asset Sales."
"Net Proceeds Offer Amount" has the meaning set forth under
"--Certain Covenants---Limitations on Asset Sales."
"Net Proceeds Offer Payment Date" has the meaning set forth under
"--Certain Covenants---Limitations on Asset Sales."
110<PAGE>
"Net Proceeds Offer Trigger Date" has the meaning set forth under
"--Certain Covenants---Limitations on Asset Sales."
"New Credit Facility" means the Credit Agreement dated as of
October 8, 1998, between the Company, the Guarantors, the lenders
party thereto in their capacities as lenders thereunder, First Union
National Bank, as administrative agent, and Bank of America, FSB, as
documentation agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder
(provided that such increase in borrowings is permitted by the
"Limitation on Incurrence of Additional Indebtedness" covenant above)
or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group
of lenders.
"New West" means New West Eyeworks, Inc.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnification, reimbursements, damages
and other liabilities payable under the documentation governing any
Indebtedness.
"Permitted Investments" means
(1) Investments by the Company or any Restricted Subsidiary of
the Company in any Person that is or will become immediately
after such Investment a Wholly Owned Restricted Subsidiary of
the Company or that will merge or consolidate into the Company
or a Wholly Owned Restricted Subsidiary of the Company;
(2) Investments in the Company by any Restricted Subsidiary of
the Company; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the notes and the
Indenture;
(3) investments in cash and Cash Equivalents;
(4) loans, guarantees and advances to employees and officers of
the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes not in
excess of $1,000,000 at any one time outstanding;
(5) Currency Agreements and Interest Swap Obligations entered
into in the ordinary course of the Company's or its Restricted
Subsidiaries' businesses and otherwise in compliance with the
Indenture;
(6) additional Investments not to exceed $5,000,000 at any one
time outstanding;
(7) Investments in securities of trade creditors or customers
received pursuant to any workout, compromise, plan of reorganiza-
tion or similar arrangement upon the bankruptcy or insolvency or
financial distress of such trade creditors or customers;
<PAGE>
(8) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset
Sale made in compliance with the "Limitation on Asset Sales"
covenant;
(9) Investments by the Company or its Restricted Subsidiaries in
joint ventures in an aggregate amount not in excess of
$3,000,000 at any time outstanding; and
111
<PAGE>
(10) Investments by the Company or its Restricted Subsidiaries in
at least a majority of the outstanding common stock of New West
pursuant to the Merger Agreement for the purpose of acquiring New
West as a Wholly Owned Restricted Subsidiary.
"Permitted Liens" means the following types of Liens:
(1) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith
by appropriate action and as to which the Company or its
Restricted Subsidiaries shall have set aside on its books such
reserves, if any, as may be required pursuant to GAAP;
(2) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made in respect
thereof;
(3) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money), including any
Lien securing letters of credit issued in connection with any
of the foregoing;
(4) judgment Liens not giving rise to an Event of Default;
(5) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property
not interfering in any material respect with the ordinary conduct
of the business of the Company or any of its Restricted
Subsidiaries;
(6) any interest or title of a lessor under any Capitalized
Lease Obligation; provided that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(7) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(8) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and
proceeds thereof;
(9) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(10) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted
under the Indenture;
<PAGE>
(11) Liens securing Purchase Money Indebtedness permitted
pursuant to clause (11) of the definition of "Permitted
Indebtedness"; provided, however, that (a) the Indebtedness
shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of the Company or any
Restricted Subsidiary of the Company other than the property and
assets so acquired or constructed and (b) the Lien securing such
112
<PAGE>
Indebtedness shall be created within 180 days of such acquisition
or construction or, in the case of a refinancing of any Purchase
Money Indebtedness, within 180 days of such refinancing;
(12) Liens securing obligations under Currency Agreements;
(13) any lease or sublease not interfering in any material
respect with the business of the Company and its Subsidiaries;
(14) Liens with respect to obligations that do not in the
aggregate exceed $1,000,000 at any one time outstanding;
(15) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of custom duties in connection
with the importation of goods;
(16) Liens on the assets of a Managed Care Entity pursuant to the
applicable rules, or regulations of, or undertakings made to, any
regulatory entity having jurisdiction and authority over such
Managed Care Entity;
(17) Liens arising under customary provisions in joint venture
agreements and other similar agreements; and
(18) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness"
covenant; provided that
(a) such Liens secured such Acquired Indebtedness at the time of
and prior to the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of,
the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company, and
(b) such Liens do not extend to or cover any property or assets
of the Company or of any of its Restricted Subsidiaries
other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to
the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of
the Company.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness of the Company
and its Restricted Subsidiaries incurred for the purpose of financing
all or any part of the purchase price, or the cost of installation,
construction or improvement, of property or equipment.
"Put Option Agreement" means the Put Option Agreement, dated
October 1, 1997, by and between the Company and Myrel Neumann, O.D. as
such agreement is effect in all material respects on the Issue Date.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
113<PAGE>
"Qualified Proceeds" means any of the following or any
combination of the following:
(1) cash;
(2) Cash Equivalents;
(3) assets that are used or usable in the business of the
Company and its Subsidiaries as existing on the Issue Date or a
business reasonably related or complementary thereto; and
(4) Capital Stock of any Person engaged primarily in the
business of the Company and its Subsidiaries as existing on the
Issue Date or a business reasonably related or complementary
thereto if, in connection with the receipt by the Company or
any Restricted Subsidiary of the Company of such Capital Stock:
(a) such Person becomes a Restricted Subsidiary, or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its
assets to, or is liquidated into the Company or any
Restricted Subsidiary of the Company.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or
retire, or to issue a security or Indebtedness in exchange or
replacement for, such security or Indebtedness in whole or in part.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company
or any Restricted Subsidiary of the Company of Indebtedness incurred
in accordance with the "Limitation on Incurrence of Additional
Indebtedness" covenant or clauses (1) and (3) of the definition of
Permitted Indebtedness, in each case that does not
(1) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium and accrued interest
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable fees and expenses
incurred by the Company in connection with such Refinancing); or
(2) create Indebtedness with (a) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of
the Indebtedness being Refinanced or (b) a final maturity earlier than
the final maturity of the Indebtedness being Refinanced.
If such Indebtedness being Refinanced is Indebtedness of the
Company only, then such Refinancing Indebtedness shall be Indebtedness
solely of the Company and if such Indebtedness being Refinanced is
subordinate or junior to the notes, then such Refinancing Indebtedness
shall be subordinate or junior to the notes at least to the same
extent and in the same manner as the Indebtedness being Refinanced.
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Company or a Restricted Subsidiary of
any property, whether owned by the Company or any Restricted
Subsidiary at the Issue Date or later acquired, which has been or is
to be sold or transferred by the Company or such Restricted Subsidiary<PAGE>
to such Person or to any other Person from whom funds have been or are
to be advanced by such Person on the security of such Property.
"Significant Subsidiary," with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a
"Significant Subsidiary" set forth in Rule 1.02(w) of Regulation S-X
under the Exchange Act.
114<PAGE>
"Special Redemption Date" means December 15, 1998.
"Special Redemption Notice Date" means November 30, 1998.
"Special Redemption Price" has the meaning set forth under "
Special Redemption."
"Subsidiary," with respect to any Person, means
(1) any corporation of which the outstanding Capital Stock
having at least a majority of the votes entitled to be cast
in the election of directors under ordinary circumstances shall
at the time be owned, directly or indirectly, by such Person;
or
(2) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly
or indirectly, owned by such Person.
"Unrestricted Subsidiary" of any Person means
(1) any Subsidiary of such Person that at the time of
determination shall be or continue to be designated an
Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns
or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided that
(1) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments"
covenant; and
(2) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any
of the assets of the Company or any of its Restricted
Subsidiaries.
The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if
(1) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance
with the "Limitation on Incurrence of Additional Indebtedness"
covenant and
(2) immediately before and immediately after giving effect to
such designation, no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board
of Directors shall be evidenced to the Trustee by promptly
filing with the Trustee a copy of the Board Resolution giving
effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing
provisions.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing
(1) the then outstanding aggregate principal amount of such
Indebtedness into
115<PAGE>
(2) the sum of the total of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such
payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding
voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable
law) are owned by such Person or any Wholly Owned Restricted
Subsidiary of such Person.
REGISTRATION RIGHTS
The Company, the Guarantors and the initial purchasers of the
outstanding notes entered into the Registration Rights Agreement on
the issue date pursuant to which each of the Company and the
Guarantors agreed, for the benefit of holders of the outstanding
notes, that they would, at their expense
(1) on or prior to the 120th day following the issue date, file
the exchange offer Registration Statement with the Commission
with respect to the exchange offer pursuant to which the
outstanding notes will be exchanged for the exchange notes,
which will have terms identical to the outstanding notes
(except that the exchange notes will not contain terms with
respect to transfer restrictions or any provision relating to
this paragraph) and
(2) use their best efforts to cause the exchange offer
Registration Statement to be declared effective under the
Securities Act by the 180th day after the issue date. Upon
effectiveness of the exchange offer Registration Statement, the
Company will offer to all holders of the outstanding notes an
opportunity to exchange their securities for a like principal
amount of the exchange notes.
The Company and the Guarantors agreed to keep the exchange offer
open for acceptance for not less than 20 business days after the date
the exchange offer Registration Statement is declared effective, and
will comply with Regulation 14E and Rule 13e-4 under the Exchange Act
(other than the filing requirements of Rule 13e-4). For each
outstanding note surrendered to the Company for exchange pursuant to
the exchange offer, the holder of such outstanding note will receive
an exchange note having a principal amount at maturity equal to that
of the surrendered outstanding note. Interest on each exchange note
will accrue from the last interest payment date on which interest was
paid on the outstanding note surrendered in exchange therefor or, if
no interest has been paid on such outstanding note, from the issue
date.
Under existing interpretations of the staff of the Commission's
Division of Corporation Finance (the "Staff"), the exchange notes will
generally be freely transferable after the exchange offer without
further registration under the Securities Act; provided, however, that
broker-dealers ("Participating Broker-Dealers") receiving exchange
notes in the exchange offer will be subject to a prospectus delivery
<PAGE>
requirement with respect to resales of such exchange notes. To date,
the Staff has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to
transactions involving an exchange of securities such as the exchange
pursuant to the exchange offer (other than a resale of an unsold
allotment from the sale of the outstanding notes to the Initial
Purchasers) with the prospectus contained in the exchange offer
Registration Statement. Pursuant to the Registration Rights
Agreement, the Company and the Guarantors will agree to permit
Participating Broker-Dealers and other persons, if any, subject to
similar prospectus delivery requirements to use the prospectus
contained in the exchange offer Registration Statement in connection
with the resale of such exchange notes.
Each holder of the outstanding notes who wishes to exchange its
outstanding notes for exchange notes in the exchange offer will be
required to make certain representations to the Company and the
Guarantors, including that
116<PAGE>
(1) any exchange notes to be received by it will be acquired in
the ordinary course of its business,
(2) it has no arrangement with any person to participate in a
public distribution (within the meaning of the Securities Act)
of the exchange notes, and
(3) it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company, or if it is such an affiliate,
that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent
applicable to it.
In addition, each holder who is not a broker-dealer will be
required to represent that it is not engaged in, and does not intend
to engage in, a public distribution of the exchange notes. Each
holder who is a broker-dealer and who receives exchange notes for its
own account in exchange for outstanding notes that were acquired by it
as a result of market-making activities or other trading activities
will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such exchange notes.
In the event that applicable interpretations of the Staff do not
permit the Company and the Guarantors to effect the exchange offer or
if for any other reason the exchange offer is not consummated by the
210th day following the issue date, or if the Initial Purchasers so
request with respect to the outstanding notes not eligible to be
exchanged for exchange notes in the exchange offer or if any holder of
outstanding notes is not eligible to participate in the exchange offer
or does not receive freely tradeable exchange notes in the exchange
offer, the Company and the Guarantors will, at their expense,
(1) promptly file the Shelf Registration Statement permitting
resales from time to time of the outstanding notes,
(2) use their best efforts to cause the Shelf Registration
Statement to become effective, and
(3) use their best efforts to keep the Shelf Registration
Statement current and effective until two years from the issue
date or such shorter period that will terminate when all the
outstanding notes covered by the Shelf Registration Statement
have been sold pursuant thereto.
The Company and the Guarantors, at their expense, will provide to
each holder of the outstanding notes copies of the prospectus, which
is a part of the Shelf Registration Statement, notify each such holder
when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales
of the outstanding notes from time to time. A holder of outstanding
notes who sells such outstanding notes pursuant to the Shelf
Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain
indemnification obligations).
In the event that
(1) the exchange offer Registration Statement is not filed with
the Commission on or prior to the 120th day after the issue
date or declared effective on or prior to the 180th day after
the issue date, <PAGE>
(2) the exchange offer is not consummated on or prior to the
210th day following the issue date,
(3) the Shelf Registration Statement is not filed or declared
effective within the required time periods, or
(4) the exchange offer Registration Statement or the Shelf
Registration Statement is declared effective but thereafter
ceases to be effective (except as specifically permitted
therein) for a period of 15 consecutive days without being
succeeded immediately by an additional exchange offer
Registration Statement or Shelf Registration
Statement, as the case may be, filed and declared effective
(each such event, a "Registration Default"),
117<PAGE>
the interest rate borne by the outstanding notes shall be
increased by 0.50% per annum for the 90-day period following such
Registration Default. Such interest rate will increase by an
additional 0.25% per annum at the beginning of each subsequent
90-day period following such Registration Default, up to a
maximum aggregate increase of 1.0% per annum. From and after
the date that all Registration Defaults have been cured, the
outstanding notes will bear interest at the rate set forth on
the cover page of this Offering Memorandum.
The summary herein of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions
of the Registration Rights Agreement, a copy of which is available
upon request to the Company.
118<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
Kilpatrick Stockton LLP, counsel to the Company, has rendered its
opinion, which opinion has been filed as an Exhibit to the
Registration Statement, that (i) adopts the following summary of
certain U.S. federal income tax consequences of the acquisition,
ownership and disposition of notes as its opinion with respect to the
material U.S. federal income tax consequences of the exchange offer,
and (ii) opines that such discussion describes the material U.S.
federal income tax consequences of the acquisition, ownership and
disposition of the notes. Such opinion is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the
final, temporary and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions in effect as of the date
hereof, all of which are subject to change (possibly with retroactive
effect) or different interpretations. The following summary is not
binding on the Internal Revenue Service ("IRS") and there can be no
assurance that the IRS will take a similar view with respect to the
tax consequences described below. No ruling has been or will be
requested by the Company from the IRS on any tax matters relating to
the notes or the exchange offer. This discussion is limited to the
material U.S. federal income tax consequences, and it does not purport
to address all of the possible federal income tax consequences or any
state, local or foreign tax consequences of the acquisition, ownership
and disposition of the notes, the exchange notes or the exchange
offer. It is limited to investors who will hold the notes and the
exchange notes as capital assets and does not address the federal
income tax consequences that may be relevant to particular investors
in light of their unique circumstances or to certain types of
investors (such as dealers in securities, insurance companies,
financial institutions and tax-exempt entities) who might be subject
to special treatment under federal income tax laws.
As used in the discussion which follows, the term "U.S. Holder"
means a beneficial owner of the notes or the exchange notes that, for
United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United
States or of any political subdivision thereof, or (iii) an estate or
trust the income of which is subject to United States federal income
taxation regardless of its source. The term "Non-U.S. Holder" means a
beneficial owner of the notes or the exchange notes that, for United
States federal income tax purposes, is not a U.S. Holder.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES OR THE EXCHANGE NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
TAX CONSEQUENCES TO U.S. HOLDERS
EXCHANGE OFFER
The exchange of the Outstanding notes for exchange notes pursuant
to the exchange offer will not be treated as an "exchange" because the
exchange notes will not be considered to differ materially in kind or
extent from the . Rather, the exchange notes received by a holder of
the outstanding note will be treated as a continuation of the
outstanding note in the hands of such holder. As a result, there will
be no federal income tax consequences to holders exchanging the
outstanding note for the exchange notes pursuant to the exchange
offer.
<PAGE>
INTEREST
Except as provided below in respect of certain Additional
Interest (as described below), a holder of a Note will be required to
report stated interest on the Note as interest income in accordance
with the holder's method of accounting for tax purposes.
The Treasury Regulations relating to original issue discount
("OID") permit the accrual of OID to be determined, in the case of a
debt instrument with alternative payment schedules, based upon the
payment schedule most likely to occur, as determined by the issuer of
the debt, so long as the timing and amounts of each payment schedule
are known as of the issue date. Under the OID rules, holders may be
required to recognize income prior to receipt of cash. Under certain
circumstances, including failure of the Company to register the notes
pursuant to an effective registration statement, additional interest
(the "Additional Interest") will accrue on the notes in the manner
described in "Description of the Exchange Notes Registration Rights
Agreement; Penalty Interest". The Company does not intend to treat
the possibility of Additional Interest as affecting the computation of
119<PAGE>
OID or the yield to maturity. If a holder of a Note becomes entitled
to Additional Interest, then, solely for purposes of determining the
accrual of OID, the yield to maturity on the notes will be determined
by treating the notes as reissued on the date that it is determined
that such Additional Interest will be required to be paid, for an
amount equal to its adjusted issue price on such date. The foregoing
position taken by the Company will be binding on all holders, unless a
holder explicitly discloses that its determination of the yield to
maturity is different from the Company's determination on a statement
attached to the holder's timely filed federal income tax return for
the year that includes the acquisition date of the notes.
TAX BASIS IN OUTSTANDING NOTES AND EXCHANGE NOTES
A holder's tax basis in a Note will be the holder's purchase
price for the Note, increased for OID, if any, previously included in
income by the holder with respect to the notes and not yet paid. If a
holder of an Outstanding Note exchanges the Outstanding Note for an
Exchange Note pursuant to the exchange offer, the tax basis of the
Exchange Note immediately after such exchange should equal the
holder's tax basis in the Outstanding Note immediately prior to the
Exchange.
DISPOSITION OF OUTSTANDING NOTES OR EXCHANGE NOTES
The sale, exchange, redemption or other disposition of a Note
will be a taxable event, except in the case of an exchange pursuant to
the exchange offer (see the above discussion), or certain exchanges in
which gain or loss is not recognized under the Code. A holder will
recognize gain or loss equal to the difference between (i) the amount
of cash(plus the fair market value of any property) received upon such
sale, exchange, redemption or other taxable disposition of the
Outstanding Note or the Exchange Note (except to the extent
attributable to accrued interest) and (ii) the holder's adjusted tax
basis in such Outstanding Note or Exchange Note. Such gain or loss
will be capital gain or loss, and will be long term if the Note has
been held for more than one year at the time of the sale or other
disposition.
PURCHASERS OF NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules that may affect the
treatment of purchasers that acquire notes other than at par,
including those provisions of the Internal Revenue Code relating to
the treatment of "market discount", "bond premium" and "amortizable
bond premium." Any such purchaser should consult its tax advisor as
to the consequences to it of the acquisition, ownership, and
disposition of notes.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
In the case of a Non-U.S. Holder, such Non-U.S. Holder will not
be subject to U.S. federal income tax, including U.S. withholding tax,
on interest paid or OID (if any) on the notes under the "portfolio
interest" exception, provided that (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote,
(ii) the Non-U.S. Holder is not (a) a bank receiving interest pursuant
to a loan agreement entered into in the ordinary course of its trade
or business or (b) a controlled foreign corporation that is related to
the Company through stock ownership, (iii) such interest or OID is not
effectively connected with a United States trade or business, and (iv)
either (a) the beneficial owner of the notes certifies to the Company
or its agent, under penalties of perjury, that the beneficial owner is<PAGE>
a foreign person and provides a completed IRS Form W-8 ("Certificate
of Foreign Status") or (b) a securities clearing organization, bank or
other financial institution which holds customers' securities in the
ordinary course of its trade or business (a "financial institution")
and holds the notes, certifies to the Company or its agency, under
penalties of perjury, that it has received Form W-8 from the
beneficial owner or that it has received from another financial
institution a Form W-8 and furnishes the payor with a copy thereof.
If any of the situations described in proviso (i), (ii) or (iv) of the
preceding sentence do not exist, then, except as described below for
effectively connected income, interest paid and OID, if any, on the
120
<PAGE>
notes would be subject to U.S. withholding tax at a 30% rate (or lower
tax treaty rate as evidenced by an IRS Form 1001 (Ownership Exemption
or Reduced Rate Certificate)). If the income on the notes is
effectively connected with a Non-U.S. Holder's conduct of a trade or
business within the United States, then, absent tax treaty protection,
the Non-U.S. Holder will be subject to U.S. federal income tax on such
income in essentially the same manner as a United States person and,
in the case of a foreign corporation, may also be subject to the U.S.
branch profits tax.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification
number (employer identification number or social security number) to
the Company and certifies that such number is correct, under the
federal income tax backup withholding rules, 31% of (i) the interest
paid on the notes, and (ii) proceeds of sale of the notes, must be
withheld and remitted to the United States Treasury. However, certain
holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a
foreign individual to qualify as an exempt foreign recipient, that
holder must submit a statement, signed under penalties of perjury,
attesting to that individual's exempt foreign status.
Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
121<PAGE>
PLAN OF DISTRIBUTION
Based on existing SEC staff interpretations, we believe that
the registration and prospectus delivery requirements of the
Securities Act will not apply to holders of exchange notes issued in
this exchange offer who offer those notes for resale, resell, or
otherwise transfer them. This exemption only applies, however, if the
holder:
(1) acquired the exchange notes in the ordinary course of
its business, and
(2) is not participating in, and does not intend to
participate in, a distribution of the exchange notes, either alone
or in cooperation with another.
Each holder of outstanding notes who wishes to participate
in the exchange offer must make certain representations to us
concerning its status and intent. These representations are described
in "The exchange offer -- Terms and Conditions of the Letter of
Transmittal."
If you tender outstanding notes in the exchange offer with
the intent or for the purpose of participating in a distribution of
the exchange notes, you cannot rely on the staff interpretations and
must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is available, the
resale transaction should be covered by an effective registration
statement containing the selling security holders information required
by Item 507 of Regulation S-K under the Securities Act.
The registration and prospectus delivery requirements also
continue to apply to holders that are:
(1) our "affiliate(s)" within the meaning of Rule 405 under
the Securities Act,
(2) broker-dealers who acquire exchange notes directly from
us, or
(3) broker-dealers who acquire exchange notes as a result
of market-making or other trading activities.
Broker-dealers who receive exchange notes for their own
account in exchange for outstanding notes that they acquired through
market-making activities or other trading activities are subject to
the prospectus delivery requirement. These broker-dealers must
acknowledge in the letter of transmittal that they will deliver a
prospectus in connection with any resales of exchange notes. To date,
the SEC staff has allowed these broker-dealers to use the prospectus
contained in the exchange offer registration statement to fulfill the
prospectus delivery requirement with respect to exchange transactions
like this offer. This rule does not apply to resales of unsold
allotments from the initial sale of the outstanding notes.
We have agreed to permit broker-dealers and any other person
subject to similar prospectus delivery requirements to use this
Prospectus in connection with the resale of exchange notes. For a
period of 180 days after the exchange offer expires, we will make this
Prospectus, as amended or supplemented, available to any broker-dealer
that so requests in its letter of transmittal. Except as expressly
authorized by us, no person may use this Prospectus in connection with
any offer to resell, resale or other retransfer of exchange notes.
Broker-dealers may resell exchange notes directly to
purchasers or through other broker-dealers, to whom they may pay
commissions or concessions in connection with the resale. Any broker-<PAGE>
dealer that resells exchange notes received for its own account or
that participates in a distribution of exchange notes may be deemed an
"underwriter" under the Securities Act. Any profit on exchange note
resales, including any commissions or concessions received by such
broker-dealers, may be deemed underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging
the prospectus delivery requirement and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
We will not receive any proceeds from any sale of exchange
notes by broker-dealers. Broker-dealers who receive exchange notes for
their own account in the exchange offer may sell them from time to
time:
122<PAGE>
* in the over-the-counter market,
* in negotiated transactions,
* by writing options on the exchange notes, or
* by a combination of these methods.
The prices received by broker-dealers in resale transactions may
be:
* the market price prevailing at the time of resale,
* prices related to the prevailing market price, or
* negotiated prices.
Certain persons participating in the exchange offer may
engage in transactions that stabilize, maintain, or otherwise affect
the price of the exchange notes. This may include short sales of the
notes. In a short sale, a person agrees to sell more exchange notes
than we issue to them in the exchange offer. The short seller "covers"
its short position by buying additional notes in the open market. In
addition, these persons may stabilize or maintain the price of the
exchange notes by bidding for or purchasing exchange notes in the open
market or by imposing penalty bids. In a penalty bid, the selling
concessions allowed to dealers participating in the offering may be
reclaimed if exchange notes sold by them are repurchased in
stabilization transactions. The effect of these transactions may be to
stabilize or maintain the market price of the exchange notes at a
level above that which might otherwise prevail in the open market.
These transactions may be discontinued at any time.
We have agreed to pay all expenses of the exchange offer,
other than commissions and concessions of any brokers or dealers. We
will indemnify holders of outstanding notes, including broker-dealers,
against certain liabilities, including liabilities under the
Securities Act. Our agreements on these issues are part of the
Registration Rights Agreement we signed in connection with our
original issuance of the outstanding notes.
LEGAL MATTERS
Certain legal matters regarding validity of the exchange notes
offered hereby will be passed upon for the Company by Kilpatrick
Stockton LLP, Atlanta, Georgia.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Vista Eyecare, Inc.. as
of December 28, 1996 and January 3, 1998 and for each of the three
years in the period ended January 3, 1998 included in this Prospectus
have been audited by Arthur Andersen LLP, independent auditors, as
stated in their report included herein.
The consolidated financial statements of Frame-n-Lens Optical,
Inc. as of December 29, 1996 and December 28, 1997 and for each of the
three years in the period ended December 28, 1997 included in this
Prospectus have been audited by Ernst & Young LLP, independent
auditors, as stated in their report included herein.
The consolidated financial statements of New West Eyeworks, Inc.
as of December 28, 1996 and December 27, 1997 and for each of the
three years in the period ended December 27, 1997 included in this
Prospectus have been audited by PricewaterhouseCoopers, LLP independent
auditors, as stated in their report included herein.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information
may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission:
New York Regional Office, Seven World Trade Center, New York, New York
10048, and Chicago Regional Office, 500 West Madison Street, Chicago,
123<PAGE>
Illinois 60661. Copies of such material may be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of
the prescribed fees. The Commission also maintains a web site that
contains reports, proxy and information statements and other materials
that are filed through the Commission's Electronic Data Gathering,
Analysis, and Retrieval system. This web site can be accessed at
http//www.sec.gov.
The Company has agreed that, whether or not it is required to do
so by the rules and regulations of the Commission, so long as any
notes are outstanding, it will furnish to the holders of the notes and
file with the Commission (unless the Commission will not accept such a
filing) (i) all quarterly and annual financial information that would
be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its
consolidated subsidiaries and, with respect to the annual information
only, a report thereon by the Company's certified public accountants
and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such
reports, in each case within the time periods specified in the
Commission's rules and regulations. In addition, for so long as any
of the notes remains outstanding, the Company has agreed to make
available to any prospective purchaser of notes or beneficial owner of
the notes in connection with any sale thereof the information required
by Rule 144A(d) (4) of the Securities Act.
124<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are incorporated in this Offering Memorandum by
reference as of their respective dates:
(1) Annual Report on Form 10-K for the fiscal year ended
January 2, 1998;
(2) Quarterly Report on Form 10-Q for the three months ended
April 4, 1998;
(3) Quarterly Report on Form 10-Q for the three months ended
July 4, 1998;
(4) Quarterly Report on Form 10-Q for the three months ended
October 3,1998;
(5) Current Report on Form 8-K for August 12,1998;
(6) Current Report on Form 8-K for October 23, 1998;
(7) Current Report on Form 8-K for November 9, 1998
(8) Current Report on Form 8-K for December 31, 1998; and
(9) Current Report on Form 8-K/A for January 6, 1999.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the date which is 180 days after the
Termination of the exchange offer shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date
of filing of such documents.
Any statement incorporated herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each recipient of this
Prospectus, upon written request, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by
reference into the document that this Prospectus incorporates by
reference). Requests should be directed to Investor Relations,
National Vision Associates, Ltd., 296 Grayson Highway, Lawrenceville,
Georgia 30045, telephone (770) 822-3600.
125
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
<S> <C>
VISTA EYECARE, INC. CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Public Accountants ............................................................ F-2
Consolidated Balance Sheets as of December 28, 1996 and January 3, 1998 and October 3,
1998 (unaudited) ................................................................................. F-3
Consolidated Statements of Operations for the Years Ended December 30, 1995,
December 28, 1996 and January 3, 1998, and the Nine Months Ended September 27, 1997 and
October 3, 1998 (unaudited) ..................................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 30,
1995, December 28, 1996 and January 3, 1998, and the Nine Months Ended October 3,
1998 (unaudited) ................................................................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 30, 1995,
December 28, 1996 and January 3, 1998, and the Nine Months Ended September 27, 1997 and
October 3, 1998 (unaudited) .................................................................... F-6
Notes to Consolidated Financial Statements ........................................................ F-7
FRAME-N-LENS OPTICAL, INC. CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditors .................................................................... F-21
Consolidated Balance Sheets as of December 29, 1996 and December 28, 1997 and
June 28, 1998 (unaudited) ....................................................................... F-22
Consolidated Statements of Operations for the Years Ended December 31, 1995,
December 29, 1996, and December 28, 1997, and the Six Months Ended June 29, 1997
and June 28, 1998 (unaudited) .................................................................. F-23
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1995, December 29, 1996, and December 28, 1997, and the Six Months Ended June 28,
1998 (unaudited) ................................................................................ F-24
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
December 29, 1996 and December 28, 1997, and the Six Months Ended June 29, 1997
and June 28, 1998 (unaudited) ................................................................... F-25
Notes to Consolidated Financial Statements ......................................................... F-26
NEW WEST EYEWORKS, INC. CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants .................................................................. F-32
Consolidated Balance Sheet as of December 28, 1996 and December 27, 1997 and
September 26, 1998 (unaudited) .................................................................. F-33
Consolidated Statement of Operations for the Years Ended December 30, 1995,
December 28, 1996 and December 27, 1997, and the Nine Months Ended September 27,
1997 and September 26, 1998 (unaudited) ........................................................ F-34
Consolidated Statement of Stockholders' Equity for the Years Ended December 30,
1995, December 28, 1996 and December 27, 1997, and the Nine Months Ended September 26,
1998 (unaudited) ................................................................................ F-35
Consolidated Statement of Cash Flows for the Years Ended December 30, 1995,
December 28, 1996 and December 27, 1997, and the Nine Months Ended September 27,
1997 and September 26, 1998 (unaudited).......................................................... F-36
Notes to Consolidated Financial Statements ........................................................ F-37
(/TABLE>
F-1<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of National Vision
Associates, Ltd. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
NATIONAL VISION ASSOCIATES, LTD. (a Georgia corporation) AND
SUBSIDIARIES as of December 28, 1996 and January 3, 1998 and the
related consolidated statements of operations, shareholders' equity,
and cash flows for each of the three years in the period ended January 3,
1998. These financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
National Vision Associates, Ltd. and subsidiaries as of December 28,
1996 and January 3, 1998 and the results of their operations and their
cash flows for each of the three years in the period ended January 3,
1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 1998
F-2
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's except share information)
December 28, January 3, October 3,
1996 1998 1998
----------- ---------- -----------
(unaudited)
<S> <S> <S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents .......................... $ 1,110 $ 2,559 $ 2,408
Accounts receivable (net of allowance:
1996 - $353; 1997 - $762) ....................... 4,164 6,066 8,583
Inventories ........................................ 23,970 23,271 28,248
Store preopening costs (net of accumulated
amortization: 1996 - $605; 1997 - $712;
1998 - $912) .................................... 240 295
Other current assets ............................... 944 464 2,347
-------- -------- ---------
Total current assets ....................... 30,428 32,655 41,586
-------- -------- ---------
Property and equipment:
Equipment .......................................... 38,573 44,070 52,291
Furniture and fixtures.............................. 17,136 20,366 23,168
Leasehold improvements.............................. 13,178 15,005 16,500
Construction in progress............................ 1,669 893 2,032
-------- -------- ---------
70,556 80,334 93,991
Less accumulated depreciation....................... (27,206) (36,692) (45,800)
-------- -------- ---------
Net property and equipment ......................... 43,350 43,642 48,191
-------- -------- ---------
Other assets and deferred costs (net of accumulated
amortization:
1996 - $729; 1997 - $846; 1998 - $954)........... 786 1,015 6,032
Assignment agreement and intangible assets (net of
accumulated amortization: 1997 - $733;
1998 - $1,172)...................................... 5,938 41,756
-------- -------- ---------
$ 74,564 $ 83,250 $ 137,565
======== ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................... $ 8,283 $ 7,252 $ 11,624
Accrued expenses and other current liabilities...... 8,643 12,754 17,354
Current portion long-term debt...................... 478 892
-------- -------- ---------
Total current liabilities................... 16,926 20,484 29,870
-------- -------- ---------
Revolving credit facility - long term ................ 26,500 19,500 52,000
Long-term notes payable, less current portion......... 4,225 6,687
Deferred income tax liabilities ...................... 1,232 2,673 2,595
Commitments and contingencies (Note 8)
Shareholders' Equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized, none issued..........................
Common stock, $.01 par value; 100,000,000 shares
authorized, 20,644,752, 20,819,955, and 21,157,612
shares issued and outstanding as of December 28,
1996, January 3, 1998 and October 3, 1998,
respectively ..................................... 206 208 212
Additional paid-in capital .......................... 42,166 43,053 46,634
Retained deficit..................................... (8,393) (2,820) 3,640
Cumulative foreign currency translation.............. (4,073) (4,073) (4,073)
-------- -------- ---------
Total shareholders' equity................... 29,906 36,368 46,413
-------- -------- ---------
$ 74,564 $ 83,250 $ 137,565
======== ======== =========
(/TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000's except per share information)
Nine Months Ended
---------------------------
December 30, December 28, January 3, September 27, October 3,
1995 1996 1998 1997 1998
------------ ----------- ---------- -------------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales .......................... $ 145,573 $ 160,376 $ 186,354 $ 134,736 $ 173,099
Cost of goods sold.................. 67,966 76,692 86,363 61,723 79,112
---------- ---------- ---------- --------- ---------
Gross profit...................... 77,607 83,684 99,991 73,013 93,987
Selling, general, and
administrative expenses........... 74,390 76,920 89,156 63,323 81,838
Provision for disposition of
assets ........................... 958
Other nonrecurring charges ......... 1,053
---------- ---------- ---------- --------- ---------
Operating income ................... 1,206 6,764 10,835 9,690 12,149
---------- ---------- ---------- --------- ---------
Other expense, net ................. 2,626 2,084 1,554 1,193 1,248
---------- ---------- ---------- --------- ---------
Income (loss) before income
taxes ............................ (1,420) 4,680 9,281 8,497 10,901
Provision for income taxes.......... 100 1,200 3,708 3,365 4,454
---------- ---------- ---------- --------- ---------
Net income (loss)................. $ (1,520) $ 3,480 $ 5,573 $ 5,132 $ 6,447
========== ========== ========== ========= =========
Basic earnings (loss) per common
share ......................... $ (.07) $ .17 $ .27 $ .25 $ .31
========== ========== ========== ========= =========
Diluted earnings (loss) per
common share ................. $ (.07) $ .17 $ .27 $ .25 $ .30
========== ========== ========== ========= =========
(/TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(000's except share information)
Common Stock Additional Retained Cumulative
------------------- Paid-In Earnings Translation
Shares Amount Capital (Deficit) Adjustments Total
------ ------ ---------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 ....................... 20,510,402 $ 205 $42,133 $(10,353) $(2,372) $29,613
Exercise of stock options 76,103 1 14 15
Foreign currency
translation................. (1,782) (1,782)
Net loss...................... (1,520) (1,520)
---------- ------ ------- -------- -------- -------
Balance, December 30,
1995........................ 20,586,505 206 42,147 (11,873) (4,154) 26,326
Exercise of stock options..... 58,247 19 19
Foreign currency
translation ................ 81 81
Net income.................... 3,480 3,480
---------- ------ ------- -------- -------- -------
Balance, December 28,
1996........................ 20,644,752 206 42,166 (8,393) (4,073) 29,906
Issuance of common stock...... 110,795 1 835 836
Restricted stock.............. 54,000 1 35 36
Exercise of stock options..... 10,408 17 17
Net income.................... 5,573 5,573
---------- ------ ------- -------- -------- -------
Balance, January 3,
1998........................ 20,819,955 208 43,053 (2,820) (4,073) 36,368
---------- ------ ------- -------- -------- -------
Restricted stock ............. 52,000 1 74 75
Exercise of stock options..... 285,657 3 212 215
Tax settlement ............... 3,295 3,295
Net income ................... 6,447 6,447
Other ........................ 13 13
---------- ------ ------- -------- -------- -------
Balance, October 3, 1998
(unaudited)................. 21,157,612 $ 212 $46,634 $ 3,640 $ (4,073) $46,413
========== ===== ======= ======== ======== =======
(/TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's)
Nine Months Ended
----------------------------
December 30, December 28, January 3, September 27, October 3,
1995 1996 1998 1997 1998
------------ ------------ ---------- ------------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) ...................... $ (1,520) $ 3,480 $ 5,573 $ 5,132 $ 6,447
-------- --------- -------- --------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Provision for disposition of
assets............................. 958
Provision for other nonrecurring
charges ........................... 1,053
Depreciation and amortization 10,378 10,058 11,035 7,876 9,227
Provision for Deferred Income Tax
Expense ........................... 1,002 1,441 1,218 3,710
Other ................................ 29 91 268 (610) (400)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Receivables........................... (701) 2,224 (875) (2,056) (2,142)
Inventories .......................... (2,467) (2,594) 2,031 1,063 836
Store preopening costs ............... (1,288) (657) (643)
Other current assets ................. (34) 67 612 285 (1,267)
Accounts payable, accrued
expenses, and other current
liabilities........................ (88) 725 1,245 3,675 (6,002)
-------- --------- -------- --------- ---------
Total adjustments................ 7,840 10,916 15,114 11,451 3,962
-------- --------- -------- --------- ---------
Net cash provided by
operating activities........... 6,320 14,396 20,687 16,583 10,409
-------- --------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment ............................ (13,175) (2,713) (8,049) (6,029) (7,198)
Acquisition, net of cash acquired....... (1,772) (30,429)
Payment for non-competition
agreement ............................ (484) (484)
Purchase of Assignment Agreement (500) (500)
-------- --------- -------- --------- ---------
Net cash used in investing
activities..................... (13,175) (2,713) (10,805) (7,013) (37,627)
-------- --------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Advances on revolving credit
facility .............................. 12,000 1,500 5,500 1,500 38,500
Repayments on revolving credit
facility .............................. (4,000) (13,000) (12,500) (10,000) (6,000)
<PAGE>
Repayments of notes payable and
capital leases ........................ (471) (480) (1,450) (862)
Debt issue costs ........................ (4,861)
Proceeds from issuance of common
stock ................................. 15 19 17 38 290
-------- --------- -------- --------- ---------
Net cash provided by (used
in) financing activities........ 7,544 (11,961) (8,433) (8,462) 27,067
-------- --------- -------- --------- ---------
Effect of foreign currency exchange
rate changes . . . . . . . . (1,782) 81
-------- --------- -------- --------- ---------
Net increase (decrease) in cash (1,093) (197) 1,449 1,108 (151)
Cash, beginning of year . . . . 2,400 1,307 1,110 1,110 2,559
-------- --------- -------- --------- ---------
Cash, end of year . . . . . . . $ 1,307 $ 1,110 $ 2,559 $ 2,218 $ 2,408
======== ========= ======== ======== =========
(/TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
<PAGE>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
National Vision Associates, Ltd. (the "Company") is engaged in the
retail sale of optical goods and services, primarily in the United
States and Mexico. The Company is largely dependent on Wal-Mart
Stores, Inc. ("Wal-Mart") for continued operation of current vision
centers (see Note 3). In October 1997, the Company acquired all the
capital stock of Midwest Vision, Inc., a retail optical company with
51 locations in Minnesota and three adjoining states (see Note 4).
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of the Company and its subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation. Effective January 1, 1995, the Company
changed its year end to a 52/53 week retail calendar with the fiscal
year ending on the Saturday closest to December 31. Pursuant to such
calendar, financial information for each of 1995 and 1996 is presented
for the 52-week period ended December 30 and December 28,
respectively. Fiscal 1997 consisted of 53 weeks ended January 3, 1998.
Due to various statutory and other considerations, international
operations were not changed to this 52/53 week calendar. To allow for
more timely consolidation and reporting, international operations are
reported using a fiscal year ending November 30. Certain amounts in
the December 28, 1996 and December 30, 1995 consolidated financial
statements have been reclassified to conform to the January 3, 1998
presentation.
REVENUE RECOGNITION: The Company recognizes revenues and the
related costs from retail sales when at least 50% of the payment has
been received.
CASH AND CASH EQUIVALENTS: The Company considers cash on hand,
short-term cash investments, and checks that have not been processed
by financial institutions to be cash and cash equivalents. The
aggregate amount of outstanding checks not processed at January 3,
1998 was $381,000 (at December 28, 1996 - $440,000). The Company's
policy is to maintain uninvested cash at minimal levels. Cash includes
cash equivalents which represent highly liquid investments with a
maturity of one month or less. The carrying amount approximates fair
value. The Company restricts investment of temporary cash investments
to financial institutions with high credit standing.
INVENTORIES: Inventories are valued at the lower of weighted
average cost or market. Market represents the net realizable value.
STORE PREOPENING COSTS: Prior to 1998, preopening costs which were
directly associated with the opening of new vision centers have been
capitalized and amortized using the straight-line method over 12
months beginning with the commencement of each vision center's
operations. The average cost capitalized per vision center
approximated $20,000. Effective in 1998, preopening costs will be
expensed as incurred in accordance with proposed AICPA Statement of
Position, "Reporting on the Costs of Start-Up Activities."
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
For financial reporting purposes, depreciation is computed using the
straight-line method over the assets' estimated useful lives or terms
of the related leases, whichever is shorter. Accelerated depreciation
methods are used for income tax reporting purposes. For financial<PAGE>
reporting purposes, the useful lives used for computation of
depreciation range from five to ten years for equipment, from three to
nine years for furniture and fixtures, from three to six years for
hardware and software related to information systems processing, and
nine years for leasehold improvements. At the time property and
equipment are retired, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is credited or
charged to income. Annually, the Company evaluates the net book value
of property and equipment for impairment. The evaluation is performed
for retail locations and compares its best estimate of future cash
flows with the net book value of the property and equipment.
Maintenance and repairs are charged to expense as incurred.
Replacements and improvements are capitalized.
BALANCE SHEET FINANCIAL INSTRUMENTS: Fair Values: The carrying
amount reported in the consolidated balance sheets for cash, accounts
receivable, accounts payable and short-term debt approximates fair
value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported for "Revolving
Credit Facility -- Long-Term" approximates fair value because the
underlying instrument is a variable rate note that reprices
frequently. The fair value of the Company's fixed interest rate swap
agreements and fixed rate debt is based on estimates using standard
pricing models that take into consideration current interest rate
market conditions supplied by independent financial institutions.
F-7<PAGE>
<PAGE>
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. The risk is limited due to the large number of individuals
and entities comprising the Company's customer base.
ASSIGNMENT AGREEMENT AND INTANGIBLE ASSETS: Assignment agreement
and intangible assets represent the excess of the cost of net assets
acquired in certain contract transactions and business combinations
over their fair value. Such amounts are amortized over periods ranging
from 11 years to 15 years. The Company evaluates intangible assets for
impairment annually. In completing this evaluation, the Company
compares its best estimate of future cash flows with the carrying
value of the underlying asset.
INCOME TAXES: Deferred income taxes are recorded using current
enacted tax laws and rates. Deferred income taxes are provided for
depreciation, store preopening costs, organization costs, inventory
basis differences, and accrued expenses where there is a temporary
difference in recording such items for financial reporting and income
tax reporting purposes.
OTHER DEFERRED COSTS: Deferred costs represent capitalized assets
resulting from contractual obligations and are being amortized on a
straight line basis over a period of time not to exceed five years.
ADVERTISING AND PROMOTION EXPENSE: Production costs of future media
advertising and related promotion campaigns are deferred until the
advertising events occur. All other advertising and promotion costs
are expensed when incurred.
OTHER INCOME AND EXPENSE: Other income and expense represents net
financing costs associated with the Company's financing activities,
including interest costs on borrowings under the revolving credit
facility and other notes payable, loan commitment fees and
amortization of interest rate hedge and swap agreements, purchase
discounts on invoice payments, interest income on cash investments and
for fiscal 1997, realized exchange gains or losses resulting from
foreign currency transactions.
FOREIGN CURRENCY TRANSLATION: The financial statements of foreign
subsidiaries are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52 ("SFAS No. 52").
Translation adjustments, which result from the process of translating
foreign financial statements into U.S. dollars, are accumulated as a
separate component of shareholders' equity.
The Securities and Exchange Commission has classified Mexico as a
highly inflationary economy under the provisions of SFAS No. 52 for
reporting periods starting in 1997. Effective in 1997, the financial
statements of the Company's Mexico operations are remeasured with the
U.S. dollar as the functional currency. Any gain or loss is recorded
in the Company's statement of operations as other income and expense.
USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
DERIVATIVES USED IN RISK MANAGEMENT ACTIVITIES: As part of its risk
management activities, the Company uses interest rate swaps to modify
the variable interest rate characteristics of long-term debt on the
revolving credit facility. The Company holds no other derivatives or<PAGE>
similar instruments. The derivative contracts are designated as hedges
when acquired. They are expected to be effective economic hedges and
have high correlation with the debt being hedged.
Interest rate swaps are accounted for using the accrual method, with
an adjustment to interest expense in the income statement. The Company
accounts for the swap by recording the offset of the swap into the
Company's accounts. The swaps are settled every 90 days. Realized
gains and losses from the early settlement or disposition of swap
contracts are deferred on the balance sheet and amortized to interest
expense over the original term of the swap agreement.
3. WAL-MART MASTER LICENSE AGREEMENT AND OTHER AGREEMENTS
WAL-MART AGREEMENT: In 1994, the Company and Wal-Mart replaced
their original agreement with a new master license agreement (the
"Wal-Mart Agreement"), which increased minimum and percentage license
fees payable by the Company and also granted the Company the
opportunity to operate up to 400 vision centers in existing and future
Wal-Mart stores (357 vision centers were in operation at fiscal year
end 1997). In January 1995, the Company made a lump sum payment in
exchange for such opportunity. The payment is being amortized over the
initial term of the vision centers opened subsequent to January 1,
1995. In 1997, the Wal-Mart Agreement was amended to provide that Wal-
Mart must, by April 1, 2000, grant the Company the opportunity to
operate 400 vision centers under the Wal-Mart Agreement, and that,
with one exception, all new vision centers opened after 1997 will be
F-8<PAGE>
<PAGE>
located in California and North Carolina. Each vision center covered
by the Wal-Mart Agreement has a separate license. Pursuant to the Wal-
Mart Agreement, the term of each such license is nine years with a
renewable option for one additional three-year term. Percentage
license fees remain the same over the nine-year base term and three-
year option term, whereas minimum license fees increase during the
three-year option term.
CONSULTING AND MANAGEMENT AGREEMENT: Among other things, the Wal-
Mart Agreement requires an independent, licensed optometrist to
practice adjacent to or near each of the Company's vision centers for
at least 48 hours per week. In 1990, the Company entered into a long-
term consulting and management service agreement, as amended, with two
companies (Eyecare Leasing, Inc. ("ELI") and Stewart-Phillips, Inc.
("SPI")) jointly owned by two shareholders to recruit such
optometrists for certain of its vision centers. Subject to applicable
state regulations, this agreement, among other things, required the
Company to provide space and certain equipment to the optometrists for
which the optometrists pay the Company an occupancy fee. In exchange
for their services, ELI and SPI received certain fees under the
agreement. Net of the fees paid to ELI and SPI, the Company received
$2.5 million and $2.9 million pursuant to this agreement during 1995
and 1996, respectively. The net payments offset occupancy expense
incurred by the Company. Occupancy expense is a component of cost of
goods sold.
In January 1997, the Company completed various transactions related
to its relationship with each of ELI and SPI. The transactions
involved the termination of such consulting agreement and transfer of
the responsibilities of ELI and SPI to a subsidiary of the Company. As
a result of these transactions, the Company acquired the right to the
payments which otherwise would have been made to ELI and SPI under the
consulting agreement. In 1997, the Company received occupancy fees of
$4.0 million, which included $1.4 million which would have been paid
to ELI and SPI if the consulting agreement had been in effect during
1997. The aggregate cost of the transactions was $4.6 million, which
was capitalized as an intangible asset and is being amortized over the
remaining life of the original term of vision center leases. The
Company made a lump sum payment of $500,000 at closing and entered
into promissory obligations for the balance, payable over a 12-year
period at 6.4% interest.
MEXICO AGREEMENT: In 1994, the Company opened 8 vision centers in
stores owned and operated by Wal-Mart de Mexico, S.A. de C.V. ("Wal-
Mart de Mexico"). In 1995, the Company completed the negotiation of a
master license agreement governing these vision centers. Pursuant to
this agreement, each vision center has an individual base term of five
years from the date of opening, followed by two options (each for two
years), and one option for one year. Each party has the right to
terminate a location which fails to meet specified sales levels. The
agreement provides for annual fees based on a minimum and percentage
of sales. The agreement also gives the Company a right of first
refusal to open vision centers in all stores in Mexico owned by Wal-
Mart de Mexico. As of January 3, 1998, the Company operated 26 vision
centers in Wal-Mart de Mexico stores.
4. ACQUISITION
In October 1997, the Company acquired the common stock of Midwest
Vision, Inc., a retail optical company which operated 51 vision
centers in Minnesota, Wisconsin, Iowa, and North Dakota. Unaudited
annual sales for Midwest Vision approximated $14.4 million for the
calendar year 1997. The purchase price was approximately $3.3 million,
excluding direct acquisition costs plus $1.4 million of assumed long-term
debt.<PAGE>
The acquisition was accounted for by the purchase method of
accounting and, accordingly, the purchase price was allocated to the
assets acquired and the liabilities assumed based on the estimated
fair values at the date of acquisition. The excess of purchase price
over the estimated fair values of the net assets acquired was recorded
as an intangible asset (goodwill), which is being amortized on a
straight-line basis over 15 years for financial reporting. Subsequent
to the close date, the Company paid off the outstanding long-term debt
of Midwest Vision.
The estimated fair values of assets and liabilities acquired are
summarized as follows (in 000's):
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 327
Inventory . . . . . . . . . . . . . . . . . . . . . 1,332
Accounts receivable and other assets . . . . . . . 1,398
Property and equipment . . . . . . . . . . . . . . 1,729
Excess of cost over net assets acquired . . . . . . 2,068
Accounts payable and accrued expenses . . . . . . . (1,867)
Debt . . . . . . . . . . . . . . . . . . . . . . . (1,433)
---------
Net Purchase Price . . . . . . . . . . . $ 3,554
=========
The purchase price was paid in cash of $1.9 million, a debt
instrument (in the principal amount of $620,000 payable over five
years), and 110,795 shares of the Company's common stock.
Additionally, the Company made cash payments of $239,000 related to
investment advisory fees and other costs directly associated with the
acquisition. In connection with 100,000 shares of the common stock,
the Company also issued a put option to the seller, entitling the
seller to put such shares to the Company at $7.00 per share in January
1999 or, if such shares are not then put back to the Company, at $9.00
F-9<PAGE>
<PAGE>
per share in January 2000. If the seller exercises the put option, the
Company will settle the transaction by issuing additional shares to
the seller such that the aggregate fair market value of the shares
equals the aggregate guarantee value. The guarantee has been recorded
at a fair market value. In conjunction with the transaction, the
Company entered into an employment agreement with the seller which
requires the performance of certain duties and contains certain
noncompete provisions.
The operating results of Midwest Vision are included in the
Company's consolidated results of operations from the date of
acquisition.
5. INVENTORY
The Company classifies inventory as finished goods if such inventory
is readily available for sale to customers without any assembly or
value added processing to satisfy a customer's order. Finished goods
include contact lens, over the counter sunglasses and accessories. The
Company classifies inventory as raw material if such inventory
requires assembly or value added processing to satisfy a customer's
order. This would include grinding a lens blank, "cutting" the lens in
accordance with a prescription from an optometrist, and fitting the
lens in a frame. Frames and uncut lens are considered raw material. A
majority of the Company's sales represent custom orders; consequently,
the majority of the Company's inventory is classified as raw material.
Inventory balances, by classification, may be summarized as follows
(in 000's):
1996 1997 1998
-------- ------- ---------
Raw material . . . . . . . . . . . $ 15,199 $15,646 $ 22,687
Finished goods . . . . . . . . . . 8,279 7,003 4,518
Supplies . . . . . . . . . . . . . 492 622 1,043
-------- ------- ---------
$ 23,970 $23,271 $ 28,248
======== ======= =========
6. LONG-TERM DEBT
Long-term debt obligations at December 28, 1996 and January 3, 1998
consisted of the following (in 000's):
1996 1997
------- -------
Borrowings under revolving credit facility . . $26,500 $19,500
Other promissory notes . . . . . . . . . . . . 4,703
------- -------
26,500 24,203
Less current portion . . . . . . . . . . . . . 478
------- -------
$26,500 $23,725
======= =======
In July 1997, the Company entered into a syndicated $45 million two-
year unsecured revolving credit facility. The aggregate outstanding
balance is due for repayment in July 1999. The Company's credit
facility contains, among other covenants, a material adverse change
clause and certain minimum net worth and other requirements.
Commitment fees payable on the average daily balance of the unused
portion of the credit facility were .25% per annum in 1997. The
Company paid approximately $150,704 and $125,611 in various fees
related to the revolving credit facility in 1996 and 1997,
respectively. Interest on the outstanding advances is based on certain<PAGE>
financial covenants and applicable interest rates for Eurodollar or
base loan borrowings, as defined in the agreement.
As of January 3, 1998, the Company had borrowed $19.5 million under
its credit facility at a weighted average interest rate of 6.9%. The
aggregate fair value of the Company's long-term debt obligation under
the credit facility is estimated to approximate its carrying value.
The Company has entered into rate swap agreements which effectively
convert underlying variable rate debt based on Eurodollar rates to
fixed rate debt. The agreements extend through February 20, 2000. The
notional principal amount on one agreement is $20 million, with an
effective fixed rate of 6.93%, which will expire on February 20, 1998.
At that date, two separate agreements will commence with an aggregate
notional principal amount of $10 million and an effective fixed rate
which averages 7.52%. The fair market value of the fixed rate hedges
approximates book value. Under existing accounting standards, this
activity is accounted for as a hedging activity. The swaps are settled
every 90 days.
The Company entered into unsecured promissory notes relative to
various transactions completed with ELI and SPI (see Note 3) and the
Midwest Vision acquisition (see Note 4). The notes are fixed rate
instruments, with rates ranging from 6.4% to 8.5%. The promissory
notes with ELI and SPI require quarterly payments through January 2009
whereas the Midwest Vision note requires monthly payments through
October 2002. Based on current market rates at January 3, 1998, the
fair market value of the promissory notes is approximately $80,000
F-10<PAGE>
<PAGE>
less than book value. At January 3, 1998, future minimum principal
payments on the promissory notes were as follows (in 000's):
1998 . . . . . . . . . . . . . . . . . . . $ 478
1999 . . . . . . . . . . . . . . . . . . . 487
2000 . . . . . . . . . . . . . . . . . . . 498
2001 . . . . . . . . . . . . . . . . . . . 509
2002 . . . . . . . . . . . . . . . . . . . 495
Thereafter . . . . . . . . . . . . . . . . 2,236
------
$4,703
======
The Company maintains an unsecured line of credit agreement with a
financial institution which, at the discretion of the lender, allows
the Company to borrow up to $5 million. The agreement is available to
fund financing needs on a short-term basis at a variable interest
rate, determined by the lender. As of year-end, there were no
borrowings outstanding under the agreement.
7. RELATED-PARTY TRANSACTIONS
In 1991, a receivable from the Company was assigned to a lease
finance company which is owned by a shareholder/director of the
Company. The Company made lease payments (including principal and
interest) of $417,000 and $341,000 to this lease finance company in
1995 and 1996, respectively. Such lease was paid in full as of
September, 1996.
During 1995, 1996, and 1997, the Company purchased its business and
casualty insurance policies through an insurance agency in which a
shareholder/director has a substantial ownership interest. Total
premiums paid for policies acquired through the insurance company
during 1995, 1996, and 1997 were approximately $910,000, $844,000, and
$904,732, respectively. The Audit Committee of the Company's Board of
Directors has approved such purchases.
In 1996, Edward G. Weiner, the Company's then Vice Chairman, was
employed at an annual salary of $165,000 pursuant to an employment
agreement with the Company with a term ending March 1, 2000. In
connection with Mr. Weiner's resignation from the Board of Directors
in February 1997, the employment agreement was terminated, and the
Company (in exchange for a non-competition agreement through March
2000) paid Mr. Weiner an amount equal to a discounted present value of
the payments which would have been made under the employment
agreement. The payment amount was capitalized as other deferred costs
and will be amortized over the term of the non-compete agreement.
8. COMMITMENTS AND CONTINGENCIES
NONCANCELABLE OPERATING LEASE AND LICENSE AGREEMENTS: As of
January 3, 1998, the Company is a lessee under noncancelable operating
lease agreements for certain equipment which expire at various dates
through 1998. Additionally, the Company is required to pay minimum
and percentage license fees pursuant to certain commercial leases and
pursuant to its agreements with its host department store companies.
Effective December 20, 1991, the Company entered into a lease
agreement with Wal-Mart for approximately 66,000 square feet of
corporate office space. The term of the lease is ten years with a
renewal option of seven years. The Company paid Wal-Mart approximately
$215,000 annually in rental fees in 1995, 1996, and 1997.
Effective July 1995, the Company entered into an operating lease for
a computer equipment upgrade that provides processing for the newly<PAGE>
installed management information and financial systems. The term of
the lease is three years. Lease expense is approximately $8,000
monthly.
Effective the first quarter 1996, the Company entered into operating
leases for 34 vehicles. The terms of the leases are cancelable by the
Company at any time, but the Company expects to retain the leases for
the three-year term. Lease expense is approximately $13,800 monthly.
Under the lease for its Los Angeles laboratory, the Company paid
$102,000, $101,000, and $87,000 in rental fees in 1995, 1996, and
1997, respectively. In December 1997, the Company entered into a new
five-year lease for a successor facility in the Los Angeles area.
Lease expense is approximately $5,528 monthly.
In connection with its acquisition of Midwest Vision, Inc. (see
Note 4), the Company entered into a ten-year lease for administrative
headquarters and an optical laboratory located in St. Cloud,
Minnesota. The facility is leased from the former owner of Midwest
Vision. Lease expense on the headquarters and laboratory is
approximately $6,667 monthly which, in the opinion of management,
F-11<PAGE>
<PAGE>
represents a fair market lease rate. Additionally, the Company assumed
operating lease agreements in connection with 51 freestanding
locations obtained from the acquisition. Lease expense on such leases
is approximately $64,000 monthly.
Aggregate future minimum payments under the license and lease
arrangements are as follows (in 000's):
1998 . . . . . . . . . . . . . . . . . . . $ 19,529
1999 . . . . . . . . . . . . . . . . . . . 19,296
2000 . . . . . . . . . . . . . . . . . . . 17,553
2001 . . . . . . . . . . . . . . . . . . . 14,592
2002 . . . . . . . . . . . . . . . . . . . 11,110
Thereafter . . . . . . . . . . . . . . . . 18,237
--------
$100,317
========
Total expenses recognized under these license and lease arrangements
were approximately $17.0 million, $19.9 million, and $22.8 million for
the years ended December 30, 1995, December 28, 1996, and January 3,
1998, respectively.
GITANO AND GUY LAROCHE TRADEMARK LICENSES: The Company has separate
license agreements with Gitano, Inc. and Guy Laroche of North America,
Inc., giving the Company the right to use the trademarks "Gitano" and
"Guy Laroche", respectively, in its vision centers in North America.
Each agreement requires the Company to pay minimum and percentage
royalties on retail and wholesale sales.
Pursuant to its terms, the Gitano agreement expired on June 30,
1997. The agreement has, however, continued to be performed by the
parties. The Guy Laroche agreement, as amended, expires on December 31,
2001. Under the Gitano agreement, the Company paid $113,000, $111,000,
and $121,000 in fees during 1995, 1996, and 1997, respectively.
Under the Guy Laroche agreement, the Company paid $150,000, $238,000,
and $176,000 in fees during 1995, 1996, and 1997, respectively.
CHANGE IN CONTROL AND OTHER ARRANGEMENTS: There are agreements
between the Company and seven of its executive officers which provide
severance benefits in the event of termination of employment under
certain circumstances following a change in control of the Company (as
defined). The circumstances are termination by the Company other than
because of death or disability commencing prior to a threatened change
in control (as defined), or for cause (as defined), or by the officer
as the result of a voluntary termination (as defined). Following any
such termination, in addition to compensation and benefits already
earned, the officer will be entitled to receive a lump sum severance
payment equal to up to three times the officer's annual rate of base
salary. The term of each agreement is for a rolling three-years unless
the Company gives notice that it does not wish to extend such term, in
which case the term of the agreement would expire three years from the
date of the notice.
One executive officer is employed pursuant to an employment
agreement which provides for an annual salary and certain other
benefits. Such agreement further provides that the Company may at any
time terminate the executive's employment upon six months notice or
upon no notice if such termination is for cause, as defined.
9. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounts Standards (SFAS) No. 109 "Accounting for Income Taxes," which
requires the use of the liability method of accounting for deferred<PAGE>
income taxes. The components of the net deferred tax
assets/(liabilities) are as follows (in 000's):
</TABLE>
<TABLE>
<CAPTION>
As of December 28, As of January 3,
1996 1998
------------------ ----------------
<S> <C> <C>
Total deferred tax (liabilities)......... $(9,484) $(9,005)
Total deferred tax assets.......... 10,658 8,738
Valuation allowance...................... (2,406) (2,406)
------- -------
Net deferred tax (liabilities)........... $(1,232) $(2,673)
(/TABLE>
F-12<PAGE>
<PAGE>
The sources of the difference between the financial accounting and tax
basis of the Company's liabilities and assets which give rise to the
deferred tax liabilities and deferred tax assets and the tax effects of
each are as follows (in 000's):
</TABLE>
<TABLE>
<CAPTION>
As of December 28, As of January 3,
1996 1998
------------------ ----------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation .................................. $ 6,062 $ 5,506
Reserve for foreign losses..................... 3,137 3,137
Store preopening costs......................... 91 99
Other.......................................... 194 263
------- -------
$ 9,484 $ 9,005
======= =======
Deferred tax assets:
Accrued expenses and reserves.................. $ 1,471 $ 1,393
Inventory basis differences.................... 326 145
Net operating loss carryforwards............... 8,650 4,677
Alternative minimum tax........................ 135 2,117
Other.......................................... 76 406
------- -------
$10,658 $ 8,738
======= =======
</TABLE>
The consolidated provision for income taxes consists of the following
(in 000's):
<TABLE>
<CAPTION>
Year Ended
----------------------------------------
December 30, December 28, January 3,
1995 1996 1998
------------ ------------ ---------
<S> <C> <C> <C>
Current:
Federal ................................. $ 50 $ 135 $1,937
State ................................... 50 63 330
----- ------- ------
100 198 2,267
----- ------- ------
Deferred:
Federal ................................. 897 1,296
State ................................... 105 145
----- ------- ------
0 1,002 1,441
----- ------- ------
Total provision for income taxes...... $ 100 $ 1,200 $3,708
===== ======= ======
(/TABLE>
<PAGE>
The tax expense (benefit) differs from the amounts resulting from
multiplying income before income taxes by the statutory federal income
tax rate for the following reasons (in 000's):
</TABLE>
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
December 30, December 28, January 3,
1995 1996 1998
------------ ------------ ----------
<S> <C> <C> <C>
Federal income tax (benefit) at statutory rate.......... $(483) $ 1,591 $3,156
State income taxes, net of federal income tax
benefit .............................................. 50 69 314
Foreign losses not deductible for U.S. federal
tax purposes ........................................... 686 63 65
Valuation allowance for U.S. state and federal
taxes ................................................ (181) (556)
Other .................................................. 28 33 173
----- ------- ------
$ 100 $ 1,200 $3,708
===== ======= ======
</TABLE>
At January 3, 1998, the Company recorded a valuation allowance of
$2.4 million due to the uncertainty regarding the realizability of its
net operating loss carryforwards. A portion of the net operating loss
carryforward deferred tax asset (approximately $3.2 million) relates
to tax benefits (subject to the outcome of the audit discussed below)
from the exercise of stock options granted by the former Chairman of
the Company to two shareholders who own companies which recruited
optometrists for the Company. (See Note 12.) This benefit will be
recorded as an addition to paid-in-capital (and a reduction in the
valuation allowance) when realized.
At January 3, 1998, the Company had U.S. regular tax net operating
loss carryforwards of $12 million (of which $8.3 million relates to
the tax benefits from the exercise of stock options discussed above)
which can reduce future federal income taxes. If not utilized, these
carryforwards will expire beginning in 2007.
As a result of an examination by the Internal Revenue Service
("IRS") of the Company's 1992 tax return, the Company received a
deficiency notice in 1996 from the IRS, challenging the tax benefit
relating to the exercise of stock options referred to above. The
Company has filed a petition in the U.S. Tax Court, contesting the
deficiency notice. The Company does not expect that the outcome of
this proceeding will have a material adverse impact on the financial
statements or conditions of the Company. Subject to the execution of
definitive documents, an agreement to settle this matter was reached
in February 1998. (See Note 15.)
F-13
<PAGE>
<PAGE>
In Mexico, the location of the Company's major foreign operations,
the Company pays the greater of its income tax or an asset tax.
Because the Company has operating losses in Mexico, the Company pays
no income tax, but it is subject to the asset tax. Therefore, no
provision for income taxes has been made on the Company's books for
its operations in Mexico.
10. EARNINGS PER COMMON SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share".
Basic earnings per common share were computed by dividing net income
by the weighted average number of common shares outstanding during the
year. Diluted earnings per common share were computed as basic
earnings per common share, adjusted for outstanding stock options that
are dilutive. The computation for basic and diluted earnings per share
may be summarized as follows (in 000's except per share information):
1995 1996 1997
------- -------- -------
Net income (loss)........................ $(1,520) $ 3,480 $ 5,573
======= ======== =======
Weighted shares outstanding.............. 20,538 20,618 20,676
Basic earnings (loss) per share........ $ (0.07) $ 0 .17 $ 0.27
======= ======== =======
Weighted shares outstanding.............. 20,538 20,618 20,676
Net options issued to employees......... 88 163
------- -------- -------
Aggregate shares outstanding............ 20,538 20,706 20,839
Diluted earnings (loss) per share..... $ (0.07) $ 0.17 $ 0.27
======== ========= ========
Outstanding options with an exercise price below the average price
of the Company's common stock have been included in the computation of
dilutive earnings per common share, using the treasury stock method,
as of the date of the grant. Stock options have been excluded from the
calculation of weighted average shares outstanding during 1995, as the
effect would be antidilutive.
11. SUPPLEMENTAL DISCLOSURE INFORMATION
Supplemental disclosure information is as follows (in 000's):
(i) Supplemental Cash Flow Information
1995 1996 1997
---------- -------- --------
Cash paid for --
Interest . . . . . . . . . . . . . $ 2,750 $ 2,565 $ 1,582
Income taxes . . . . . . . . . . . 244 149 2,383
(ii) Supplemental Noncash Investing and Financial Activities
The acquisition information relates to the ELI and SPI transactions
and the purchase of Midwest Vision, Inc. (see Notes 3 and 4).
1997
--------
Business acquisitions, net of cash acquired
Fair value of assets acquired . . . . . . . . . . . . . . . $ 4,459
Purchase price in excess of net assets acquired . . . . . . 6,671
Liabilities assumed . . . . . . . . . . . . . . . . . . . . (8,022)
Stock issued . . . . . . . . . . . . . . . . . . . . . . . (836)
--------
Net cash paid for acquisitions . . . . . . . . . . $ 2,272
========<PAGE>
(iii) Supplemental Balance Sheet Information
Significant components of accrued expenses and other current
liabilities may be summarized as follows:
1996 1997
------ ------
Accrued employee compensation and benefits . . $2,903 $5,425
Accrued license fees . . . . . . . . . . . . . 1,851 2,349
At January 3, 1998, accrued expenses and other current liabilities
include an increase of $875,000 related to the Midwest Vision
operation.
(iv) Supplemental Income Statement Information
F-14<PAGE>
<PAGE>
The components of other expense, net, may be summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Interest expense on debt and capital leases............... $ 2,818 $2,338 $1,853
Purchase discounts on invoice payments.................... (230) (430) (483)
Finance fees and amortization of hedge and swap
agreements.............................................. 150 230 236
Interest income........................................... (99) (66) (38)
Other..................................................... (13) 12 (14)
------ ------ ------
$ 2,626 $2,084 $1,554
======= ====== ======
(/TABLE>
12. EQUITY TRANSACTIONS
EMPLOYEE STOCK OPTION AND INCENTIVE AWARD PLAN: In 1996, the
Company adopted the Restated Stock Option and Incentive Award Plan
(the "Plan") pursuant to which incentive stock options qualifying
under Section 422A of the Internal Revenue Code and nonqualified stock
options may be granted to key employees. The Plan also provides for
the issuance of other equity awards, such as awards of restricted
stock. The Plan replaced and restated all the Company's prior employee
stock option plans. A total of up to 3,350,000 shares of common stock
may be granted under the Plan (a total of up to 2,350,000 shares were
available for grant under the prior plans). The Plan is administered
by the Compensation Committee of the Company's Board of Directors. The
Compensation Committee has the authority to determine the persons
receiving options, option prices, dates of grants, and vesting
periods, although no option may have a term exceeding ten years.
Options granted prior to 1996 have a term of five years.
DIRECTORS' STOCK OPTION PLAN: In April 1997, the Company adopted
the Restated Non-Employee Director Stock Option Plan (the "Directors
Plan"), pursuant to which stock options for up to 500,000 shares of
Common Stock may be granted to nonemployee directors. The Directors
Plan replaced and restated the Company's prior non-employee director
stock option plan. The Directors Plan provides for automatic grants of
options to purchase 7,500 shares of the Company's common stock to each
nonemployee director serving on the date of each annual meeting of
shareholders, beginning with the 1997 annual meeting. Of the options
granted, 50% of the shares under each option are exercisable on the
second anniversary of the grant date, 75% in three years, and 100% in
four years. All option grants are at exercise prices no less than the
market value of a share of Common Stock on the date of grant and are
exercisable for a ten-year period. Options granted under the
predecessor stock option plan are exercisable for a five-year period.
Options covering 67,500 shares under the Directors Plan were
exercisable at January 3, 1998.
RESTRICTED STOCK AWARDS: Restricted stock grants, with an
outstanding balance of 54,000 shares at January 3, 1998, were awarded
to certain officers and key employees which require five years of
continuous employment from the date of grant before vesting and
receiving the shares without restriction. The number of shares to be
received without restriction is based on the Company's performance
relative to a peer group of companies. Unamortized deferred
compensation expense with respect to the restricted stock amounted to
$225,000 at January 3, 1998 and is being amortized over the five-year
vesting period. Deferred compensation expense aggregated $54,000 in
1997. A summary of restricted stock granted during 1997 is as follows:
<PAGE>
1997
-------
Shares granted . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Shares forfeited . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Weighted-average fair value of stock granted during year . . . . $ 4.81
ALL STOCK OPTION PLANS: All exercise prices represent the estimated
fair value of the Common Stock on the date of grant as determined by
the Board of Directors. Of the options granted, 50% of the shares
under each option are exercisable after two years from the grant date,
75% in three years, and 100% in four years.
Stock option transactions during the three years ended January 3,
1998 were as follows:
1995 1996 1997
---------- ---------- ----------
Options outstanding beginning of year 1,736,150 1,813,195 1,950,166
Options granted . . . . . . . . . . . 576,044 395,305 631,864
Options exercised . . . . . . . . . . (75,927) (55,371) (7,840)
Options cancelled . . . . . . . . . . (423,072) (202,963) (279,987)
---------- ---------- ----------
Options outstanding end of year . . . 1,813,195 1,950,166 2,294,203
========== ========== ==========
Options exercisable end of year . . . 386,644 734,109 1,020,674
========== ========== ==========
Weighted average option prices per
share:
Granted . . . . . . . . . . . . . . $ 4.638 $ 3.394 $ 4.878
Exercised . . . . . . . . . . . . . 0.248 0.278 2.168
Cancelled . . . . . . . . . . . . . 8.376 7.816 9.640
Outstanding end of year . . . . . . 7.569 6.904 6.028
Exercisable end of year . . . . . . 11.376 9.806 7.891
F-15<PAGE>
<PAGE>
The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company will continue to account for stock option
awards in accordance with APB Opinion No. 25. Had compensation cost
for the Plan been determined based on the fair value at the grant date
for awards in 1995, 1996 and 1997 consistent with the provisions of
SFAS No. 123, the Company's net earnings and earnings per share would
have been reduced to the pro forma amounts indicated below (amounts in
000's except per share information):
As Reported:
-----------
1995 1996 1997
---------- ---------- --------
Net earnings (loss) . . . . . . . . . $ (1,520) $ 3,480 $ 5,573
========= ========= ========
Earnings per share . . . . . . . . . $ (0.07) $ 0.17 $ 0.27
========= ========= ========
Pro forma:
---------
Net earnings (loss) . . . . . . . . . $ (1,769) $ 3,163 $ 5,142
========= ========= ========
Earnings per share . . . . . . . . . $ (0.09) $ 0.15 $ 0.25
======== ======= =======
Basic and diluted earnings per share are the same for each year.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were used in the model:
1995 1996 1997
----- ----- -----
Dividend yield . . . . . . . . . . . 0.00% 0.00% 0.00%
Expected volatility . . . . . . . . . 86% 86% 74%
Risk free interest rates . . . . . . 6.70% 5.90% 6.14%
Expected lives (years) . . . . . . . 4.34 4.34 4.51
The following table shows the options outstanding and the options
exercisable with pertinent data related to each:
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- --------------------------
Weighted
Average Weighted Number Weighted
Number Remaining Average Exercisable Average
Range of Outstanding Contractual Exercise As of Exercise
Exercise Prices As of 1/3/98 Life Price 1/3/98 Price
- ---------------- ------------ ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.12 $4.81 . . . . . . . . . 890,877 7.48 $4.059 79,856 $ 3.863
$4.88 $7.00 . . . . . . . . . 1,022,915 3.17 $5.417 562,157 $ 5.490
$7.25 $21.38 . . . . . . . 380,411 0.90 $12.282 378,661 $12.306
--------- ---- ------- --------- -------
$3.12 $21.38 . . . . . . . . 2,294,203 4.47 $ 6.028 1,020,674 $ 7.891
</TABLE>
PRINCIPAL SHAREHOLDER TRANSACTIONS: On November 13, 1990, in
consideration of the services rendered by two principals in two
companies recruiting optometrists for the Company (Note 3), the then
Chairman and largest shareholder of the Company entered into option
agreements which granted each of the two principals the option (the<PAGE>
"Option") to acquire from the then Chairman 683,775 shares of Common
Stock. The Options were exercised in 1992 and 1994.
Upon the exercise of all the Options, the Company became entitled to
a tax benefit valued at approximately $4.1 million, which is equal to
the number of option shares multiplied by the difference between the
market price of the option shares as of the date of exercise and the
exercise price for the option shares, adjusted for the impact of tax
rates. The tax benefit will be treated as a contribution to capital
and will have no impact on earnings for financial reporting purposes.
The timing and the amount of the benefit from the tax deduction will
depend on future earnings of the Company. The Company has recorded a
valuation allowance against the tax benefit. The Company has received
a deficiency notice from the Internal Revenue Service with respect to
the tax benefit the Company expects to realize from the exercise of
the Options. (See Note 9.)
PREFERRED STOCK: The Company is authorized to issue up to 5,000,000
shares of preferred stock, par value $1 per share, with such terms,
characteristics and designations as may be determined by the Board of
Directors. No such shares are issued and outstanding.
SHAREHOLDER RIGHTS PLAN: In January of 1997, the Company's Board of
Directors approved a Shareholders Rights Plan (the "Rights Plan"). The
Rights Plan provides for the distribution of one Right for each
outstanding share of the Company's Common Stock held of record as of
the close of business on January 27, 1997 or that thereafter becomes
outstanding prior to the earlier of the final expiration date of the
Rights or the first date upon which the Rights become exercisable.
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Participating Cumulative
Preferred Stock, par value $0.01 per share, at a price of $40.00 (the
"Purchase Price"), subject to adjustment. The Rights are not
exercisable until ten calendar days after a person or group (an
"Acquiring Person") buys or announces a tender offer for 15% or more
of the Company's Common Stock, or if any person or group has acquired
such an interest, the acquisition by that person or group of an
additional 2% of the Company's Common Stock. In the event the Rights
F-16<PAGE>
<PAGE>
become exercisable, then each Right will entitle the holder to receive
that number of shares of Common Stock (or, under certain
circumstances, an economically equivalent security or securities of
the Company) having a market value equal to the Purchase Price. If,
after any person has become an Acquiring Person (other than through a
tender offer approved by qualifying members of the Board of
Directors), the Company is involved in a merger or other business
combination where the Company is not the surviving corporation, or the
Company sells 50% or more of its assets, operating income, or cash
flow, then each Right will entitle the holder to purchase, for the
Purchase Price, that number of shares of common or other capital stock
of the acquiring entity which at the time of such transaction have a
market value of twice the Purchase Price. The Rights will expire on
January 26, 2007, unless extended, unless the Rights are earlier
exchanged, or unless the Rights are earlier redeemed by the Company in
whole, but not in part, at a price of $0.001 per Right. The
Shareholder Rights Plan was amended in February 1998. (See Note 16.)
F-17
<PAGE>
<PAGE>
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly data for the Company for the fiscal years ended
December 28, 1996 and January 3, 1998 is as follows (in 000's except
per share information). The fourth quarter of fiscal 1997 consisted of
14 weeks; all other quarters consisted of 13 weeks.
YEAR ENDED DECEMBER 28, 1996:
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------
March 30 June 29 September 28 December 28
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . $40,133 $ 40,525 $41,347 $38,371
Cost of goods sold . . . . . . . . . 18,724 19,133 19,684 19,151
------- -------- ------- -------
Gross profit . . . . . . . . . . . . 21,409 21,392 21,663 19,220
Selling, general, and administrative
expenses . . . . . . . . . . . . . 19,386 19,202 19,679 18,653
------- -------- ------- -------
Operating income . . . . . . . . . . 2,023 2,190 1,984 567
Other expense, net . . . . . . . . . 659 507 453 465
------- -------- ------- -------
Income before income taxes . . . . . 1,364 1,683 1,531 102
Provision for income taxes . . . . . 373 431 321 75
------- -------- ------- -------
Net income . . . . . . . . . . . . . $ 991 $ 1,252 $ 1,210 $ 27
======= ======== ======= =======
Basic earnings per common share . . . $ .05 $ .06 $ .06 $ .00
======= ======== ======= =======
Diluted earnings per common share . . $ .05 $ .06 $ .06 $ .00
======= ======== ======= =======
(/TABLE>
YEAR ENDED JANUARY 3, 1998:
Quarter Ended
-------------------------------------------------
March 29 June 28 September 27 January 3
--------- -------- ------------ ---------
Net sales . . . . . . . . . . . . . . $ 44,362 $ 44,512 $ 45,862 $51,618
Cost of goods sold . . . . . . . . . 20,143 20,654 20,926 24,640
-------- -------- -------- -------
Gross profit . . . . . . . . . . . . 24,219 23,858 24,936 26,978
Selling, general, and administrative
expenses . . . . . . . . . . . . . 20,971 20,793 21,559 25,833
-------- -------- -------- -------
Operating income . . . . . . . . . . 3,248 3,065 3,377 1,145
Other expense, net . . . . . . . . . 488 391 314 361
-------- -------- -------- -------
Income before income taxes . . . . . 2,760 2,674 3,063 784
Provision for income taxes . . . . . 1,107 1,054 1,204 343
-------- -------- -------- -------
Net income . . . . . . . . . . . . . $ 1,653 $ 1,620 $ 1,859 $ 441
======== ======== ======== =======
Basic earnings per common share . . . $ .08 $ .08 $ .09 $ .02
======== ======== ======== =======
Diluted earnings per common share . . $ .08 $ .08 $ .09 $ .02
======== ======== ======== =======
<PAGE>
14. DISPOSITIONS
SALE OF FRENCH OPERATIONS: On December 29, 1995, the Company sold
its shares in IVACAR, S.A., its French subsidiary, to Carrefour
France, for the sum of 18,000,000 FF ($3.7 million U.S.), paid in cash
at the closing. The initial sum was received the first business day of
1996. In connection with this transaction, the Company recorded a gain
of $491,000 in 1995. Such gain was offset by the provisions discussed
below.
SALE OF VENTURE OPERATIONS: The Company's vision centers located in
Venture Department Stores were disposed of in the fourth quarter 1995
and the first quarter 1996. In anticipation of the disposition of the
Venture operations, a provision of $1.4 million was recorded in 1995
to reduce the net assets of the Venture operations to management's
estimate of net realizable value.
Net sales and operating losses for each operation (exclusive of
disposition costs, allocated corporate overhead, interest and taxes)
for each period presented is summarized as follows (in 000's):
Venture France
---------- -------
Year ended December 28, 1996
Net sales . . . . . . . . . . . . . . . . . . . $ 37 $ 402
Operating losses . . . . . . . . . . . . . . . $ (81) $ (240)
Year ended December 30, 1995
Net sales . . . . . . . . . . . . . . . . . . . $ 2,257 $ 5,117
Operating losses . . . . . . . . . . . . . . . $ (2,073) $ (523)
INVESTMENT IN CZECH REPUBLIC AND SLOVAKIA: In 1995, the Company
decided that it would pursue the disposition of its interest in the
joint venture which operated three vision centers in Eastern Europe. A
provision has been recorded to reflect management's estimate of net
realizable value of the Company's investment in such joint venture.
F-18<PAGE>
<PAGE>
AURRERA STORE CLOSURES: In 1995, the Company decided to close 16
underperforming vision centers located in Aurrera stores. The Mexican
operations recorded a $346,000 provision to reduce the assets in those
locations to management's estimate of net realizable value and record
separation costs for employees. The Company closed six vision centers
in February 1995 and the remainder in the first quarter 1996.
FORECLOSURE PROCEEDINGS---FRAME MANUFACTURER: In February 1995, the
Company foreclosed on its security interest covering the assets of
CompuFrame, a frame manufacturer. The Company recorded a provision of
$400,000 to reduce the net carrying amount of assets held for sale to
management's estimate of their net realizable value. The remaining
assets were liquidated in 1996.
The net assets of the Venture operations and the frame manufacturer
were classified as assets held for sale in the current asset section
of the Company's balance sheet at December 30, 1995. The dispositions
were completed in 1996. For purposes of the accompanying statements of
cash flows, the change in components comprising assets held for sale
is reflected in the original balance sheet classification.
15. REPORTABLE BUSINESS SEGMENTS
The Company's operating business segments provide quality retail
optical services and products that represent high value and
satisfaction to the customer. Vision centers offer eyewear through
each retail location, which includes eyeglasses, contact lenses, and
sunglasses. Optometrists are available on-site to provide eye
examinations. The separate businesses within the Company use the same
production processes for eyeglass lens manufacturing, offer products
and services to a broad range of customers and utilize the Company's
central administrative offices to coordinate product purchases and
distribution to retail locations. A field organization provides
management support to individual store locations. The Mexico operation
has a separate laboratory and distribution center in Mexico and buys a
majority of its products from local vendors. However, market demands,
customer requirements, laboratory manufacturing and distribution
processes, as well as product offerings, are substantially the same
for the domestic and Mexico business. Consequently, the Company
considers its domestic and Mexico businesses as one reportable segment
under the definitions required by SFAS 131 - Disclosures about
Segments of an Enterprise and Related Information.
Information relative to sales and identifiable assets for the United
States and Mexico for the fiscal years ended December 30, 1995,
December 28, 1996, and January 3, 1998 are summarized in the following
tables (in 000's). Identifiable assets include all assets associated
with operations in the indicated reportable segment excluding
intercompany receivables and investments.
United States Mexico Other Consolidated
------------- ------ ----- ------------
1997
Sales . . . . . . . . . . $ 182,333 $2,988 $1,033 $ 186,354
========= ====== ====== =========
Identifiable assets . . . $ 80,284 $2,279 $ 687 $ 83,250
========= ====== ====== =========
1996
Sales . . . . . . . . . . $ 156,599 $2,068 $1,709 $ 160,376
========= ====== ====== =========
Identifiable assets . . . $ 72,209 $1,811 $ 544 $ 74,564
========= ====== ====== =========
<PAGE>
1995
Sales . . . . . . . . . . $ 136,633 $2,915 $6,025 $ 145,573
========= ====== ====== =========
Identifiable assets . . . $ 74,270 $2,611 $4,356 $ 81,237
========= ====== ====== =========
16. SUBSEQUENT EVENTS AND INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited condensed consolidated financial
statements as of October 3, 1998 and for the nine months ended
September 27, 1997 and October 3, 1998, have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. Although management believes that the
disclosures are adequate to make the information presented not
misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with the Company's most
recent audited consolidated financial statements and notes thereto. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the
financial position, results of operations, and cash flows for the
interim periods presented have been made. Operating results for the
interim periods presented are not necessarily indicative of the
results that may be expected for the year ending January 2, 1999.
Certain amounts in the September 27, 1997 condensed consolidated
financial statements have been reclassified to conform to the October 3,
1998 presentation.
In the first quarter of 1998, the Company and the Internal Revenue
Service executed a definitive settlement agreement to settle
litigation in the U.S. Tax Court arising out of the grant and exercise
of certain stock options and a tax deduction claimed by the Company in
connection therewith. The settlement provides that the Company will
receive substantially all of the deduction it has claimed. As a result
of the settlement, the Company has reassessed the realizability of
F-19<PAGE>
<PAGE>
related net operating loss carryforwards and, accordingly, reduced the
related valuation allowance in the first quarter. An after-tax benefit
of $3.3 million has been recorded as a contribution to capital and
will have no impact on earnings for financial reporting purposes.
In February 1998, the Company's Board of Directors amended the
Company's Shareholder Rights Plan (See Note 12) effective March 1,
1998 to provide that Rights under such plan can be redeemed and
certain amendments to such plan can be effected only with the approval
of the Continuing Directors, which are defined in the Rights Plan as
the current directors and any future directors that are approved or
recommended by Continuing Directors.
On July 28, 1998, the Company acquired all of the issued and
outstanding capital stock of Frame-n-Lens Optical, Inc. ("Frame-n-
Lens"), which operates approximately 156 freestanding retail vision
centers as well as approximately 130 retail vision centers located
primarily in Sam's Clubs. Frame-n-Lens also operates an optical
laboratory and has its administrative offices in Fullerton,
California. The purchase price was $32.3 million consisting of cash
and the assumption of debt. The transaction was financed through the
Company's revolving credit facility. Annual sales for Frame-n-Lens for
1997 were $78.4 million.
On October 23, 1998, the Company completed its tender offer for all
the issued and outstanding capital stock of New West Eyeworks, Inc.
("New West"), which operates approximately 126 free-standing retail
vision centers as well as approximately 52 retail vision centers located
in Fred Meyer stores. New West also operates an optical laboratory
and has its administrative offices in Tempe, Arizona. The Company
paid approximately $68.3 million consisting of cash and the assumption
of approximately $43.2 million of debt. The transaction was financed
through the issuance of the Company's $125 million Senior Notes due
2005. The Company intends to continue to operate subsequently all of
the vision centers and to achieve administrative and manufacturing
synergies.
In anticipation of the Offering, the Company entered into three
anticipatory hedging transactions. The Company settled these
transactions for approximately $4.6 million in September 1998 with $.6
million cash and additional borrowings of $4.0 million on the Existing
Credit Facility. The settlement costs will be treated as deferred
financing costs amortized over the life of the Notes.
F-20
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Frame-n-Lens Optical, Inc.
We have audited the accompanying consolidated balance sheets of
Frame-n-Lens Optical, Inc. as of December 29, 1996, and December 28,
1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in
the period ended December 28, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying
financial statements and initial issuance of our report thereon dated
February 20, 1998, which report contained an explanatory paragraph
regarding the Company's ability to continue as a going concern, the
Company, as discussed in Note 10, has been acquired. Therefore, the
conditions that raised substantial doubt about whether the Company
will continue as a going concern no longer exist.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Frame-n-Lens Optical, Inc. at December 29, 1996
and December 28, 1997, and the consolidated results of its operations
and its cash flows for each of for the three years in the period ended
December 28, 1997 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
February 20, 1998, except for
Note 10 as to which the date
is July 25, 1998
F-21
<PAGE>
<PAGE>
FRAME-N-LENS OPTICAL, INC.
CONSOLIDATED BALANCE SHEETS
</TABLE>
<TABLE>
<CAPTION>
December 29, December 28, June 28,
1996 1997 1998
------------ ------------ -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS <F2>
Current asset:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 484,472 $ 542,748 $ 284,170
Accounts receivable, net of allowance for doubtful accounts of
$30,563 (December 29, 1996), $15,462 (December 28, 1997) and
$20,105 (June 28, 1998) . . . . . . . . . . . . . . . . . . . 324,630 458,186 464,519
Inventories:
Frames, lenses and cases . . . . . . . . . . . . . . . . . . 4,463,224 4,679,599 5,514,294
Work in process and finished goods . . . . . . . . . . . . . 360,824 379,014 378,850
------------ ------------ ------------
4,824,048 5,058,613 5,893,144
Prepaid expenses and other current assets . . . . . . . . . . . 377,559 572,512 160,294
Income tax receivable . . . . . . . . . . . . . . . . . . . . . 829,200 426,677
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 630,000 494,100 494,100
------------ ------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . 6,640,709 7,955,359 7,722,904
Furniture, equipment and improvements, at cost:
Store equipment and improvements . . . . . . . . . . . . . . . 9,159,937 11,543,894 11,449,381
Lab equipment and improvements . . . . . . . . . . . . . . . . 5,162,245 4,253,500 4,270,874
Office furniture and equipment . . . . . . . . . . . . . . . . 1,814,406 3,682,197 4,074,636
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . 60,721 48,131 30,946
------------ ------------ ------------
16,197,309 19,527,722 19,825,837
Less accumulated depreciation and amortization. . . . . . . . . (10,022,931) (12,239,140) (13,211,671)
------------ ------------ ------------
6,174,378 7,288,582 6,614,166
Goodwill, net of $2,312,110 (December 29, 1996), $3,185,829 (December
28, 1997) and $3,622,689 (June 28, 1998) of accumulated
amortization . . . . . . . . . . . . . . . . . . . . . . . . . 10,797,647 10,134,406 9,750,492
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 196,000 76,000 76,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 493,449 143,448 132,482
------------ ------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . $ 24,302,183 $ 25,597,795 $ 24,296,044
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 4,975,432 $ 6,697,094 $ 6,512,104
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . 1,233,545 1,224,695 1,329,969
Accrued compensation and related expenses . . . . . . . . . . . 4,207,964 3,726,966 3,801,110
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . 1,443,647 1,849,498 2,052,398
Other current liabilities . . . . . . . . . . . . . . . . . . . 2,771,811 3,144,302 3,566,648
Current portion of bank credit line . . . . . . . . . . . . . . 1,157,877 1,643,248
Current portion of capital lease obligations . . . . . . . . . 660,083 397,102 279,597
Current maturities of long-term debt . . . . . . . . . . . . . 1,327,484 5,431,827 4,647,497
------------ ------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . 16,619,966 23,629,361 23,832,571
Bank line of credit . . . . . . . . . . . . . . . . . . . . . . . 83,418 --- ---
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 3,860,723 --- 359,938
Capital lease obligations . . . . . . . . . . . . . . . . . . . . 477,326 70,242 ---
Commitments and contingencies
<PAGE>
Shareholders' equity:
Preferred stock, $1,000 par value:
Authorized shares---5,042
Issued and outstanding shares---3,675 (December 29, 1996),
3,823 (December 28, 1997) and 3,899 (June 28, 1998)
Liquidation preference at $1,000 per share . . . . . . . . . 3,675,000 3,823,000 3,899,000
Common stock, no par value:
Authorized shares---1,546,000
Issued and outstanding shares---432,096 (December 29, 1996),
424,615 (December 28, 1997) and 423,480 (June 28, 1998) . . 2,471,219 1,956,984 1,879,825
Redeemable warrants . . . . . . . . . . . . . . . . . . . . . . 969,701 1,024,140 628,888
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (3,855,170) (4,905,932) (6,304,178)
------------ ------------ ------------
Total shareholders' equity . . . . . . . . . . . . . . . 3,260,750 1,898,192 103,535
------------ ------------ ------------
Total liabilities and shareholders' equity . . . . . . . $ 24,302,183 $ 25,597,795 $ 24,296,044
============ ============ ============
(/TABLE>
See accompanying notes.
F-22
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FRAME-N-LENS OPTICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended Six months ended
------------------------------------------- ------------------------
December 31, December 29, December 28, June 29, June 28,
1995 1996 1997 1997 1998
------------ ----------- ----------- ---------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales .................... $71,895,523 $79,486,433 $78,370,815 $41,186,837 $ 38,890,403
Cost of sales................. 28,550,548 28,454,098 28,632,435 14,800,460 13,837,225
Gross profit.................. 43,344,975 51,032,335 49,738,380 26,386,377 25,053,178
------------ ----------- ----------- ---------- ------------
Operating expenses:
Selling, general and
administrative........... 44,453,076 47,819,434 49,782,968 25,187,643 26,336,568
Impairment of long-lived
assets................... 1,902,667 --- --- --- ---
Leasehold abandonments...... 290,101 --- --- --- ---
------------ ----------- ----------- ---------- ------------
Total operating
expenses.......... 46,645,844 47,819,434 49,782,968 25,187,643 26,336,568
------------ ----------- ----------- ---------- ------------
Operating income (loss)....... (3,300,869) 3,212,901 (44,588) 1,198,734 (1,283,390)
Interest...................... 974,278 851,696 803,735 380,963 464,799
------------ ----------- ----------- ---------- ------------
Income (loss) before
income tax provision
(benefit)................... (4,275,147) 2,361,205 (848,323) 817,771 (1,748,189)
Income tax provision
(benefit)................... --- 959,000 --- 333,384 (30,691)
------------ ----------- ----------- ---------- ------------
Net income
(loss)............ $ (4,275,147) $ 1,402,205 $ (848,323) $ 484,387 $ (1,717,498)
============ =========== =========== ========== ============
(/TABLE>
See accompanying notes.
F-23
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FRAME-N-LENS OPTICAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Common Preferred Redeemable Accumulated Shareholders'
Stock Stock Warrants Deficit Equity
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balances at January 1,
1995.................................... $ 2,871,828 $ 3,397,000 $ 1,048,000 $ (810,943) $ 6,505,885
Net loss................................ --- --- --- (4,275,147) (4,275,147)
Increase warrant to
redemption value..................... --- --- 91,827 (91,827) ---
Issuance of warrants to
purchase 8,588 shares of
stock................................ --- --- 17,176 --- 17,176
Cumulative preferred
dividends, 136 shares................ --- 136,000 --- (136,000) ---
Repurchase of stock, 591
shares............................... (48,494) --- --- --- (48,494)
----------- ----------- ----------- ----------- -----------
Balances at December 31,
1995 ................................... 2,823,334 3,533,000 1,157,003 (5,313,917) 2,199,420
Net income.............................. --- --- 1,402,205 1,402,205 ---
Decrease warrant to
redemption value..................... --- --- (198,542) 198,542 ---
Issuance of warrants to
purchase 5,620 shares of
stock .............................. --- --- 11,240 --- 11,240
Cumulative preferred
dividends, 142 shares............... --- 142,000 --- (142,000) ---
Repurchase of stock, 4,557
shares............................. (352,115) --- --- --- (352,115)
----------- ----------- ----------- ----------- -----------
Balances at December 29,
1996.................................. 2,471,219 3,675,000 969,701 (3,855,170) 3,260,750
Net loss.............................. --- --- --- (848,323) (848,323)
Increase warrant to
redemption value................... --- --- 54,439 (54,439) ---
Cumulative preferred
dividends, 148 shares.............. --- 148,000 --- (148,000) ---
Repurchase of stock, 7,577
shares............................. (514,235) --- --- --- (514,235)
----------- ----------- ----------- ----------- -----------
Balances at December 28,
1997.................................. 1,956,984 3,823,000 1,024,140 (4,905,932) 1,898,192
Net loss (unaudited).................. --- --- --- (1,717,498) (1,717,498)
Decrease warrant to
redemption value
(unaudited)........................ --- --- (395,252) 395,252 ---
Cumulative preferred
dividends, 76 shares
(unaudited)........................ --- 76,000 --- (76,000) ---
Repurchase of stock, 2,026
shares (unaudited)................. (77,159) --- --- --- (77,159)
----------- ----------- ----------- ----------- -----------
Balances at June 28, 1998
(unaudited).......................... $ 1,879,825 $ 3,899,000 $ 628,888 $(6,304,178) $ 103,535
=========== =========== =========== =========== ===========
(/TABLE>
See accompanying notes.
F-24<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
FRAME-N-LENS OPTICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Six months ended
------------------------------------------- ----------------------------
December 31, December 29, December 28, June 29, June 28,
1995 1996 1997 1997 1998
------------- ------------- -------------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................... $(4,275,147 $ 1,402,205 $ (848,323) $ 484,387 $(1,717,498)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Charge for long-lived asset
impairment....................... 1,902,667 --- --- --- ---
Goodwill amortization.............. 873,917 873,917 873,719 437,860 436,860
Depreciation and amortization...... 2,757,352 1,945,864 2,172,058 962,966 972,531
Loss on disposition of
furniture, equipment and
improvements..................... 374,990 39,717 76,645 --- 17,164
Deferred income taxes.............. (201,000) 90,000 255,900 --- ---
Reserve for inventories............ 100,000 --- --- --- 75,000
Changes in operating assets and
liabilities:
Accounts receivable.............. (158,912) 62,385 (133,556) (328,188) (6,333)
Inventories...................... (505,667) (455,299) (234,562) (509,818) (909,531)
Prepaid expenses and other
current assets................. (26,582) (195,661) (194,953) 188,004 412,218
Income tax receivable............ --- --- (829,200) --- 402,523
Other assets..................... 282,226 (41,746) 51,494 265,213 (41,951)
Accounts payable and other
current liabilities............ 1,599,239 (1,144,824) 2,094,153 1,034,564 237,356
Customer deposits................ 404,095 (56,343) (8,850) (49,421) 105,274
Accrued compensation and
related expenses............... 517,726 1,392,578 (480,998) (879,374) 74,144
Deferred revenue................. 394,675 616,074 405,851 280,224 202,900
----------- ----------- ----------- ---------- -----------
Net cash provided by
operating activities...... 4,039,579 4,528,867 3,199,378 1,886,417 260,657
INVESTING ACTIVITIES
Purchase of furniture, equipment
and improvements................... (3,583,339) (1,455,901) (3,273,881) (1,755,566) (315,279)
----------- ----------- ----------- ---------- -----------
Net cash used in investing
activities......................... (3,583,339) (1,455,901) (3,273,881) (1,755,566) (315,279)
FINANCING ACTIVITIES
Principal payments on capital
lease obligations.................. (599,899) (753,576) (670,065) (352,954) (187,747)
Proceeds from long-term debt......... --- 5,000,000 1,249,992 --- ---
Repayment of long-term debt.......... (2,202,732) (5,039,962) (1,334,192) (530,346) (424,392)
Net (payments) proceeds from bank
line of credit..................... 1,639,833 (1,109,165) 1,074,459 585,451 485,371
(Repayment of) proceeds from note
payable to shareholders............ 750,000 (750,000) --- --- ---
Purchase of treasury stock........... (48,494) (81,441) (187,415) (61,354) (77,188)
----------- ----------- ----------- ---------- -----------
<PAGE>
Net cash provided by
(used in) financing
activities................ (461,292) (2,734,144) 132,779 (359,203) (203,956)
----------- ----------- ----------- ---------- -----------
Increase (decrease) in cash ......... (5,052) 338,822 58,276 (228,352) (258,578)
Cash at beginning of year............ 150,702 145,650 484,472 484,472 542,748
----------- ----------- ----------- ---------- -----------
Cash at end of period................ $ 145,650 $ 484,472 $ 542,748 $ 256,120 $ 284,170
=========== =========== ============ ========== ===========
Supplemental disclosures of
cash flow information
Cash paid during the year for:
Interest........................... $ 886,000 $ 652,000 $ 686,000 $ 349,000 $ 376,000
Income taxes ...................... 112,000 904,000 532,000 303,000 ---
</TABLE>
The Company acquired approximately $732,000, $556,000, $0, $0 and
$104,000 in equipment under capital leases and issued 136, 142, 148,
73 and 76 shares of preferred stock as dividends for the years ended
December 31, 1995, December 29, 1996, December 28, 1997, and six
months ended June 29, 1997, and June 28, 1998, respectively.
See accompanying notes.
F-25<PAGE>
<PAGE>
Frame-n-Lens Optical, Inc.
Notes to Consolidated Financial Statements
December 28, 1997
(Unaudited with respect to the periods ended June 29, 1997 and June 28, 1998)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Frame-n-Lens Optical, Inc. (the Company) sells eyeglasses from
159 California retail stores which it owns and operates. One of
the Company's wholly owned subsidiaries, Family Vision Centers,
Inc. (FVC) sells eyeglasses from 130 retail stores that are
located in the Sam's Club and Wal-Mart retail chains within the
United States. The Company's fiscal year end is the Sunday
nearest December 31.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The interim financial statements as of June 29, 1997 and June 28,
1998 and for each of the six months then ended, have been
prepared on the same basis as the audited financial statements.
In the opinion of management, all adjustments (consisting of
normal accruals) considered necessary for a fair presentation
have been included in the unaudited financial statements. The
results for the six months ended June 28, 1998 are not
necessarily indicative of the results to be expected for the full
year and for any other interim period.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant intercompany transactions have been eliminated in
consolidation.
ACCOUNTING ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
REVENUE RECOGNITION
The Company collects deposits from customers in advance of
filling orders and recognizes the related revenues on product
sales upon delivery to the customer. Additionally, the Company
defers revenue received on sales of separately priced warranties
and recognizes the revenue on a straight-line basis over the
warranty period.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense
for the years ended December 31, 1995, December 29, 1996, and
December 28, 1997, was approximately $3,263,000, $5,078,000, and
$5,386,000, respectively.
<PAGE>
INVENTORIES
Inventories are stated at the lower of cost or market, with
cost determined by approximating the first-in, first-out method.
Approximately 12% ($2,964,000), 9% ($2,460,000) and 11%
($3,140,000), of total purchases were acquired from one vendor
during 1995, 1996 and 1997 fiscal years, respectively.
GOODWILL
The cost in excess of fair value of assets acquired resulted
from the acquisition of FVC and is being amortized on a straight-
line basis over 15 years.
F-26<PAGE>
<PAGE>
DEPRECIATION AND AMORTIZATION
Depreciation of furniture and equipment is provided on the
straight-line method over their estimated useful lives (primarily
five years). Leasehold improvements are amortized over the
shorter of the lease term or useful life.
INCOME TAXES
The Company accounts for income taxes under the liability
method required by FASB Statement 109. Deferred income taxes
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial
statement purposes and the amount used for income tax purposes.
Tax bases of assets and liabilities are measured using the
enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
ASSET IMPAIRMENT
The Company adopted FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," in March 1995. Statement No. 121 requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amounts. Statement 121 also
addresses the accounting for long-lived assets that are expected
to be disposed of.
RECLASSIFICATIONS
Certain balances from the December 31, 1995 and December 29,
1996, financial statements have been reclassified to conform to
the December 28, 1997, presentation.
STOCK-BASED COMPENSATION
The Company has elected to continue to account for stock-based
compensation plans using the intrinsic value-based method
prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. Management has determined that the effect of
applying Financial Accounting Standards Board Statement No. 123's
fair-value method to the Company's stock-based compensation plans
results in net income that is not materially different from
amounts reported. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
<PAGE>
2. BANK FINANCING
Long-term debt consists of the following:
December 29, December 28,
1996 1997
------------ ------------
Bank line of credit ............... $ 83,418 $ 1,157,877
Term loan to bank.................. 4,791,668 4,833,333
Other ............................. 396,539 598,494
---------- -----------
5,271,625 6,589,704
Less amounts due within one year.. (1,327,484) (6,589,704)
----------- -----------
$ 3,944,141 $ ---
=========== ===========
The Company maintains a credit facility with a bank (Credit
Facility), providing for a line of credit and a term loan. The Credit
Facility, as amended, currently consists of a $2,300,000 line of
credit and a $5,000,000 term loan. The Credit Facility is secured by
substantially all of the Company's assets. The loan agreements contain
certain restrictive covenants, including limitations on capital
expenditures, compensation to shareholders and incurrence of new debt,
and requirements to maintain certain financial ratios. At December 28,
1997, the Company was in violation of certain of the covenants.
F-27<PAGE>
<PAGE>
The line of credit matures on May 1, 1998, with interest payable
monthly at prime (8.5% at December 28, 1997), plus 4% and principal
due at maturity. The line of credit has $1,157,877 outstanding at
December 28, 1997, and has been included in the current maturities of
long-term debt on the balance sheet. The $5,000,000 term loan also
matures May 1, 1998, with interest payable monthly at prime (8.5% at
December 28, 1997), plus 1%.
3. STOCK PURCHASE WARRANT
In connection with the financing obtained originally on March 31,
1989, for the establishment of an Employee Stock Option Plan, the
Company issued a stock purchase warrant to a bank to purchase 3% of
the Company's outstanding common stock (including the warrant shares)
on the date the warrant is exercised at a purchase price of $.01 per
share. The warrant may be exercised at anytime through March 31, 1999.
Effective March 31, 1994, the warrant holder may request the Company
to repurchase the warrant at its fair market value on the date
exercised, payable in twelve quarterly installments. The Company has
changed the value of the warrant from the value assigned at the date
of issuance to the highest redemption price, which is estimated by
management to be $82, $68, and $78 at December 31, 1995, December 29,
1996, and December 28, 1997, respectively, and is based upon a
valuation of the Company as of December 31, 1994, December 31, 1995
and December 31, 1996, respectively. This resulted in a charge/(credit)
to accumulated deficit of $91,827 at December 31,1995, $(198,542) at
December 29, 1996 and $54,439 at December 28, 1997.
In accordance with a term note payable which was repaid in full
during 1996, the Company issued warrants to purchase 8,588 and 5,620
shares of common stock during the years ended December 31, 1995 and
December 29, 1996. There were warrants outstanding to purchase 17,042
shares of Common Stock, Series D, at December 29, 1996 and December
28, 1997, respectively.
4. EMPLOYEE BENEFIT PLANS
The Company maintains an Employees' 401(k) Plan and
Health/Disability Plan (the 401(k) Plan) covering substantially all
employees. Under the 401(k) Plan, employees may elect to contribute a
portion of their wages to a retirement fund. The Company, at its
discretion, may make contributions to the 401(k) Plan, which are
allocated among the participants. The Company made no contributions
for the years ended December 31, 1995, December 29, 1996 and December 28,
1997.
The Company has an Employee Stock Ownership Plan (the ESOP) which
provides employees an opportunity to participate and share in the
growth of the Company through stock ownership. All full-time employees
who are at least 18 years of age are eligible to participate in the
ESOP as of their initial date of employment, provided they have
completed four months of employment by the end of the ESOP year. There
was no contribution expense for the years ended December 31, 1995,
December 29, 1996 and December 28, 1997.
At the option of the participants, the Company may purchase shares
from the participant who is withdrawing from the plan. During 1995,
1996 and 1997, the Company repurchased 591, 4,557 and 7,577 shares,
respectively, from participants who withdrew from the plan at either
$68 or $82 per share, and recorded notes payable in original amounts
of $0, $284,450 and $395,488, respectively. Repurchased shares are
redeemed and treated as authorized but unissued shares.
F-28<PAGE>
<PAGE>
5. INCOME TAXES
Significant components of the provision (benefit) for income taxes
attributable to operations are as follows:
December 31, December 29, December 28,
1995 1996 1997
------------ ------------ ------------
Current:
Federal . . . $139,000 $ 711,000 $ (261,500)
State . . . . 62,000 158,000 1,900
-------- --------- ----------
201,000 869,000 (259,600)
Deferred:
Federal . . . (1,314,000) 51,000 (6,900)
State . . . . (391,000) 39,000 (13,200)
----------- --------- --------
(1,705,000) 90,000 (20,100)
Valuation allowance.. 1,504,000 279,700
----------- --------- --------
$ --- $ 959,000 $ ---
=========== ========= ========
Significant components of the Company's deferred tax assets and tax
liabilities are as follows:
<TABLE>
<CAPTION>
December 29 December 28
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not currently deductible for tax......... $ 1,812,000 $ 1,981,700
Assets impaired........................................... 748,000 748,000
Other, net................................................ 123,000 188,200
----------- -----------
Total deferred tax assets.................................. 2,683,000 2,917,900
Deferred tax liabilities:
Goodwill ................................................. (181,000) (167,300)
Tax depreciation in excess of book depreciation........... (18,000) (219,000)
Expenses deducted for tax................................. (154,000) (177,800)
----------- -----------
Total deferred tax liabilities............................. (353,000) (564,100)
----------- -----------
Net........................................................ 2,330,000 2,353,800
Valuation allowance........................................ (1,504,000) (1,783,700)
----------- -----------
$ 826,000 $ 570,100
=========== ===========
</TABLE>
6. CAPITAL STOCK
Shares authorized under the Company's articles of incorporation
amount to 1,551,042 and are allocated to five series as of December 28,
1997, as follows:
<PAGE>
Authorized
----------
Series A Preferred..... 5,042
Series A Common........ 500,000
Series B Common........ 500,000
Series C Common........ 500,000
Series D Common........ 46,000
Series A Preferred shareholders are entitled to receive dividends
(the Dividends) at the rate of $40.00 (4%) per share per annum out of
any funds legally available prior, and in preference, to (i) the
declaration or payment of a dividend (other than a dividend payable in
common stock) on the common stock of the Company, or (ii) a redemption
or repurchase of the common stock of the Company. The Dividends
accumulate daily from the date of issuance and are payable
semiannually beginning six months after the date that the Series A
Preferred is first issued by the Company and continuing on each six-
month anniversary thereafter. The payment of such dividends may be
made in cash or by issuing additional Series A Preferred shares.
Series A Preferred shareholders shall be entitled to receive $1,000
per share prior and in preference to distribution of any of the assets
or surplus funds of the Company to the holders of the common stock.
Series A and B Common shareholders shall be entitled to one vote for
each share of stock held, and shall each be entitled to elect two
members of the Board of Directors. Series A preferred and Series C and
D Common shareholders have no voting rights, and Series C and Series D
Common shares are convertible into Series A and Series B Common shares
upon a change of control of the Company.
F-29<PAGE>
<PAGE>
In connection with the acquisition of FVC in 1994, 2,947 shares of
common stock were placed in escrow as collateral for a note from
certain former FVC shareholders which resulted from their
indemnification of liabilities and net worth of FVC in the
acquisition.
7. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company leases office, manufacturing and retail store facilities
under operating lease agreements. The minimum annual rents for most of
these leases are subject to increases based on changes in the Consumer
Price Index. Additionally, most leases have renewal options, and
several leases are subject to contingent rents based upon a percentage
of sales. The amount of rent based upon a percentage of sales
(included in rent expense) is approximately $2,048,000, $2,805,000 and
$2,592,000 for the years December 31, 1995, December 29, 1996 and
December 28, 1997, respectively.
Minimum future lease payments under capital leases and noncancelable
operating leases with an initial term of one year or more and future
minimum capital lease payments at December 28, 1997, are approximately
as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- -----------
<s. <C> <C>
1998.............................................................. $424,335 $ 4,767,000
1999.............................................................. 67,786 4,013,000
2000.............................................................. --- 3,312,000
2001.............................................................. --- 2,813,000
2002.............................................................. --- 2,460,000
Thereafter........................................................ --- 4,361,000
-------- -----------
Total minimum lease payments............................ 492,121 $21,726,000
-------- ===========
Less amount representing interest................................. 24,777
--------
Present value of minimum capital lease payments (including
current portion of $397,102).................................... $467,344
========
</TABLE>
Rent expense under operating leases approximated $7,835,000,
$8,335,000 and $7,543,615 for the years ended December 31, 1995,
December 29, 1996 and December 28, 1997, respectively.
During the years ended December 29, 1996, and December 28, 1997, the
Company entered into several capital leases for lab and computer
equipment. Total cost and accumulated amortization related to assets
under capital leases amounted to $3,143,555 and $2,216,649,
respectively, at December 29, 1996, and $1,453,715 and $805,313,
respectively, at December 28, 1997. Amortization of assets recorded
under capital leases is included in depreciation expense.
<PAGE>
CONTINGENCIES
There are certain legal actions pending against the Company which
have arisen in the normal course of operations. In the opinion of
management, after consultation with counsel, the ultimate resolution
of such actions is not expected to have a significant effect on the
financial position or operations of the Company.
8. STOCK OPTIONS
The Company has granted nonqualified stock options to a key officer
to purchase an aggregate of 18,000 shares of Series C Common Stock at
appraised values of either $60.63 or $82 per share, which management
believes approximated market value at the grant dates. The options
vest (i) 10,000 shares over a five-year period in accordance with the
option agreement (at December 31, 1995, December 29, 1996, and
December 28, 1997, options to purchase 7,600, 9,200 and 10,000 shares,
respectively, were exercisable), and (ii) 4,000 shares at June 17,
1996, and 4,000 shares at December 17, 1998.
F-30<PAGE>
<PAGE>
Additionally, as of fiscal years December 31, 1995, December 29,
1996, and December 28, 1997, the Company has granted nonqualified
stock options to key employees to purchase shares of Series C Common
Stock. These options vest 20% per year commencing on each employee s
employment anniversary date. Such options are canceled upon
termination prior to vesting.
A summary of the Company's stock option activity and related
information for the following years follows:
<TABLE>
<CAPTION>
December 31, 1995 December 29, 1996 December 28, 1997
--------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <c. <C>
Options outstanding, beginning
of year ............................... 31,500 $72.60 41,500 $74.86 53,500 $ 73.32
Options exercised........................ --- --- --- --- --- ---
Options granted.......................... 10,000 82.00 12,000 68.00 --- ---
Options forfeited/canceled............... --- --- --- --- 8,000 71.50
------ -------- ------
Options outstanding, end of
year................................... 41,500 74.86 53,500 73.32 45,500 73.64
Exercisable at end of year............... 19,386 72.60 27,282 72.90 32,300 72.31
</TABLE>
Exercise prices for options outstanding as of December 28, 1997,
ranged from $60.63 to $82. The weighted-average remaining contractual
life of those options is six years.
9. YEAR 2000 ISSUE - UNAUDITED
The Company has developed a plan to modify its information
technology to be ready for the year 2000 and has begun converting
critical data processing systems. The Company currently expects the
project to be substantially complete by early 1999. The Company does
not expect this project to have a significant effect on operations.
10. SUBSEQUENT EVENT
On July 28, 1998, the Company was acquired by National Vision
Associates, Ltd. The transaction consisted of cash and the assumption
of debt amounting to approximately $32.3 million. In connection with
the acquisition of the Company's Credit Facility was repaid.
F-31
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of New West Eyeworks, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' equity
and of cash flows present fairly, in all material respects, the
financial position of New West Eyeworks, Inc. and its subsidiaries at
December 27, 1997 and December 28, 1996, and the results of their
operations and their cash flows for each of the three years in the
period ended December 27, 1997, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Phoenix, Arizona
March 6, 1998
F-32
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED BALANCE SHEET
December 28, December 27, September 26,
1996 1997 1998
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . $ 256,000 $ 577,000 $ 397,000
Accounts receivable, net . . . . . . . . . 1,304,000 1,741,000 2,483,000
Inventory . . . . . . . . . . . . . . . . . 3,190,000 3,519,000 4,466,000
Deferred tax assets . . . . . . . . . . . . 579,000 508,000
Other current assets . . . . . . . . . . . 309,000 400,000 269,000
--------------- ------------ ------------
Total current assets . . . . . . . 5,059,000 6,816,000 8,123,000
Property and equipment, net . . . . . . . . . 7,518,000 9,108,000 11,550,000
Goodwill, net . . . . . . . . . . . . . . . . 506,000 416,000 348,000
Other assets . . . . . . . . . . . . . . . . 44,000 12,000 14,000
--------------- ------------ ------------
Total assets . . . . . . . . . . . $ 13,127,000 $ 16,352,000 $ 20,035,000
=============== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . $ 5,392,000 $ 4,022,000 $ 5,256,000
Accrued expenses . . . . . . . . . . . . . 1,868,000 1,948,000 1,894,000
Line of credit . . . . . . . . . . . . . . 1,968,000 30,000 542,000
Deferred warranty revenues . . . . . . . . 279,000 271,000 301,000
Notes payable and capital lease obligations,
current portion . . . . . . . . . . . . 320,000 338,000 673,000
Notes payable to related party . . . . . . 358,000
--------------- ------------ ------------
Total current liabilities . . . . . 10,185,000 6,609,000 8,666,000
Notes payable and capital lease obligations . 516,000 291,000 1,936,000
--------------- ------------ ------------
Total liabilities . . . . . . . . . 10,701,000 6,900,000 10,602,000
--------------- ------------ ------------
Stockholders' Equity:
Series A 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 3,960 shares
authorized, issued and outstanding . . . 3,960,000 3,960,000 3,960,000
Series B 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 1,500 shares
authorized, issued and outstanding . . . 1,500,000 1,500,000 1,500,000
Common stock, $0.01 par value, 25,000,000
shares authorized, 4,868,436 and 3,763,036
shares issued and outstanding at December
27, 1997 and December 28, 1996,
respectively . . . . . . . . . . . . . . 38,000 49,000 49,000
Paid-in capital . . . . . . . . . . . . . . 10,100,000 15,630,000 15,746,000
Accumulated deficit . . . . . . . . . . . . (13,172,000) (11,687,000) (11,822,000)
--------------- ------------ ------------
Total stockholders' equity . . . . 2,426,000 9,452,000 9,433,000
--------------- ------------ ------------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . $ 13,127,000 $ 16,352,000 $ 20,035,000
=============== ============ ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-33<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended Nine Months Ended
----------------------------------------- ----------------------------
December 30, December 28, December 27, September 27, September 26,
1995 1996 1997 1997 1998
----------- ------------ ------------ ------------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales................ $ 40,033,000 $43,940,000 $49,212,000 $37,855,000 $41,449,000
Cost of sales............ 20,352,000 21,719,000 24,253,000 18,533,000 20,556,000
------------- ----------- ----------- ----------- -----------
Gross profit........... 19,681,000 22,221,000 24,959,000 19,322,000 20,893,000
Selling, general and
administrative
expenses............... 21,667,000 21,173,000 23,641,000 17,902,000 20,290,000
------------- ----------- ----------- ----------- -----------
Operating income (loss) (1,986,000) 1,048,000 1,318,000 1,420,000 603,000
Acquisition related
expenses............... 270,000
Interest income.......... 12,000 66,000 64,000
Interest expense......... 51,000 216,000 122,000 102,000 154,000
------------- ----------- ----------- ----------- -----------
Income (loss) before
income tax expense (2,025,000) 832,000 1,262,000 1,382,000 179,000
Income tax benefit
(expense).............. (30,000) 547,000 (27,000) (71,000)
------------- ----------- ----------- ----------- -----------
Net income (loss)........ (2,025,000) 802,000 1,809,000 1,355,000 108,000
Preferred stock
dividends.............. (329,000) (328,000) (324,000) (243,000) (243,000)
------------- ----------- ----------- ----------- -----------
Net income (loss)
applicable to common
shares................. $ (2,354,000) $ 474,000 $ 1,485,000 $ 1,112,000 $ (135,000)
============ =========== =========== =========== ===========
Basic and diluted income
(loss) per share....... $ (0.63) $ 0.13 $ 0.31 $ 0.24 $ (0.03)
============ =========== =========== =========== ===========
Weighted average shares
outstanding - Basic..... 3,763,000 3,763,000 4,717,000 4,666,000 4,877,000
Weighted average shares
outstanding - Diluted.. 3,763,000 3,786,000 4,785,000 4,720,000 5,027,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Shares Amounts
--------------------- ---------------------------------------------------------------
Paid-in Accumulated
Preferred Common Preferred Common Capital Deficit Total
--------- ------ --------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31,
1994.......................... 5,460 3,763,036 $5,460,000 $38,000 $10,070,000 $(11,292,000) $ 4,276,000
Preferred stock dividends (329,000) (329,000)
Net loss ....................... (2,025,000) (2,025,000)
----- --------- ----------- ------- ----------- ------------ ------------
BALANCES AT DECEMBER 30,
1995.......................... 5,460 3,763,036 5,460,000 38,000 10,070,000 (13,646,000) 1,922,000
Issuance of warrants............ 30,000 30,000
Preferred stock dividends....... (328,000) (328,000)
Net income...................... 802,000 802,000
----- --------- ----------- ------- ----------- ------------ ------------
BALANCES AT DECEMBER 28,
1996.......................... 5,460 3,763,036 5,460,000 38,000 10,100,000 (13,172,000) 2,426,000
Common stock issued............. 1,105,400 11,000 5,530,000 5,541,000
Preferred stock dividends....... (324,000) (324,000)
Net income...................... 1,809,000 1,809,000
----- --------- ----------- ------- ----------- ------------ ------------
BALANCES AT DECEMBER 27,
1997.......................... 5,460 4,868,436 5,460,000 49,000 15,630,000 (11,687,000) 9,452,000
Exercise of stock options
(unaudited)................... 19,000 116,000 116,000
Preferred stock dividends
(unaudited)................... (243,000) (243,000)
Net income (unaudited).......... 108,000 108,000
----- --------- ----------- ------- ----------- ------------ ------------
BALANCES AT SEPTEMBER 26,
1998 (unaudited).............. 5,460 4,887,436 $5,460,000 $49,000 $15,746,000 $(11,822,000) $ 9,433,000
===== ========= ========== ======= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-35
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Fiscal Year Ended Nine Months Ended
---------------------------------------- ---------------------------
December 30, December 28, December 27, September 27, September 26,
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES:
Net income (loss)................................ $(2,025,000) $ 802,000 $1,809,000 $1,355,000 $ 108,000
Adjustments to reconcile net income
(loss) to net cash from (used in)
operating activities:
Depreciation and amortization.................. 1,048,000 1,229,000 1,505,000 1,129,000 1,289,000
Loss on disposal of fixed assets............... 65,000 2,000 3,000 15,000
Income tax benefit............................. (579,000) 71,000
Changes in assets and liabilities:
Accounts receivable ........................... (124,000) (305,000) (437,000) (518,000) (742,000)
Inventory...................................... (281,000) (58,000) (329,000) (686,000) (947,000)
Other current assets........................... 52,000 (231,000) (91,000) 213,000 131,000
Accounts payable............................... 1,696,000 (363,000) (1,370,000) (1,458,000) 1,234,000
Accrued expenses............................... 603,000 (1,228,000) 80,000 489,000 (54,000)
Deferred warranty revenues..................... (240,000) (69,000) (8,000) (6,000) 30,000
Other assets and liabilities................... (72,000) (57,000) 32,000 29,000 (2,000)
----------- ----------- ---------- ---------- -----------
Net cash from (used in) operating
activities................................ 722,000 (280,000) 614,000 550,000 1,132,000
----------- ----------- ---------- ---------- -----------
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES:
Purchase of property and equipment............... (1,532,000) (1,459,000) (2,864,000) (1,970,000) (3,407,000)
----------- ----------- ---------- ---------- -----------
Net cash (used in) investing
activities................................ (1,532,000) (1,459,000) (2,864,000) (1,970,000) (3,407,000)
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Proceeds from the revolving line of
credit......................................... 24,050,000 8,136,000 5,126,000 45,522,000
Payment on the revolving line of
credit......................................... (22,082,000) (10,074,000) (7,094,000) (43,010,000)
Proceeds from the bridge loans................... 1,050,000
Payment of bridge loans.......................... (700,000) (358,000) (358,000)
Proceeds from capital leases..................... 505,000
Payment of capital leases........................ (208,000) (236,000) (350,000) (252,000) (290,000)
Payment of preferred stock dividends............. (246,000) (328,000) (324,000) (243,000) (243,000)
Net proceeds from common stock
offering....................................... 5,541,000 5,541,000
Exercise of stock options........................ 116,000
----------- ----------- ---------- ---------- -----------
Net cash from financing
activities................................ 51,000 1,754,000 2,571,000 2,720,000 2,095,000
----------- ----------- ---------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents ..................................... (759,000) 15,000 321,000 1,300,000 (180,000)
Cash and Cash equivalents, beginning of
year............................................. 1,000,000 241,000 256,000 256,000 577,000
----------- ----------- ---------- ---------- -----------
<PAGE>
Cash and Cash equivalents, end of
year............................................. $ 241,000 $ 256,000 $ 577,000 $ 1,556,000 $ 397,000
=========== ========== ========== =========== ==========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid.................................... $ 51,000 $ 208,000 $ 122,000 102,000 153,000
Income taxes paid................................ 30,000 25,000 11,000 19,000
Assets acquired under capital lease.............. 524,000 141,000 136,000 270,000
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-36
<PAGE>
<PAGE>
NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and Its Significant Accounting Policies
New West Eyeworks, Inc. (the Company) is a leading specialty
retailer of eyewear, operating under the trade names "Vista Optical"
and "Lee Optical." The Company operates value-priced optical stores in
thirteen states. These stores are located in malls, strip shopping
centers and Fred Meyer host stores. The Company operates optical
laboratory and distribution facilities in Tempe, Arizona and near
Portland, Oregon.
USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION: The accompanying financial statements
include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
FISCAL YEAR: The Company's fiscal year ends on the last Saturday of
the calendar year. References to the year 1995, 1996, and 1997 relate
to the fiscal years ended December 30, 1995, December 28, 1996, and
December 27, 1997, each of which consisted of 52 weeks.
REVENUE RECOGNITION: Revenues are recognized at the time of
customer order. Revenues from separately priced warranty contracts are
deferred and recognized on a pro rata basis over the contract period.
The Company receives certain vendor rebates and allowances which are
reflected in operations based on the terms of the underlying
agreements. Such amounts are classified as reductions of either
selling, general and administrative costs or cost of sales as
appropriate.
STORE OPENING COSTS: The Company expenses store opening costs as
incurred.
ADVERTISING COSTS: The Company expenses advertising production
costs in the period in which the related advertisement first takes
place. Advertising communication costs such as television air time and
newspaper advertising space are expensed as the related services are
received. All other costs are expensed as incurred. Advertising
expenses totaled $4,136,000, $3,576,000, and $4,228,000, for the years
1995, 1996, and 1997, respectively.
CASH AND CASH EQUIVALENTS: The Company considers liquid investments
with an original maturity of three months or less to be cash
equivalents.
ACCOUNTS RECEIVABLE: Accounts receivable are primarily comprised of
amounts due from insurance and managed care plans on sales where the
Company has contractual arrangements or has accepted an assignment of
insurance benefits from the customer. The reported balance is net of
an allowance for doubtful accounts of $139,000 and $159,000 at
December 28, 1996, and December 27, 1997, respectively.
<PAGE>
INVENTORY AND COST OF SALES: Inventory primarily consists of the
direct material cost of eyeglass frames, contact lenses, ophthalmic
lenses and optical laboratory supplies and is stated at the lower of
cost or market. Cost is determined using the first-in, first-out
method.
Cost of sales includes the cost of merchandise sold during the year,
optical laboratory costs directly related to manufacturing eyeglasses,
store occupancy expenses, and depreciation expense relating to store
and optical laboratory fixtures and equipment.
F-37<PAGE>
<PAGE>
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the related
assets which range from five to ten years. Major improvements are
capitalized while repairs which do not extend the useful life of the
asset are expensed.
GOODWILL: Goodwill represents the cost in excess of the net assets
of a business acquired and is being amortized for financial statement
purposes on a straight-line basis over a period of fifteen years. The
reported balance is net of accumulated amortization of $759,000 and
$849,000 at December 28, 1996, and December 27, 1997 respectively. The
Company evaluates the possibility of goodwill impairment when events
or changes in economic circumstances indicate that the related
carrying amount may not be recoverable.
ACCOUNTS PAYABLE: Accounts payable includes $644,000 at December 28,
1996 and $641,000 at December 27, 1997 relating to the
reclassification of book overdrafts.
STOCK COMPENSATION: The Company measures compensation expense
related to employee stock options using the intrinsic value-based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations.
INCOME TAXES: The Company accounts for income taxes using the
liability method, recognizing temporary differences between the
financial reporting basis of the Company's assets and liabilities and
the related income tax basis for such assets and liabilities. This
method generates a net deferred income tax liability or a net deferred
income tax asset for the Company as of the end of the year, as
measured by the statutory tax rates in effect as enacted. The Company
derives its deferred income tax charge or benefit by recording the
change in the net deferred income tax liability or net deferred income
tax asset balance for the year.
The Company's deferred income tax assets include certain future tax
benefits. The Company records a valuation allowance against the
portion of these deferred income tax assets which it believes it will
more likely than not fail to realize.
EARNINGS PER SHARE: In 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS No.
128). Basic earnings per share is computed by dividing income
applicable to common shares by the weighted average number of common
shares outstanding for the year. Diluted earnings per share is similar
to basic earnings per share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potential dilutive common shares had been issued.
Adoption of SFAS No. 128 did not effect the Company's previously
reported income (loss) per share computations for years subsequent to
its initial public offering. The following table presents a
reconciliation of the basic and diluted earnings per share
calculations:
<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Basic earnings per share:
Numerator:
Net income (loss) applicable to common
shares.................................... $(2,354,000) $ 474,000 $ 1,485,000
----------- ----------- -----------
Denominator:
Weighted average common shares
outstanding............................... 3,763,000 3,763,000 4,717,000
----------- ----------- -----------
Basic earnings (loss) per share............... $ (0.63) $ 0.13 $ 0.31
=========== =========== ===========
Diluted earnings per share:
Numerator:
Net income (loss) applicable to common
shares.................................... $(2,354,000) $ 474,000 $ 1,485,000
----------- ----------- -----------
Denominator:
Weighted average common shares
outstanding............................... 3,763,000 3,763,000 4,717,000
Weighted average employee stock
options ................................. --- 23,000 68,000
----------- ----------- -----------
3,763,000 3,786,000 4,785,000
----------- ----------- -----------
Diluted earnings (loss) per share............... $ (0.63) $ 0.13 $ 0.31
=========== =========== ===========
</TABLE>
F-38<PAGE>
<PAGE>
UNAUDITED INTERIM FINANCIAL STATEMENTS: The interim consolidated
financial statements as of September 26, 1998 and for the nine-month
periods ended September 26, 1998 and September 27, 1997 are unaudited.
In the opinion of management, such interim consolidated financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's
consolidated financial position as of September 26, 1998 and the
consolidated results of operations and cash flows for the periods
ended September 26, 1998 and September 27, 1997. The interim results
are not necessarily indicative of results which may occur for the full
year.
2. PROPERTY, EQUIPMENT AND LEASES
Property and equipment consists of the following:
December 28, December 27,
1996 1997
----------- -------------
Store fixtures and equipment......... $11,549,000 $ 13,796,000
Laboratory fixtures and equipment.... 2,100,000 2,286,000
Other fixtures and equipment......... 2,558,000 2,717,000
Building and improvements............ 641,000 686,000
Construction in progress............. 188,000
----------- ------------
16,848,000 19,673,000
Less: accumulated depreciation....... (9,330,000) (10,565,000)
----------- ------------
$ 7,518,000 $ 9,108,000
=========== ============
The Company leases substantially all of its store facilities under
operating leases which expire at various dates through 2002. Certain
leases require payment of property taxes, utilities, common area
maintenance and insurance as well as additional rent if sales exceed
specified amounts. Total rent expense incurred during 1995, 1996, and
1997 approximated $5,000,000, $5,493,000, and $6,069,000,
respectively, including additional rent expense of $889,000,
$1,045,000, and $1,192,000, respectively. At December 27, 1997, future
minimum annual rental commitments under noncancelable operating leases
were as follows:
1998......... $ 3,820,000
1999......... 3,184,000
2000......... 2,455,000
2001......... 2,016,000
2002......... 1,554,000
Thereafter... 3,109,000
-----------
$16,138,000
===========
3. LINE OF CREDIT
The Company entered into a new $3.0 million revolving line of credit
agreement and a $2.0 million term loan agreement with a major national
bank in August 1997. The revolving line of credit matures on August 1,
1999, and is secured by the Company's inventory, accounts receivable,
and general intangibles. The revolving line of credit bears interest
at a rate of prime plus one-eighth percent (8.625% at December 27,
1997) or, at the Company's option, a rate equal to the then current
London Interbank Offered Rate ("LIBOR") for the term selected by the
Company plus 2.35% on any principal outstanding; interest is payable
on a monthly basis. The Company may request advances on the term loan<PAGE>
until August 1, 1998, at which time the balance will be amortized over
a 48 month period. The term loan is secured by the Company's property
and equipment, and bears interest at a rate of prime plus one-half
percent or, at the Company's option, a rate equal to LIBOR for the
term selected by the Company plus 2.75% on any principal outstanding.
At December 27, 1997, $30,000 was outstanding on the revolving line of
credit while no amounts were outstanding under the term loan.
The Company entered into a $2.0 million revolving line of credit
with a bank in June 1996. The revolving line of credit matured on May
31, 1997, and was secured by substantially all of the Company's
assets, including the Company's executive office building and optical
laboratory in Tempe, Arizona, but excluding furniture, fixtures, and
equipment. The Company repaid the line of credit borrowings with a
portion of the proceeds from its February 1997 common stock offering
described in Note 5.
F-39<PAGE>
<PAGE>
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable, and capital lease obligations consist of the
following:
December 28, December 27,
1996 1997
------------ ------------
Capital lease obligations.......... $ 836,000 $ 629,000
Notes payable - related party...... 358,000
---------- ----------
Total debt............... 1,194,000 629,000
Less: current portion.............. 678,000 338,000
---------- ----------
Total long-term debt..... $ 516,000 $ 291,000
========== ==========
In early 1996, the Company entered into two bridge loans with Mesirow
Capital Partners VI, a common and preferred stockholder, and Ronald E.
Weinberg, Chairman of the Board, totaling $700,000 to fund the
Company's expansion and advertising needs. The loans bore interest at
an annual rate of 15% and were secured by a deed of trust on the
Company's executive office building and optical laboratory facility in
Tempe, Arizona. The bridge loans were retired with the proceeds of the
former revolving line of credit described in Note 3.
In December 1996, the Company entered into a bridge loan for
$350,000 with The Second National Bank of Warren (Ohio). The loan was
scheduled to mature on June 2, 1997 and bore interest at a rate equal
to the lending bank's prime rate plus 1.5% per annum, payable upon
maturity. The loan was guaranteed by Mr. Weinberg and Mr. Feld agreed
to share in the guaranty. The Company paid Mr. Weinberg and Mr. Feld a
total of $7,500 in exchange for their guaranty of the loan. Norman C.
Harbert, a director of the Company, is also a director of Second
Bancorp Inc., the parent holding company of the Second National Bank
of Warren (Ohio). The Bridge Loan was retired with a portion of the
proceeds from the February 1997 common stock offering described in
Note 5.
5. STOCKHOLDERS' EQUITY
In February 1997, the Company completed a public offering (the
"Offering") of 1,505,400 shares of its common stock, including shares
sold upon the exercise of the underwriters' over allotment option.
Gross proceeds, direct costs, and net proceeds of this Offering
totaled approximately $6,626,000, $1,085,000, and $5,541,000,
respectively. Of the shares sold, 400,000 shares were sold by selling
stockholders. The Company did not receive any proceeds from the sale
of shares by the selling stockholders.
In December 1993, the Company issued 3,960 shares of Series A and
1,500 shares of Series B $1,000 par value 6% Cumulative Convertible
Preferred Stock (the "Preferred Stock"). The Preferred Stock is
redeemable by the Company at par value plus accrued but unpaid
dividends; however, Series B shares cannot be redeemed while any
Series A shares are outstanding. The number of common shares issuable
upon conversion is determined by dividing the par value of outstanding
Preferred Stock by $8.40, subject to customary adjustments. Dividends
on the Preferred Stock are payable quarterly, at an annual rate of $60
per share.
<PAGE>
6. COMMON STOCK OPTIONS AND WARRANTS
In October 1993, the Company established the New West Eyeworks Stock
Option Plan under which certain eligible employees and directors of
the Company may receive awards in the form of stock options. Certain
stock options become exercisable on the date the Company achieves
annual earnings per share targets while others become exercisable
immediately or over a multi-year period with the options vesting
ratably during that period. The exercise price is generally equal to
the fair market price of the Company's common stock on the date of the
grant. The stock option exercise period may not exceed ten years from
the date of grant.
F-40<PAGE>
<PAGE>
A summary of the status of the Company's Stock Option Plan as of
December 30, 1995 December 28, 1996, and December 27, 1997, and
changes during the years ended is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of
year..................................... 108,500 $7.00 131,500 $5.89 143,500 $5.56
Granted.................................. 99,500 $4.10 53,000 $4.25 159,000 $6.75
Exercised................................
Forfeited................................ (76,500) $4.99 (41,000) $5.00 (7,000) $4.75
Options outstanding at end of
year..................................... 131,500 $5.89 143,500 $5.56 295,500 $6.29
Options exercisable at end of
year..................................... 86,500 $7.00 77,000 $6.90 163,600 $6.31
Weighted-average fair value of
options granted during the year.......... $2.17 $2.12 $3.61
</TABLE>
The following table summarizes information about the stock options granted
during 1995, 1996, and 1997 which are outstanding at December 27, 1997:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Average Average Average
Exercise Options Remaining Exercise Options Exercise
Prices Outstanding Contract Life Price Exercisable Price
---------- ----------- ------------- -------- ----------- --------
<C> <C> <S> <C> <C> <C>
$3.44-$4.63 64,500 7.2-8.2 years $4.14 6,600 $4.63
$5.50-$7.00 189,000 6.0-9.1 years $6.31 157,000 $6.38
$9.50 42,000 9.8 years $9.50 --- ---
------- -------
295,500 163,600
======= =======
</TABLE>
For purposes of determining the weighted average fair market value of the
options granted during the year, the Company used the Black-Scholes
option-pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield................ 0% 0% 0%
Expected stock price volatility........ 50% 50% 50%
Risk free interest rate................ 7.1% 5.3% 4.6%
Expected option life................... 5 years 5 years 5 years
</TABLE>
<PAGE>
In accordance with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company applies APB 25 and related
interpretations in accounting for its stock option plan and,
accordingly, does not recognize compensation expense. If the Company
had elected to recognize compensation expense based on the fair value
of the options granted at grant date as prescribed by SFAS No. 123,
net income and earnings per share (basic and diluted) for 1997 would
have been reduced by approximately $170,000 and $0.04, respectively.
Similar pro forma disclosures for 1996 and 1995 have not been
presented as the effect of such pro forma adjustments is not material.
In connection with the initial public offering in December 1993, the
Company sold warrants to its primary underwriter and two individuals
at a nominal price (1993 Warrants). The 1993 Warrants, which are
exercisable for a four-year period commencing December 23, 1994,
entitle the holders to purchase a total of 106,563 shares of the
Company's common stock at an exercise price of 125% of the initial
public offering price of $7.00 per share ($8.75 per share). In
conjunction with the Offering in early 1997, the Company reduced the
exercise price of the 1993 Warrants from $8.75 to $8.00 per share.
In connection with the Offering, the Company granted to its primary
underwriter and certain individuals warrants (1997 Warrants) to
purchase a number of shares of common stock equal to the number of
shares of common stock that remain issuable and unexercised under the
1993 Warrants upon their termination. The 1997 Warrants are
exercisable beginning on December 23, 1998, the termination date of
the 1993 Warrants, for a period of three years terminating on December
23, 2001. The initial exercise price for the 1997 Warrants will equal
the exercise price under the 1993 Warrants upon their termination,
which price is currently $8.00.
F-41<PAGE>
<PAGE>
In exchange for the guarantee of the Company's obligations under its
former line of credit by certain officers and shareholders, the
Company issued warrants to them to purchase, in the aggregate, 50,000
shares of the Company's common stock at a price per share of $6.11,
subject to customary anti-dilution adjustments. The value of the
warrants, which was determined by independent valuation to be $0.57
per share, is reflected on the December 28, 1996 balance sheet in
other assets and paid-in capital and was amortized to expense in 1997,
concurrent with the termination of the revolving line of credit.
7. INCOME TAXES
Income tax (expense) benefit is comprised of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current (expense) benefit:
Federal......................... --- $ (30,000) $(32,000)
State........................... --- --- ---
------ ---------- --------
Total....................... --- (30,000) (32,000)
------ ---------- --------
Deferred (expense) benefit:
Federal......................... --- --- 521,000
State........................... --- --- 58,000
------ ---------- --------
Total....................... --- --- 579,000
------ ---------- --------
Total (expense) benefit..... --- $ (30,000) $547,000
====== ========== ========
</TABLE>
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
December 28, 1996 December 27, 1997
----------------- -----------------
<S> <C> <C>
Net operating loss carryforwards................... $ 2,873,000 $ 2,297,000
Employee benefits.................................. 244,000 289,000
Deferred warranty revenues......................... 112,000 108,000
Other.............................................. 306,000 317,000
----------- -----------
Deferred tax assets................................ 3,535,000 3,011,000
Less: valuation allowance.......................... (3,535,000) (2,432,000)
----------- -----------
Net deferred tax assets..................... $ --- $ 579,000
=========== ===========
</TABLE>
Income tax (expense) benefit differs from the amount determined by
applying the U.S. statutory federal tax rate of 34% to income (loss)
before income tax (expense) benefit as a result of the following:
<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Expected income tax (expense) benefit............... $ 689,000 $(283,000) $ (429,000)
Nondeductible expenses.............................. (38,000) (56,000) (49,000)
(Increase) decrease in valuation allowance.......... (651,000) 309,000 1,025,000
---------- --------- ----------
Income tax (expense) benefit........................ $ --- $ (30,000) $ 547,000
========== ========= ==========
</TABLE>
The Company increased its valuation allowance in 1995 due to the net
operating loss (NOL) incurred during the year coupled with the lack of
sustained historical profitability. In 1996, the Company returned to
profitability and reduced its valuation allowance as it was able to
substantially offset taxable income generated during the year with
existing NOL carryforwards. The Company further reduced its valuation
allowance in 1997 because of its ability to once again substantially
offset taxable income generated during the year as well as the
Company's belief that it will be able to realize a portion of its
remaining deferred tax assets. The Company will consider further
reduction to or elimination of the remaining valuation allowance as
profitable operations continue.
As of December 27, 1997, the Company had NOL carryforwards of $5.7
million and $4.9 million for regular tax and alternative minimum tax
purposes, respectively, which begin to expire in 2006. The Company
also has nonexpiring alternative minimum tax credit carryforwards of
$79,000 available to offset future regular taxes.
F-42<PAGE>
<PAGE>
8. EMPLOYEE BENEFIT PLAN
The Company established the New West Eyeworks, Inc. Profit Sharing
and 401(k) Savings Plan (the Plan) for the benefit of employees
(participants) who meet certain age and eligibility requirements. The
Plan provides for discretionary profit sharing contributions as well
as employer matching contributions on participants' pre-tax savings
deferrals. A profit sharing contribution was not made in 1995, 1996 or
1997; however, employer matching contributions approximated $97,000,
$90,000, and $106,000 in 1995, 1996 and 1997, respectively.
9. RELATED PARTY TRANSACTIONS
The Company is a party to an expense sharing arrangement whereby it
pays an entity owned by an officer of the Company for certain services
provided by such entity for the Company and as reimbursement for
certain expenses incurred directly on behalf of the Company. The
aggregate amount of the payments by the Company to such entity,
including expenses incurred directly on behalf of the Company, were
approximately $136,000, $109,000, and $137,000 in 1995, 1996 and 1997,
respectively.
A director of the Company is a partner in a law firm which provides
legal services to the Company. The aggregate amount of expense
included in 1996 and 1997 for services provided to the Company by this
entity amount to $158,000 and $173,000, respectively.
10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is involved in legal matters which
are incidental to its operations. In the opinion of management, the
ultimate resolution of these matters is not anticipated to have a
material adverse effect on the Company's financial condition or
results of operations.
11. (UNAUDITED) SUBSEQUENT EVENT
On October 23, 1998, Vista Eyecare, Inc. completed its tender offer
for all the issued and outstanding capital stock of the Company. In
connection with this transaction, the Company incurred approximately
$270,000 of related costs through September 26, 1998. These costs
have been reflected as acquisition related expenses in the
accompanying consolidated statement of operations.
F-43
<PAGE>
==========================================================================
WE HAVE NOT AUTHORIZED ANY
DEALER, SALESPERSON OR OTHER PERSON
TO GIVE ANY INFORMATION OR REPRESENT
ANYTHING NOT CONTAINED IN THIS PROSPECTUS.
YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION. THIS PROSPECTUS DOES NOT
OFFER TO SELL OR BUY ANY SECURITY IN ANY
JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORAMATION IN THIS PROSPECTUS IS CURRENT
AS OF ____________ __, 1999.
=========================================================================
[VISTA EYECARE, INC. LOGO APPEARS HERE]
12 3/4% Senior Notes
due 2005
__________ __, 1999
==========================================================================
F-44
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Amended and Restated Articles of
Incorporation provide that no director will be personally liable to
the Registrant or its shareholders for monetary damages for breach of
duty of care or other duty owed to the Registrant as a director,
except that such provision will only eliminate or limit the liability
of a director to the extent permitted from time to time by the Georgia
Business Corporation Code or any successor law or laws.
Article VII of the Bylaws of the Registrant authorizes
indemnification of the Registrant's officers and directors for any
liability and expense incurred by them in connection with or resulting
from any threatened, pending or completed legal action or other
proceeding or investigation by reason of his being or having been an
officer or director. An officer or director may only be indemnified
if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Registrant, and, with
respect to a criminal matter, he did not have reasonable cause to
believe that his conduct was unlawful. No officer or director who has
been adjudged liable to the Registrant or adjudged liable for the
improper receipt of a personal benefit is entitled to indemnification.
Any officer or director who has been wholly successful on
the merits or otherwise in defense of any proceeding to which he was a
party, or in defense of any claim because of his official capacity is
entitled to indemnification as to reasonable expenses by the
Registrant as of right. All other determinations in respect of
indemnification shall be made by either: (i) a majority vote of a
quorum of directors not at the time parties to the proceeding, or if a
quorum cannot be obtained, then by a majority vote of a committee duly
designated by the board of directors (in which designation directors
who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding; (ii) independent
legal counsel selected in accordance with the Bylaws and at the
request of the Board; or (iii) the holders of a majority of the
Registrant's stock who at such time are entitled to vote for the
election of directors.
The provisions of the Registrant's Bylaws on indemnification
are consistent in all material respects with the laws of the State of
Georgia, which authorize indemnification of corporate officers and
directors.
The Registrant's directors and officers are insured against
losses arising from any claim against them as such for wrongful acts
or omissions, subject to certain limitations. In addition, the
Registration Rights Agreement filed as Exhibit 4.3 hereto contains
certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified
by the Initial Purchasers and other holders of Notes.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this
Registration Statement:
<PAGE>
Exhibit
Number Description of Exhibit
------- ----------------------
4.1 Indenture dated as of October 8, 1998, among the
Company, the Guarantors and State Street Bank &
Trust Company, as Trustee (including form of
Exchange Note).
4.2 Purchase Agreement dated as of October 8, 1998,
among the Company, the Guarantors and the Initial
Purchasers.
4.3 Registration Rights Agreement dated as of October 8,
1998, among the Company, the Guarantors and the
Initial Purchasers.
II-1
<PAGE>
4.4 Form of Exchange Note (included in Exhibit 4.1).
*5 Opinion of Kilpatrick Stockton LLP.
8 Tax Opinion of Kilpatrick Stockton LLP.
10.58 Credit Agreement dated October 8, 1998 by and
among the Company, Bank of America, FSB, First
Union National Bank and the financial institutions
listed therein.
21 Subsidiaries of the Registrant.
*23.1 Consent of Kilpatrick Stockton LLP (See Exhibit 5)
23.2 Consent of Arthur Anderson LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Ernst & Young LLP.
24 Powers of Attorney (see signature pages).
25 Statement of Eligibility of Trustee under the
Trust Indenture Act on Form T-1.
99.1 Form of Transmittal Letter.
99.2 Form of Notice of Guaranteed Delivery.
____________________________
* To be filed by amendment.
(b) Financial Statement Schedules
None.
(c) Reports, Opinions or Appraisals
Not Applicable.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating
to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(ii) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
II-2
<PAGE>
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This include information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the Company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Atlanta, State of Georgia, on February 3, 1999.
VISTA EYECARE, INC.
By: /s/ James W. Krause
James W. Krause
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James W. Krause his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause Chairman of the Board, and
James W. Krause Chief Executive Officer
(Principal Executive Officer)
/s/ Barry J. Feld Director, President, and Chief
Barry J. Feld Operating Officer (Principal
Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief
Angus C. Morrison Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
/s/ David I. Fuente Director
David I. Fuente
/s/ Ronald J. Green Director
Ronald J. Green
/s/ James E. Kanaley Director
James E. Kanaley
/s/ Campbell B. Lanier, III Director
Campbell B. Lanier, III
/s/ J. Smith Lanier, II Director
J. Smith Lanier, II
II-4<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
FAMILY VISION CENTERS, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
FRAME-N-LENS OPTICAL, INC.
By: Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/c/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
INTERNATIONAL VISION ASSOCIATES, LTD.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
MIDWEST VISION, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/a/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
NVAL HEALTHCARE SYSTEMS, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
VISION ADMINISTRATORS, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
NEW WEST EYEWORKS, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
ALEXIS HOLDINGS COMPANY, INC.
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on February 3,
1999.
VISTA EYECARE NETWORK, LLC
By: /s/ Mitchell Goodman
Mitchell Goodman
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Goodman his attorney-
in-fact, with power of substitution for him in any and all capacities,
to sign any amendments to this Registration Statement, and to file the
same, with the exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission hereby
ratifying and confirming all that each of said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following
persons in the capacities indicated on the 3rd day of February, 1999.
/s/ James W. Krause President, Chief Executive Officer and
James W. Krause Director (Principal Executive Officer)
/s/ Angus C. Morrison Senior Vice President, Chief Financial
Angus C. Morrison Officer and Director (Principal Financial
and Accounting Officer)
/s/ Mitchell Goodman Director
Mitchell Goodman
II-13
<PAGE>
Exhibit Index
Exhibit
Number Description of Exhibit
------- ----------------------
4.1 Indenture dated as of October 8, 1998, among the
Company, the Guarantors and State Street Bank &
Trust Company, as Trustee (including form of
Exchange Note).
4.2 Purchase Agreement dated as of October 8, 1998,
among the Company, the Guarantors and the Initial
Purchasers.
4.3 Registration Rights Agreement dated as of October 8,
1998, among the Company, the Guarantors and the
Initial Purchasers.
4.4 Form of Exchange Note (included in Exhibit 4.1).
*5 Opinion of Kilpatrick Stockton LLP.
8 Tax Opinion of Kilpatrick Stockton LLP.
10.58 Credit Agreement dated October 8, 1998 by and
among the Company, Bank of America, FSB, First
Union National Bank and the Financial institutions
listed therein.
21 Subsidiaries of the Registrant.
*23.1 Consent of Kilpatrick Stockton LLP (See Exhibit 5)
23.2 Consent of Arthur Anderson LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Ernst & Young LLP.
24 Powers of Attorney (see signature pages).
25 Statement of Eligibility of Trustee under the
Trust Indenture Act on Form T-1.
99.1 Form of Transmittal Letter.
99.2 Form of Notice of Guaranteed Delivery.
______________________________
* To be filed by amendment.
II-14
<PAGE>
Exhibit 4.1
===========================================================================
NATIONAL VISION ASSOCIATES, LTD.,
as Issuer,
each of the Guarantors named herein
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
INDENTURE
Dated as of October 8, 1998
up to $190,000,000
12 3/4% Senior Notes due 2005, Series A
12 3/4% Senior Notes due 2005, Series B
===========================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . 7.08; 7.10;
11.02
(c) . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . 4.06; 4.08;
11.02
(b) . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . 9.04
317(a)(1) . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means Not Applicable.
_________________
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................ 1
SECTION 1.02. Incorporation by Reference of TIA.......................... 27
SECTION 1.03. Rules of Construction...................................... 27
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating............................................ 28
SECTION 2.02. Execution and Authentication; Aggregate Principal
Amount................................................................... 29
SECTION 2.03. Registrar and Paying Agent................................. 31
SECTION 2.04. Paying Agent To Hold Assets in Trust....................... 32
SECTION 2.05. Holder Lists............................................... 32
SECTION 2.06. Transfer and Exchange...................................... 32
SECTION 2.07. Replacement Notes.......................................... 33
SECTION 2.08. Outstanding Notes.......................................... 33
SECTION 2.09. Treasury Notes............................................. 34
SECTION 2.10. Temporary Notes............................................ 34
SECTION 2.11. Cancellation............................................... 35
SECTION 2.12. Defaulted Interest......................................... 35
SECTION 2.13. CUSIP Numbers.............................................. 36
SECTION 2.14. Deposit of Monies.......................................... 36
SECTION 2.15. Restrictive Legends........................................ 36
SECTION 2.16. Book-Entry Provisions for Global Security.................. 38
SECTION 2.17. Special Transfer Provisions................................ 40
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee......................................... 43
SECTION 3.02. Selection of Notes To Be Redeemed.......................... 43
SECTION 3.03. Optional Redemption........................................ 44
SECTION 3.04. Notice of Redemption....................................... 45
SECTION 3.05. Effect of Notice of Redemption............................. 46
SECTION 3.06. Deposit of Redemption Price................................ 46
SECTION 3.07. Notes Redeemed in Part..................................... 47
-i-<PAGE>
Page
----
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.......................................... 47
SECTION 4.02. Maintenance of Office or Agency........................... 47
SECTION 4.03. Corporate Existence....................................... 48
SECTION 4.04. Payment of Taxes and Other Claims......................... 48
SECTION 4.05. Maintenance of Properties and Insurance................... 48
SECTION 4.06. Compliance Certificate; Notice of Default................. 49
SECTION 4.07. Compliance with Laws...................................... 50
SECTION 4.08. Reports to Holders........................................ 50
SECTION 4.09. Waiver of Stay, Extension or Usury Laws................... 51
SECTION 4.10. Limitation on Restricted Payments......................... 51
SECTION 4.11. Limitations on Transactions with Affiliates............... 53
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness....... 54
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................. 55
SECTION 4.14. Change of Control......................................... 56
SECTION 4.15. Limitation on Asset Sales................................. 58
SECTION 4.16. Limitation on Preferred Stock of Restricted
Subsidiaries............................................ 61
SECTION 4.17. Limitation on Liens....................................... 61
SECTION 4.18. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries........................................... 62
SECTION 4.19. Additional Subsidiary Guarantees.......................... 62
SECTION 4.20. Conduct of Business....................................... 62
SECTION 4.21. Special Redemption........................................ 63
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.................. 64
SECTION 5.02. Successor Corporation Substituted......................... 66
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default......................................... 66
-ii-<PAGE>
Page
----
SECTION 6.02. Acceleration.............................................. 68
SECTION 6.03. Other Remedies............................................ 69
SECTION 6.04. Waiver of Past Defaults................................... 69
SECTION 6.05. Control by Majority....................................... 69
SECTION 6.06. Limitation on Suits....................................... 70
SECTION 6.07. Right of Holders To Receive Payment....................... 70
SECTION 6.08. Collection Suit by Trustee................................ 71
SECTION 6.09. Trustee May File Proofs of Claim.......................... 71
SECTION 6.10. Priorities................................................ 71
SECTION 6.11. Undertaking for Costs..................................... 72
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee......................................... 72
SECTION 7.02. Rights of Trustee......................................... 74
SECTION 7.03. Individual Rights of Trustee.............................. 75
SECTION 7.04. Trustee's Disclaimer...................................... 75
SECTION 7.05. Notice of Default......................................... 75
SECTION 7.06. Reports by Trustee to Holders............................. 76
SECTION 7.07. Compensation and Indemnity................................ 76
SECTION 7.08. Replacement of Trustee.................................... 77
SECTION 7.09. Successor Trustee by Merger, Etc.......................... 78
SECTION 7.10. Eligibility; Disqualification............................. 79
SECTION 7.11. Preferential Collection of Claims Against Company......... 79
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations...................... 79
SECTION 8.02. Application of Trust Money................................ 82
SECTION 8.03. Repayment to the Company.................................. 83
SECTION 8.04. Reinstatement............................................. 83
SECTION 8.05. Acknowledgment of Discharge by Trustee.................... 84
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders................................ 84
SECTION 9.02. With Consent of Holders................................... 85
SECTION 9.03. Compliance with TIA....................................... 86
SECTION 9.04. Revocation and Effect of Consents......................... 86
SECTION 9.05. Notation on or Exchange of Notes.......................... 87
SECTION 9.06. Trustee To Sign Amendments, Etc........................... 87
-iii-<PAGE>
Page
----
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Unconditional Guarantee.................................. 88
SECTION 10.02. Limitations on Guarantees................................ 90
SECTION 10.03. Execution and Delivery of Guarantee...................... 90
SECTION 10.04. Release of Guarantors.................................... 90
SECTION 10.05. Waiver of Subrogation.................................... 91
SECTION 10.06. Immediate Payment........................................ 92
SECTION 10.07. No Set-Off............................................... 92
SECTION 10.08. Obligations Absolute..................................... 92
SECTION 10.09. Obligations Continuing................................... 92
SECTION 10.10. Obligations Not Reduced.................................. 92
SECTION 10.11. Obligations Reinstated................................... 93
SECTION 10.12. Obligations Not Affected................................. 93
SECTION 10.13. Waiver................................................... 94
SECTION 10.14. No Obligation To Take Action Against the Company......... 95
SECTION 10.15. Dealing with the Company and Others...................... 95
SECTION 10.16. Default and Enforcement.................................. 96
SECTION 10.17. Amendment, Etc........................................... 96
SECTION 10.18. Acknowledgment........................................... 96
SECTION 10.19. Costs and Expenses....................................... 96
SECTION 10.20. No Merger or Waiver; Cumulative Remedies................. 96
SECTION 10.21. Survival of Obligations.................................. 97
SECTION 10.22. Guarantee in Addition to Other Obligations............... 97
SECTION 10.23. Severability............................................. 97
SECTION 10.24. Successors and Assigns................................... 97
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls............................................. 98
SECTION 11.02. Notices.................................................. 98
SECTION 11.03. Communications by Holders with Other Holders............. 99
SECTION 11.04. Certificate and Opinion as to Conditions Precedent....... 99
SECTION 11.05. Statements Required in Certificate or Opinion............ 100
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar................ 100
SECTION 11.07. Legal Holidays........................................... 100
SECTION 11.08. Governing Law............................................ 101
-iv-<PAGE>
Page
----
SECTION 11.09. No Adverse Interpretation of Other Agreements............ 101
SECTION 11.10. No Personal Liability.................................... 101
SECTION 11.11. Successors............................................... 101
SECTION 11.12. Duplicate Originals...................................... 101
SECTION 11.13. Severability............................................. 202
SECTION 11.14. Independence of Covenants................................ 102
Exhibit A - Form of Initial Note........................................ A-1
Exhibit B - Form of Exchange Note....................................... B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors................... C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S.......................... D-1
Exhibit E-Form of Guarantee............................................. E-1
Note: This Table of Contents shall not, for any purpose, be deemed to
be part of this Indenture
-v-
<PAGE>
INDENTURE, dated as of October 8, 1998, among NATIONAL VISION
ASSOCIATES, LTD., a Georgia corporation (the "Company"), each of the
Guarantors named herein (the "Guarantors"), as guarantors, and State
Street Bank and Trust Company, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of
12 3/4% Senior Notes due 2005, Series A, and 12 3/4% Senior Notes due
2005, Series B, to be issued in exchange for the 12 3/4% Senior Notes due
2005, Series A, pursuant to a Registration Rights Agreement (as
defined) and, to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary to
make the Notes (as defined), when duly issued and executed by the
Company and authenticated and delivered hereunder, the valid and
binding obligations of the Company and to make this Indenture a valid
and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of
the Company's 12 3/4% Senior Notes due 2005, Series A and Series B:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.01. Definitions.
-----------
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates
with the Company or any of its Subsidiaries or assumed in connection
with the acquisition of assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary of the
Company or such acquisition, merger or consolidation.
"ADDITIONAL INTEREST" has the meaning set forth in the Registration
Rights Agreement.
"AFFILIATE" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
specified Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the
foregoing.
<PAGE>
"AFFILIATE TRANSACTION" has the meaning set forth in Section
4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGENT MEMBERS" has the meaning set forth in Section 2.16.
"ASSET ACQUISITION" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to
which such Person shall become a Restricted Subsidiary of the Company
or any Restricted Subsidiary of the Company, or shall be merged with
or into the Company or any Restricted Subsidiary of the Company, or
(b) the acquisition by the Company or any Restricted Subsidiary of the
Company of the assets of any Person (other than a Restricted
Subsidiary of the Company) which constitute all or substantially all
of the assets of such Person or comprise any division or line of
business of such Person or any other properties or assets of such
Person other than in the ordinary course of the Company's or such
Restricted Subsidiary's business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into
in the ordinary course of business), assignment or other transfer for
value by the Company or any of its Restricted Subsidiaries (including
any Sale and Leaseback Transaction) to any Person other than the Company
or a Wholly Owned Restricted Subsidiary of the Company of (a) any
Capital Stock of any Restricted Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary
of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or
its Restricted Subsidiaries receive aggregate consideration of less
than $750,000, (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as
permitted under Section 5.01, (iii) the sale, lease, conveyance,
disposition or other transfer by the Company or any Restricted
Subsidiary of assets or property in transactions constituting
Investments that are not prohibited under Section 4.10, (iv) leases or
subleases to third persons not interfering in any material respect
with the business of the Company or any of its Restricted Subsidiaries
or (v) the creation of any Lien not prohibited by this Indenture.
-2-<PAGE>
"AUTHENTICATING AGENT" has the meaning set forth in Section
2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary
of such Person to have been duly adopted by the Board of Directors of
such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
any other day on which commercial banking institutions in the City of New
York or the city in which the principal corporate trust office of the
Trustee is located are required or authorized by law or other
governmental action to be closed.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP
and, for purposes of this definition, the amount of such obligations
at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is
a corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of
corporate stock, including each class of Common Stock and Preferred
Stock of such Person, and (ii) with respect to any Person that is not
a corporation, any and all partnership, membership or other equity
interests of such Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government
or issued by any agency thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the
date of acquisition thereof; (ii) marketable direct obligations issued
by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at
-3-<PAGE>
the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (iii) commercial paper maturing
no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $500,000,000 and
a Thompson or Keefe Bank Watch Rating of "B" or better; (v) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause
(iv) above; (vi) in the case of any foreign Restricted Subsidiary,
Investments: (a) in direct obligations of the sovereign nation (or any
agency thereof) in which such foreign Restricted Subsidiary is
organized or is conducting a substantial amount of business or in
obligations fully and unconditionally guaranteed by such sovereign
nation (or any agency thereof), (b) of the type and maturity described
in clauses (i) through (v) above of foreign obligors, which
Investments or obligors (or the parents of such obligors) have ratings
described in such clauses or equivalent ratings from comparable
foreign rating agencies or (c) of the type and maturity described in
clauses (i) through (v) above of foreign obligors (or the parents of
such obligors), which Investments or obligors (or the parents of such
obligors) are not rated as provided in such clauses or in clause
(vi)(b) but which are, in the reasonable judgment of the Company,
comparable in investment quality to such Investments and obligors (or
the parents of such obligors); and (vii) investments in money market
funds which invest substantially all their assets in securities of the
types described in clauses (i) through (vi) above.
"Change of Control" means the occurrence of one or more of
the following events: (i) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company to any Person or group
of related Persons for purposes of Section 13(d) of the Exchange Act
(a "Group"), together with any Affiliates thereof (whether or not
otherwise in compliance with the provisions of this Indenture) other
than the creation of a Lien permitted pursuant to this Indenture;
(ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company
(whether or not otherwise in compliance with the provisions of this
Indenture); (iii) any Person or Group shall become the owner, directly
or indirectly, beneficially or of record, of shares representing more
-4-
<PAGE>
than 50% of the aggregate ordinary voting power represented by the
issued and outstanding Capital Stock of the Company; or (iv) the
replacement of a majority of the Board of Directors of the Company
over a two-year period from the directors who constituted the Board of
Directors of the Company at the beginning of such period, and such
replacement shall not have been approved by a vote of at least a
majority of the Board of Directors of the Company then still in office
who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors
was previously so approved. Notwithstanding anything to the contrary
contained in the foregoing, a "Change of Control" shall not be deemed
to occur upon the consummation of the merger of the Company with an
Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction or the transfer of assets to a
Restricted Subsidiary of the Company who is or will become
concurrently with such transfer a Guarantor.
"CHANGE OF CONTROL OFFER" has the meaning set forth in Section
4.14.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth in
Section 4.14.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMON STOCK" of any Person means any and all shares, interests
or other participations in, and other equivalents (however designated and
whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and
includes, without limitation, all series and classes of such common
stock.
"COMPANY" means National Vision Associates, Ltd., a Georgia
corporation.
"CONSOLIDATED EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income
and (ii) to the extent Consolidated Net Income has been reduced
thereby, (A) all income taxes of such Person and its Restricted
Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business),
(B) Consolidated Interest Expense, (C) Consolidated Non-cash Charges
less any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for such Person and
its Restricted Subsidiaries in accordance with GAAP, and (D) after-tax
losses from Asset Sales or abandonments or reserves relating thereto.
-5-<PAGE>
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during
the four full fiscal quarters for which financial statements are
reasonably available (the "Four Quarter Period") most recently ending
on or prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period as determined from an Officers' Certificate
delivered to the Trustee at the time that such calculation is required
to be made. In addition to and without limitation of the foregoing,
for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect
on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of
its Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of
the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the
Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if
such incurrence or repayment, as the case may be (and the application
of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any asset sales or other dispositions or Asset
Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such
Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (including any
pro forma expense and cost reductions calculated on a basis consistent
with Regulation S-X under the Exchange Act) attributable to the assets
which are the subject of the Asset Acquisition or asset sale or other
disposition during the Four Quarter Period) occurring during the Four
Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such
asset sale or other disposition or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period.
If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such
Person had directly incurred or otherwise assumed such guaranteed
Indebtedness; provided that if such guarantee is limited to a
principal amount that is less than the amount of such Indebtedness,
such effect shall be limited to the incurrence of such Indebtedness in
such limited amount. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis
as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; (2) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an
-6-<PAGE>
interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest
rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to
Interest Swap Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such
agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of such Person (other than
dividends paid in Qualified Capital Stock) paid, accrued or scheduled
to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus
the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for
such period determined on a consolidated basis in accordance with
GAAP, including without limitation, (a) any amortization of debt
discount and amortization or write-off of deferred financing costs,
(b) the net costs under Interest Swap Obligations, (c) all capitalized
interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by
such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and
its Restricted Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP; provided that there shall be
-7-<PAGE>
excluded therefrom (a) after-tax gains from Asset Sales or
abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income
of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any
Restricted Subsidiary of the referent Person, (d) the net income (but
not loss) of any Restricted Subsidiary of the referent Person to the
extent that the declaration of dividends or similar distributions by
that Restricted Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any Person, other
than a Restricted Subsidiary of the referent Person, except to the
extent of cash dividends or distributions paid to the referent Person
or to a Wholly Owned Restricted Subsidiary of the referent Person by
such Person, (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date,
(g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether
or not such operations were classified as discontinued), and (h) in
the case of a successor to the referent Person by consolidation or
merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation,
merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts
attributable to Disqualified Capital Stock of such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and
other non-cash expenses of such Person and its Restricted Subsidiaries
reducing Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"CONSOLIDATED TANGIBLE ASSETS" means, with respect to any Person,
as of any date of determination, the total assets, less goodwill,
deferred financing costs and other intangibles and less accumulated
amortization, shown on the most recent balance sheet of such Person,
determined on a consolidated basis in accordance with GAAP.
-8-<PAGE>
"CORPORATE TRUST OFFICE" means the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture
is located at Goodwin Square, 225 Asylum Street, 23rd Floor, Hartford,
CT 06103, except that with respect to presentation of Notes for
payment or for registration of transfer or exchange, such term shall
mean any office or agency of the Trustee at which, at any particular
time, its corporate agency business shall be conducted.
"COVENANT DEFEASANCE" has the meaning set forth in Section 8.01.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed
to protect the Company or any Restricted Subsidiary of the Company
against fluctuations in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be,
an Event of Default.
"DEFAULT INTEREST" has the meaning set forth in Section 2.12.
"DEFAULT INTEREST PAYMENT DATE" has the meaning set forth in
Section 2.12.
"DEPOSITORY" means The Depository Trust Company, its nominees
and successors.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof on or prior to the final maturity date of the
Notes.
"DOLLARS" and "$" means U.S. Legal Tender.
"EQUITY OFFERING" means a sale of Qualified Capital Stock of
the Company other than Indebtedness or Disqualified Capital Stock
convertible or exchangeable into Capital Stock of the Company.
-9-<PAGE>
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"EXCHANGE NOTES" means the 12 3/4% Senior Notes due 2005,
Series B to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement or, with respect to Initial Notes
issued under this Indenture subsequent to the Issue Date pursuant to
Section 2.02, a registration rights agreement substantially identical
to the Registration Rights Agreement.
"EXCHANGE OFFER" has the meaning set forth in the Registration
Rights Agreement.
"EXCHANGE REGISTRATION STATEMENT" means the registration
statement filed by the Company pursuant to the Registration Rights
Agreement.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able
buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Unless the TIA otherwise requires, fair
market value shall be determined by the Board of Directors of the
Company acting reasonably and in good faith and shall be evidenced by
a Board Resolution of the Board of Directors of the Company delivered
to the Trustee.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States,
which are in effect as of the Issue Date and consistently applied.
"GLOBAL NOTE" has the meaning set forth in Section 2.01.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters
of credit and reimbursement agreements in respect thereof), of all or any
part of any Indebtedness.
-10-<PAGE>
"GUARANTEE" means the guarantee of the Notes by the Guarantors.
"GUARANTOR" means (i) each domestic Subsidiary of the Company
on the Issue Date other than any Managed Care Entity and (ii) each of
the Company's domestic Restricted Subsidiaries that in the future executes
a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of this Indenture as a Guarantor; provided that
for each of clauses (i) and (ii), with regard to any domestic
Restricted Subsidiary of the Company formed after the Issue Date which
is or seeks to become a Managed Care Entity such Restricted
Subsidiary's obligations under the Guarantee shall only become
effective if (a) the approval of the requisite regulatory entity is
obtained (if such approval is required) and (b) the granting of the
Guarantee by such Restricted Subsidiary shall not have a material
adverse effect upon the business, operations, assets, condition
(financial or otherwise) or prospects of such Restricted Subsidiary (a
"material adverse effect"); provided that if a Guarantee is not issued
by such Restricted Subsidiary in reliance on the provisions of this
clause (b), the Company shall deliver an Officers' Certificate to the
Trustee stating that the granting of such Guarantee would have a
material adverse effect and provided, further, that such obligation
under the Guarantees shall be limited to the maximum amount which such
Restricted Subsidiary would be permitted to declare or pay as a
dividend in compliance with the applicable rules or regulations of, or
undertakings made to, any regulatory entity having jurisdiction and
authority over such Restricted Subsidiary. Each Managed Care Entity
existing on the Issue Date shall use its reasonable efforts to issue a
Guarantee as promptly as practicable after the Issue Date. Any Person
constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance
with the terms of this Indenture. The documentation evidencing a
Guarantee given by a Managed Care Entity shall be permitted to contain
the text of the restrictions imposed on such Guarantee.
"HOLDER" means the Person in whose name a Note is registered on
the Registrar's books.
"INCUR" has the meaning set forth in Section 4.12.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money,
(ii) all Obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all Capitalized Lease Obligations of
such Person, (iv) all Obligations of such Person issued or assumed as
the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement
(but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90
days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all
Obligations for the reimbursement of any obligor on any letter of
credit (other than a letter of credit relating to a trade account
payable that is not considered Indebtedness pursuant to clause (iv)
above), banker's acceptance or similar credit transaction,
-11-<PAGE>
(vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such Obligation
being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured,
(viii) all net Obligations of such Person under currency agreements
and interest swap agreements, (ix) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by
such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed
repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably
and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"INITIAL NOTES" means, collectively, (i) the 12 3/4% Senior Notes
due 2005, Series A, of the Company issued on the Issue Date and (ii) one
or more series of 12 3/4% Senior Notes due 2005 that are issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02,
in each case for so long as such securities constitute Restricted
Notes.
"INITIAL PURCHASERS" means Schroder & Co. Inc., NationsBanc Montgomery
Securities LLC and First Union Capital Markets.
-12-<PAGE>
"INTEREST" when used with respect to any Note means the amount
of all interest accruing on such Note, including any applicable Default
Interest pursuant to Section 2.12 and any Additional Interest pursuant
to the Registration Rights Agreement.
"INTEREST PAYMENT DATE" means the stated maturity of an installment
of interest on the Notes.
"INTEREST SWAP OBLIGATIONS" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986,
as amended to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation,
a guarantee) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or
acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by,
any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of
Section 4.10, (i) "Investment" shall include and be valued at the fair
market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets
of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount
of any Investment shall be the original cost of such Investment plus
the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment
of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends
or distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Company or any Restricted Subsidiary
of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Common Stock
of such Restricted Subsidiary not sold or disposed of.
-13-
<PAGE>
"ISSUE DATE" means October 8, 1998.
"LEGAL DEFEASANCE" has the meaning set forth in Section
8.01.
"LEGAL HOLIDAY" has the meaning set forth in Section 11.07.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest).
"MANAGED CARE ENTITY" means (i) NVAL VisionCare Systems of
California, Inc., ProCare Eye Exam, Inc. and NVAL VisionCare Systems
of North Carolina, Inc. and (ii) any other Subsidiary of the Company whose
financial condition or activities are regulated under the laws of any
state in connection with the provision of health or vision care
products or services (or related administrative services) and shall
include, without limitation, a health maintenance organization
(whether single or multi service), third party administrator, or any
entity similar to any of the foregoing.
"MATURITY DATE" means October 15, 2005.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated
as of July 13, 1998, by and among National Vision Associates, Ltd., NW
Acquisition Corp. and New West, as amended and in effect as of the
Issue Date.
"MOODY'S" means Moody's Investors Service, Inc. and its
successors.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of
cash or Cash Equivalents (other than the portion of any such deferred
payment constituting interest) received by the Company or any of its
Restricted Subsidiaries from such Asset Sale net of (a) reasonable
out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements,
(c) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale and (d) appropriate amounts to be
-14-<PAGE>
provided by the Company or any Restricted Subsidiary, as the case may
be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale.
"NET PROCEEDS OFFER" has the meaning set forth in Section 4.15.
"NET PROCEEDS OFFER AMOUNT" has the meaning set forth in Section
4.15.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning set forth in
Section 4.15.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning set forth in
Section 4.15.
"NEW CREDIT FACILITY" means the Credit Agreement dated as of
October 8, 1998, between the Company, the Guarantors, the lenders
party thereto in their capacities as lenders thereunder, First Union
National Bank, as administrative agent, and Bank of America, FSB, as
documentation agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder
(provided that such increase in borrowings is permitted by Section
4.12) or adding Restricted Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group
of lenders.
"NEW WEST" means New West Eyeworks, Inc.
-15-<PAGE>
"NOTES" means, collectively, the Initial Notes, the Private
Exchange Notes, if any, and the Exchange Notes, treated as a single class
of securities, as amended or supplemented from time to time in accordance
with the terms of this Indenture, that are issued pursuant to this
Indenture.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnification, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
"OFFERING" means the offering of the Notes or the Issue Date.
"OFFERING MEMORANDUM" means the confidential Offering Memorandum
dated October 5, 1998 of the Company relating to the offering of the Notes.
"OFFICER" means, with respect to any Person, the Chairman of the
Board of Directors, any Vice Chairman of the Board of Directors, the
Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors
serving in a similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or
any Vice President and the Chief Financial Officer or any Treasurer of
such Person that shall comply with applicable provisions of this
Indenture.
"OPINION OF COUNSEL" means a written opinion, in form and
substance reasonably acceptable to the Trustee, from legal counsel who
is reasonably acceptable to the Trustee complying with the requirements
of Sections 11.04 and 11.05, as they relate to the giving of an
Opinion of Counsel, and delivered to the Trustee.
"PAYING AGENT" has the meaning set forth in Section 2.03.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
(i) Indebtedness under the Notes issued in the Offering, this
Indenture and the Guarantees not to exceed $125,000,000 in aggregate
principal amount;
(ii) Indebtedness incurred pursuant to or in connection with the
New Credit Facility in an aggregate principal amount at any time
outstanding not to exceed the greater of (x) $30,000,000 and (y) the sum,
at such time, of (I) 85% of the consolidated book value of accounts
receivable of the Company and its Restricted Subsidiaries and (II) 60%
of the consolidated book value of inventory of the Company and its
Restricted Subsidiaries;
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(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of
any scheduled amortization payments or mandatory prepayments, when
actually paid (except to the extent paid from the proceeds of Refinancing
Indebtedness);
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that
such Interest Swap Obligations are entered into to protect the Company
and its Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the
Company to the Company or to a Wholly Owned Restricted Subsidiary of
the Company for so long as such Indebtedness is held by the Company or
a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien other than Liens permitted under this Indenture;
provided that if as of any date any Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company owns or holds any
such Indebtedness or holds a Lien in respect of such Indebtedness
other than a Lien permitted under this Indenture, such date shall be
deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject to
no Lien other than a Lien permitted under this Indenture; provided that
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(a) any Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary of the Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under this Indenture
and the Notes (including any Indebtedness that is pari passu with this
Indenture and the Notes) and (b) if as of any date any Person other
than a Wholly Owned Restricted Subsidiary of the Company owns or holds
any such Indebtedness or any Person holds a Lien in respect of such
Indebtedness other than a Lien permitted under this Indenture, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a daylight overdraft or Indebtedness arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by reimbursement obligations in respect of letters of
credit for the account of the Company or such Restricted Subsidiary,
as the case may be, which letters of credit were issued in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(x)Indebtedness in respect of trade letters of credit, standby
letters of credit or performance, surety or appeal bonds, in each case
incurred in the ordinary course of business and securing obligations
not constituting Indebtedness;
(xi) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries not to exceed the greater of (i) $7,500,000 and (ii) 5%
of Consolidated Tangible Assets of the Company and its Restricted
Subsidiaries at any one time outstanding;
(xii) Refinancing Indebtedness; and
(xiii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $7,500,000
at any one time outstanding (which amount may, but need not, be
incurred in whole or in part under the New Credit Facility).
-18-<PAGE>
"PERMITTED INVESTMENTS" means (i) Investments by the Company or
any Restricted Subsidiary of the Company in any Person that is or will
become immediately after such Investment a Wholly Owned Restricted
Subsidiary of the Company or that will merge or consolidate into the
Company or a Wholly Owned Restricted Subsidiary of the Company,
(ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under the Notes and this Indenture;
(iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $1,000,000 at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or its Restricted Subsidiaries'
businesses and otherwise in compliance with this Indenture; (vi)
additional Investments not to exceed $5,000,000 at any one time
outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any workout, compromise, plan of
reorganization or similar arrangement upon the bankruptcy or
insolvency or financial distress of such trade creditors or customers;
(viii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale
made in compliance with Section 4.15; (ix) Investments by the Company
or its Restricted Subsidiaries in joint ventures in an aggregate
amount not in excess of $3,000,000 at any time outstanding; and (x)
Investments by the Company or its Restricted Subsidiaries in at least
a majority of the outstanding common stock of New West pursuant to the
Merger Agreement for the purpose of acquiring New West as a Wholly
Owned Restricted Subsidiary.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate action and as to which the Company or its Restricted
Subsidiaries shall have set aside on its books such reserves, if any, as
may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
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(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money), including any Lien securing letters of credit issued
in connection with any of the foregoing;
(iv) judgment Liens not giving rise to an Event of Default;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
asset which is not leased property subject to such Capitalized Lease
Obligation;
(vii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(viii) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(ix) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of
offset and set-off;
(x) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under
this Indenture;
(xi) Liens securing Purchase Money Indebtedness permitted pursuant
to clause (xi) of the definition of "Permitted Indebtedness"; provided,
however, that (A) the Indebtedness shall not exceed the cost of such
property or assets and shall not be secured by any property or assets
of the Company or any Restricted Subsidiary of the Company other than
the property and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition or construction or, in the case of a refinancing of any
Purchase Money Indebtedness, within 180 days of such refinancing;
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(xii) Liens securing obligations under Currency Agreements;
(xiii) any lease or sublease not interfering in any material respect
with the business of the Company and its Subsidiaries;
(xiv) Liens with respect to obligations that do not in the aggregate
exceed $1,000,000 at any one time outstanding;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with
the importation of goods;
(xvi) Liens on the assets of a Managed Care Entity pursuant to the
applicable rules, or regulations of, or undertakings made to, any
regulatory entity having jurisdiction and authority over such Managed
Care Entity;
(xvii) Liens arising under customary provisions in joint venture
agreements and other similar agreements; and
(xviii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company and were not granted in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of the
Company and are no more favorable to the lienholders than those
securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
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"PERSON" means an individual, partnership, corporation, unincor-
porated organization, limited liability company, trust or joint venture, or
a governmental agency or political subdivision thereof.
"PHYSICAL NOTES" has the meaning set forth in Section 2.01.
"PLAN OF LIQUIDATION" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (a) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of such
Person otherwise than as an entirety or substantially as an entirety
and (b) the distribution of all or substantially all of the proceeds
of such sale, lease, conveyance or other disposition and all or
substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on
such Indebtedness.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in the
Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Notes in the form set forth in Section 2.15.
"PRO FORMA" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act,
as determined by the Board of Directors of the Company in consultation
with its independent public accountants.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or
its Restricted Subsidiaries incurred for the purpose of financing all or
any part of the purchase price or the cost of installation,
construction or improvement of property or equipment.
"PUT OPTION AGREEMENT" means the Put Option Agreement, dated
October 1, 1997, by and between the Company and Myrel Neumann, O.D. as such
agreement is effect in all material respects on the Issue Date.
-22-<PAGE>
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"QUALIFIED PROCEEDS" means any of the following or any combination
of the following: (i) cash, (ii) Cash Equivalents, (iii) assets that are
used or usable in the business of the Company and its Subsidiaries as
existing on the Issue Date or a business reasonably related or
complementary thereto and (iv) Capital Stock of any Person engaged
primarily in the business of the Company and its Subsidiaries as
existing on the Issue Date or a business reasonably related or
complementary thereto if, in connection with the receipt by the
Company or any Restricted Subsidiary of the Company of such Capital
Stock: (A) such Person becomes a Restricted Subsidiary; or (B) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into the Company or any Restricted Subsidiary of the
Company.
"RECORD DATE" means the Record Date specified in the Notes.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this
Indenture and the Notes.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption, including principal
and premium, if any, pursuant to this Indenture and the Notes.
"REFERENCE DATE" has the meaning set forth in Section 4.10.
"REFINANCE" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or
retire, or to issue a security or Indebtedness in exchange or
replacement for, such security or Indebtedness in whole or in part.
"Refinanced" and "Refinancing" shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company
or any Restricted Subsidiary of the Company of Indebtedness incurred
in accordance with Section 4.12 or clauses (i) and (iii) of the
definition of Permitted Indebtedness, in each case that does not (1)
result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium and accrued interest
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required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable fees and expenses
incurred by the Company in connection with such Refinancing) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that
is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if
such Indebtedness being Refinanced is Indebtedness of the Company
only, then such Refinancing Indebtedness shall be Indebtedness solely
of the Company and (y) if such Indebtedness being Refinanced is
subordinate or junior to the Notes, then such Refinancing Indebtedness
shall be subordinate or junior to the Notes at least to the same
extent and in the same manner as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning set forth in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors
and the Initial Purchasers.
"REGULATION S" means Regulation S under the Securities Act.
"REPLACEMENT ASSETS" has the meaning set forth in Section 4.15.
"RESTRICTED PAYMENT" shall have the meaning set forth in Section
4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term
in Rule 144(a)(3) under the Securities Act; provided, however, that
the Trustee shall be entitled to request and conclusively rely on an
Opinion of Counsel with respect to whether any Note constitutes a
Restricted Security.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Company or a Restricted Subsidiary of
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<PAGE>
any property, whether owned by the Company or any Restricted
Subsidiary at the Issue Date or later acquired, which has been or is
to be sold or transferred by the Company or such Restricted Subsidiary
to such Person or to any other Person from whom funds have been or are
to be advanced by such Person on the security of such Property.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc., and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SIGNIFICANT SUBSIDIARY," with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a
"Significant Subsidiary" set forth in Rule 1.02(w) of Regulation S-X
under the Exchange Act.
"SPECIAL REDEMPTION" has the meaning set forth in Section 3.01.
"SPECIAL REDEMPTION DATE" means December 15, 1998.
"SPECIAL REDEMPTION NOTICE" has the meaning set forth in Section
4.21.
"SPECIAL REDEMPTION NOTICE DATE" means November 30, 1998.
"SPECIAL REDEMPTION PRICE" has the meaning set forth in Section
4.21.
"SUBSIDIARY," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by
such Person or (ii) any other Person of which at least a majority of
the voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person.
"SURVIVING ENTITY" shall have the meaning set forth in Section
5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture,
except as otherwise provided in Section 9.03.
"TRUST OFFICER" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the
-25-<PAGE>
case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such
successor and assigned to administer this Indenture.
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary
of such Person that at the time of determination shall be or continue to
be designated an Unrestricted Subsidiary by the Board of Directors of
such Person in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary)
to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; provided that
(x) the Company certifies to the Trustee that such designation
complies with Section 4.10 and (y) each Subsidiary to be so designated
and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12 and (y) immediately before and
immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" mean direct obligations of,
and obligations guaranteed by, the United States of America for the
payment of which the full faith and credit of the United States of
America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for
the payment of public and private debts.
-26-<PAGE>
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to
any Indebtedness at any date, the number of years obtained by dividing
(a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the sum of the total of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking
fund, serial maturity or other required payment of principal,
including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means
any Restricted Subsidiary of such Person of which all the outstanding
voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable
law) are owned by such Person or any Wholly Owned Restricted
Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA,
such provision is incorporated by reference in, and made a part of,
this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by
Commission rule and not otherwise defined herein have the meanings
assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that statute,
law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however,
that any reference to the Bankruptcy Law shall mean the Bankruptcy Law
as applicable to the relevant case.
ARTICLE TWO
THE NOTES
---------
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A. The
Exchange Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit B. The
Notes may have notations, legends or endorsements required by law,
stock exchange rule or depository rule or usage. The Company and the
Trustee shall approve the form of the Notes and any notation, legend
or endorsement on them. If required, the Notes may bear the
appropriate legend regarding any original issue discount for federal
income tax purposes. Each Note shall be dated the date of its
issuance and shall show the date of its authentication. Each Note
shall have an executed Guarantee from each of the Guarantors endorsed
thereon substantially in the form of Exhibit E hereto.
The terms and provisions contained in the Notes, annexed hereto
as Exhibits A and B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company, the
Guarantors and the Trustee, by their execution and delivery of this
-28-<PAGE>
Indenture, expressly agree to such terms and provisions and to be
bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes offered
and sold in reliance on Regulation S shall be issued initially in the
form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"),
deposited with the Trustee, as custodian for the Depository, duly
executed by the Company (and having an executed Guarantee from each of
the Guarantors endorsed thereon) and authenticated by the Trustee as
hereinafter provided and shall bear all the legends set forth in
Section 2.15. The aggregate principal amount of the Global Note may
from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as
hereinafter provided.
Notes issued in exchange for interests in a Global Note pursuant
to Section 2.16 may be issued in the form of permanent certificated Notes
in definitive registered form in substantially the form set forth in
Exhibit A (the "Physical Notes") and shall bear the first legend set
forth in Section 2.15. All Notes offered and sold in reliance on
Regulation S shall remain in the form of a Global Note until the
earlier of the expiration of the "40-day distribution compliance
period," within the meaning of Regulation S, or the consummation of
the Exchange Offer pursuant to the Registration Rights Agreement.
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
-----------------------------
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer or an Assistant Secretary (each of whom shall, in
each case, have been duly authorized by all requisite corporate actions)
shall attest to, the Notes for the Company, and the Guarantees for the
Guarantors, by manual or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a Note
or a Guarantee, as the case may be, was an Officer or Assistant Secretary
at the time of such execution but no longer holds that office or
position at the time the Trustee authenticates the Note, the Note
shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note.
The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $190,000,000 in one
or more series, provided that the aggregate principal amount of Initial
Notes on the Issue Date shall not exceed $125,000,000, and further
provided that the Company complies with Section 4.12 of this
Indenture, (ii) Private Exchange Notes from time to time only in
exchange for a like principal amount of Initial Notes and
(iii) Exchange Notes from time to time only in exchange for (A) a like
principal amount of Initial Notes or (B) a like principal amount of
Private Exchange Notes, in each case upon a written order of the
Company in the form of an Officers' Certificate of the Company. Each
such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated,
whether the Notes are to be Initial Notes, Private Exchange Notes or
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Exchange Notes and whether (subject to Section 2.01) the Notes are to
be issued as Physical Notes or Global Notes or such other information
as the Trustee may reasonably request. In addition, with respect to
authentication pursuant to clause (iii) of the first sentence of this
paragraph, the first such written order from the Company shall be
accompanied by an Opinion of Counsel of the Company in a form
reasonably satisfactory to the Trustee stating that the issuance of
the Exchange Notes does not give rise to an Event of Default, complies
with this Indenture and has been duly authorized by the Company. The
aggregate principal amount of Notes outstanding at any time may not
exceed $190,000,000, except as provided in Sections 2.07 and 2.08.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the
Issue Date pursuant to clauses (i) and (iii) of the first sentence of
the immediately preceding paragraph, the Company shall use its
reasonable efforts to obtain the same "CUSIP" number for such Notes as
is printed on the Notes outstanding at such time; provided, however,
that if any series of Notes issued under this Indenture subsequent to
the Issue Date is determined, pursuant to an Opinion of Counsel of the
Company in a form satisfactory to the Trustee to be a different class
of security than the Notes outstanding at such time for federal income
tax purposes, the Company may obtain a "CUSIP" number for such Notes
that is different than the "CUSIP" number printed on the Notes then
outstanding.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which
any of such Notes may vote or consent) as one class and no series of
Notes will have the right to vote or consent as a separate class on
any matter.
The Trustee may appoint an authenticating agent (the "Authenti-
cating Agent") reasonably acceptable to the Company to authenticate Notes.
Unless otherwise provided in the appointment, an Authenticating Agent
may authenticate Notes whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes
authentication by such Authenticating Agent. An Authenticating Agent
has the same rights as an Agent to deal with the Company or with any
Affiliate of the Company.
-30-<PAGE>
The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.03. Registrar and Paying Agent.
---------------------------
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New
York) where (a) Notes may be presented or surrendered for registration
of transfer or for exchange ("Registrar"), (b) Notes may be presented
or surrendered for payment ("Paying Agent") and (c) notices and
demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company hereby initially designates the
office of State Street Bank and Trust Company, 61 Broadway, 15th
Floor, New York, New York 10006, Attn: Corporate Trust Division, as
their office or agency in the Borough of Manhattan, The City of New
York. The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company, upon prior written notice to the
Trustee, may have one or more co-Registrars and one or more additional
paying agents acceptable to the Trustee. The term "Paying Agent"
includes any additional Paying Agent. The Company may act as its own
Paying Agent, except that for the purposes of payments on the Notes
pursuant to Sections 4.14 and 4.15, neither the Company nor any
Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the
Trustee, in advance, of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or fails to
give the foregoing notice, the Trustee shall act as such and shall be
entitled to appropriate compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying
Agentand agent for service of demands and notices in connection with the
Notes, until such time as the Trustee has resigned or a successor has
been appointed. Any of the Registrar, the Paying Agent or any other
agent may resign upon 30 days' notice to the Company.
-31-<PAGE>
SECTION 2.04. Paying Agent To Hold Assets in Trust.
-------------------------------------
The Company shall require each Paying Agent other than the
Trustee to agree in writing that such Paying Agent shall hold in trust
for the benefit of the Holders or the Trustee all assets held by the
Paying Agent for the payment of principal of, premium, if any, or interest
on, the Notes (whether such assets have been distributed to it by the
Company or any other obligor on the Notes), and the Company and the
Paying Agent shall notify the Trustee of any Default by the Company
(or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed
and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to
account for any assets distributed. Upon distribution to the Trustee
of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for
such assets.
SECTION 2.05. Holder Lists.
-------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and
addresses of the Holders. If the Trustee is not the Registrar, the
Company shall furnish or cause the Registrar to furnish to the Trustee
five (5) Business Days before each Interest Payment Date and at such
other times as the Trustee may request in writing a list as of such
date and in such form as the Trustee may require of the names and
addresses of the Holders, which list may be conclusively relied upon
by the Trustee.
SECTION 2.06. Transfer and Exchange.
----------------------
When Notes are presented to the Registrar or a co-Registrar with
a request to register the transfer of such Notes or to exchange such
Notes for an equal principal amount of Notes or other authorized
denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for
such transaction are met; provided, however, that the Notes presented
or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Registrar or co-
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registration of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate Notes (and each of the Guarantors shall execute a
Guarantee thereon). No service charge shall be made for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax, fee or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Sections 2.10, 3.04, 4.14, 4.15 or
9.05, in which event the Company shall be responsible for the payment
of such taxes).
-32-<PAGE>
The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of
redemption of Notes and ending at the close of business on the day of
such mailing,(ii) selected for redemption in whole or in part pursuant
to Article Three, except the unredeemed portion of any Note being
redeemed in part or (iii) between a Record Date and the next
succeeding Interest Payment Date.
Any Holder of a beneficial interest in a Global Note shall,
by acceptance of such Global Note, agree that transfers of beneficial
interests in such Global Notes may be effected only through a book
entry system maintained by the Holder of such Global Note (or its
agent), and that ownership of a beneficial interest in the Note shall
be required to be reflected in a book entry system.
SECTION 2.07. Replacement Notes.
------------------
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a
replacement Note and each of the Guarantors shall execute a Guarantee
thereon if the Trustee s requirements are met. If required by the
Trustee or the Company, such Holder must provide satisfactory evidence
of such loss, destruction or taking, and an indemnity bond or other
indemnity of reasonable tenor, sufficient in the reasonable judgment
of the Company, the Guarantors and the Trustee, to protect the
Company, the Guarantors, the Trustee or any Agent from any loss which
any of them may suffer if a Note is replaced. Every replacement Note
shall constitute an obligation of the Company and the Guarantors. The
Company and the Trustee each may charge such Holder for its expenses
in replacing such Note.
SECTION 2.08. Outstanding Notes.
------------------
Notes outstanding at any time are all the Notes that have
been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section
as not outstanding. Subject to the provisions of Section 2.09, a Note
does not cease to be outstanding because the Company or any of its
Affiliates holds the Note.
-33-<PAGE>
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Note
is held by a bona fide purchaser. A mutilated Note ceases to be
outstanding upon surrender of such Note and replacement thereof
pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all
of the principal, premium, if any, and interest due on the Notes
payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on
and after that date such Notes shall be deemed not to be outstanding
and interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
---------------
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or
notice, Notes owned by the Company or an Affiliate of the Company shall
be considered as though they are not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes which a
Trust Officer of the Trustee actually knows are so owned shall be so
considered. The Company shall notify the Trustee, in writing, when it
or, to its knowledge, any of its Affiliates repurchases or otherwise
acquires Notes, of the aggregate principal amount of such Notes so
repurchased or otherwise acquired and such other information as the
Trustee may request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
----------------
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes and the Guarantors
shall prepare temporary Guarantees thereon upon receipt of a written
order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to
be authenticated and the date on which the temporary Notes are to be
authenticated. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company considers
appropriate for temporary Notes and so indicate in the Officers'
Certificate. Without unreasonable delay, the Company shall prepare
and execute, the Trustee shall authenticate, and the Guarantors shall
execute Guarantees on, upon receipt of a written order of the Company
pursuant to Section 2.02, definitive Notes in exchange for temporary
Notes.
-34-<PAGE>
SECTION 2.11. Cancellation.
-------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent, and no one else, shall cancel and, at
the written direction of the Company, shall dispose, in its customary
manner, of all Notes surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new
Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section
2.11.
SECTION 2.12. Defaulted Interest.
------------------
The Company shall pay interest on overdue principal, overdue
premium, if any, and on overdue installments of interest (without regard to
any applicable grace periods), to the extent lawful, from time to time on
demand at the rate borne by the Notes plus 2%. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day
months, and, in the case of a partial month, the actual number of days
elapsed.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus (to the extent lawful) any
interest payable on the defaulted amounts (collectively, "Default
Interest"), to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of Default
Interest or the next succeeding Business Day if such date is not a
Business Day. The Company shall notify the Trustee in writing of the
amount of Default Interest proposed to be paid on each Note and the
date of the proposed payment (a "Default Interest Payment Date"), and
at the same time the Company shall deposit with the Trustee an amount
of money equal to the aggregate amount proposed to be paid in respect
of such Default Interest or shall make arrangements satisfactory to
the Trustee for such deposit on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit
of the Persons entitled to such Default Interest as provided in this
Section; provided, however, that in no event shall the Company deposit
monies proposed to be paid in respect of Default Interest later than
11:00 a.m. New York City time of the proposed Default Interest Payment
Date. At least 15 days before the subsequent special record date, the
Company shall mail (or cause to be mailed) to each Holder, as of a
recent date selected by the Company, with a copy to the Trustee, a
notice that states the subsequent special record date, the payment
date and the amount of Default Interest to be paid. Notwithstanding
the foregoing, any Default Interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(a) shall be
paid to Holders as of the regular record date for the Interest Payment
Date for which interest has not been paid. Notwithstanding the
-35-<PAGE>
foregoing, the Company may make payment of any Default Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange.
SECTION 2.13. CUSIP Numbers.
--------------
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and, if so, the Trustee shall use the CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided, however,
that no representation is hereby deemed to be made by the Trustee as
to the correctness or accuracy of the CUSIP number printed in the
notice or on the Notes, and that reliance may be placed only on the
other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP numbers.
SECTION 2.14. Deposit of Monies.
------------------
Prior to 11:00 a.m. New York City time on each Interest Payment
Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make
cash payments, if any, due on such Interest Payment Date, Maturity
Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, as the case may be, in a timely manner which
permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date, Maturity Date, Redemption Date, Change of
Control Payment Date and Net Proceeds Offer Payment Date, as the case
may be.
SECTION 2.15. Restrictive Legends.
--------------------
Each Global Note and Physical Note that constitutes a Restricted
Security or is sold in compliance with Regulation S shall bear the
following legend (the "Private Placement Legend") on the face thereof
until after the second anniversary of the later of the Issue Date and
the last date on which the Company or any Affiliate of the Company was
the owner of such Note (or any predecessor security) (or such shorter
period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) (or such longer period of time as
may be required under the Securities Act or applicable state
securities laws in the opinion of counsel for the Company, unless
otherwise agreed by the Company and the Holder thereof):
-36-<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT
IS TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY THEREOF OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
(AN "ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR
HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
-37-<PAGE>
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE GOVERNING
THIS NOTE.
SECTION 2.16. Book-Entry Provisions
for Global Security.
---------------------
(a) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as
set forth in Section 2.15.
-38-<PAGE>
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note
held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be
treated by the Company, the Trustee and any Agent of the Company or
the Trustee as the absolute owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of a Global Note shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in a Global Note
may be transferred or exchanged for Physical Notes in accordance with
the rules and procedures of the Depository and the provisions of
Section 2.17. In addition, Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in a
Global Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Global Notes and
a successor depositary is not appointed by the Company within 90 days
of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a written request from the
Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of
the beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are
to be issued) reflect on its books and records the date and a decrease
in the principal amount of such Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and
amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Guarantors shall execute Guarantees on and
the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest
in the Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
-39-<PAGE>
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note pursuant to paragraph (b) or
(c) shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.17, bear the Private Placement Legend applicable to
the Physical Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
----------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and
-----------------------------------------------------------
Non-U.S. Persons. The following provisions shall apply with respect to
- ----------------
the registration of any proposed transfer of a Note constituting a
Restricted Security to any Institutional Accredited Investor which is
not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears
the Private Placement Legend, if (x) the requested transfer is after
the second anniversary of the Issue Date (provided, however, that neither
the Company nor any Affiliate of the Company has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to
the second anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C and
any legal opinions and certifications required thereby or (2) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding
Physical Notes) a decrease in the principal amount of such Global Note
in an amount equal to the principal amount of the beneficial interest
in the Global Note to be transferred, and (b) the Company shall
execute and the Trustee shall authenticate and deliver one or more
Physical Notes of like tenor and amount.
-40-<PAGE>
(b) Transfers to QIBs. The following provisions shall apply
------------------
with respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a QIB (excluding transfers to
Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Restricted
Note, whether or not such Note bears the Private Placement Legend,
if (x) the requested transfer is after the second anniversary of the
Issue Date; provided, however, that neither the Company nor any
Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date or (y) if such transfer is being made by
a proposed transferor who has checked the box provided for on the form
of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes
to be transferred consist of Physical Notes which after transfer are to
be evidenced by an interest in a Global Note, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of such Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
-------------------------
replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement
-41-<PAGE>
Legend. Upon the transfer, exchange or replacement of Notes bearing
the Private Placement Legend, the Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) the requested
transfer is after the second anniversary of the Issue Date (provided,
however, that neither the Company nor any Affiliate of the Company has
held any beneficial interest in such Note, or portion thereof, prior
to or on the second anniversary of the Issue Date), or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither
such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities
Act.
(d) General. By its acceptance of any Note bearing the
--------
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.16 or this
Section 2.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at
any reasonable time during the Registrar's normal business hours upon
the giving of reasonable written notice to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate
-------------------------------------
(i) evidencing a Note that has been transferred to an Affiliate of the
Company within two years after the Issue Date, as evidenced by a
notation on the Assignment Form for such transfer or in the
representation letter delivered in respect thereof or (ii) evidencing
a Note that has been acquired from an Affiliate of the Company (other
than by an Affiliate of the Company) in a transaction or a chain of
transactions not involving any public offering, shall, until two years
after the last date on which either the Company or any Affiliate of
the Company was an owner of such Note, in each case, bear a legend in
substantially the form set forth in Section 2.15, unless otherwise
agreed by the Company (with written notice thereof to the Trustee).
-42-<PAGE>
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
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If the Company elects to redeem Notes pursuant to Paragraph 5
of the Notes and Section 3.03, it shall notify the Trustee and the Paying
Agent in writing of the Redemption Date and the principal amount of
the Notes to be redeemed.
The Company shall give each notice provided for in this Section
3.01 at least 45 but not more than 90 days before the Redemption Date
(unless a shorter notice period shall be satisfactory to the Trustee,
as evidenced in a writing signed on behalf of the Trustee), together
with an Officers' Certificate stating that such redemption shall
comply with the conditions contained herein and in the Notes, the
Redemption Date, the redemption price and the principal amount of the
Notes to be redeemed.
If the Company is required to make an offer to redeem Notes
pursuant to the provisions of Section 4.14 or 4.15 hereof, it shall furnish
to the Trustee at least 45 days but not more than 90 days before a
Redemption Date (or such shorter period as may be agreed to by the
Trustee in writing), an Officers' Certificate setting forth (i) the
Section of this Indenture pursuant to which the redemption shall
occur, (ii) the Redemption Date, (iii) the principal amount of Notes
to be redeemed, (iv) the redemption price and (v) a statement to the
effect that (a) the Company or one of its Subsidiaries has effected an
Asset Sale and the conditions set forth in Section 4.15 have been
satisfied or (b) a Change of Control has occurred and the conditions
set forth in Section 4.14 have been satisfied, as applicable.
The Company shall give notice of a redemption pursuant to
Paragraph 8 of the Notes and Section 4.21 ("Special Redemption") to
the Paying Agent and the Trustee at least fifteen days before the
Special Redemption Date with respect to the Special Redemption (unless
a shorter notice period shall be agreed to by the Trustee in writing),
together with an Officers' Certificate stating that such redemption
will comply with the conditions contained herein.
SECTION 3.02. Selection of Notes To Be Redeemed.
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In the event that less than all of the Notes are to be redeemed
at any time, selection of such Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed or, if
such Notes are not then listed on a national securities exchange, on a
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pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided, however, that no Notes of a principal
amount of $1,000 or less shall be redeemed in part; provided, further,
that if a partial redemption is made with the proceeds of an Equity
Offering, selection of the Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless
such method is otherwise prohibited. Notice of redemption shall be
mailed by first-class mail at least 30 but not more than 60 days
before the redemption date to each Holder of Notes to be redeemed at
its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in
a principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the
original Note. On and after the redemption date, interest will cease
to accrue on Notes or portions thereof called for redemption as long
as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to this
Indenture.
SECTION 3.03. Optional Redemption.
--------------------
(a) The Notes will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after October 15,
2003, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing
on October 15 of the year set forth below, plus, in each case, accrued
and unpaid interest thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2003............................ 105.000%
2004 and thereafter............. 100.000%
(b) At any time, or from time to time, on or prior to October 15,
2001, the Company may, at its option, redeem up to 35% of the sum of
(i) the initial aggregate principal amount of the Notes issued in the
Offering and (ii) the respective initial aggregate principal amount of
the Notes issued under this Indenture after the Issue Date, on one or
more occasions with the net cash proceeds of one or more Equity
Offerings at a redemption price equal to 112.75% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the
redemption date; provided, however, that immediately after giving
effect to such redemption, at least 65% of the sum of (i) the initial
aggregate principal amount of the Notes issued in the Offering and
(ii) the respective initial aggregate principal amount of the Notes
issued under this Indenture after the Issue Date remain outstanding
(other than any Notes owned by the Company or any of its Affiliates).
In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than
120 days after the consummation of any such Equity Offering.
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SECTION 3.04. Notice of Redemption.
---------------------
At least 30 days but not more than 60 days before the Redemption
Date (other than with respect to a Special Redemption), the Company shall
mail or cause to be mailed a notice of redemption by first class mail
to each Holder of Notes to be redeemed at its registered address, with
a copy to the Trustee and any Paying Agent. At the Company's request,
the Trustee shall give the notice of redemption in the Company's name
and at the Company's expense. The Company shall provide such notices
of redemption to the Trustee at least five days before the intended
mailing date (other than with respect to a Special Redemption). In
any case, failure to give such notice or any defect in the notice to
the holder of any Note shall not affect the validity of the proceeding
for the redemption of any other Note.
Each notice of redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such redemption
is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest, if
any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Notes is to receive payment
of the redemption price plus accrued interest as of the Redemption Date,
if any, upon surrender to the Paying Agent of the Notes redeemed;
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(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
(8) if fewer than all the Notes are to be redeemed, the identifica-
tion of the particular Notes (or portion thereof) to be redeemed, as well
as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such
partial redemption.
No representation is made as to the accuracy of the CUSIP numbers
listed in such notice or printed on the Notes.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection
with the purchase of Notes.
SECTION 3.05. Effect of Notice of Redemption.
-------------------------------
Once notice of redemption is mailed in accordance with Section
3.04, such notice of redemption shall be irrevocable and Notes called for
redemption become due and payable on the Redemption Date and at the
redemption price plus accrued interest as of such date, if any. Upon
surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the redemption price plus accrued interest
thereon to the Redemption Date, but installments of interest, the
maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant
record dates referred to in the Notes. Interest shall accrue on or
after the Redemption Date and shall be payable only if the Company
defaults in payment of the redemption price.
SECTION 3.06. Deposit of Redemption Price.
----------------------------
On or before 11:00 a.m. New York City time on the Redemption
Date and in accordance with Section 2.14, the Company shall deposit with
the Paying Agent U.S. Legal Tender sufficient to pay the redemption price
plus accrued interest, if any, of all Notes to be redeemed on that
date. The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited which is not required for that purpose,
except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
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Unless the Company fails to comply with the preceding paragraph
and defaults in the payment of such redemption price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to
accrue on and after the applicable Redemption Date, whether or not
such Notes are presented for payment.
SECTION 3.07. Notes Redeemed in Part.
-----------------------
Upon surrender of a Note that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Note or Notes equal in
principal amount to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
-----------------
(a) The Company shall pay the principal of, premium, if any,
Default Interest, if any, and interest on the Notes on the dates and in
the manner provided in the Notes and in this Indenture.
(b) An installment of principal of or interest on the Notes shall
be considered paid on the date it is due if the Trustee or Paying Agent
(other than the Company or any of its Affiliates) holds, prior to
11:00 a.m. New York City time on that date, U.S. Legal Tender
designated for and sufficient to pay the installment in full and is
not prohibited from paying such money to the Holders pursuant to the
terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by
law, deduct or withhold income or other similar taxes imposed by the
United States of America from principal or interest payments
hereunder.
SECTION 4.02. Maintenance of Office or Agency.
--------------------------------
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee
of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth
in Section 11.02.
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SECTION 4.03. Corporate Existence.
--------------------
Except as provided in Article Five, the Company shall do or
shall cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate,
partnership or other existence of each of its Restricted Subsidiaries
in accordance with the respective organizational documents of the
Company and each such Restricted Subsidiary and the rights (charter
and statutory) and material franchises of the Company and its
Restricted Subsidiaries.
SECTION 4.04. Payment of Taxes and Other Claims.
----------------------------------
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material
taxes, assessments and governmental charges (including withholding taxes
and any penalties, interest and additions to taxes) levied or imposed upon
the Company or any of the Subsidiaries or properties of the Company or
any of the Subsidiaries and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien
upon the property of the Company or any of the Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in
good faith by appropriate negotiations or proceedings properly
instituted and diligently conducted for which adequate reserves, to
the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
-------------------------
(a) The Company and each of its Subsidiaries shall cause all
material properties owned by or leased to it and used or useful in the
conduct of its business to be maintained and kept in normal condition,
repair and working order and supplied with all necessary equipment and
shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the
Company or such Subsidiary may be necessary so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this
Section shall prevent the Company or any of its Subsidiaries from
discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors of the Company
or of the Board of Directors of the Subsidiary concerned, or of an
officer (or other agent employed by the Company or any of its
Subsidiaries) of the Company or such Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the
business of the Company or any of its Subsidiaries.
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(b) The Company and the Subsidiaries shall cause to be
provided insurance (including appropriate self-insurance) against loss
or damage of the kinds that, in the good faith judgment of the respective
Boards of Directors or other governing body or officer or other agent
of the Company or such Subsidiaries, as the case may be, are adequate
and appropriate for the conduct of the business of the Company or such
Subsidiaries, as the case may be, with reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as
shall be customary, in the good faith judgment of the respective Boards
of Directors or other governing body or officer or other agent of the
Company or such Subsidiary, as the case may be, for companies similarly
situated in the industry.
SECTION 4.06. Compliance Certificate;
Notice of Default.
-----------------------
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each of the Company's fiscal years, an Officers'
Certificate (signed by the principal executive officer, principal
financial officer and/or principal accounting officer) stating that a
review of its activities and the activities of its Restricted
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing officers with a view to determining whether
it has kept, observed, performed and fulfilled its obligations under
this Indenture and further stating, as to each such officer signing
such certificate, that to the best of such officers' knowledge the
Company during such preceding fiscal year has kept, observed,
performed and fulfilled each and every such obligation and no Default
or Event of Default occurred during such year and at the date of such
certificate there is no Default or Event of Default that has occurred
and is continuing or, if such signers do know of such Default or Event
of Default, the certificate shall describe the Default or Event of
Default and its status with particularity. The Officers' Certificate
shall also notify the Trustee should the Company elect to change the
manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to
Section 4.08 shall be accompanied by a written report of the Company's
independent certified public accountants (who shall be a firm of
established national reputation) stating (A) that their audit
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examination has included a review of the terms of this Indenture and
the form of the Notes as they relate to accounting matters, and (B)
whether, in connection with their audit examination, any Default or
Event of Default has come to their attention and if such a Default or
Event of Default has come to their attention, specifying the nature
and period of existence thereof; provided, however, that, without any
restriction as to the scope of the audit examination, such independent
certified public accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default
that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards.
(c) So long as any of the Notes are outstanding (i) if any
Default or Event of Default has occurred and is continuing or (ii) if
any Holder seeks to exercise any remedy hereunder with respect to a claimed
Default under this Indenture or the Notes, the Company shall promptly
deliver to the Trustee by registered or certified mail or by telegram,
telex or facsimile transmission followed by hard copy by registered or
certified mail an Officers' Certificate specifying such event, notice
or other action promptly of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
---------------------
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and
municipalities thereof and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses
and the ownership of their respective properties, except for such
noncompliances as could not singly or in the aggregate reasonably be
expected to have a material adverse effect on the financial condition,
business or results of operations of the Company and its Subsidiaries
taken as a whole.
SECTION 4.08. Reports to Holders.
-------------------
The Company shall deliver to the Trustee within 15 days after
the filing of the same with the Commission, copies of the quarterly and
annual reports and of the information, documents and other reports, if
any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding
that the Company may not be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file with
the Commission after consummation of the Exchange Offer, to the extent
permitted, and provide the Trustee and Holders with such annual
reports and such information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act. The Company shall also
comply with the other provisions of TIA Section 314(a).
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SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
--------------------------
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of
or interest on the Notes as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants
or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power
as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
----------------------------------
The Company shall not, and shall not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, (a) declare
or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or
in respect of shares of the Company's Capital Stock to holders of such
Capital Stock, (b) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital
Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to
any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or (d) make any Investment
(other than Permitted Investments) (each of the foregoing actions set
forth in clauses (a), (b) (c) and (d) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.12 or (iii)
the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair
market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company) shall exceed the sum
of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss) of the Company earned subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs (the "Reference Date")
(treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and
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sale subsequent to the Issue Date and on or prior to the Reference
Date of Qualified Capital Stock of the Company; plus (y) without
duplication of any amounts included in clause (iii)(x) above, 100% of
the aggregate net cash proceeds of any equity contribution received by
the Company from a holder of the Company's Capital Stock (excluding,
in the case of clauses (iii)(x) and (y), any net cash proceeds from an
Equity Offering to the extent used to redeem the Notes); plus (z)
without duplication, the sum of (1) the aggregate amount returned in
cash on or with respect to Investments (other than Permitted
Investments) made subsequent to the Issue Date whether through
interest payments, principal payments, dividends or other
distributions or payments, (2) the net cash proceeds received by the
Company or any of its Restricted Subsidiaries from the disposition of
all or any portion of such Investments (other than to a Subsidiary of
the Company) and (3) upon redesignation of an Unrestricted Subsidiary
as a Restricted Subsidiary, the fair market value of such Subsidiary;
provided, however, that the sum of clauses (1), (2) and (3) above
shall not exceed the aggregate amount of all such Investments made
subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in
the immediately preceding paragraph do not prohibit: (1) the payment
of any dividend within 60 days after the date of declaration of such
dividend if the dividend would have been permitted on the date of
declaration; (2) if no Default or Event of Default shall have occurred
and be continuing, the acquisition of any shares of Capital Stock of
the Company, either (i) solely in exchange for shares of Qualified
Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and
be continuing, the acquisition of any Indebtedness of the Company that
is subordinate or junior in right of payment to the Notes either (i)
solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a
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substantially concurrent sale for cash (other than to a Subsidiary of
the Company) of (A) shares of Qualified Capital Stock of the Company
or (B) Refinancing Indebtedness; (4) so long as no Default or Event of
Default shall have occurred and be continuing, repurchases by the
Company of Common Stock of the Company from employees of the Company
or any of its Subsidiaries or their authorized representatives or
successors upon the death, disability or termination of employment of
such employees, in an aggregate amount not to exceed $1,000,000 in any
calendar year; and (5) the repurchase by the Company of Common Stock
of the Company pursuant to the terms of the Put Option Agreement in an
aggregate amount not to exceed $900,000. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in
accordance with clause (iii) of the immediately preceding paragraph,
amounts expended pursuant to clauses (1), (2)(ii), 3(ii)(A), (4) and
(5) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment complies with this Indenture and setting forth
in reasonable detail the basis upon which the required calculations
were computed, which calculations may be based upon the Company's
latest available internal quarterly financial statements.
SECTION 4.11. Limitations on Transactions
with Affiliates.
---------------------------
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property
or the rendering of any service) with, or for the benefit of, any of its
Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time
on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or
part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $250,000 shall be approved by a
majority of non-interested directors of the Board of Directors or a
majority of non-interested directors of a committee of the Board of
Directors of the Company or such Restricted Subsidiary, as the case
may be, such approval to be evidenced by a Board Resolution stating
that such majority of non-interested directors of the Board of
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<PAGE>
Directors or such majority of non-interested directors of the
committee of the Board of Directors, as the case may be, have
determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company
enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair
market value of more than $5,000,000, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial
point of view, from an independent nationally recognized investment
banking firm and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply
to (i) reasonable fees and compensation paid to and indemnity provided
on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary of the Company as determined in
good faith by the Company's Board of Directors or a committee thereof
or senior management; (ii) transactions exclusively between or among
the Company and any of its Wholly Owned Restricted Subsidiaries or
exclusively between or among such Wholly Owned Restricted
Subsidiaries, provided such transactions are not otherwise prohibited
by this Indenture; (iii) any agreement as in effect as of the Issue
Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Holders in any material
respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by this Indenture; (v) any payment,
issuance of securities or other payments, awards or grants, in cash or
otherwise, pursuant to, or the funding of, employment arrangements and
stock option and stock ownership plans approved by the Board of
Directors, or the appropriate committee of the Board of Directors, of
the Company; and (vi) loans or advances to officers, directors or
employees of the Company or its Restricted Subsidiaries not in excess
of $1,000,000 at any one time outstanding.
SECTION 4.12. Limitation on Incurrence
of Additional Indebtedness.
---------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of
(collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company
and the Guarantors may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof, the
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Consolidated Fixed Charge Coverage Ratio of the Company is greater
than 2.0 to 1.0 if such incurrence is on or prior to October 15, 2000
and 2.25 to 1.0 if such incurrence is thereafter.
For purposes of determining any particular amount of Indebtedness
under this Section 4.12, guarantees, Liens or obligations with respect
to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included.
Indebtedness of any Person which is outstanding at the time
such Person becomes a Restricted Subsidiary or is merged with or into
or consolidated with the Company or a Restricted Subsidiary shall be
deemed to have been incurred at the time such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with
the Company or a Restricted Subsidiary, and Indebtedness which is
assumed at the time of the acquisition of any asset shall be deemed to
have been incurred at the time of such acquisition.
The Company shall not, and shall not permit any Guarantor to,
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to
any other Indebtedness of the Company or such Guarantor, as the case
may be, unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the Notes or the Guarantee of such
Guarantor, as the case may be, pursuant to subordination provisions
that are substantively identical to the subordination provisions of
such Indebtedness (or such agreement) that are most favorable to the
holders of any other Indebtedness of the Company or such Guarantor, as
the case may be.
SECTION 4.13. Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries.
--------------------------
The Company shall not, and shall not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary of the
Company to (a) pay dividends or make any other distributions on or in
respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other
-55-<PAGE>
Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary
of the Company; except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) this Indenture; (3) any
instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or
assets of the Person so acquired; (4) agreements existing on the Issue
Date to the extent and in the manner such agreements are in effect on
the Issue Date; (5) any security or pledge agreements, leases or
options (or similar agreements) containing customary restrictions on
transfers of the assets encumbered thereby or leased or subject to
option or on the transfer or subletting of the leasehold interest
represented thereby to the extent such agreements, leases or options
are not otherwise prohibited under this Indenture; (6) restrictions on
cash or other deposits or net worth and prohibitions on assignment
imposed by leases that are permitted under this Indenture; (7)
customary provisions in joint venture agreements and other similar
agreements; (8) the New Credit Facility and any instruments issued
pursuant thereto; (9) any agreement or instrument governing Capital
Stock of any Person that is acquired after the Issue Date; (10) Liens
permitted to be incurred pursuant to Section 4.17; (11) any
restrictions on a Managed Care Entity pursuant to the applicable rules
or regulations of, or undertakings made to, any regulatory entity
having jurisdiction and authority over such Managed Care Entity; or
(12) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clauses (2) through (11) above; provided, however, that
the provisions relating to such encumbrance or restriction contained
in any such Indebtedness are no less favorable to the Company in any
material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in
agreements referred to in such clauses (2) through (11).
SECTION 4.14. Change of Control.
------------------
(a) Upon the occurrence of a Change of Control, each Holder
shall have the right to require that the Company purchase all or a portion
of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any,
thereon to the date of purchase.
(b) Within 30 days following the date upon which the Change
of Control occurred, the Company shall send, by first class mail, a
notice to each Holder at such Holder's last registered address, with a
copy to the Trustee, which notice shall govern the terms of the Change
of Control Offer. The notice to the Holders shall contain all
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instructions and materials necessary to enable such Holders to tender
Notes pursuant to the Change of Control Offer. Such notice shall
state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes tendered and not withdrawn shall
be accepted for payment;
(ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered shall continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment
Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day
prior to the Change of Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the second Business Day prior
to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Notes purchased;
(vii) that Holders whose Notes are purchased only in part shall
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered; provided, however, that each Note
purchased and each new Note issued shall be in an original principal
amount of $1,000 or integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change
of Control.
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On the Change of Control Payment Date, the Company shall, to
the extent permitted by law, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent an amount equal to the aggregate
Change of Control Payment in respect of all Notes or portions thereof
so tendered and (iii) deliver, or cause to be delivered, to the
Trustee for cancellation the Notes so accepted together with an
Officers' Certificate stating that such Notes or portions thereof have
been tendered to and purchased by the Company. The Paying Agent shall
promptly either (x) pay to the Holder against presentation and
surrender (or, in the case of partial payment, endorsement) of the
Global Notes or (y) in the case of Physical Notes, mail to each Holder
of Notes the Change of Control Payment for such Notes, and the Trustee
shall promptly authenticate and deliver to the Holder of the Global
Notes a new Global Note or Notes or, in the case of Physical Notes,
mail to each Holder new Physical Notes, as applicable, equal in
principal amount to any unpurchased portion of the Notes surrendered,
if any, provided that each new Physical Note shall be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall
notify the Trustee and the Holders of the results of the Change of
Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Neither the Board of Directors of the Company nor the Trustee
may waive the provisions of this Section 4.14 relating to the Company's
obligation to make a Change of Control Offer or a Holder's right to
redemption upon a Change of Control.
The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of Notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.14, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations
under the provisions of this Section 4.14 by virtue thereof.
SECTION 4.15. Limitation on Asset Sales.
--------------------------
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Company's Board of Directors), (ii) at
least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall
be in the form of Qualified Proceeds and shall be received at the time
of such disposition; and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to apply,
the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to prepay any Indebtedness ranking at least
pari passu with the Notes (including Indebtedness under the New Credit
-58-
<PAGE>
Facility) and, in the case of any such Indebtedness under any
revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility, (B) to make an
investment in properties and assets that replace the properties and
assets that were the subject of such Asset Sale or in properties and
assets that shall be used in the business of the Company and its
Restricted Subsidiaries as existing on the Issue Date or in businesses
reasonably related or complementary thereto ("Replacement Assets"), it
being understood that the receipt of Qualified Proceeds (other than
cash or Cash Equivalents) is deemed to be a valid application of such
Qualified Proceeds pursuant to this clause (iii)(B), or (C) a
combination of repayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). On the 361st day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or
of such Restricted Subsidiary determines not to apply the Net Cash
Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each a "Net Proceeds Offer
Amount") shall be applied by the Company or such Restricted Subsidiary
to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 45
days following the applicable Net Proceeds Offer Trigger Date, from
all Holders on a pro rata basis, that amount of Notes equal to the Net
Proceeds Offer Amount at a price equal to 100% of the principal amount
of the Notes to be purchased, plus accrued and unpaid interest
thereon, if any, to the date of purchase; provided, however, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any
such non-cash consideration), then such conversion or disposition
shall be deemed to constitute an Asset Sale hereunder and the Net Cash
Proceeds thereof shall be applied in accordance with this
Section 4.15. The Company may defer the Net Proceeds Offer until there
is an aggregate unutilized Net Proceeds Offer Amount equal to or in
excess of $5,000,000 resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not just
the amount in excess of $5,000,000, shall be applied as required
pursuant to this paragraph). Upon completion of a Net Proceeds Offer,
the amount of Net Cash Proceeds and the amount of aggregate unutilized
Net Proceeds Offer Amount shall be reset to zero. Accordingly, to the
extent that any Net Cash Proceeds remain after consummation of a Net
Proceeds Offer, the Company may use such Net Cash Proceeds for any
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purpose not prohibited by this Indenture and no Net Proceeds Offer
shall be required until the Net Proceeds Offer amount again
accumulates to $5,000,000. Pending the final application of such Net
Cash Proceeds, the Company or such Restricted Subsidiary may, but
shall not be required to, temporarily reduce the outstanding
Indebtedness under any revolving credit facility under the New Credit
Facility; provided, however, that the final application of such Net
Cash Proceeds shall be as required by this Section 4.15.
In the event of the transfer of substantially all (but not all)
of the property and assets of the Company and its Restricted Subsidiaries
as an entirety to a Person in a transaction permitted pursuant to Section
5.01, the surviving entity shall be deemed to have sold the properties
and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this Section 4.15, and shall comply with
the provisions of this Section 4.15 with respect to such deemed sale
as if it were an Asset Sale. In addition, the fair market value of
such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be for cash in an Asset Sale for
purposes of this Section 4.15.
Each Net Proceeds Offer shall be mailed to the record Holders as
shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with
the procedures set forth in this Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Notes in
whole or in part in integral multiples of $1,000 in exchange for cash.
To the extent Holders properly tender Notes in an amount exceeding the
Net Proceeds Offer Amount, Notes of tendering Holders shall be
purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 Business Days or
such longer period as may be required by law.
The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection
with the repurchase of Notes pursuant to a Net Proceeds Offer. To the
extent that the provisions of any securities laws or regulations
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conflict with this Section 4.15, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.15 by virtue
thereof.
SECTION 4.16. Limitation on Preferred Stock
of Restricted Subsidiaries.
-----------------------------
The Company shall not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Wholly
Owned Restricted Subsidiary of the Company) or permit any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company) to own any Preferred Stock of any Restricted Subsidiary of
the Company.
SECTION 4.17. Limitation on Liens.
--------------------
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or
upon any property or assets of the Company or any of its Restricted
Subsidiaries whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey
any right to receive income or profits therefrom unless (i) in the
case of Liens securing Indebtedness that is expressly subordinate or
junior in right of payment to the Notes or any Guarantee, the Notes
and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens
and (ii) in all other cases, the Notes and the Guarantees are equally
and ratably secured, except for (A) Liens existing as of the Issue
Date to the extent and in the manner such Liens are in effect on the
Issue Date; (B) Liens securing Indebtedness and other obligations
under the New Credit Facility; (C) Liens securing the Notes and the
Guarantees; (D) Liens in favor of the Company or a Wholly Owned
Restricted Subsidiary of the Company on assets of any Restricted
Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness
which is incurred to Refinance any Indebtedness which has been secured
by a Lien permitted under this Indenture and which has been incurred
in accordance with the provisions of this Indenture; provided,
however, that such Liens (I) are no less favorable to the Holders and
are not more favorable to the lienholders with respect to such Liens
than the Liens in respect of the Indebtedness being Refinanced and
(II) do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (F) Permitted Liens.
-61-<PAGE>
SECTION 4.18. Limitation on Guarantees of
Indebtedness by Restricted
Subsidiaries.
---------------------------
The Company shall not permit any of its Restricted Subsidiaries
that is not a Guarantor (whether formed or acquired before or after the
Issue Date), directly or indirectly, to guarantee the payment of any
Indebtedness under the New Credit Facility, unless such Restricted
Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Restricted Subsidiary's
Guarantee of the Notes pursuant to the terms of the Indenture, such
Guarantee of the Notes to be a senior unsecured obligation of such
Subsidiary; provided that if any such Restricted Subsidiary who
becomes a Guarantor as described above is released from its guarantee
with respect to Indebtedness and obligations outstanding under the New
Credit Facility, such Restricted Subsidiary who becomes a Guarantor as
described above shall automatically be released from its obligations
as a Guarantor. Nothing in this Section 4.18 shall be construed to
permit any Restricted Subsidiary of the Company to incur Indebtedness
otherwise prohibited by Section 4.12.
SECTION 4.19. Additional Subsidiary Guarantees.
---------------------------------
If the Company or any of its Restricted Subsidiaries transfers
or causes to be transferred, in one transaction or a series of related
transactions, any property to any domestic Restricted Subsidiary that
is not a Guarantor, or if the Company or any of its Restricted
Subsidiaries shall organize, acquire or otherwise invest in another
domestic Restricted Subsidiary having total assets with a book value
in excess of $500,000, then such transferee or acquired or other
Restricted Subsidiary shall (i) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally
guarantee all of the Company's obligations under the Notes and this
Indenture on the terms set forth in this Indenture and (ii) deliver to
the Trustee an Opinion of Counsel that such supplemental indenture has
been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable
obligation of such Restricted Subsidiary. Thereafter, such Restricted
Subsidiary shall be a Guarantor for all purposes of this Indenture.
Notwithstanding the foregoing, any Restricted Subsidiary of the
Company which is or seeks to become a Managed Care Entity shall be a
Guarantor only at such time as and then only to the extent provided in
the definition of Guarantor.
SECTION 4.20. Conduct of Business.
--------------------
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The Company and its Restricted Subsidiaries shall not engage in
any businesses which are not the same, similar or reasonably related
to the businesses in which the Company and its Restricted Subsidiaries
are engaged on the Issue Date.
SECTION 4.21. Special Redemption.
-------------------
(a) If the Company has not consummated the tender offer for at
least a majority of the common stock of New West on or prior to the Special
Redemption Notice Date and delivered an Officers' Certificate stating
that such tender offer has been effected in all material respects on
the terms and conditions contemplated by the Merger Agreement and as
disclosed in the Offering Memorandum, the Company shall be required to
effect the Special Redemption on or prior to the Special Redemption
Date at an aggregate redemption price equal to 100% of the principal
amount of the Securities, plus accrued and unpaid interest to the date
of redemption (the "Special Redemption Price").
(b) If the Officers' Certificate contemplated by paragraph
(a) of this Section has not been previously delivered to the Trustee, upon
the earlier to occur of (i) the notice given by the Company of the
Special Redemption pursuant to the last paragraph of Section 3.01 or
(ii) the Special Redemption Notice Date:
(i) Within five days after the Special Redemption Notice Date,
the Trustee shall mail a notice in compliance with Section 3.04 hereof
(the "Special Redemption Notice") to the holders of the Notes stating
that the Notes shall be redeemed on the Special Redemption Date at the
Special Redemption Price, and shall state that the Notes must be
surrendered to the Trustee as paying agent in order to collect the
Special Redemption Price, it being acknowledged and agreed that the
failure of the Company to deliver the Officers' Certificate
contemplated by Section 4.21(a) by 5:00 P.M., New York time, on
November 30, 1998 shall be a request for the Trustee to give the
Special Redemption Notice to the holders of the Notes; and
(ii) The Company shall, on or prior to the Special Redemption Date,
deposit with the Trustee as paying agent an amount of funds such that
on the Special Redemption Date the Trustee shall have immediately
available funds to pay the Special Redemption Price for all
outstanding Notes to be redeemed.
-63-<PAGE>
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation
and Sale of Assets.
---------------------
(a) The Company shall not, in a single transaction or series
of related transactions, consolidate or merge with or into any Person,
or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than
the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of
the Company and of the Company's Restricted Subsidiaries substantially
as an entirety (the "Surviving Entity") (x) shall be a corporation
organized and validly existing under the laws of the United States or
any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every covenant of
the Notes, this Indenture and the Registration Rights Agreement on the
part of the Company to be performed or observed; (ii) immediately
after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the
Company or such Surviving Entity, as the case may be, (1) shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction and (2)
shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.12;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any
Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and
(iv) the Company or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, transfer,
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lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this
Indenture and that all conditions precedent in this Indenture relating
to such transaction have been satisfied. Notwithstanding the
foregoing clauses (ii) and (iii), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties
and assets to the Company or to another Restricted Subsidiary and (b)
the Company may merge with or transfer all of its properties and
assets to an Affiliate incorporated or formed solely for the purpose
of either reincorporating or reforming the Company in another State of
the United States so long as the amount of Indebtedness of the Company
and its Restricted Subsidiaries is not increased thereby.
(b) For purposes of this Section 5.01, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions but excluding the creation of any Lien permitted to be
incurred pursuant to Section 4.17) of all or substantially all of the
properties or assets of one or more Restricted Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company, shall be deemed to be
the transfer of all or substantially all of the properties and assets
of the Company.
(c) Each Guarantor (other than any Guarantor whose Guarantee
is to be released in accordance with the terms of the Guarantee and this
Indenture in connection with any transaction complying with the
provisions of Section 4.15) shall not, and the Company shall not cause
or permit any Guarantor to, consolidate with or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, any Person other than the Company
or any other Guarantor unless: (i) the entity formed by or surviving
any such consolidation or merger (if other than the Guarantor) or to
which such sale, lease, conveyance or other disposition shall have
been made is a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia;
(ii) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee; (iii) immediately after
giving effect to such transaction, no Default or Event of Default
shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds
-65-<PAGE>
therefrom on a pro forma basis, the Company could satisfy the
provisions of clause (ii) of the first paragraph of this Section 5.01.
Any merger or consolidation of a Guarantor with and into the Company
(with the Company being the surviving entity) or another Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company need only
comply with clause (iv) of Section 5.01(a).
(d) The creation of a Lien permitted to be incurred pursuant
to Section 4.17 shall not constitute a disposition for the purposes of
this Section 5.01.
SECTION 5.02. Successor Corporation Substituted.
----------------------------------
Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance
with Section 5.01, in which the Company is not the continuing corporation,
the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is
made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture and the Notes
with the same effect as if such surviving entity had been named as
such.
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
------------------
An "Event of Default" means any of the following events:
(a) the failure to pay interest on any Notes when the same
becomes due and payable and the default continues for a period of
30 days;
(b) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds
Offer);
(c) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be remedied)
from the Trustee or the Holders of at least 25% of the outstanding
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principal amount of the Notes (except in the case of a default with
respect to Section 5.01, which shall constitute an Event of Default
with such notice requirement but without such passage of time
requirement);
(d) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary
of the Company, or the acceleration of the final stated maturity of
any such Indebtedness (which acceleration is not rescinded, annulled
or otherwise cured within 20 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated,
aggregates $5,000,000 or more at any time;
(e) one or more judgments in an aggregate amount in excess of
$5,000,000 shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid
or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable;
(f) the Company or any of its Significant Subsidiaries pursuant to
or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it
in an involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) shall generally not pay its debts when such debts become
due or shall admit in writing its inability to pay its debts
generally;
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding,
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(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries for all or substantially all of their
properties taken as a whole, or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries,
and in each case the order or decree remains unstayed and in effect
for 60 days; or
(h) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid, in each
case by a court of competent jurisdiction in a final non-appealable
judgment, or any of the Guarantors denies its liability under its
Guarantee (other than by reason of release of a Guarantor in
accordance with the terms of this Indenture).
SECTION 6.02. Acceleration.
-------------
If an Event of Default (other than an Event of Default specified
in Section 6.01 (f) or (g) relating to the Company) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may declare the principal of and accrued
interest on all the Notes to be due and payable by notice in writing
to the Company and the Trustee specifying the respective Event of
Default and that it is a declaration of acceleration, and the same
shall become immediately due and payable. If an Event of Default
specified in Section 6.01 (f) or (g) with respect to the Company
occurs and is continuing, then all unpaid principal of, and premium,
if any, and accrued and unpaid interest on all of the outstanding
Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration with respect
to the Notes as described in the preceding paragraph, the Holders of a
majority in principal amount of the Notes may rescind and cancel such
declaration and its consequences (a) if the rescission would not
conflict with any judgment or decree, (b) if all existing Events of
Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (c)
to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has
been paid, (d) if the Company has paid the Trustee its reasonable
compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver
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of an Event of Default of the type described in Section 6.01, the
Trustee shall have received an Officers' Certificate and an Opinion of
Counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies.
---------------
(a) If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to
collect the payment of the principal of, premium, if any, or interest
or Additional Interest, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
(b) All rights of action and claims under this Indenture or the
Notes may be enforced by the Trustee even if it does not possess any of the
Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of
Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
------------------------
Prior to the acceleration of the Notes, the Holders of a majority
in aggregate principal amount of the Notes then outstanding by notice to
the Trustee may, on behalf of the Holders of all the Notes, waive any
existing Default or Event of Default and its consequences under this
Indenture, except a Default or Event of Default specified in Section
6.01(a) or (b) or in respect of any provision hereof which cannot be
modified or amended without the consent of the Holder so affected
pursuant to Section 9.02. When a Default or Event of Default is so
waived, it shall be deemed cured and shall cease to exist. This
Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such
Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
--------------------
Holders of the Notes may not enforce this Indenture or the Notes
except as provided in this Article Six and under the TIA. The Holders
of a majority in aggregate principal amount of the then outstanding
Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided,
however, that the Trustee may refuse to follow any direction (a) that
conflicts with any rule of law or this Indenture, (b) that the
Trustee, in its sole discretion, determines may be unduly prejudicial
to the rights of another Holder (it being understood that the Trustee
shall have no duty to ascertain whether or not such actions or
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forebearances are unduly prejudicial to such Holders), or (c) that may
expose the Trustee to personal liability for which adequate indemnity
provided to the Trustee against such liability is not reasonably
assured to it; provided, further, however, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent
with such direction or this Indenture. This Section 6.05 shall be in
lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the
TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
SECTION 6.06. Limitation on Suits.
--------------------
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy
hereunder, unless the Holders of at least 25% in aggregate principal
amount of the outstanding Notes have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as
Trustee under the Notes and this Indenture, the Trustee has failed to
institute such proceeding within 30 days after receipt of such request
and offer of indemnity and the Trustee, within such 30-day period, has
not received directions inconsistent with such written request by
Holders of a majority in aggregate principal amount of the outstanding
Notes.
The foregoing limitations shall not apply to a suit instituted
by a Holder of a Note for the enforcement of the payment of the principal
of, premium, if any, or interest or Additional Interest, if any, on,
such Note on or after the respective due dates expressed or provided
for in such Note.
A Holder may not use this Indenture to prejudice the rights
of any other Holders or to obtain priority or preference over such other
Holders.
SECTION 6.07. Right of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision in this Indenture, the right
of any Holder of a Note to receive payment of the principal of, premium,
if any, and interest or Additional Interest, if any, on such Note, on
or after the respective due dates expressed or provided for in such
Note, or to bring suit for the enforcement of any such payment on or
after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
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SECTION 6.08. Collection Suit by Trustee.
---------------------------
If an Event of Default specified in paragraph (a) or (b) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust against the Company,
or any other obligor on the Notes for the whole amount of the principal
of, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue principal, overdue premium, if any, and
interest on overdue installments of interest, to the extent lawful, in
each case at the rate per annum provided for by the Notes and such
further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee pursuant to the provisions of
Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim.
---------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents,
counsel, accountants and experts) and the Holders allowed in any
judicial proceedings relative to the Company (or any other obligor
upon the Notes), its creditors or its property and shall be entitled
and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby
authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts
due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the
rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
-----------
If the Trustee collects any money pursuant to this Article Six
it shall pay out such money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the
cost and expenses of collection;
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Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes for interest (including any Additional
Interest);
Third: to Holders for the principal amounts (including any premium)
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for the
principal (including any premium); and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may
fix a record date and payment date for any payment to Holders pursuant to
this Section 6.10.
SECTION 6.11. Undertaking for Costs.
----------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken
or omitted by it as Trustee, a court may in its discretion require the
filing by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of
more than 10% in aggregate principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
-------
SECTION 7.01. Duties of Trustee.
------------------
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it
by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
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<PAGE>
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture that are adverse to the Trustee.
(2) The Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture. However, in the case of any such
certificates or opinions that by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture, but need not verify the contents
thereof.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this
Section 7.01 and Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with
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the Company. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by law.
SECTION 7.02. Rights of Trustee.
------------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate
or an Opinion of Counsel, which shall conform to Sections 11.04 and
11.05. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability in respect to
any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or
attorney and to consult with the officers and representatives of the
Company, including the Company's accountants and attorneys.
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(f) The Trustee shall be under no obligation to exercise any of its
rights or powers vested in it by this Indenture at the request, order
or direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders have offered to the Trustee reasonable
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such
request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational purposes only and the
Trustee's receipt of the foregoing shall not constitute constructive
notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with
any of their covenants hereunder (as to which the Trustee is entitled
to rely exclusively on Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, or
any of its Subsidiaries, or their respective Affiliates with the same
rights it would have if it were not Trustee. Any Agent may do the
same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
---------------------
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, it shall not be
responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other
than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
------------------
If a Default or an Event of Default occurs and is continuing and
if it is known to a Trust Officer, the Trustee shall mail to each Holder
notice of the uncured Default or Event of Default within 90 days after
obtaining knowledge thereof. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note,
including an accelerated payment, a Default in payment on the Change
of Control Payment Date pursuant to a Change of Control Offer or on
the Net Proceeds Offer Payment Date pursuant to a Net Proceeds Offer
and a Default in compliance with Article Five hereof, the Trustee may
withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its
directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders. The
foregoing sentence of this Section 7.05 shall be in lieu of the
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<PAGE>
proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of
the TIA is hereby expressly excluded from this Indenture and the Notes, as
permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
------------------------------
Within 60 days after May 15 of each year beginning with 1998,
the Trustee shall, to the extent that any of the events described in
TIA Section 313(a) occurred within the previous twelve months, but not
otherwise, mail to each Holder a brief report dated as of such date
that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Sections 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the Commission and each
stock exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes
become listed on any stock exchange and the Trustee shall comply with
TIA Section 313(d).
SECTION 7.07. Compensation and Indemnity.
---------------------------
The Company shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed
by the Company and the Trustee. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it in connection
with the performance of its duties under this Indenture. Such
expenses shall include the reasonable fees and expenses of the
Trustee's agents, counsel, accountants and experts.
The Company shall indemnify each of the Trustee (or any
predecessor Trustee) and its agents, employees, stockholders, Affiliates
and directors and officers for, and hold them each harmless against, any
and all loss, liability, damage, claim or expense (including
reasonable fees and expenses of counsel), including taxes (other than
taxes based on the income of the Trustee) incurred by them, except for
such actions to the extent caused by any negligence or willful
misconduct on their part, arising out of or in connection with the
acceptance or administration of this trust including the reasonable
costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of
their rights, powers or duties hereunder. The Trustee shall notify
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the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its Obligations hereunder
except to the extent such failure shall have prejudiced the Company.
The Company shall have the right, upon written notice to the Trustee,
to assume, at its own expense, the defense of such claim, including
the employment of counsel reasonably satisfactory to the Trustee;
provided, however, that any settlement of a claim shall be approved in
writing by the Trustee if such settlement would result in an admission
of liability by the Trustee or if such settlement would not be
accompanied by a full release of the Trustee for all liability arising
out of the events giving rise to such claim. If, however, the Company
declines or fails to assume the defense, or to employ counsel
reasonably satisfactory to the Trustee, in either case in a timely
manner, then the Trustee may employ separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of
such counsel.
To secure the Company's payment obligations in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except
assets or money held in trust to pay principal of or premium, if any,
or interest on particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01 (f) or (g) occurs, such expenses
and the compensation for such services are intended to constitute expenses
of administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination
of this Indenture.
SECTION 7.08. Replacement of Trustee.
-----------------------
The Trustee may resign at any time by so notifying the Company.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee and appoint a successor Trustee with the Company's
consent, by so notifying the Company and the Trustee. The Company may
remove the Trustee if:
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(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of performing its obligations
under this Indenture.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder
of such event and shall promptly appoint a successor Trustee. Within
one year after the successor Trustee takes office, the Holders of a
majority in aggregate principal amount of the outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed
by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately
after that, the retiring Trustee shall transfer all property held by
it as Trustee to the successor Trustee, subject to the lien provided
in Section 7.07, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The
Company shall mail notice of such successor Trustee's appointment to
each Holder.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee,
the Company or the Holders of at least 10% in aggregate principal
amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section
7.07 shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business
to, another corporation, the resulting, surviving or transferee
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corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee; provided, however, that such corporation
shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
------------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or,
in the case of a Trustee that is a subsidiary of another bank or a
corporation included in a bank holding company system, the related
bank or bank holding company) shall have a combined capital and
surplus of at least $100,000,000 as set forth in its most recent
published annual report of condition, and have a corporate trust
office in the City of New York. In addition, if the Trustee is a
subsidiary of another bank or a corporation included in a bank holding
company system, the Trustee, independently of such bank or bank
holding company, shall meet the capital requirements of TIA
Section 310(a)(2). The Trustee shall comply with TIA Section 310(b);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion
set forth in TIA Section 310(b)(1) are met. The provisions of TIA Section
310 shall apply to the Company, as obligor of the Notes.
SECTION 7.11. Preferential Collection of
Claims Against Company.
--------------------------
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
-------------------------------------
This Indenture shall be discharged and shall cease to be of
further effect (except as to surviving rights or registration of transfer
or exchange of the Notes, as expressly provided for in this Indenture)
as to all outstanding Notes when (a) either (i) all Notes, theretofore
authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for whose payment money has
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<PAGE>
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust) have been delivered to the Trustee for cancellation or
(ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds
in an amount sufficient to pay and discharge the entire Indebtedness
on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest and
Additional Interest, if any, on the Notes to the date of deposit
together with irrevocable instructions from the Company directing the
Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (b) the Company has paid all other
sums payable under this Indenture by the Company; and (c) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been
complied with; provided, however, that such counsel may rely, as to
matters of fact, on an Officers' Certificate of the Company.
The Company may, at its option and at any time, elect to have
its obligations and the obligations of the Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance"). Such Legal
Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding
Notes, except for (a) the rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest and
Additional Interest, if any, on the Notes when such payments are due,
(b) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for
payments, (c) the rights, powers, trust, duties and immunities of the
Trustee and the Company's obligations in connection therewith and (d)
the Legal Defeasance provisions of this Section 8.01. In addition,
the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to covenants
contained in Sections 4.04, 4.05, 4.08 and 4.10 through 4.20 and
Article Five ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event of Covenant
Defeasance, those events described under Section 6.01 (except those
events described in Section 6.01(a),(b),(f) and (g)) shall no longer
constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders cash in United States
dollars, non-callable U.S. Government Obligations, or a combination
thereof, in such amounts as shall be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable Redemption Date,
as the case may be;
(b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee (which may be counsel to the
Company) confirming that (i) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (ii)
since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the
Holders shall not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and shall be subject to
U.S. federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee (which may be counsel to the
Company) confirming that the Holders shall not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant
Defeasance and shall be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default with respect to the Indenture resulting from the incurrence
of Indebtedness, all or a portion of which will be used to defease the
Notes concurrently with such incurrence) or insofar as Events of
Default under Section 6.01 (f) or (g) from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
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(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture
or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied
with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit,
the trust funds shall not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
Notwithstanding the foregoing, the Opinion of Counsel required by
clause (b) with respect to Legal Defeasance need not be delivered if
all the Notes not theretofore delivered to the Trustee for
cancellation (i) have become due and payable, (ii) shall become due
and payable on the maturity date within one year or (iii) are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by such Trustee
in the name, and at the expense, of the Company.
SECTION 8.02. Application of Trust Money.
---------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to
Section 8.01, and shall apply the deposited U.S. Legal Tender and the
money from U.S. Government Obligations in accordance with this
Indenture to the payment of the principal of and interest on the
Notes. The Trustee shall be under no obligation to invest said U.S.
Legal Tender or U.S. Government Obligations, except that, upon request
of the Company, the Trustee shall invest said U.S. Legal Tender in
U.S. Government Obligations.
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The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.01 or the
principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the
Holders of outstanding Notes.
SECTION 8.03. Repayment to the Company.
-------------------------
Subject to Sections 7.07 and 8.01, the Trustee and the Paying
Agent shall promptly pay to the Company upon request any excess U.S. Legal
Tender or U.S. Government Obligations held by them at any time and
thereupon shall be relieved from all liability with respect to such
money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or
interest that remains unclaimed for one year after the due date for
payment of such principal or interest; provided, however, that the
Company shall, if requested by the Trustee or Paying Agent, give to
the Trustee or Paying Agent, indemnification reasonably satisfactory
to it against any and all liability which may be incurred by it by
reason of such paying; provided, further, that the Trustee or such
Paying Agent, before being required to make any payment, may at the
expense of the Company cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and
that after a date specified therein which shall be at least 30 days
from the date of such publication or mailing any unclaimed balance of
such money then remaining shall be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to
the Company for payment as general creditors unless an applicable law
designates another Person, and all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
SECTION 8.04. Reinstatement.
--------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.01
by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.01 until such
time as the Trustee or Paying Agent is permitted to apply all such
U.S. Legal Tender or U.S. Government Obligations in accordance with
Section 8.01; provided, however, that if the Company has made any
payment of interest on or principal of any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to
the rights of the Holders of such Notes to receive such payment from
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<PAGE>
the U.S. Legal Tender or U.S. Government Obligations held by the
Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge
by Trustee.
---------------------------
After (i) the conditions of Section 8.01 have been satisfied,
(ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company and (iii) the Company has delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with,
the Trustee upon request shall acknowledge in writing the discharge of
the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.01, provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of
fact on one or more Officers' Certificates of the Company.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
-----------------------------
SECTION 9.01. Without Consent of Holders.
---------------------------
Subject to the provisions of Section 9.02, the Company, the
Guarantors and the Trustee may amend, waive or supplement this Indenture
without notice to or consent of any Holder: (a) to cure any ambiguity,
defect or inconsistency; (b) to comply with Section 5.01 of this Indenture;
(c) to provide for uncertificated Notes in addition to certificated
Notes; (d) to comply with any requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
TIA; or (e) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect the
rights of any Holder. Notwithstanding the foregoing, the Trustee, the
Guarantors and the Company may not make any change pursuant to this
Section 9.01 that adversely affects the rights of any Holder under
this Indenture without the consent of such Holder. In formulating its
determination on such matters, the Trustee shall be entitled to rely
on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel (which may be counsel to
the Company) or an Officers' Certificate, and may not be held liable
therefor.
-84-<PAGE>
Upon the request of the Company and the Guarantors accompanied
by a Board Resolution authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the
Company and the Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee may but
shall not be obligated to enter into such amended or supplemental
Indenture which affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.02. With Consent of Holders.
------------------------
The Company, the Guarantors and the Trustee may amend or supplement
this Indenture or the Notes or any amended or supplemental Indenture
with the written consent of the Holders of Notes of not less than a
majority in aggregate principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or
exchange offer for the Notes).
Upon the request of the Company and the Guarantors accompanied
by a Board Resolution authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of
evidence satisfactory to the Trustee of the consent of the Holders of
Notes as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.06, the Trustee shall join with the Company and
the Guarantors in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its sole discretion, but
shall not be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any
such amended or supplemental Indenture or waiver. Subject to
Sections 6.04 and 6.07, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance in
a particular instance by the Company with any provision of this
-85-<PAGE>
Indenture or the Notes. However, without the consent of each Holder
of the Notes affected thereby, an amendment or waiver may not,
directly or indirectly: (i) reduce the amount of Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or
have the effect of changing the time for payment of premium, if any,
and interest, including Default Interest, on any Notes; (iii) reduce
the principal of or change or have the effect of changing the fixed
maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor; (iv) make any Notes payable in money other
than that stated in the Notes; (v) make any change in provisions of
this Indenture protecting the right of each Holder to receive payment
of premium, if any, principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of the Notes to
waive Defaults or Events of Default; (vi) after the Company's
obligation to purchase Notes arises thereunder, amend, change or
modify in any material respect the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control which has occurred or make and consummate a Net Proceeds Offer
with respect to any Asset Sale that has been consummated or modify any
of the provisions or definitions with respect thereto; (vii) modify or
change any provision of this Indenture or the related definitions
affecting the ranking of the Notes or any Guarantee in a manner which
adversely affects the Holders; or (viii) release any Guarantor from
any of its obligations under its Guarantee or this Indenture otherwise
than in accordance with the terms of this Indenture.
SECTION 9.03. Compliance with TIA.
--------------------
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect; provided, however,
that this Section 9.03 shall not of itself require that this Indenture
or the Trustee be qualified under the TIA or constitute any admission
or acknowledgment by any party hereto that any such qualification is
required prior to the time this Indenture and the Trustee are required
by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
----------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the
same debt as the consenting Holder's Note, even if notation of the
consent is not made on any Note. Subject to the following paragraph,
any such Holder or subsequent Holder may revoke the consent as to such
Holder's Note or portion of such Note by notice to the Trustee or the
Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite
-86-<PAGE>
principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment,
supplement or waiver becomes effective upon receipt by the Trustee of
such Officers' Certificate and evidence of consent by the Holders of
the requisite percentage in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record
Date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding
paragraph, those Persons who were Holders at such Record Date (or
their duly designated proxies), and only those Persons, shall be
entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such Record Date. No such
consent shall be valid or effective for more than 90 days after such
Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not
revoked within such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
---------------------------------
If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder of such Note to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Note
about the changed terms and return it to the Holder. Alternatively,
if the Company or the Trustee so determine, the Company in exchange
for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the
Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own
rights, duties or immunities under this Indenture. In executing such
amendment, supplement or waiver the Trustee shall be entitled to
receive indemnity reasonably satisfactory to it, and shall be fully
protected in relying upon an Opinion of Counsel and an Officers'
Certificate of the Company, stating that no Event of Default shall
occur as a result of such amendment, supplement or waiver and that the
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execution of such amendment, supplement or waiver is authorized or
permitted by this Indenture; provided, however, that the legal counsel
delivering such Opinion of Counsel may rely as to matters of fact on
one or more Officers' Certificates of the Company. Such Opinion of
Counsel shall not be an expense of the Trustee.
ARTICLE TEN
GUARANTEE OF NOTES
SECTION 10.01. Unconditional Guarantee.
------------------------
Subject to the provisions of this Article Ten, each Guarantor
hereby, jointly and severally, unconditionally and irrevocably guarantees,
on a senior basis (such guarantee to be referred to herein as a
"Guarantee") to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Notes or the obligations of the Company or any other Guarantor to the
Holders or the Trustee hereunder or thereunder, that: (a) the
principal of, premium, if any, and interest on the Notes (and any
Additional Interest payable thereon) shall be duly and punctually paid
in full when due, whether at maturity, upon redemption at the option
of Holders pursuant to the provisions of the Notes relating thereto,
by acceleration or otherwise, and interest on the overdue principal,
overdue premium, if any, and overdue installments of interest, to the
extent lawful, on the Notes and all other obligations of the Company
or the Guarantors to the Holders or the Trustee hereunder or
thereunder (including amounts due the Trustee under Section 7.07) and
all other obligations shall be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of
any extension of time of payment or renewal of any Notes or any of
such other obligations, the same shall be promptly paid in full when
due or performed in accordance with the terms of the extension or
renewal, whether at maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance
of any other obligation of the Company to the Holders under this
Indenture or under the Notes, for whatever reason, each Guarantor
shall be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the
Notes shall constitute an event of default under this Guarantee, and
shall entitle the Holders of Notes to accelerate the obligations of
the Guarantors hereunder in the same manner and to the same extent as
the obligations of the Company.
-88-<PAGE>
Each of the Guarantors hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity
or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the
Notes with respect to any provisions hereof or thereof, any release of
any other Guarantor, the recovery of any judgment against the Company,
any action to enforce the same, whether or not a Guarantee is affixed
to any particular Note, or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that its Guarantee
shall not be discharged except by complete performance of the
obligations contained in the Notes, this Indenture and this Guarantee.
This Guarantee is a guarantee of payment and not of collection. If
any Holder or the Trustee is required by any court or otherwise to
return to the Company or to any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company
or such Guarantor, any amount paid by the Company or such Guarantor to
the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (a) subject to
this Article Ten, the maturity of the obligations guaranteed hereby
may be accelerated as provided in Article Six for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed
hereby, and (b) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for
the purpose of this Guarantee.
No stockholder, officer, director, employee, agent or incorporator,
past, present or future, or any Guarantor , as such, shall have any
personal liability under this Guarantee by reason of his, her or its
status as such stockholder, officer, director, employee, agent or
incorporator.
Each Guarantor that makes a payment or distribution under
its Guarantee shall be entitled to a contribution from each other
Guarantor in an amount pro rata, based on the net assets of each
Guarantor, determined in accordance with GAAP.
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SECTION 10.02. Limitations on Guarantees.
--------------------------
The obligations of any Guarantor under its Guarantee are limited
to the maximum amount which, after giving effect to all other contingent
and fixed liabilities of the Guarantor will result in the obligations
of the Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under any laws of the United States,
any state of the United States or the District of Columbia.
SECTION 10.03. Execution and Delivery of
Guarantee.
-------------------------
To further evidence the Guarantee set forth in Section 10.01,
each Guarantor hereby agrees that a notation of such Guarantee,
substantially in the form of Exhibit E, shall be endorsed on each Note
authenticated and delivered by the Trustee. Such Guarantee shall be
executed on behalf of each Guarantor by either manual or facsimile
signature of two Officers of the Guarantor, each of whom, in each
case, shall have been duly authorized to so execute by all requisite
corporate action. The validity and enforceability of any Guarantee
shall not be affected by the fact that it is not affixed to any
particular Note. Each of the Guarantors hereby agrees that its
Guarantee set forth in Section 10.01 shall remain in full force and
effect notwithstanding any failure to endorse on each Note a notation
of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture
or a Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which such Guarantee is endorsed or at any
time thereafter, such Guarantor's Guarantee of such Note shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set
forth in this Indenture on behalf of each Guarantor.
SECTION 10.04. Release of Guarantors.
----------------------
(a) If no Default exists or would exist under this Indenture,
upon (i) the sale or other disposition of all of the Capital Stock of any
Guarantor by the Company, or (ii) the sale or disposition of all or
substantially all of the assets of any Guarantor in compliance with
all of the terms of this Indenture, such Guarantor's Guarantee shall
be released, and such Guarantor shall be deemed released from all
obligations under this Article Ten without any further action required
on the part of the Trustee or any Holder. If such Guarantor is not so
released, such Guarantor or the entity surviving such Guarantor, as
applicable, shall remain or be liable under its Guarantee as provided
in this Article Ten until such time as no Default exists or would
exist under this Indenture.
-90-<PAGE>
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of the Guarantor upon receipt of a request by the Company
or the Guarantor accompanied by an Officers' Certificate and an
Opinion of Counsel certifying as to the compliance with this Section
10.04, provided the legal counsel delivering such Opinion of Counsel
may rely as to matters of fact on one or more Officers Certificates of
the Company.
The Trustee shall execute any documents reasonably requested
by the Company or the Guarantor in order to evidence the release of the
Guarantor from its obligations under its Guarantee endorsed on the
Notes and under this Article Eleven.
Except as set forth in Articles Four and Five and this Section
10.04, nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of the Guarantor with or into the
Company or shall prevent any sale or conveyance of the property of the
Guarantor as an entirety or substantially as an entirety to the
Company.
SECTION 10.05. Waiver of Subrogation.
----------------------
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Guarantor hereby irrevocably waives
and agrees not to exercise any claim or other rights which it may now or
hereafter acquire against the Company that arise from the existence,
payment, performance or enforcement of the Company's obligations under
the Notes or this Indenture and such Guarantor's obligations under
this Guarantee and this Indenture, in any such instance including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company,
whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the
right to take or receive from the Company, directly or indirectly, in
cash or other property or by set-off or in any other manner, payment
or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence
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and any amounts owing to the Trustee or the Holders of Notes under the
Notes, this Indenture, or any other document or instrument delivered
under or in connection with such agreements or instruments, shall not
have been paid in full, such amount shall have been deemed to have
been paid to such Guarantor for the benefit of, and held in trust for
the benefit of, the Trustee or the Holders and shall forthwith be paid
to the Trustee for the benefit of itself or such Holders to be
credited and applied to the obligations in favor of the Trustee or the
Holders, as the case may be, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 10.05 is knowingly made in
contemplation of such benefits.
SECTION 10.06. Immediate Payment.
------------------
Each Guarantor agrees to make immediate payment to the Trustee
on behalf of the Holders or the Trustee of all Obligations owing or
payable to the respective Holders or the Trustee upon receipt of a
demand for payment therefor by the Trustee to such Guarantor in
writing.
SECTION 10.07. No Set-Off.
-----------
Each payment to be made by a Guarantor hereunder in respect of
the Obligations shall be payable in the currency or currencies in which
such Obligations are denominated, and shall be made without set-off,
counterclaim, reduction or diminution of any kind or nature.
SECTION 10.08. Obligations Absolute.
---------------------
The obligations of each Guarantor hereunder are and shall be
absolute and unconditional and any monies or amounts expressed to be owing
or payable by each Guarantor hereunder which may not be recoverable from
such Guarantor on the basis of a Guarantee shall be recoverable from
such Guarantor as a primary obligor and principal debtor in respect
thereof.
SECTION 10.09. Obligations Continuing.
-----------------------
The obligations of each Guarantor hereunder shall be continuing
and shall remain in full force and effect until all the obligations have
been paid and satisfied in full. Each Guarantor agrees with the
Trustee that it will from time to time deliver to the Trustee suitable
acknowledgments of this continued liability hereunder.
SECTION 10.10. Obligations Not Reduced.
------------------------
The obligations of each Guarantor hereunder shall not be
satisfied, reduced or discharged solely by the payment of such principal,
premium, if any, interest, fees and other monies or amounts as may at
any time prior to discharge of this Indenture pursuant to Article
Eight be or become owing or payable under or by virtue of or otherwise
in connection with the Securities or this Indenture.
-92-<PAGE>
SECTION 10.11. Obligations Reinstated.
-----------------------
The obligations of each Guarantor hereunder shall continue to
be effective or shall be reinstated, as the case may be, if at any time
any payment which would otherwise have reduced the obligations of any
Guarantor hereunder (whether such payment shall have been made by or
on behalf of the Company or by or on behalf of a Guarantor) is
rescinded or reclaimed from any of the Holders upon the insolvency,
bankruptcy, liquidation or reorganization of the Company or any
Guarantor or otherwise, all as though such payment had not been made.
If demand for, or acceleration of the time for, payment by the Company
is stayed upon the insolvency, bankruptcy, liquidation or
reorganization of the Company, all such Indebtedness otherwise subject
to demand for payment or acceleration shall nonetheless be payable by
each Guarantor as provided herein.
SECTION 10.12. Obligations Not Affected.
-------------------------
The obligations of each Guarantor hereunder shall not be
affected, impaired or diminished in any way by any act, omission, matter
or thing whatsoever, occurring before, upon or after any demand for
payment hereunder (and whether or not known or consented to by any
Guarantor or any of the Holders) which, but for this provision, might
constitute a whole or partial defense to a claim against any Guarantor
hereunder or might operate to release or otherwise exonerate any
Guarantor from any of its obligations hereunder or otherwise affect
such obligations, whether occasioned by default of any of the Holders
or otherwise, including, without limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other Person,
including any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding-up or other proceeding
involving or affecting the Company or any other Person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of the Company or any
other Person under this Indenture, the Notes, the Guarantees or any
other document or instrument;
(c) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this
Indenture or the Securities, or to give notice thereof to a Guarantor;
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(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other Person or their respective assets or the release
or discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to
the Company or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure
from, any of the Notes or this Indenture, including, without
limitation, any increase or decrease in the principal amount of or
premium, if any, or interest on any of the Securities;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a
Guarantor;
(h) any merger or amalgamation of the Company or a Guarantor with
any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or
otherwise affecting, or purporting to amend, vary, reduce or otherwise
affect, any of the Obligations or the obligations of a Guarantor under
its Guarantee; and
(j) any other circumstance, including release of a Guarantor
pursuant to Section 10.04 (other than by complete, irrevocable payment)
that might otherwise constitute a legal or equitable discharge or defense
of the Company under this Indenture or the Notes or of another
Guarantor in respect of its Guarantee hereunder;
provided, that the provisions of this Section 10.12 are not intended
to affect in any way any release of a Guarantor in accordance with the
provisions of Section 10.04.
SECTION 10.13. Waiver.
-------
Without in any way limiting the provisions of Section 10.01
hereof, each Guarantor hereby waives notice or proof of reliance by the
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Holders upon the obligations of any Guarantor hereunder, and
diligence, presentment, demand for payment on the Company, protest or
notice of dishonor of any of the Obligations, or other notice or
formalities to the Company of any kind whatsoever.
SECTION 10.14. No Obligation To Take Action
Against the Company.
----------------------------
Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies or to take any other steps
under any security for the Obligations or against the Company or any
other Person or any property of the Company or any other Person before
the Trustee is entitled to demand payment and performance by any or
all Guarantors of their liabilities and obligations under their
Guarantees or under this Indenture.
SECTION 10.15. Dealing with the Company and Others.
------------------------------------
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any
Guarantor hereunder and without the consent of or notice to any
Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or
any other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security
given by the Company or any third party with respect to the
obligations or matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see
fit or change any such application in whole or in part from time to
time as the Holders may see fit; and
-95-<PAGE>
(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders
or the Trustee may see fit.
SECTION 10.16. Default and Enforcement.
------------------------
If any Guarantor fails to pay in accordance with Section 10.06,
the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Guarantee of any such Guarantor and such Guarantor
's obligations thereunder and hereunder by any remedy provided by law,
whether by legal proceedings or otherwise, and to recover from such
Guarantor the obligations.
SECTION 10.17. Amendment, Etc.
---------------
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any
Guarantor or any other Person from any such provision will in any
event be effective unless it is signed by such Guarantor and the
Trustee.
SECTION 10.18. Acknowledgment.
---------------
Each Guarantor hereby acknowledges communication of the terms
of this Indenture and the Notes and consents to and approves of the same.
SECTION 10.19. Costs and Expenses.
-------------------
Each Guarantor shall pay on demand by the Trustee any and all
costs, fees and expenses (including, without limitation, legal fees on a
solicitor and client basis) incurred by the Trustee, its agents,
advisors and counsel or any of the Holders in enforcing any of their
rights under any Guarantee.
SECTION 10.20. No Merger or Waiver;
Cumulative Remedies.
--------------------
No Guarantee shall operate by way of merger of any of the
obligations of a Guarantor under any other agreement, including, without
limitation, this Indenture. No failure to exercise and no delay in
exercising, on the part of the Trustee or the Holders, any right,
remedy, power or privilege hereunder or under this Indenture or the
Notes, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or
under this Indenture or the Notes preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges in the
Guarantee and under this Indenture, the Notes and any other document
or instrument between a Guarantor and/or the Company and the Trustee
are cumulative and not exclusive of any rights, remedies, powers and
privilege provided by law.
-96-
<PAGE>
SECTION 10.21. Survival of Obligations.
------------------------
Without prejudice to the survival of any of the other obligations
of each Guarantor hereunder, the obligations of each Guarantor under
Section 10.01 shall survive the payment in full of the Obligations and
shall be enforceable against such Guarantor without regard to and
without giving effect to any right of offset or counterclaim available
to or which may be asserted by the Company or any Guarantor.
SECTION 10.22. Guarantee in Addition to Other
Obligations.
------------------------------
The obligations of each Guarantor under its Guarantee and
this Indenture are in addition to and not in substitution for any other
obligations to the Trustee or to any of the Holders in relation to
this Indenture or the Notes (including the purchase agreement by and
among the Company, the Guarantors and the Initial Purchasers, dated
October 5, 1998, and the Registration Rights Agreement) and any
guarantees or security at any time held by or for the benefit of any
of them.
SECTION 10.23. Severability.
-------------
Any provision of this Article Ten which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining
provisions and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction unless its removal would substantially defeat the basic
intent, spirit and purpose of this Indenture and this Article Ten.
SECTION 10.24. Successors and Assigns.
-----------------------
Each Guarantee shall be binding upon and inure to the benefit
of each Guarantor and the Trustee and the other Holders and their respective
successors and permitted assigns, except that no Guarantor may assign
any of its obligations hereunder or thereunder.
-97-<PAGE>
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control; provided,
however, that this Section 11.01 shall not of itself require that this
Indenture or the Trustee be qualified under the TIA or constitute any
admission or acknowledgment by any party hereto that any such
qualification is required prior to the time this Indenture and the
Trustee are required by the TIA to be so qualified.
SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company or the Guarantors:
National Vision Associates, Ltd.
296 Grayson Highway
Lawrenceville, GA 30045-5737
Facsimile No. (770) 822-2029
Attention: General Counsel
with a copy to:
Kilpatrick Stockton LLP
Suite 2800, 1100 Peachtree Street
Atlanta, GA 30309-4530
Facsimile No. (404) 815-6555
Attention: David A. Stockton
-98-<PAGE>
if to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Facsimile No.: (860) 244-1897
Attention: Corporate Trust Division
The Company, the Guarantors and the Trustee by written notice to
the other may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company, the
Guarantors or the Trustee shall be deemed to have been given or made
as of the date so delivered if hand delivered; when answered back, if
telexed; when receipt is acknowledged, if faxed; one (1) Business Day
after mailing by reputable overnight courier and five (5) calendar
days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar ten (10) days prior
to such mailing and shall be sufficiently given to him if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders
with Other Holders.
-------------------------
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and any other Person shall have
the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.
--------------------------
Upon any request or application by the Company or the Guarantors
to the Trustee to take any action under this Indenture, the Company shall
furnish to the Trustee:
-99-<PAGE>
(1) an Officers' Certificate, in form and substance satisfactory
to the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company,
if any, provided for in this Indenture relating to the proposed action
have been complied with (which counsel, as to factual matters, may rely
on an Officers' Certificate).
SECTION 11.05. Statements Required in
Certificate or Opinion.
-----------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the
Officers' Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying
Agent, Registrar.
------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
---------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New
York, New York or at such place of payment are not required to be
-100-<PAGE>
open. If a payment date is a Legal Holiday at such place, payment may
be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 11.08. Governing Law.
--------------
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
SECTION 11.09. No Adverse Interpretation
of Other Agreements.
-------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. No Personal Liability.
---------------------
No director, officer, partner, member, employee, agent or
stockholder, as such, of the Company or any Guarantor, as such, shall
have any liability for any obligations of the Company or any Guarantor
under the Notes, the Guarantees, this Indenture or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
SECTION 11.11. Successors.
----------
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
------------
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall
not in any way be affected or impaired thereby, it being intended that
all of the provisions hereof shall be enforceable to the full extent
permitted by law.
-101-<PAGE>
SECTION 11.14. Independence of Covenants.
-------------------------
All covenants and agreements in this Indenture and the Notes shall
be given independent effect so that if any particular action or condition
is not permitted by any of such covenants, the fact that it 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.
-102-
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties specified below have caused this
Indenture to be duly executed, all as of the date first written above.
NATIONAL VISION ASSOCIATES, LTD.,
as Issuer
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Sr. Vice President
MIDWEST VISION, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
NVAL HEALTHCARE SYSTEMS, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES,
LTD., as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
FRAME-N-LENS OPTICAL, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
-101-<PAGE>
VISION ADMINISTRATORS, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES
OF CANADA LTD., as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES
OF ONTARIO LTD., as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
FAMILY VISION CENTERS, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
NW ACQUISITION CORP.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
-102-
<PAGE>
STATE STEET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Kathy A. Lanmore
Name: Kathy A. Lanmore
Title: Assistant Vice President
IN WITNESS WHEREOF, the parties specified below have caused this
Indenture to be duly executed, all as of the date first written above.
Date: October 23, 1998
NEW WEST EYEWORKS, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
ALEXIS HOLDING COMPANY, INC.,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
VISTA EYECARE NETWORK, LLC,
as Guarantor
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
-105-
<PAGE>
EXHIBIT A
CUSIP No.: [ ]
NATIONAL VISION ASSOCIATES, LTD.
12 3/4% SENIOR NOTE DUE 2005, SERIES A
No. [ ] $
NATIONAL VISION ASSOCIATES, LTD., a Georgia corporation (the
"Company"), for value received promises to pay to Cede & Co. or
registered assigns the principal sum of Dollars on
October 15, 2005.
Interest Payment Dates: April 15 and October 15, commencing
April 15, 1999.
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as
if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
NATIONAL VISION ASSOCIATES, LTD.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Dated: [ ]
A-1
<PAGE>
Certificate of Authentication
This is one of the 12 3/4% Senior Notes due 2005 referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:______________________________
Authorized Signatory
Date of Authentication: [ ]
A-2
<PAGE>
(REVERSE OF SECURITY)
12 3/4% Senior Note due 2005, Series A
1. Interest. NATIONAL VISION ASSOCIATES, LTD., a Georgia
corporation (the "Company"), promises to pay interest on the principal
amount of this Note at the rate per annum shown above. Interest on
the Notes will accrue from the most recent date on which interest has
been paid or, if no interest has been paid, from October 8, 1998. The
Company will pay interest semiannually in arrears on each Interest
Payment Date, commencing April 15, 1999. Interest will be computed on
the basis of a 360-day year of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal, overdue
premium, if any, and on overdue installments of interest (without
regard to any applicable grace periods), to the extent lawful, from
time to time on demand at the rate borne by the Notes plus 2%.
2. Method of Payment. The Company shall pay interest on
the Notes (except Default Interest) to the Persons who are the
registered Holders at the close of business on the Record Date
immediately preceding the Interest Payment Date even if the Notes are
cancelled on registration of transfer or registration of exchange
(including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and
private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent
or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, State Street
Bank and Trust Company (the "Trustee") will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of October 8, 1998 (the "Indenture"), among the
Company, each of the Guarantors named therein and the Trustee. This
Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 12 3/4% Senior Notes due 2005, Series A (the
"Initial Notes"). The Notes are limited (except as otherwise provided
in the Indenture) in aggregate principal amount to $190,000,000, which
may be issued under the Indenture; provided the principal amount of
Initial Notes issued on the Issue Date will not exceed $125,000,000.
The Notes include the Initial Notes, Private Exchange Notes and the
Exchange Notes issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes and the Exchange
Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of the Indenture. Notwithstanding
anything to the contrary herein, the Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and said Act
A-3
<PAGE>
for a statement of them. The Notes are general unsecured obligations
of the Company.
Each Holder, by accepting a Note, agrees to be bound by all
of the terms and provisions of the Indenture, as the same may be
amended from time to time in accordance with its terms.
5. Redemption. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time,
on and after October 15, 2003, upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the
twelve-month period commencing on October 15 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
Year Percentage
---- ----------
2003 . . . . . . . . . . . . . 105.000%
2004 and thereafter . . . . . . 100.000%
At any time, or from time to time, on or prior to October 15,
2001, the Company may, at its option, redeem up to 35% of the sum
of (i) the initial aggregate principal amount of the Notes issued in
the Offering and (ii) the respective initial aggregate principal
amount of the Notes issued under the Indenture after the Issue Date,
on one or more occasions with the net cash proceeds of one or more
Equity Offerings at a redemption price equal to 112.75% of the
principal amount thereof, plus accrued and unpaid interest, if any, to
the redemption date; provided, however, that immediately after giving
effect to such redemption, at least 65% of the sum of (i) the initial
aggregate principal amount of the Notes issued in the Offering and
(ii) the respective initial aggregate principal amount of the Notes
issued under the Indenture after the Issue Date remain outstanding
(other than any Notes owned by the Company or any of its Affiliates).
In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than
120 days after the consummation of any such Equity Offering.
A-4<PAGE>
6. Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger than
$1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been
deposited with the Paying Agent for redemption on such Redemption
Date, then, unless the Company defaults in the payment of such
redemption price plus accrued interest, if any, the Notes called for
redemption will cease to bear interest from and after such Redemption
Date and the only right of the Holders of such Notes will be to
receive payment of the redemption price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.14 and 4.15 of the
Indenture provide that, upon the occurrence of a Change of Control and
after Certain Asset Sales, and subject to further limitations
contained therein, the Company will make an offer to purchase certain
amounts of the Notes in accordance with the procedures set forth in
the Indenture.
8. Special Redemption. On the Special Redemption Date, the
Notes will be subject to mandatory redemption at an aggregate
redemption price equal to 100% of the principal amount of the Notes,
plus accrued and unpaid interest to the date of redemption, if the
tender offer for at least a majority of the common stock of New West
is not consummated on or prior to the Special Redemption Notice Date.
9. Registration Rights. Pursuant to a registration rights
agreement among the Company, the Guarantors and the Initial
Purchasers, the Company and the Guarantors will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note
shall have the right to exchange this Note for Exchange Notes, which
have been registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the
Initial Notes. The Holders of the Initial Notes shall be entitled to
receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the registration
rights agreement.
A-5<PAGE>
10. Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and in denominations of $1,000 and
integral multiples of $1,000. A Holder shall register the transfer of
or exchange Notes in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes
or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
11. Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for one year, the Trustee and the Paying
Agent will pay the money back to the Company. After that, all
liability of the Trustee and such Paying Agent with respect to such
money shall cease.
13. Discharge Prior to Redemption or Maturity. If the
Company at any time deposits with the Trustee U.S. Legal Tender or
U.S. Government Obligations sufficient to pay the principal of and
interest on the Notes to redemption or maturity and complies with the
other provisions of the Indenture relating thereto, the Company will
be discharged from certain provisions of the Indenture and the Notes
(including certain covenants, but including, under certain
circumstances, its obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive
such amounts from such deposits).
14. Amendment; Supplement; Waiver. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may
be amended or supplemented with the written consent of the Holders of
a majority in aggregate principal amount of the Notes then
outstanding, and any past Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes,
comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply
with Article Five of the Indenture or make any other change that does
not adversely affect the rights of any Holder of a Note.
A-6<PAGE>
15. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to,
among other things, incur additional Indebtedness, pay dividends or
make certain other Restricted Payments, consummate certain Asset
Sales, enter into certain transactions with Affiliates, incur liens,
impose restrictions on the ability of a Subsidiary to pay dividends or
make certain payments to the Company and its Subsidiaries, merge or
consolidate with any other Person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the assets
of the Company. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the
Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
16. Successors. When a successor assumes, in accordance
with the Indenture, all the obligations of its predecessor under the
Notes and the Indenture, the predecessor, subject to certain
exceptions, will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs
and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of Notes then outstanding may declare all
the Notes to be due and payable in the manner, at the time and with
the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or
the Notes unless it has received indemnity reasonably satisfactory to
it. The Indenture permits, subject to certain limitations therein
provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Notes notice
of any continuing Default or Event of Default (except a Default in
payment of principal or interest when due, for any reason or a Default
in compliance with Article Five of the Indenture) if it determines
that withholding notice is in their interest.
18. Trustee Dealings with the Company and Its Subsidiaries.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates
as if it were not the Trustee.
19. No Recourse Against Others. No partner, director,
officer, employee, member, agent or stockholder, as such, of the
Company or any Guarantor shall have any liability for any obligation
of the Company or any Guarantor under the Notes, the Guarantees, the
Indenture or the Registration Rights Agreement or for any claim based
on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
A-7<PAGE>
20. Guarantees. This Note will be entitled to the benefits
of certain Guarantees, if any, made for the benefit of the Holders.
Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations
thereunder of the Guarantors, the Trustee and the Holders.
21. Authentication. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of
authentication on this Note.
22. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of
New York, as applied to contracts made and performed within the State
of New York, without regard to principles of conflict of laws. Each
of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising
out of or relating to this Note.
23. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
24. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on the
Notes as a convenience to the Holders of the Notes. No representation
is made as to the accuracy of such numbers as printed on the Notes and
reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture, which has
the text of this Note. Requests may be made to: National Vision
Associates, Ltd., 296 Grayson Highway, Lawrenceville, GA 30045-5737,
Attention: General Counsel.
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
(Print or type name, address and zip code and social security or tax
ID number of assignee)
and irrevocably appoint _______________________________________, agent
to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Dated: ____________ Signed: _________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:_________________________________________________
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by
the Commission of the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act") covering
resales of this Note (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) the
undersigned confirms that it has not utilized any general solicitation
or general advertising in connection with the transfer:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
A-9<PAGE>
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form
of which letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of 1933,
as amended; or
(5) __ pursuant to the exemption from registration provided by Rule
144 under the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that
such Note is not being transferred to an "affiliate" of the Company as
defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of
any person other than the registered Holder thereof; provided,
however, that if item (3), (4), (5) or (7) is checked, the Company or
the Trustee may require, prior to registering any such transfer of the
Notes, in their sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, as amended.
A-10
<PAGE>
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 2.17 of
the Indenture shall have been satisfied.
Dated: ____________________ Signed: _______________________________
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee: _______________________________________________
A-11
<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act of 1933, as amended and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor
is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: _____________ _______________________________________
NOTICE: To be executed by an executive
officer
A-12
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture,
state the amount you elect to have purchased:
$___________________
Dated: ________________ _____________________________________
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement
or any change whatsoever and be
guaranteed.
Signature Guarantee: ________________________________________
A-13
<PAGE>
EXHIBIT B
CUSIP No.: [ ]
NATIONAL VISION ASSOCIATES, LTD.
12 3/4% SENIOR NOTE DUE 2005, SERIES B
No. [ ] $
NATIONAL VISION ASSOCIATES, LTD., a Georgia corporation (the
"Company"), for value received, promises to pay to Cede & Co. or
registered assigns the principal sum of Dollars on
October 15, 2005.
Interest Payment Dates: April 15 and October 15, commencing
April 15, 1999.
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as
if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
NATIONAL VISION ASSOCIATES, LTD.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Dated: [ ]
B-1
<PAGE>
Certificate of Authentication
This is one of the 12 3/4% Senior Notes due 2005, Series B
referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:________________________________
Authorized Signatory
Date of Authentication: [ ]
B-2
<PAGE>
(REVERSE OF SECURITY)
12 3/4% Senior Note due 2005, Series B
1. Interest. NATIONAL VISION ASSOCIATES, LTD. a Georgia
corporation (the "Company"), promises to pay interest on the principal
amount of this Note at the rate per annum shown above. Interest on the
Notes will accrue from the most recent date on which interest has been
paid or, if no interest has been paid, from October 8, 1998. The Company
will pay interest semiannually in arrears on each Interest Payment
Date, commencing April 15, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months and, in the case of
partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal, overdue
premium, if any, and on overdue installments of interest (without regard
to any applicable grace periods), to the extent lawful, from time to time
on demand at the rate borne by the Notes plus 2%.
2. Method of Payment. The Company shall pay interest on the
Notes (except Default Interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately
preceding the Interest Payment Date even if the Notes are canceled on
registration of transfer or registration of exchange after such Record
Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender
for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar. Initially, State Street Bank and
Trust Company (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without
notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated
as of October 8, 1998 (the "Indenture"), among the Company, each of
the Guarantors named therein and the Trustee. This Note is one of a
duly authorized issue of Exchange Notes of the Company designated as
its 12 3/4% Senior Notes due 2005, Series B (the "Exchange Notes").
The Notes include the 12 3/4% Notes due 2005, Series A (the "Initial
Notes") and the Exchange Notes, issued in exchange for the Initial
Notes pursuant to a registration rights agreement. The Notes are
limited (except as otherwise provided in the Indenture) in aggregate
principal amount to $190,000,000, which may be issued under the
Indenture; provided the principal amount of Initial Notes issued on
the Issue Date will not exceed $125,000,000. The Initial Notes and
the Exchange Notes are treated as a single class of securities under
the Indenture. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes
are subject to all such terms, and Holders of Notes are referred to
the Indenture and said Act for a statement of them. The Notes are
general unsecured obligations of the Company.
B-3
<PAGE>
Each Holder, by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as the same may be amended from
time to time in accordance with its terms.
5. Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after
October 15, 2003, upon not less than 30 nor more than 60 days' notice,
at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period
commencing on October 15 of the years set forth below, plus, in each
case, accrued and unpaid interest, if any, thereon to the date of
redemption:
Year Percentage
---- ----------
2003 . . . . . . . . . . . . . 105.000%
2004 and thereafter . . . . . . 100.000%
At any time, or from time to time, on or prior to October 15,
2001, the Company may, at its option, redeem up to 35% of the sum of (i)
the initial aggregate principal amount of the Notes issued in the Offering
and (ii) the respective initial aggregate principal amount of the
Notes issued under the Indenture after the Issue Date, on one or more
occasions with the net cash proceeds of one or more Equity Offerings
at a redemption price equal to 112.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption
date; provided, however, that immediately after giving effect to such
redemption, at least 65% of the sum of (i) the initial aggregate
principal amount of the Notes issued in the Offering and (ii) the
respective initial aggregate principal amount of the Notes issued
under the Indenture after the Issue Date remain outstanding (other
than any Notes owned by the Company or any of its Affiliates). In
order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than
120 days after the consummation of any such Equity Offering.
B-4<PAGE>
6. Notice of Redemption. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Notes to be redeemed at such Holder's registered address.
Notes in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such redemption price plus accrued
interest, if any, the Notes called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the redemption
price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture
provide that, upon the occurrence of a Change of Control and after certain
Asset Sales, and subject to further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Notes in
accordance with the procedures set forth in the Indenture.
8. Special Redemption. On the Special Redemption Date, the Notes
will be subject to mandatory redemption at an aggregate redemption price
equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest to the date of redemption, if the tender offer for at
least a majority of the common stock of New West is not consummated on
or prior to the Special Redemption Notice Date.
9. Denominations; Transfer; Exchange. The Notes are in
registered form, without coupons, and in denominations of $1,000 and
integral multiples of $1,000. A Holder shall register the transfer of
or exchange Notes in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes
or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall
be treated as the owner of it for all purposes.
B-5<PAGE>
11. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the
Notes to redemption or maturity and complies with the other provisions
of the Indenture relating thereto, the Company will be discharged from
certain provisions of the Indenture and the Notes (including certain
covenants, including, under certain circumstances, its obligation to
pay the principal of and interest on the Notes but without affecting
the rights of the Holders to receive such amounts from such deposit).
13. Amendment; Supplement; Waiver. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of a majority in
aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes
in addition to or in place of certificated Notes, comply with any
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does not adversely
affect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and its Subsidiaries to, among
other things, incur additional Indebtedness, pay dividends or make certain
other Restricted Payments, consummate certain Asset Sales, enter into
certain transactions with Affiliates, incur liens, impose restrictions
on the ability of a Subsidiary to pay dividends or make certain
payments to the Company and its Subsidiaries, merge or consolidate
with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the
Company. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.06 of the
Indenture, the Company must annually report to the Trustee on
compliance with such limitations.
B-6<PAGE>
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and
the Indenture, the predecessor, subject to certain exceptions, will be
released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of Notes then outstanding may declare all
the Notes to be due and payable in the manner, at the time and with
the effect provided in the Indenture. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or
the Notes unless it has received indemnity reasonably satisfactory to
it. The Indenture permits, subject to certain limitations therein
provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of Notes notice
of any continuing Default or Event of Default (except a Default in
payment of principal or interest when due, for any reason or a Default
in compliance with Article Five of the Indenture) if it determines
that withholding notice is in their interest.
17. Trustee Dealings with the Company and Its Subsidiaries. The
Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Notes and may otherwise deal with
the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
18. No Recourse Against Others. No partner, director, officer,
employee, member, agent or stockholder, as such, of the Company or any
Guarantor shall have any liability for any obligation of the Company
or any Guarantor under the Notes, the Guarantees, the Indenture or the
Registration Rights Agreement or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for the issuance
of the Notes.
19. Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference
is hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the
Guarantors, the Trustee and the Holders.
20. Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication
on this Note.
B-7<PAGE>
21. Governing Law. This Note and the Indenture shall be governed
by and construed in accordance with the laws of the State of New York, as
applied to contracts made and performed within the State of New York,
without regard to principles of conflict of laws. Each of the parties
hereto agrees to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to
this Note.
22. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as:
TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT
TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Notes as a convenience
to the Holders of the Notes. No representation is made as to the
accuracy of such numbers as printed on the Notes and reliance may be
placed only on the other identification numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of
this Note. Requests may be made to: National Vision Associates, Ltd., 296
Grayson Highway, Lawrenceville, GA 30045-5737, Attention: General
Counsel.
B-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(Print or type name, address and zip code and social security or tax
ID number of assignee)
and irrevocably appoint_________________________________________,
agent to transfer this Note on the books of the Company. The agent
may substitute another to act for him.
Dated: _________________ Signed: _______________________________
(Sign exactly as name appears on the
other side of this Note)
Signature Guarantee:________________________
B-9
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.14 or Section 4.15 of
the Indenture, state the amount you elect to have purchased:
$___________________
Dated: _______________ ________________________________________
NOTICE: The signature on this
assignment must correspond with the name
as it appears upon the face of the
within Note in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:_____________________________
B-10
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[ ], [ ]
State Street Bank and Trust Company
Corporate Trust Division
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Ladies and Gentlemen:
In connection with our proposed purchase of 12 3/4% Senior
Notes due 2005 (the "Notes") of National Vision Associates, Ltd., a
Georgia corporation (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated October 5, 1998, relating to the
Notes and such other information as we deem necessary in order to
make our investment decision. We acknowledge that we have read
and agreed to the matters stated in the section entitled "Notice
to Investors" of such Offering Memorandum.
2. We understand that any subsequent transfer of the Notes
is subject to certain restrictions and conditions set forth in
the Indenture relating to the Notes (the "Indenture") as
described in the Offering Memorandum and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer
the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the
"Securities Act"), and all applicable State securities laws.
3. We understand that the offer and sale of the Notes have
not been registered under the Securities Act, and that the Notes
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (i)
to the Company or any subsidiary thereof, (ii) inside the United
States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A
promulgated under the Securities Act), (iii) inside the United
States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes (or has furnished
on its behalf by a U.S. broker-dealer) to the Trustee (as defined
in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions on
transfer of the Notes (the form of which letter can be obtained
from the Trustee), (iv) outside the United States in accordance
with Rule 904 of Regulation S promulgated under the Securities
Act to non-U.S. persons, (v) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if
available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to
C-1
<PAGE>
provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are
restricted as stated herein.
4. We understand that, on any proposed resale of any
Notes, we will be required to furnish to the Trustee and the
Company such certification, legal opinions and other information
as the Trustee and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
C-2
<PAGE>
You, the Company, the Trustee and others are entitled to
rely upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative
or legal proceeding or official inquiry with respect to the matters
covered hereby.
Very truly yours,
[Name of Transferee]
By:_____________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[ ], [ ]
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, CT 06103
Re: National Vision Associates, Ltd. (the "Company")
12 3/4% Senior Notes due 2005 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of
aggregate principal amount of the Notes, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under
the U.S. Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed
in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our
behalf knows that the transaction has been pre-arranged with a
buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You, the Company and counsel for the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative
D-1<PAGE>
or legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
FORM OF GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of
this Note the cash payments in United States dollars of principal of,
premium, if any, and interest on this Note (and including Additional
Interest payable thereon) in the amounts and at the times when due and
interest on the overdue principal, premium, if any, and interest, if
any, of this Note, if lawful, and the payment or performance of all
other obligations of the Company under the Indenture (as defined
below) or the Notes, to the Holder of this Note and the Trustee, all
in accordance with and subject to the terms and limitations of this
Note, Article Ten of the Indenture and this Guarantee. This Guarantee
will become effective in accordance with Article Ten of the Indenture
and its terms shall be evidenced therein. The validity and
enforceability of any Guarantee shall not be affected by the fact that
it is not affixed to any particular Note. Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the
Indenture dated as of October 8, 1998, among National Vision
Associates, Ltd., a Georgia corporation, as Company (the "Company"),
each of the Guarantors named therein and State Street Bank and Trust
Company, as Trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set
forth in Article Ten of the Indenture and reference is hereby made to
the Indenture for the precise terms of the Guarantee and all of the
other provisions of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES
OF CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the
jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in
the Indenture.
E-1
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be
duly executed as of the date of this Note.
Date:______________
MIDWEST VISION, INC., as Guarantor
By:___________________________
Name:
Title:
NVAL HEALTHCARE SYSTEMS, INC.,
as Guarantor
By:___________________________
Name:
Title:
INTERNATIONAL VISION ASSOCIATES, LTD.,
as Guarantor
By:___________________________
Name:
Title:
FRAME-N-LENS OPTICAL, INC., as
Guarantor
By:___________________________
Name:
Title:
VISION ADMINISTRATORS, INC., as
Guarantor
By:___________________________
Name:
Title:
E-2<PAGE>
INTERNATIONAL VISION ASSOCIATES OF
CANADA LTD., as Guarantor
By:___________________________
Name:
Title:
INTERNATIONAL VISION ASSOCIATES
OF ONTARIO LTD., as Guarantor
By:___________________________
Name:
Title:
NW ACQUISITION CORP., as
Guarantor
By:___________________________
Name:
Title:
FAMILY VISION CENTERS, INC., as
Guarantor
By:___________________________
Name:
Title:
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be
duly executed as of the date this Note.
Date: October 23, 1998
NEW WEST EYEWORKS, INC., as
Guarantor
By:___________________________
Name:
Title:
E-3<PAGE>
ALEXIS HOLDING COMPANY, INC., as
Guarantor
By:___________________________
Name:
Title:
VISTA EYECARE NETWORK, LLC,
as Guarantor
By:___________________________
Name:
Title:
E-4
Exhibit 4.2
National Vision Associates, Ltd.
$125,000,000 Aggregate Principal Amount of
12 % Senior Notes due 2005
__________________
PURCHASE AGREEMENT
------------------
New York, New York
October 5, 1998
SCHRODER & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST UNION CAPITAL MARKETS
c/o SCHRODER & CO. INC.
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Ladies and Gentlemen:
National Vision Associates, Ltd., a Georgia corporation (the
"COMPANY"), proposes, subject to the terms and conditions stated herein, to
issue and sell to you (the "INITIAL PURCHASERS") $125,000,000 aggregate
principal amount of 12 % Senior Notes due 2005 (the "NOTES"), to be issued
pursuant to the provisions of an Indenture (the "INDENTURE") to be entered
into among the Company, the Guarantors (as defined below) and State Street
Bank and Trust Company, as trustee (the "TRUSTEE"). The Notes will be
guaranteed (the "GUARANTEES") by each of the Subsidiaries (as defined below)
of the Company signatory hereto and each subsidiary that in the future
executes a supplemental indenture pursuant to which such subsidiary agrees
to guarantee the Notes (each, a "GUARANTOR" and collectively, the
"GUARANTORS," and together with the Company, the "ISSUERS"). The Notes and
the Guarantees are collectively referred to herein as the "SECURITIES."
The Securities will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), in reliance on
exemptions therefrom provided by Section 4(2) of the Securities Act and Rule
144A promulgated thereunder.
<PAGE>
-2-
In connection with the offering and sale of the Securities (the
"OFFERING"), the Issuers have prepared a preliminary offering memorandum
including the documents incorporated by reference therein, the "PRELIMINARY
OFFERING MEMORANDUM") and will prepare a final offering memorandum
(including the documents incorporated by reference therein, the "FINAL
OFFERING MEMORANDUM" and, together with the Preliminary Offering Memorandum,
each a "MEMORANDUM") setting forth or including a description of the terms
of the Notes, the terms of the Offering, a description of the Company and
its Subsidiaries and any material developments relating to the Company and
its Subsidiaries occurring after the date of the most recent financial
statements included therein.
You and your direct and indirect transferees will be entitled to
the benefits of a registration rights agreement to be entered into among the
Company, the Guarantors and the Initial Purchasers substantially in the form
attached hereto as EXHIBIT A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant
to which the Issuers will agree to use their best efforts to file and have
declared effective a registration statement (an "EXCHANGE OFFER REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the offer and sale of the Notes, the Private Exchange Notes or
the Exchange Notes (each as defined in the Registration Rights Agreement)
and related guarantees under the Securities Act. This Agreement, the
Guarantees, the Notes, the Indenture and the Registration Rights Agreement
are referred to herein as the "OFFERING DOCUMENTS."
In connection with the Offering, the Company will acquire New West
Eyeworks, Inc. ("NEW WEST") pursuant to an Agreement and Plan of Merger,
dated July 13, 1998, by and among the Company, NW Acquisition Corp. and New
West, as amended (the "MERGER AGREEMENT"). To effect the transaction, the
Company commenced a cash tender offer pursuant to that certain Offer to
Purchase dated July 20, 1998 (the "OFFER TO PURCHASE") for all of the shares
of common stock of New West (as the same may be modified or amended, the
"TENDER OFFER"). Subsequent to the consummation of the Tender Offer,
pursuant to the Merger Agreement, NW Acquisition Corp., a wholly owned
subsidiary of the Company, will be merged with and into New West (the
"MERGER"). In addition, the Company and the Guarantors will enter into a
credit agreement (such agreement, together with all documents executed in
connection therewith, the "NEW CREDIT AGREEMENT") for a $25.0 million
revolving credit facility (the "NEW CREDIT FACILITY").
This is to confirm the agreement concerning the purchase by you of
the Securities from the Issuers.
1. The Company and the Guarantors, jointly and severally,
represent and warrant to and agree with you that:
<PAGE>
-3-
(a) The Preliminary Offering Memorandum, as of its date, did not
contain any untrue statement of a material fact or omit to state a
material fact (except for pricing terms and other financial terms
intentionally left blank) necessary to make the statements therein, in
the light of the circumstances under which they were made, not mislead-
ing, and the Final Offering Memorandum, as of its date, did not, and as
of the Delivery Date (as defined below) will not, contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties set forth in this Section 1(a) do not apply to
statements or omissions contained in any Memorandum made in reliance
upon and in conformity with information relating to the Initial
Purchasers furnished by the Initial Purchasers to the Company in
writing expressly for use in either Memorandum or any amendment or
supplement thereto.
(b) Neither the Company nor any of the Subsidiaries has
sustained, since the date of the most recent financial statements
included in the Final Offering Memorandum, any loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, which loss or interference is
material to the Company and the Subsidiaries, taken as a whole. Since
the respective dates as of which information is given in the Final
Offering Memorandum there has not been any change in the capital stock
or short-term debt (other than in the ordinary course of business) or
long-term debt of the Company or any of the Subsidiaries, or any change
or development which could reasonably be expected to have a material
adverse effect upon the business, operations, assets, condition
(financial or otherwise) or prospects of the Company and the
Subsidiaries, taken as a whole, or an adverse effect on the ability of
the Company to perform its obligations under the Offering Documents (a
"MATERIAL ADVERSE EFFECT"), otherwise than as set forth or contemplated
in the Final Offering Memorandum.
(c) The Company, the Subsidiaries, New West and the New West
Subsidiaries (as defined below) have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them, in each case, free and clear of all
liens, adverse claims, encumbrances, security interests and defects
except those that are described or contemplated by the Final Offering
Memorandum or those that do not materially affect the value of such
property and do not interfere with the use made or proposed to be made
(as described in the Final Offering Memorandum) of such property by the
Company, the Subsidiaries, New West and the New West Subsidiaries
(collectively, "LIENS"). Except with respect to leases to which New West
or any New West Subsidiary is a party for which consents must be obtained
<PAGE>
-4-
for the Merger and which consents have not yet been obtained, any real
property and buildings held under lease by the Company, the Subsidiaries,
New West and the New West Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made or proposed to be made (as
described in the Final Offering Memorandum) of such real property and
buildings by the Company, the Subsidiaries, New West and the New West
Subsidiaries. Except as stated in the previous sentence, all contracts
and agreements to which the Company, any of the Subsidiaries, New West
or any of the New West Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company, such Subsidiary,
New West or such New West Subsidiary, as the case may be, and are valid
and enforceable against the other party or parties thereto and are in
full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Georgia, with all necessary corporate power and authority to own its
properties and to conduct its business as described in the Final
Offering Memorandum. The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
property, or conducts any business, so as to require such qualification
(except where the failure to so qualify, singly or in the aggregate
with all other such failures, would not have a Material Adverse
Effect). Each of the Company's subsidiaries is listed on SCHEDULE IA
hereto. Each of New West's subsidiaries (the "NEW WEST SUBSIDIARIES")
is listed on SCHEDULE IB hereto (collectively with New West and the
Company's subsidiaries, the "SUBSIDIARIES"). Except as described in
the Final Offering Memorandum, each of the Subsidiaries is wholly owned
directly or indirectly by the Company and each of the New West
Subsidiaries is wholly owned directly or indirectly by New West. Each
of the Subsidiaries, New West and the New West Subsidiaries has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with all
necessary corporate power and authority to own its properties and
conduct its business as described in the Final Offering Memorandum.
None of the Company, the Subsidiaries, New West, or the New West
Subsidiaries owns, directly or indirectly, any shares of capital stock
or any other equity or long-term debt securities or has any equity
interest in any firm, partnership, joint venture or other entity
(except for the Subsidiaries and the New West Subsidiaries and except
as disclosed on SCHEDULE IC hereto). Each of the Subsidiaries, New
West and the New West Subsidiaries has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
property, or conducts any business, so as to require such qualification
<PAGE>
-5-
(except where the failure to so qualify, singly or in the aggregate
with all other such failures, would not have a Material Adverse
Effect).
(e) All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any
preemptive or similar rights and the issuance of the Securities and the
consummation of the transactions contemplated by the Offering Documents
and the Final Offering Memorandum do not give any person the right to
require registration of any securities of the Company, any Subsidiary,
New West or any New West Subsidiary whether under any registration
statement filed pursuant to the Registration Rights Agreement (other
than as expressly permitted thereby) or otherwise.
(f) The Company had at the date indicated in the Final Offering
Memorandum the capitalization set forth in the column entitled "NVAL
Actual" under the caption "Capitalization" as set forth in the Final
Offering Memorandum and, based on the assumptions stated in the Final
Offering Memorandum, the Company would have had on the date indicated
the adjusted capitalization as set forth in the column entitled
"Company Pro Forma" under the caption "Capitalization" as set forth in
the Final Offering Memorandum. Except as described in the Final
Offering Memorandum, all of the issued and outstanding shares of
capital stock of each Subsidiary, New West and each New West Subsidiary
have been duly and validly authorized and issued, are fully paid and
nonassessable, were not issued in violation of preemptive or similar
rights, are owned, with respect to the Subsidiaries (other than New
West and the New West Subsidiaries), by the Company and, with respect
to the New West Subsidiaries, by New West free and clear of all Liens,
and, with respect to the Subsidiaries, New West and the New West
Subsidiaries, will be owned upon consummation of the Merger free and
clear of all Liens. Except as described in the Final Offering
Memorandum, (i) there are no outstanding options, warrants or other
rights to acquire, or instruments convertible into or options to
acquire, or instruments convertible into or exchangeable for, any
shares of capital stock of the Company, any Subsidiary, New West or any
New West Subsidiary and (ii) there are no agreements, understandings or
arrangements relating to the ownership or disposition of any capital
stock in the Company, any Subsidiary, New West or any New West
Subsidiary, the election of directors of the Company, any Subsidiary,
New West or any New West Subsidiary or the governance of the Company's,
any Subsidiary's, New West's or any New West Subsidiary's affairs other
than the Merger Agreement and documents executed pursuant thereto.
(g) The Company, the Guarantors, New West and the New West
Subsidiaries have all requisite corporate power and authority (to the
extent a party thereto) to execute, deliver and perform their
obligations under the Offering Documents, the Merger Agreement and the
<PAGE>
-6-
New Credit Agreement and to consummate the transactions contemplated
thereby, including the Tender Offer and the Merger.
(h) This Agreement has been duly and validly authorized, executed
and delivered by the Company and each Guarantor (other than the
delivery by New West and the New West Subsidiaries) and (assuming due
authorization, execution and delivery by the Initial Purchasers) is a
legally valid and binding agreement of the Company and each Guarantor
(or, in the case of New West and the New West Subsidiaries, will be,
when delivered thereby).
(i) The Indenture has been duly and validly authorized by the
Company and each Guarantor and, when executed and delivered by the
Company and each Guarantor on the Delivery Date (or, in the case of New
West and the New West Subsidiaries, upon the consummation of the
Merger) assuming due authorization, execution and delivery by the
Trustee, will be a legally valid and binding agreement of the Company
and each Guarantor, enforceable against the Company and each Guarantor
in accordance with its terms, except that (i) the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorgani-
zation, moratorium, fraudulent transfer or other similar laws relating
to or affecting creditors' rights generally and (ii) the availability
of equitable remedies may be limited by equitable principles of general
applicability (regardless of whether in a proceeding in equity or at
law). The Indenture meets the requirements for qualification under the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture
will conform in all material respects to the description thereof in the
Final Offering Memorandum.
(j) The Notes have been duly and validly authorized by the
Company and, when executed and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be
legally valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in
accordance with their terms, except that (i) the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in
equity or at law). The Notes will conform in all material respects to
the description thereof contained in the Final Offering Memorandum,
and, when issued, will be in the form contemplated by the Indenture.
(k) The Guarantees to be endorsed on the Notes by each Guarantor
have been duly and validly authorized by each Guarantor and, when
executed and delivered in accordance with the terms of the Indenture,
<PAGE>
-7-
will be legally valid and binding obligations of such Guarantor,
entitled to the benefits of the Indenture and enforceable against such
Guarantor in accordance with their terms, except that (i) the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws relating to or affecting creditors' rights generally and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability (regardless of whether considered
in a proceeding in equity or at law). The Guarantees will conform in
all material respects to the description thereof contained in the Final
Offering Memorandum.
(l) The Exchange Notes and the Private Exchange Notes and their
respective guarantees have been duly and validly authorized by the
Company and each Guarantor and, when executed, authenticated and
delivered in accordance with the terms of the Indenture and the Regis-
tration Rights Agreement, will be legally valid and binding obligations
of the Company and each Guarantor, entitled to the benefits of the
Indenture and enforceable against the Company and each Guarantor in
accordance with their terms, except that (i) the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in
equity or at law).
(m) The Registration Rights Agreement has been duly and validly
authorized by the Company and each Guarantor and, when executed and
delivered by the Company and each Guarantor on the Delivery Date (or,
in the case of New West and the New West Subsidiaries, upon the
consummation of the Tender Offer and the Merger) assuming due
authorization, execution and delivery by, and enforceability against,
the Initial Purchasers, will be a legally valid and binding agreement
of the Company and each Guarantor, enforceable against the Company and
each Guarantor in accordance with its terms, except that (i) the
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws relating to or affecting creditors' rights generally,
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability (regardless of whether considered
in a proceeding in equity or at law) and (iii) rights to indemnity may
be limited by state or federal laws relating to securities or by
policies underlying such laws. The Registration Rights Agreement will
conform in all material respects to the description thereof contained
in the Final Offering Memorandum.
(n) The New Credit Agreement has been duly and validly authorized
by the Company and each of the Guarantors and, when executed and
delivered by the Company and each of the Guarantors on the Delivery
<PAGE>
-8-
Date (or, in the case of New West and the New West Subsidiaries, upon
the consummation of the Tender Offer and the Merger), will constitute a
valid and legally binding agreement of the Company and each of the
Guarantors, enforceable against the Company and each of the Guarantors
in accordance with its terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought. The New Credit Facility will conform in all material respects
to the description thereof contained in the Final Offering Memorandum.
(o) The Merger Agreement has been duly and validly authorized by
the Company, NW Acquisition Corp. and New West and constitutes a valid
and legally binding agreement of the Company, NW Acquisition Corp. and
New West, enforceable against the Company, NW Acquisition Corp. and New
West in accordance with its terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought. The Merger Agreement conforms in all material respects to the
description thereof contained in the Final Offering Memorandum.
(p) None of the Company, the Subsidiaries, New West or the New
West Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws (or similar organizational document), (ii) in
breach or violation of any statute, law, judgment, decree, order, rule
or regulation applicable to any of them or any of their respective
properties or assets, except for any such breach or violation which
would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would
constitute a default under) or in violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument to which any of them is a
party or to which any of them or their respective properties or assets
is subject, except for any such breach, default, violation or event
which would not, individually or in the aggregate, have a Material
Adverse Effect.
(q) The execution, delivery and performance by the Company and
the Guarantors (including New West and the New West Subsidiaries upon
the consummation of the Tender Offer and the Merger) of the Offering
Documents, the Merger Agreement and the New Credit Agreement and the
consummation of the transactions contemplated thereby and by the Final
Offering Memorandum will not (i) conflict with, or result in a breach
<PAGE>
-9-
or violation of, any of the terms or provisions of, or constitute a
default under (or, with notice or passage of time or both, constitute a
default under), any indenture, mortgage, deed of trust, license,
permit, loan agreement, lease or other material agreement or instrument
to which the Company, any of the Subsidiaries, New West or any of the
New West Subsidiaries is a party or by which any of them or any of
their respective properties or assets is bound or is subject, (ii)
violate any provision of the certificate of incorporation or the by-
laws or similar organizational documents of the Company, any of the
Subsidiaries, New West or any of the New West Subsidiaries or any
material statute or any material order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company,
any of the Subsidiaries, New West or any of the New West Subsidiaries
or any of their properties or assets, or (iii) result in or require the
creation or imposition of any Lien, upon or with respect to any of the
properties of the Company, any of the Subsidiaries, New West or any of
the New West Subsidiaries, except as permitted by the terms of the
Indenture. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Notes or the Guarantees and the
consummation by the Issuers of the other transactions contemplated
hereby, except such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the offer and sale of the Securities and except
as have been or, by the Delivery Date, shall have been obtained.
(r) No event with respect to the Company or the Guarantors has
occurred and is continuing that, upon issuance of the Notes and the
Guarantees, would (whether or not with the giving of notice and/or the
passage of time and/or the fulfillment of any other requirement)
constitute a default or an event of default as described in the
Indenture.
(s) There are no legal or governmental proceedings pending to
which the Company, any of the Subsidiaries, New West or any of the New
West Subsidiaries is a party or of which any of their respective
properties or assets is the subject which, if determined adversely,
would singly or in the aggregate have a Material Adverse Effect or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Notes or the
Guarantees to be sold hereunder or the consummation of the transactions
described in or contemplated by the Offering Documents or the Final
Offering Memorandum. To the Issuers' best knowledge, no such proceed-
ings are threatened or contemplated by any governmental agency or body
or any other person. There are no legal or governmental proceedings
involving or affecting the Company, the Subsidiaries, New West or any
of the New West Subsidiaries or any of their properties or assets that
would be required to be described in a prospectus on Form S-1 pursuant
<PAGE>
-10-
to the Securities Act that are not described in the Final Offering
Memorandum, nor are there any material contracts or other documents
that would be required to be described in a prospectus on Form S-1
pursuant to the Securities Act that are not described in the Final
Offering Memorandum.
(t) Each of the Company, the Subsidiaries, New West and the New
West Subsidiaries has such permits, licenses, franchises,
authorizations, consents, certificates, orders and clearances
("PERMITS") of governmental or regulatory authorities as are necessary
to own, lease and operate its properties and to conduct its business in
the manner described in the Final Offering Memorandum, subject to such
qualifications as may be set forth in the Final Offering Memorandum;
subject to such qualifications as may be set forth in the Final
Offering Memorandum, each of the Company, the Subsidiaries, New West
and the New West Subsidiaries has fulfilled and performed all its
material obligations with respect to the Permits, and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any Permit. Except as
described in the Final Offering Memorandum, none of the Permits
contains any restrictions that materially affect the ability of the
Company, any Subsidiary, New West or any New West Subsidiary to satisfy
its obligations under the Offering Documents or to consummate any of
the transactions described in or contemplated by the Offering Documents
or the Final Offering Memorandum.
(u) Each of Arthur Andersen LLP, Ernst & Young LLP and
PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company, the Subsidiaries, New West, the New West
Subsidiaries, Frame-N-Lens, Inc. ("FNL"), and the FNL subsidiaries
before the acquisition by the Company of FNL (the "FNL SUBSIDIARIES"),
are independent public accountants under rule 101 of AICPA's Code of
Professional Conduct and its interpretation and rulings.
(v) The consolidated financial statements of the Company included
or incorporated by reference in the Final Offering Memorandum present
fairly the financial condition, the results of operations and the cash
flows of the Company and the Subsidiaries as of the dates and for the
periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods
involved, except as otherwise stated therein. The consolidated
financial statements of New West and the related notes thereto included
in the Final Offering Memorandum present fairly in all material
respects the consolidated financial position of New West and its
consolidated subsidiaries, the results of their operations and the
changes in their consolidated cash flow at the dates and for the
periods specified and have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis,
except as otherwise stated therein. The consolidated financial
<PAGE>
-11-
statements of FNL and the related notes thereto included in the Final
Offering Memorandum present fairly in all material respects the
consolidated financial position of FNL and its consolidated
subsidiaries, the results of their operations and the changes in their
consolidated cash flow at the dates and for the periods specified and
have been prepared in accordance with GAAP applied on a consistent
basis, except as otherwise stated therein. The summary and selected
financial and statistical data in the Final Offering Memorandum present
fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited
financial statements included in the Final Offering Memorandum. The
unaudited PRO FORMA financial statements included in the Final Offering
Memorandum (i) comply as to form in all material respects with the
applicable requirements of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder (collectively, the
"EXCHANGE ACT"), (ii) have been prepared in accordance with the
Commission's rules and guidelines with respect to PRO FORMA financial
statements and (iii) have been properly computed on the bases described
therein; the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(w) There is no presently existing dispute or controversy between
the Company, any of the Subsidiaries, New West or any of the New West
Subsidiaries on the one hand and any of their respective employees on
the other hand which has had or is likely to have, and the Issuers have
no reason to believe that the relationship of the Company, the
Subsidiaries, New West and the New West Subsidiaries with their unions
or employees is likely to have, a Material Adverse Effect.
(x) The Company, the Subsidiaries, New West and the New West
Subsidiaries own or possess adequate patents, patent rights,
inventions, trademarks, service marks, trade names, copyrights and
know-how necessary to conduct their business as presently conducted as
described in the Final Offering Memorandum. Neither the Company, any
of the Subsidiaries, New West or any of the New West Subsidiaries has
received any notice of infringement of or conflict with asserted rights
of others with respect to any material patent, patent rights, inventions,
trademarks, service marks, trade names, copyrights or know-how which
could reasonably be expected to have a Material Adverse Effect.
(y) The Company, the Subsidiaries, New West and the New West
Subsidiaries have timely filed all federal income and other material
tax returns and notices. The Issuers have no knowledge of any tax
deficiencies which would have a Material Adverse Effect. The Company,
the Subsidiaries, New West and the New West Subsidiaries have paid all
federal, state, local and foreign taxes of any nature which are
<PAGE>
-12-
shown on its returns to be due, in each case except as may be set forth
or adequately reserved for in accordance with GAAP in the financial
statements included in the Final Offering Memorandum. The amounts
currently set up as provisions for taxes or otherwise by the Company,
the Subsidiaries, New West and the New West Subsidiaries on their books
and records are materially sufficient for the payment of all their
unpaid federal, foreign, state, county and local taxes accrued through
the dates as of which they relate, and for which the Company, the
Subsidiaries, New West and the New West Subsidiaries may be liable in
their own right, or as a transferee of the assets of, or as successor
to any other corporation, association, partnership, joint venture or
other entity.
(z) Since the date of the most recent financial statements
appearing in the Final Offering Memorandum, except as described
therein, (i) none of the Company, the Subsidiaries, New West or the New
West Subsidiaries has incurred any liabilities or obligations, direct
or contingent, or entered into or agreed to enter into any transactions
or contracts (written or oral) not in the ordinary course of business,
which liabilities, obligations, transactions or contracts would,
individually or in the aggregate, be material to the general affairs,
management, business, condition (financial or otherwise), prospects or
results of operations of the Company, the Subsidiaries, New West and
the New West Subsidiaries, taken as a whole, (ii) none of the Company,
any of the Subsidiaries, New West or the New West Subsidiaries has
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock (other than, with respect to any of such Subsidiaries, the
purchase of, or dividend or distribution on, capital stock owned by the
Company or a Subsidiary and other than, with respect to any of such New
West Subsidiaries, the purchase of, or dividend or distribution on,
capital stock owned by New West or a New West Subsidiary) and (iii)
there shall not have been any change in the capital stock or long-term
indebtedness of the Company, the Subsidiaries, New West or the New West
Subsidiaries. Since the date as of which information is given in the
Preliminary Offering Memorandum through the date hereof, and except as
may otherwise be disclosed in the Final Offering Memorandum, neither
the Company, any of the Subsidiaries, New West nor any of the New West
Subsidiaries has sold or otherwise disposed of any capital stock of the
Company or the Subsidiaries, directly or indirectly.
(aa) The Company, each Subsidiary, New West and each New West
Subsidiary maintain systems of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
<PAGE>
-13-
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(bb) The Issuers, taken as a whole, immediately before and after
the consummation of the transactions contemplated by each of the Merger
Agreement, the New Credit Agreement, this Agreement and the Indenture
and the other transactions contemplated in the Final Offering
Memorandum, will be Solvent. As used herein, the term "SOLVENT" means,
with respect to any such entity on a particular date, (i) the fair
market value of the assets of such entity is greater than the total
amount of liabilities (including contingent liabilities) of such
entity, (ii) the present fair salable value of the assets of such
entity is greater than the amount that will be required to pay the
probable liabilities of such entity on its debts as they become abso-
lute and matured, (iii) such entity is able to realize upon its assets
and pay its debts and other liabilities, including contingent
obligations, as they mature and (iv) such entity does not have an
unreasonably small capital in relation to its operations.
(cc) None of the Issuers or any of their respective affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act, an
"AFFILIATE") has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require
the registration under the Securities Act of the Notes or (ii) engaged
in any form of general solicitation or general advertising in
connection with the offering of the Notes (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.
(dd) Neither the Company, any of the Subsidiaries, New West nor
any of the New West Subsidiaries has taken or will take any action that
might cause this Agreement or the sale of the Securities to or by the
Initial Purchasers to violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Delivery Date.
(ee) Neither the Company nor any of the Subsidiaries is, or will
be after giving effect to the Offering and the application of the
proceeds therefrom and the other transactions contemplated by the
Offering Documents, an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT").
<PAGE>
-14-
(ff) Assuming the representations and warranties of the Initial
Purchasers are true and correct, it is not necessary in connection with
the offer, sale and delivery of the Notes to the Initial Purchasers in
the manner contemplated by this Agreement to register the Notes under
the Securities Act or to qualify the Indenture under the TIA.
(gg) The Company has been advised by the National Association of
Securities Dealers, Inc. Private Offerings, Resales and Trading through
Automated Linkages market ("PORTAL") that the Notes have been
designated PORTAL eligible securities in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc.
(hh) None of the Issuers has taken, nor will take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Securities.
(ii) The statistical and market-related data included in the Final
Offering Memorandum are based on or derived from sources that the
Issuers believe to be reliable and accurate or represent the Issuers'
good faith estimates that are made on the basis of data derived from
such sources.
(jj) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (A) each of
the Company, the Subsidiaries, New West and the New West Subsidiaries
is in compliance with and not subject to liability under applicable
Environmental Laws (as defined below), (B) each of the Company, the
Subsidiaries, New West and the New West Subsidiaries has made all
filings and provided all notices required under any applicable
Environmental Law, and has, and is in compliance with, all Permits
required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter or
request for information pending or, to the knowledge of the Company or
any of the Subsidiaries, threatened against the Company, any of the
Subsidiaries, New West or any of the New West Subsidiaries under any
Environmental Law, (D) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by the
Company, the Subsidiaries, New West or any of the New West
Subsidiaries, (E) none of the Company, any of the Subsidiaries, New
West or any of the New West Subsidiaries has received notice that it
has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any comparable state law, (F) no
property or facility of the Company, any of the Subsidiaries, New West
or any of the New West Subsidiaries is (i) listed or proposed for
<PAGE>
-15-
listing on the National Priorities List under CERCLA or is (ii) listed
in the Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "ENVIRONMENTAL LAWS" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials into
the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and
(iii) underground and aboveground storage tanks and related piping, and
emissions, discharges, releases or threatened releases therefrom.
(kk) When the Notes are issued and delivered pursuant to this
Agreement, the Notes will not be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the Company
which are listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated interdealer
quotation system.
(ll) The Company, each of the Subsidiaries, New West and each of
the New West Subsidiaries maintain insurance covering their properties,
operations, personnel and businesses. Such insurance insures against
such losses and risks as are adequate in accordance with customary
industry practice to protect the Company, the Subsidiaries, New West
and each of the New West Subsidiaries and their businesses. All such
insurance is outstanding and in force on the date hereof and will be
outstanding and in force on the Delivery Date and immediately after
consummation of the Merger.
(mm) None of the Company, any Subsidiary, New West, any New West
Subsidiary or any of their officers, employees, agents or any other
person acting on behalf of the Company, any Subsidiary, New West or any
New West Subsidiary has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency (domestic or foreign)
or instrumentality of any government (domestic of foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the
<PAGE>
-16-
business of the Company, any Subsidiary, New West or any New West
Subsidiary (or assist the Company, any Subsidiary, New West or any New
West Subsidiary in connection with any actual or proposed transaction)
which (a) might subject the Company, any Subsidiary, New West or any
New West Subsidiary or any other such person to any damage or penalty
in any civil, criminal or governmental litigation or proceeding
(domestic or foreign), (b) if not given in the past, might have had a
Material Adverse Effect, or (c) if not continued in the future, might
have a Material Adverse Effect. None of the Company, any Subsidiary,
New West, any New West Subsidiary or any of their officers, employees,
agents or any other person acting on behalf of the Company, any
Subsidiary, New West or any New West Subsidiary has made any payment of
funds prohibited by law, and no funds of the Company, any Subsidiary,
New West or any New West Subsidiary have been set aside to be used for
any payment prohibited by law. The Company's, each Subsidiary's, New
West's and each New West Subsidiary's internal accounting controls are
sufficient to cause the Company, each Subsidiary, New West and each New
West Subsidiary to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(nn) The Company, the Subsidiaries, New West and the New West
Subsidiaries are in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company, any of the Subsidiaries,
New West or any of the New West Subsidiaries would have any liability;
none of the Company, any of the Subsidiaries, New West or any of the
New West Subsidiaries has incurred or expects to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension
plan" for which the Company, any of the Subsidiaries, New West or any
of the New West Subsidiaries would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, which would be expected to cause the loss of such
qualification.
(oo) Except as set forth in the Final Offering Memorandum, there
is no strike, labor dispute, slowdown or work stoppage with the
employees of the Company, any of the Subsidiaries, New West or any of
the New West Subsidiaries which is pending or, to the best knowledge of
the Issuers, threatened.
(pp) None of the Issuers, any of their respective Affiliates or
any person acting on any of their behalf (other than the Initial
Purchasers) has engaged in any directed selling efforts (as that term
<PAGE>
-17-
is defined in Regulation S under the Act ("Regulation S")) with respect
to the Securities; the Issuers and their respective Affiliates and any
person acting on any of their behalf (other than the Initial
Purchasers) have complied with the offering restrictions requirement of
Regulation S.
(qq) Each representation and warranty contained in this Agreement
will be true and correct immediately after consummation of each of the
Tender Offer and the Merger.
(rr) All Information Systems and Equipment (as defined below) are
either Year 2000 Compliant (as defined below), or any reprogramming,
remediation, or any other corrective action, including the internal
testing of all such Information Systems and Equipment, will be
completed by June 1, 1999, except insofar as a failure to do so will
not result in a Material Adverse Effect. Further, to the extent that
such reprogramming, remediation and testing is required, the cost
thereof, as well as the cost of the reasonably foreseeable consequences
of failure to become Year 2000 Compliant, to the Company, its
Subsidiaries, New West and the New West Subsidiaries (including,
without limitation, reprogramming errors and the failure of other
systems or equipment) will not result in a Material Adverse Effect.
"YEAR 2000 COMPLIANT" means that all Information Systems and
Equipment accurately process date data (including, but not limited to,
calculating, comparing and sequencing), before, during and after the year
2000, as well as same and multi-century dates, or between the years 1999 and
2000, taking into account all leap years, including the fact that the year
2000 is a leap year, and further, that when used in combination with, or
interfacing with, other Information Systems and Equipment, shall accurately
accept, release and exchange date data, and shall in all material respects
continue to function in the same manner as it performs today and shall not
otherwise impair the accuracy or functionality of Information Systems and
Equipment.
"INFORMATION SYSTEMS AND EQUIPMENT" means all computer hardware,
firmware and software, as well as other information processing systems, and
any equipment containing embedded microchips, whether directly owned,
licensed, leased, operated or otherwise controlled by the Company, any of
its Subsidiaries, New West or any of the New West Subsidiaries, including
through third-party service providers, and which, in whole or in part, are
used, operated, relied upon, or integral to, in the conduct of its business,
any of the Company, any Subsidiaries, New West or any New West Subsidiaries.
Each of the foregoing representations and warranties, as far as
each relates to information concerning New West or the New West
Subsidiaries, is made by the Issuers to the best of their knowledge.
<PAGE>
-18-
Any certificate signed by any officer of the Company or any
Subsidiary and delivered to any Initial Purchaser or to counsel for the
Initial Purchasers shall be deemed a representation and warranty by the
Company or such Subsidiary, as the case may be, to each Initial Purchaser as
to the matters covered thereby.
2. On the basis of the representations and warranties contained
in this Agreement, and subject to the terms and conditions herein set forth,
the Issuers agree to issue and sell to the Initial Purchasers, and the
Initial Purchasers agree, severally, to purchase from the Issuers, the
aggregate principal amount of Securities set forth opposite such Initial
Purchaser's name on SCHEDULE II attached hereto, at a purchase price of
95.864% of the principal amount thereof.
3. Certificates in definitive form for the Notes and the
Guarantees to be purchased by you hereunder shall be delivered by or on
behalf of the Issuers to you for your account against payment by you of the
purchase price therefor by wire transfer of immediately available funds to
an account specified by the Company by written notice to the Initial
Purchasers (given at least two business days prior to the Delivery Date),
for the purchase price of the Securities being sold by the Issuers in New
York, New York, at 9:30 A.M., New York City time, on October 8, 1998, or at
such other time, date and place as you and the Company may agree upon in
writing, such time and date being herein called the "DELIVERY DATE."
Certificates for the Notes so to be delivered will be in good
delivery form, and in such denominations and registered in such names as you
may request not less than 48 hours prior to the Delivery Date. Such
certificates will be made available for checking and packaging in New York,
New York, at least 24 hours prior to the Delivery Date.
4. The Initial Purchasers propose to offer the Securities for
resale, as soon as practicable after this Agreement is entered into and as
in the judgment of the Initial Purchasers is advisable, only to certain
investors (as further described in subparagraph (a) of this Section 4) upon
the terms and conditions set forth in this Agreement and the Final Offering
Memorandum initially at the purchase price set forth on the cover page of
the Final Offering Memorandum. Each of the Initial Purchasers hereby
represents and warrants to, severally, and agrees with, the Issuers that:
(a) It is an institutional "accredited investor" (as defined in
501(a)(1), (2), (3) or (7) under the Securities Act) and will offer or
sell the Notes only (i) inside the United States, to persons who it
reasonably believes are "qualified institutional buyers" within the
meaning of Rule 144A in transactions meeting the requirements of Rule
144A and (ii) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities
Act; and
<PAGE>
-19-
(b) It has not and will not offer or sell the Notes by any form
of general solicitation or general advertising, including but not
limited to, the methods described in Rule 502(c) under the Securities
Act.
5. In consideration of the agreements of the Initial Purchasers
contained in this Agreement, the Issuers, jointly and severally, covenant
and agree as follows:
(a) The Issuers will furnish to you, without charge, as many
copies of the Final Offering Memorandum and any supplements and
amendments thereto as you may reasonably request.
(b) Before amending or supplementing the Final Offering
Memorandum subsequent to the execution of this Agreement, the Issuers
will furnish to you a copy of each such proposed amendment or
supplement and will not use any such proposed amendment or supplement
to which you reasonably object.
(c) If, at any time prior to the completion of the distribution
of the Securities to persons that are not your affiliates (as
determined by you), any event occurs as a result of which the Final
Offering Memorandum as then amended or supplemented would include any
untrue statement of a material fact, or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any
other reason it is necessary at any time to amend or supplement the
Final Offering Memorandum to comply with applicable law, the Issuers
will notify you thereof and will prepare, at the expense of the
Issuers, an amendment or supplement to the Final Offering Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Issuers will endeavor to qualify the Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions in
the United States as you shall reasonably request; PROVIDED, HOWEVER,
that the Issuers shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject. The
Issuers will file such statements and reports as may be required by the
laws of each jurisdiction in which the Securities have been qualified
as above provided. The Issuers will also supply you with such
information as is necessary for the determination of the legality of
the Securities in such jurisdictions as you may request.
(e) The Issuers will not, and will not permit any of their
Affiliates to, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
<PAGE>
-20-
Securities Act) which could be integrated with the sale of the
Securities in a manner which would require the registration under the
Securities Act of the Securities.
(f) Except following the effectiveness of the Exchange Offer
Registration Statement, the Issuers will not solicit any offer to buy
or offer to sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities
Act.
(g) While any of the Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Issuers will make available at their expense, upon
request, to any holder, beneficial owner or prospective purchaser of
outstanding Securities the information specified in Rule 144A(d)(4)
under the Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(h) The Issuers will use their best efforts to permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL Market and to permit
the Securities to be eligible for clearance and settlement through The
Depository Trust Company.
(i) For so long as the Securities remain outstanding, the Issuers
will furnish to the Initial Purchasers copies of any annual reports,
quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Issuers to the Trustee or to
the holders of the Notes pursuant to the Indenture.
(j) The Issuers will not, and will not permit any of their
Affiliates to, resell any Securities that have been acquired by any of
them.
(k) The Issuers will use the proceeds from the sale of the
Securities in the manner set forth in the Final Offering Memorandum and
in a manner that will not result in the Issuers becoming an investment
company within the meaning of the Investment Company Act, and the rules
and regulations of the Commission thereunder.
(l) The Company will not, and will cause each of the Subsidiaries
not to, offer, sell, contract to sell or grant any option to purchase
or otherwise transfer or dispose of any debt security, or any security
convertible into or in exchange for, any such debt security of the
<PAGE>
-21-
Company or any such Subsidiary (other than (x) any private loan, credit
or financing agreement with a bank or similar institution and (y) the
Notes, the Exchange Notes and the Private Exchange Notes), for a period
of 180 days after the date of this Agreement, without the prior
written consent of Schroder & Co. Inc.
(m) Prior to the Delivery Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim consolidated
financial statements of the Company for any period subsequent to the
period covered by its most recent financial statements appearing in the
Final Offering Memorandum.
(n) The Company will use reasonable efforts to consummate the
Merger as soon as practicable after the Delivery Date, taking into
account all relevant factors, including successful operation of the
Company's business.
(o) Upon the consummation of the Tender Offer and the Merger, the
Issuers shall cause New West and the New West Subsidiaries to become
Guarantors pursuant to the Indenture and they shall each execute and
deliver the Guarantee, the Indenture, the New Credit Agreement, this
Agreement and the Registration Rights Agreement as of the respective
dates of such documents.
(p) On or prior to November 30, 1998, (i) the Tender Offer shall
have been consummated in accordance with the Offer to Purchase and all
applicable laws, (ii) the Company shall have purchased that number of
shares sufficient to satisfy the minimum tender conditions in the Offer
to Purchase in accordance with the terms and conditions set forth in
the Offer to Purchase and (iii) such tendered shares shall be
transferable to the purchaser with good title and shall be free and
clear of Liens and encumbrances created by the Company or its
affiliates. After giving effect to the consummation of the purchase of
the shares pursuant to the Tender Offer, the Company shall own and
control that number of shares as shall be necessary to permit the
Company to approve the Merger either with or without the affirmative
vote or approval of the shareholders of New West, and there shall be no
applicable statute or other restriction (other than provisions of the
Delaware General Corporation Law and proxy rules under Section 14 of
the Exchange Act) which would prohibit, materially restrict or
materially delay the consummation of the Merger or would be reasonably
likely to make the consummation of the Merger economically unfeasible.
In addition, any state anti-takeover law regulating the Merger shall
have been complied with or shall have been determined by the Initial
Purchasers to be invalid or inapplicable to the Tender Offer and the
Merger. At the time of the consummation of the Tender Offer, no fair
price provisions under applicable law shall require a higher price be
paid for shares in the Tender Offer, which price, in any event, shall
not exceed that amount set forth in the Offer to Purchase and the
<PAGE>
-22-
Merger Agreement as in effect at the time of the consummation of the
Merger.
(q) The Issuers will ensure that their Information Systems and
Equipment are at all times after June 1, 1999 Year 2000 Compliant,
except insofar as a failure to do so will not result in a Material
Adverse Effect.
6. The Issuers, jointly and severally, covenant and agree that
the Issuers will pay or cause to be paid: (i) the fees, disbursements and
expenses of counsel and accountants for the Issuers and the Trustee and its
counsel, and all other expenses, in connection with the preparation and
printing of each Memorandum and amendments and supplements thereto and the
furnishing of copies thereof, including charges for mailing, air freight and
delivery and counting and packaging thereof to the Initial Purchasers and
dealers; (ii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(d) hereof, including disbursements and expenses for counsel for
the Initial Purchasers in connection with such qualification and in
connection with Blue Sky surveys; (iii) any fees charged by rating agencies
for the rating of the Securities; (iv) the costs and expenses in connection
with the preparation and delivery of the Securities; and (v) all other costs
and expenses incident to the performance of its obligations hereunder which
are not otherwise specifically provided for in this Section 6, including the
fees, if any, incurred in connection with the admission of the Securities
for trading in any appropriate market systems, the cost of the Issuers'
personnel and other internal costs, the cost of printing and engraving the
certificates representing the Securities and all expenses and property,
excise and similar taxes incident to the sale and delivery of the Securities
to be sold by the Issuers to the Initial Purchasers hereunder.
7. Your obligations hereunder shall be subject, in your
discretion, to the following additional conditions:
(a) The representations and warranties of the Issuers contained
in this Agreement shall be true and correct as of the date hereof and
as of the Delivery Date. The Issuers shall have performed in all
material respects all covenants and agreements and satisfied in all
material respects all conditions on their part to be performed or
satisfied hereunder at or prior to the Delivery Date.
(b) The sale of the Securities by the Issuers hereunder shall not
be enjoined (temporarily or permanently) on the Delivery Date.
(c) Subsequent to the date as of which information is given in
the Final Offering Memorandum, except in each case as described in or
as contemplated by the Final Offering Memorandum, the Company, the
Subsidiaries, New West and the New West Subsidiaries shall not have
<PAGE>
-23-
incurred any liabilities or obligations, direct or contingent that are
material to the Company, the Subsidiaries, New West and the New West
Subsidiaries taken as a whole or entered into any transactions that are
material to the business, condition (financial or other), results of
operations or prospects of the Company, the Subsidiaries, New West and
the New West Subsidiaries taken as a whole.
(d) Subsequent to the date of this Agreement and prior to the
Delivery Date, there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Issuers' securities, including the Securities, by any "nationally
recognized statistical rating organization" as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act.
(e) You shall have received on the Delivery Date a certificate of
each of the Issuers dated the Delivery Date and signed by its Chief
Executive Officer, President or any Vice President and by the Chief
Financial Officer, to the effect set forth in clauses (a), (b), (c) and
(d) above.
(f) Kilpatrick Stockton LLP, counsel to the Issuers, shall have
furnished to you their written opinion, dated the Delivery Date, in
substantially the form attached hereto as EXHIBIT B, portions of which
opinion reasonably satisfactory to you may be rendered by Kohrman
Jackson & Krantz, P.L.L. counsel to New West, Gray Cary Ware
Freidenrich LLP, counsel to Frame-n-Lens, Inc., or Mitchell Goodman,
General Counsel to the Company.
(g) Cahill Gordon & Reindel, counsel to the Initial Purchasers,
shall have furnished to the Initial Purchasers a written opinion, dated
the Delivery Date, in form and substance satisfactory to you, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon the matters covered by
such opinion.
(h) You shall have received on each of the date hereof and the
Delivery Date letters, dated the date hereof or the Delivery Date, as
the case may be, in form and substance reasonably satisfactory to you,
from Arthur Andersen LLP, Ernst & Young LLP and PricewaterhouseCoopers
LLP, the Company's and the Subsidiaries' independent public
accountants.
(i) (i) Since the date of this Agreement, neither the Company,
any of the Subsidiaries, New West nor any of the New West Subsidiaries
shall have sustained any loss or interference with its business from
<PAGE>
-24-
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree which could reasonably be expected to have a Material
Adverse Effect; and (ii) since the respective dates as of which
information is given in the Final Offering Memorandum, there shall not
have been any change in the capital stock or short-term debt (other
than in the ordinary course of business) or long-term debt of the
Company, any of the Subsidiaries, New West or any of the New West
Subsidiaries nor any change which could reasonably be expected to have
a Material Adverse Effect otherwise than as set forth or contemplated
in the Final Offering Memorandum, the effect of which, in any such case
described in clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed with the
Offering or the delivery of the Notes on the terms and in the manner
contemplated in the Final Offering Memorandum.
(j) Subsequent to the execution and delivery of this Agreement,
(i) there shall have been no declaration of war by the Government of
the United States, (ii) there shall not have occurred any material
adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United
States or any outbreak or material escalation of hostilities or other
calamity or crisis, the effect of which is such as to make it, in the
reasonable judgment of the Initial Purchasers, impracticable to market
the Securities or to enforce contracts for the resale of Securities and
(iii) no event shall have occurred resulting in (A) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market being suspended or limited or
minimum or maximum prices being generally established on such exchange
or market, or (B) additional material governmental restrictions, not in
force on the date of this Agreement, being imposed upon trading in
securities generally by such exchange or by order of the Commission or
any court or other governmental authority or (C) a general banking
moratorium being declared by either Federal or New York authorities.
(k) The Issuers shall have furnished or caused to be furnished to
you at the Delivery Date any additional certificates signed by officers
of the Issuers, reasonably satisfactory to you as to such matters as
you may reasonably request.
(l) On the Delivery Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by each of the
Issuers (other than New West and the New West Subsidiaries) and such
agreement shall be in full force and effect at all times from and after
the Delivery Date.
(m) On the Delivery Date, the Indenture shall have been duly
executed and delivered by each Issuer (other than New West and the New
West Subsidiaries) and the Trustee, and the Notes shall have been duly
<PAGE>
-25-
executed by the Company and shall have been duly authenticated by the
Trustee.
(n) On the Delivery Date, Guarantees shall have been duly
executed and delivered by the Guarantors (other than New West and the
New West Subsidiaries).
(o) Before or on the Delivery Date, the Company and the
Guarantors (other than New West and the New West Subsidiaries) shall
have entered into the New Credit Agreement on terms and conditions
described in the Final Offering Memorandum or that are satisfactory to
the Initial Purchasers.
(p) The Company and the Guarantors shall have duly executed and
delivered this Agreement (other than New West and the New West
Subsidiaries).
(q) On the Delivery Date, the Initial Purchasers shall have
received a true and correct copy of the Merger Agreement and any
schedules and amendments thereto, and there shall have been no material
amendments, alterations, modifications or waivers of any provisions of
the Merger Agreement since the date of this Agreement.
(r) All actions contemplated by the Merger Agreement to be
consummated on or prior to the Delivery Date shall have been
consummated in accordance with the provisions of such agreement.
8. (a) The Issuers jointly and severally agree to indemnify and
hold harmless the Initial Purchasers against any losses, claims, damages or
liabilities ("LOSSES") to which the Initial Purchasers may become subject,
under the Securities Act, the Exchange Act, any other federal or state
statutory law or regulation, at common law or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
any Memorandum, or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse the Initial Purchasers for any
legal or other expenses reasonably incurred by the Initial Purchasers in
connection with investigating, preparing to defend, defending or appearing
as a third-party witness in connection with any such action or claim;
PROVIDED FURTHER, HOWEVER, that the Issuers shall not be liable to the
Initial Purchasers in any such case to the extent that any such Loss arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission relating to the Initial Purchasers made in any
Memorandum, or such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of the Initial Purchasers expressly for use therein; PROVIDED, HOWEVER, that
<PAGE>
-26-
the foregoing indemnity with respect to the Preliminary Offering Memorandum
shall not inure to the benefit of the Initial Purchasers if the person
asserting such losses, claims, damages or liabilities purchased Securities
and (x) it is established in the related proceeding that such Initial
Purchasers failed to send or give a copy of the Final Offering Memorandum to
such person with or prior to the written confirmation of such sale (provided
that the Issuers have complied with their obligations under Section 5(a)
hereof) and (y) the untrue statement or omission or alleged untrue statement
or omission was completely corrected in the Final Offering Memorandum and
the Final Offering Memorandum does not contain any other untrue statement or
omission or alleged untrue statement or omission that was the subject matter
of the related proceeding.
(b) In addition to any obligations of the Issuers under Section
8(a), each of the Issuers agrees that it shall perform its indemnification
obligations under Section 8(a) (as modified by the last paragraph of this
Section 8(b)), with respect to counsel fees and expenses and other expenses
reasonably incurred by making payments within 45 days to the Initial
Purchasers in the amount of the statements of the Initial Purchasers'
counsel or other statements which shall be forwarded by the Initial
Purchasers, and that it shall make such payments notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
obligation to reimburse the Initial Purchasers for such expenses and the
possibility that such payments might later be held to have been improper by
a court and a court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition to
any liability which the Issuers may otherwise have and shall extend upon the
same terms and conditions to each person, if any, who controls the Initial
Purchasers within the meaning of the Securities Act or the Exchange Act, and
to the officers, directors, partners, employees, representatives and agents
of the Initial Purchasers or any such control person.
(c) The Initial Purchasers will indemnify and hold harmless the
Issuers against any Losses to which the Issuers may become subject, under
the Securities Act, the Exchange Act, any federal or state statutory law or
regulation, at common law or otherwise, insofar as such Losses (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Memorandum, or
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in any Memorandum or such amendment or supplement in reliance upon and
in conformity with written information furnished to the Issuers by or on
behalf of the Initial Purchasers relating to the Initial Purchasers
expressly for use therein, and will reimburse the Issuers for any legal or
other expenses reasonably incurred by the Issuers in connection with
<PAGE>
-27-
investigating, preparing to defend, defending or appearing as a third-party
witness in connection with any such action or claim.
In addition to any obligations of the Initial Purchasers under the
preceding paragraph, each of the Initial Purchasers severally agrees that it
shall perform its indemnification obligations under the preceding paragraph
(as modified by the last paragraph of this Section 8(c)), with respect to
counsel fees and expenses and other expenses reasonably incurred by making
payments within 45 days to the Issuers in the amount of the statements of
the Issuers' counsel or other statements which shall be forwarded by the
Issuers, and that it shall make such payments notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
obligation to reimburse the Issuers for such expenses and the possibility
that such payments might later be held to have been improper by a court and
a court orders return of such payments.
The indemnity agreement in this Section 8(c) shall be in addition
to any liability which the Initial Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls the Issuers within the meaning of the Securities Act or the
Exchange Act, and to the officers, directors, partners, employees,
representatives and agents of the Issuers or any such control person.
(d) Promptly after receipt by an indemnified party under Section
8(a) or 8(c) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party
under Section 8(a) or 8(c) except to the extent it was unaware of such
action and has been prejudiced in any material respect by such failure or
from any liability which it may have to any indemnified party otherwise than
under such Section 8(a) or 8(c). In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation. If,
however, (i) the indemnifying party has not authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party
or (ii) an indemnified party shall have reasonably concluded that
representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of
professional conduct due to actual or potential differing interests between
<PAGE>
-28-
them, and the indemnified party so notifies the indemnifying party, then the
indemnified party shall be entitled to employ counsel different from counsel
for the indemnifying party at the expense of the indemnifying party and the
indemnifying party shall not have the right to assume the defense of such
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to local counsel)
for all indemnified parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising out of the
same set of allegations or circumstances. The counsel with respect to which
fees and expenses shall be so reimbursed shall be designated in writing by
the Initial Purchasers in the case of parties indemnified pursuant to
Section 8(a) and by the Issuers in the case of parties indemnified pursuant
to Section 8(c).
The Issuers shall not be liable for any settlement of any such
action or proceeding effected without its prior written consent (not to be
unreasonably withheld) and if settled with its written consent or if there
is a final judgment for the plaintiff, the Issuers jointly and severally
agree to indemnify and hold harmless the Initial Purchasers and each other
person referred to in Section 8(b) to the extent provided herein. Without
limiting the generality of the foregoing, no indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
such indemnified party is or has been threatened to be made a party and to
which the indemnity herein is applicable; PROVIDED, HOWEVER, that an
indemnifying party may effect such a settlement without the consent of the
indemnified party if such settlement includes an unconditional release of
such indemnified party from all liability for claims that are the subject
matter of such proceeding or the indemnifying party indemnifies the
indemnified party in writing and posts a bond for an amount equal to the
maximum liability for all such claims as contemplated above.
(e) In the event that the indemnity provided by Section 8(a) or
8(c) is unavailable or insufficient to hold harmless an indemnified party
for the matters covered by such Sections for any reason, the Issuers and the
Initial Purchasers shall contribute to the aggregate Losses to which they
may be subject as an indemnifying party hereunder (after contribution from
others) in such proportion so that the Initial Purchasers are responsible
for the portion represented by the percentage that the total discounts and
commissions paid to the Initial Purchasers appearing on the cover page of
the Final Offering Memorandum bears to the total proceeds to the Issuers
(net of discounts and commissions of the Initial Purchasers) appearing
thereon and the Issuers jointly and severally are responsible for the
remaining portion; PROVIDED, HOWEVER, that, in any such case, (x) the
Initial Purchasers shall not be required to contribute any amount in excess
of the Initial Purchasers' discount and commission applicable to the
Securities and (y) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to a contribution from any person who was not guilty of such
<PAGE>
-29-
fraudulent misrepresentation. The amount paid or payable by the Initial
Purchasers as result of this Section 8(e) shall be deemed to include any
legal or other expenses reasonably incurred by the Initial Purchasers or the
Issuers, as the case may be, in connection with investigating, preparing to
defend or defending any such claim.
9. The respective indemnities, agreements, representations,
warranties and other statements of the Issuers and the Initial Purchasers,
as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of the Initial Purchasers or any controlling
person of the Initial Purchasers, the Issuers or an officer or director or
controlling person of the Issuers and shall survive delivery of and payment
for the Securities.
10. The obligations of the Initial Purchasers hereunder may be
terminated by the Initial Purchasers by notice given to and received by the
Issuers prior to delivery of and payment for the Securities, if, prior to
that time, any of the events described in Section 7(d), 7(i), or 7(j) shall
have occurred or if the Initial Purchasers shall decline to purchase the
Securities for any other reason permitted under this Agreement.
11. If (a) the Issuers shall fail to tender the Notes for
delivery to the Initial Purchasers (other than by reason of a default by the
Initial Purchasers) or (b) the Initial Purchasers shall decline to purchase
the Securities for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10), the Issuers shall
reimburse the Initial Purchasers for the reasonable fees and expenses of
their counsel and for such other reasonable out-of-pocket expenses as shall
have been incurred by them in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Issuers shall pay
the full amount thereof to the Initial Purchasers.
12. All statements, requests, notices and agreements hereunder
shall be in writing or by written telecommunication, and shall be sufficient
in all respects if delivered or sent by registered mail, if to the Initial
Purchasers, to Schroder & Co., Inc., NationsBanc Montgomery Securities LLC,
First Union Capital Markets, c/o Schroder & Co. Inc. at 787 Seventh Avenue,
New York, NY 10019, Attention: High Yield Department; and if to the
Issuers, to National Vision Associates, Ltd., 296 Grayson Highway,
Lawrenceville, GA 30045-5737, Attention: Chief Executive Officer.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, you, the Issuers and, to the extent provided in Section 8
hereof, controlling persons, officers, directors, partners, employees,
representatives and agents referred to in Section 8, and their respective
heirs, executors, administrators, successors and assigns, and no other per-
son shall acquire or have any right under or by virtue of this Agreement.
<PAGE>
-30-
No purchaser of any of the Securities from the Initial Purchasers shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE U.S. FEDERAL COURTS SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE INDENTURE OR THE REGISTRATION RIGHTS AGREEMENT. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF THE INITIAL PURCHASERS TO BRING PROCEEDINGS AGAINST
THE COMPANY AND/OR ANY GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one
and the same instrument.
17. Each Guarantor, by its execution and delivery of a
counterpart to this Agreement, agrees that it shall be jointly and severally
liable for all obligations and liabilities of the Company hereunder.
<PAGE>
If the foregoing is in accordance with your understanding, please
sign and return to us a counterpart hereof, and upon the acceptance hereof
by you, this letter and such acceptance hereof shall constitute a binding
agreement among you, the Company and the Guarantors.
Very truly yours,
THE COMPANY:
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
THE GUARANTORS:
MIDWEST VISION, INC.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
NVAL HEALTHCARE SYSTEMS, INC.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES,
LTD.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
<PAGE>
FRAME-N-LENS OPTICAL, INC.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
VISION ADMINISTRATORS, INC.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
NW ACQUISITION CORP.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES
OF CANADA LTD.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES
OF ONTARIO LTD.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
<PAGE>
FAMILY VISION CENTERS, INC.
By: /s/ Mitchell Goodman
------------------------------
Name: Mitchell Goodman
Title: Vice President
Accepted as of the date hereof:
SCHRODER & CO. INC.
By: /s/ William T. Clay IV
---------------------------
Name: William T. Clay, IV
Title: Director
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Bruce R. Thompson
---------------------------
Name: Bruce R. Thompson
Title: Managing Director
FIRST UNION CAPITAL MARKETS
By: /s/ Kevin A. Smith
---------------------------
Name: Kevin A. Smith
Title: Vice President
<PAGE>
The foregoing Purchase Agreement is hereby
agreed to and accepted as of the date of such
Agreement:
Date: October 23, 1998
The Guarantors:
NEW WEST EYEWORKS, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
ALEXIS HOLDING COMPANY, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
VISTA EYECARE NETWORK, LLC
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
<PAGE>
Schedule IA
-----------
Company Subsidiaries
--------------------
International Vision Associates, Ltd.
Mexican Vision Associates, S.A. de C.V.
Mexican Vision Associates Operadora, S. de R.L. de C.V.
Mexican Vision Associates Servicios, S. de R.L. de C.V.
Midwest Vision, Inc.
NVAL Healthcare Systems, Inc.
NVAL Visioncare Systems of California, Inc.
NVAL Visioncare Systems of North Carolina, Inc.
Frame-n-Lens Optical, Inc.
Vision Administrators, Inc.
ProCare Eye Exam, Inc.
Family Vision Centers, Inc.
NW Acquisition Corp.
National Vision Associates of Canada Ltd.
International Vision Associates of Canada Ltd.
International Vision Associates of Ontario Ltd.
International Vision Associates (Netherlands) B.V.
CECIVA B.V.
Czech Vision Associates s.r.o.
Slovak Vision Associates s.r.o.
<PAGE>
Schedule IB
-----------
New West Subsidiaries
---------------------
Alexis Holding Company, Inc.
Vista Eyecare Network, LLC
<PAGE>
Schedule IC
-----------
New West Joint Venture
----------------------
Eye Care Partners
<PAGE>
Schedule II
-----------
Principal Amount
Initial Purchaser of Notes
----------------- ----------------
Schroder & Co. Inc. $ 75,000,000
NationsBanc Montgomery Securities LLC 25,000,000
First Union Capital Markets 25,000,000
-------------
Total . . . . . . . . . . . . $ 125,000,000
=============
<PAGE>
Exhibit A to
Purchase Agreement
------------------
Registration Rights Agreement
-----------------------------
<PAGE>
Exhibit B to
Purchase Agreement
------------------
1
Opinion of Company Counsel
-------------------------
1. The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Georgia,
with all necessary corporate power and authority to own its properties and
to conduct its business as described in each Memorandum. Except as
described in the Final Offering Memorandum, each of the domestic
Subsidiaries is wholly owned directly or indirectly by the Company and each
of the New West Subsidiaries is wholly owned directly or indirectly by New
West. Each of the domestic Subsidiaries, New West and the New West
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, with all necessary corporate power and authority to own its
properties and conduct its business as described in the Final Offering
Memorandum. To our best knowledge, none of the Company, the Subsidiaries,
New West, or the New West Subsidiaries owns, directly or indirectly, any
shares of capital stock or any other equity or long-term debt securities or
has any equity interest in any firm, partnership, joint venture or other
entity (except for the Subsidiaries and the New West Subsidiaries). Each of
the Company, the Subsidiaries, New West and the New West Subsidiaries is
duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of the respective jurisdictions listed in
Schedule A attached hereto. The preceding sentence is based solely upon
certificates provided by agencies of those jurisdictions, copies of which
have been delivered to the Initial Purchasers or their counsel, and is
limited to the meaning ascribed to such certificates by each applicable
agency.
2. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued (without expressing
any opinion with respect to compliance with federal and state securities
laws), are fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights and the issuance of the Securities and the
consummation of the transactions contemplated by the Offering Documents and
the Final Offering Memorandum do not give any person the right to require
registration of any securities of the Company, any Subsidiary, New West or
any New West Subsidiary whether under any registration statement filed
_________________________
1 Capitalized terms not defined herein have the meaning given to them in
the Purchase Agreement.
<PAGE>
-2-
pursuant to the Registration Rights Agreement (other than as expressly
permitted thereby) or otherwise.
3. As of the date of the Final Offering Memorandum, the Company
had authorized capital stock consisting of 100,000,000 shares of Common
Stock, $0.01 par value, with attached rights to purchase Preferred Stock
upon the occurrence of certain events, and 500,000 shares of Preferred
Stock, $1.00 par value. Except as described in the Final Offering
Memorandum, all of the issued and outstanding shares of capital stock of
each domestic Subsidiary, New West and each New West Subsidiary have been
duly and validly authorized and issued, are fully paid and nonassessable,
were not issued in violation of preemptive or similar rights, to our
knowledge are owned, with respect to the domestic Subsidiaries (other than
New West and the New West Subsidiaries), by the Company or a Subsidiary and,
with respect to the New West Subsidiaries, by New West, free and clear of
all Liens, and, with respect to the domestic Subsidiaries, New West and the
New West Subsidiaries, to our knowledge will be owned upon consummation of
the Merger free and clear of all Liens. Except as described in the Final
Offering Memorandum, there are no outstanding options, warrants or other
rights to acquire, or instruments convertible into or options to acquire, or
instruments convertible into or exchangeable or, any shares of capital stock
of the Company, any domestic Subsidiary, New West or any New West Subsidiary.
4. The Company, the Guarantors, New West and the New West
Subsidiaries have all requisite corporate power and authority (to the extent
a party thereto) to execute, deliver and perform their obligations under the
Offering Documents, the Merger Agreement and the New Credit Agreement and to
consummate the transactions contemplated thereby, including the Tender Offer
and the Merger.
5. The Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company and each Guarantor (other than the
execution and delivery by New West and the New West Subsidiaries), and
(assuming due authorization, execution and delivery by the Initial
Purchasers) is a legally valid and binding agreement of the Company and each
Guarantor (or, in the case of New West and the New West Subsidiaries, will
be, when executed and delivered thereby).
6. The Indenture has been duly and validly authorized, executed
and delivered by the Company and each Guarantor (other than the execution
and delivery by New West and the New West Subsidiaries) and assuming due
authorization, execution and delivery by the Trustee, is a legally valid and
binding agreement of the Company and each Guarantor (or, in the case of New
West and the New West Subsidiaries, will be, when executed and delivered
thereby) enforceable against the Company and each Guarantor in accordance
with its terms, except (i) that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting creditors' rights
<PAGE>
-3-
generally and (ii) for general principles of equity, including without
limitation, concepts of reasonableness, good faith and fair dealing and the
possible unavailability of specific performance ot injunctive relief
(regardless of whether in a proceeding in equity or at law). The Indenture
meets the requirements for qualification under the Trust Indenture Act of
1939, as amended (the "TIA"). The Indenture conforms in all material
respects to the description thereof in the Final Offering Memorandum.
7. The Notes have been duly and validly authorized and executed
by the Company and, assuming due authentication by the Trustee, when
delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be legally valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except
(i) that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws relating to or affecting creditors' rights generally and (ii) for
general principles of equity, including without limitation, concepts of
reasonableness, good faith and fair dealing and the possible unavailability
of specific performance ot injunctive relief (regardless of whether
considered in a proceeding in equity or at law). The Notes conform in all
material respects to the description thereof contained in the Final Offering
Memorandum, and are in the form contemplated by the Indenture.
8. The Guarantees to be endorsed on the Notes by each Guarantor
have been duly and validly authorized, executed and delivered in accordance
with the terms of the Indenture by each Guarantor (other than the execution
and delivery by New West and the New West Subsidiaries), and each is the
legally valid and binding obligation of such Guarantor (or, in the case of
New West and the New West Subsidiaries, will be, when executed and delivered
thereby), entitled to the benefits of the Indenture and enforceable against
such Guarantor in accordance with their terms, except (i) that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
relating to or affecting creditors' rights generally and (ii) for general
principles of equity, including without limitation, concepts of
reasonableness, good faith and fair dealing and the possible unavailability
of specific performance ot injunctive relief (regardless of whether considered
in a proceeding in equity or at law). The Guarantees conform in all material
respects to the description thereof contained in the Final Offering Memorandum.
9. The Exchange Notes and the Private Exchange Notes have been
duly and validly authorized by the Company and the respective guarantees
thereof have been duly and validly authorized by each Guarantor and, when
executed, authenticated and delivered in accordance with the terms of the
Indenture and the Registration Rights Agreement, will be legally valid and
binding obligations of the Company, with respect to the Exchange Notes and
the Private Exchange Notes, and each Guarantor, with respect to the
respective guarantees thereof, entitled to the benefits of the Indenture and
enforceable against the Company and each Guarantor in accordance with their
<PAGE>
-4-
terms, except (i) that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting creditors' rights
generally and (ii) for general principles of equity, including without
limitation, concepts of reasonableness, good faith and fair dealing and the
possible unavailability of specific performance ot injunctive relief
(regardless of whether considered in a proceeding in equity or at law).
10. The Registration Rights Agreement has been duly and validly
authorized, executed and delivered by the Company and each Guarantor (other
than the execution and delivery by New West and the New West Subsidiaries)
and is a legally valid and binding agreement of the Company and each
Guarantor (or, in the case of New West and the New West Subsidiaries, will
be, when executed and delivered thereby), enforceable against the Company
and each Guarantor in accordance with its terms, except that (i) the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
relating to or affecting creditors' rights generally, (ii) the availability
of equitable remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in equity or
at law) and (iii) rights to indemnity may be limited by state or federal
laws relating to securities or by policies underlying such laws. The
Registration Rights Agreement conforms in all material respects to the
description thereof contained in the Final Offering Memorandum.
11. The New Credit Agreement has been duly and validly
authorized, executed and delivered by the Company and each of the Guarantors
(other than the execution and delivery by New West and the New West
Subsidiaries), will constitute a valid and legally binding agreement of the
Company and each of the Guarantors (or, in the case of New West and the New
West Subsidiaries, will be, when executed anddelivered thereby), enforceable
against the Company and each of the Guarantors in accordance with its terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought. The New Credit
Facility conforms in all material respects to the description thereof
contained in the Final Offering Memorandum.
12. The Merger Agreement has been duly and validly authorized by
the Company, NW Acquisition Corp. and New West and constitutes a valid and
legally binding agreement of the Company, NW Acquisition Corp. and New West,
enforceable against the Company, NW Acquisition Corp. and New West
inaccordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (iii) limitations,
<PAGE>
-5-
in whole or in part, with respect to rights to termination payments. The
Merger Agreement conforms in all material respects to the description thereof
contained in the Final Offering Memorandum.
13. None of the Company, the domestic Subsidiaries, New West or
the New West Subsidiaries is in violation of its certificate of
incorporation (or similar organizational document).
14. The execution, delivery and performance by the Company and
the Guarantors (including New West and the New West Subsidiaries upon the
consummation of the Tender Offer and the Merger, as applicable) of the
Offering Documents, the Merger Agreement and the New Credit Agreement and
the consummation of the transactions contemplated thereby and by the Final
Offering Memorandum will not (i) violate any provision of the certificate of
incorporation or the by-laws of the Company, any of the domestic Subsidiaries,
New West or any of the New West Subsidiaries, (ii) conflict with, or result
in a breach or violation of, any of the terms or provisions of, or constitute
a default under (or, with notice or passage of time or both, constitute a
default under), any "Material Contract" (defined as an indenture, mortgage,
deed of trust, license, permit, loan agreement, lease or other agreement or
instrument, in the case of Frame-n-Lens Optical, Inc. ("FNL") and its
subsidiaries, listed on Schedule B hereto, and, in the case of the Company,
the domestic Subsidiaries, New West and the New West Subsidiaries (other than
FNL and its subsidiaries), filed with the Securities and Exchange Commission
as exhibits to the respective Forms 10-K of Company and New West for their
1997 fiscal years) to which the Company, any of the domestic Subsidiaries,
New West or any of the New West Subsidiaries is a party or by which any of
them or any of their respective properties or assets is bound or is subject,
except to the extent any such conflict, breach, violation or default, singly
or in the aggregate with all other such conflicts, breaches, violations and
defaults, would not have a Material Adverse Effect, (iii) violate any order
known to such counsel or any Georgia or California (as applicable) or federal
or Delaware General Corporation Law ("Applicable") statute, rule or regulation
of any Applicable court or governmental agency or body having jurisdiction
over the Company, any of the domestic Subsidiaries, New West or any of the New
West Subsidiaries or any of their properties or assets or (iv) result in or
require the creation or imposition of any Lien, pursuant to any Material
Contract or pursuant to any Applicable statute, rule or regulation, upon or
with respect to any of the properties of the Company, any of the domestic
Subsidiaries, New West or any of the New West Subsidiaries, except pursuant
to the terms of the Indenture. No consent, approval, authorization, order,
registration or qualification of or with any Applicable court or
governmental agency or body is required for the issue and sale of the Notes
or the Guarantees to the Initial Purchasers in the manner described in the
Final Offering Memorandum and the consummation of the other transactions
contemplated by the Purchase Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be required under
<PAGE>
-6-
state securities or Blue Sky laws in connection with the offer and sale of
the Notes and except as have been or, by the Delivery Date, shall have been
obtained.
15. To our knowledge, there are no legal or governmental proceedings
pending to which the Company or any of the domestic Subsidiaries, New West or
any of the New West Subsidiaries is a party or of which any of their
respective properties or assets is the subject which, if determined adversely,
would singly or in the aggregate have a Material Adverse Effect or which seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Notes or the Guarantees to be sold pursuant to the
Purchase Agreement or the consummation of the transactions described in or
contemplated by the Offering Documents or the Final Offering Memorandum. To
our knowledge, there are no legal or governmental proceedings involving or
affecting the Company, the Subsidiaries, New West or any of the New West
Subsidiaries or any of their properties or assets that would be required to
be described in a prospectus on Form S-1 pursuant to the Securities Act that
are not described in the Final Offering Memorandum, nor are there any
material contracts or other documents that would be required to be described
in a prospectus on Form S-1 pursuant to the Securities Act that are not
described in the Final Offering Memorandum.
16. The statements set forth under the headings "Risk Factors,"
"Business-Relationship with Host Companies," "Business-Government
Regulation," "Business-Trade Names and Trademarks," "Business-Properties,"
"Business-Environmental Matters," "Business-Legal Proceedings," "The New
West Acquisition," "Description of New Credit Facility" and "Description of
the Notes" in the Final Offering Memorandum, insofar as such statements
constitute a summary of legal matters, documents, proceedings or conclusions
of law referred to therein, fairly present in all material respects such
legal matters, documents, proceedings and conclusions.
17. Assuming that the proceeds of the Offering will be applied as
described in the Final Offering Memorandum under the caption "Use of
Proceeds," consummation of the Offering, the Tender Offer, the Merger and
the other transactions contemplated by the Offering Documents and the Final
Offering Memorandum, will not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
18. Neither the Company nor any of the Subsidiaries is, or will
be after the consummation of Offering, the Tender Offer, the Merger and the
other transactions contemplated by the Offering Documents and the Final
Offering Memorandum, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company
Act.
19. Assuming (i) the accuracy of and compliance with the
representations, warranties and agreements of the Initial Purchasers in
Section 4 of the Purchase Agreement, (ii) the accuracy of and compliance
<PAGE>
-7-
with the representations, warranties and agreements of the Company set forth
in the Purchase Agreement and (iii) the offer, sale and delivery of the
Notes and the Guarantees are made as contemplated by the Purchase Agreement
and the Final Offering Memorandum, neither registration of the Notes or the
Guarantees under the Securities Act nor qualification of the Indenture under
the TIA is required in connection with the offer, sale and delivery of the
Notes and the Guarantees to the Initial Purchasers.
Such counsel shall also state that such counsel has participated
in conferences with officers and other representatives of the Company,
representatives of the Initial Purchasers and counsel for the Initial
Purchasers and representatives of the independent public accountants of the
Company at which the contents of each Memorandum and related matters were
discussed, and that, although such counsel has not independently verified
the accuracy, completeness or fairness of the statements contained therein,
nothing has come to the attention of such counsel which would lead such
counsel to believe that the Final Offering Memorandum, as of its date or as
of the Delivery Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need not
make any comment with respect to the financial statements and the notes
thereto and the other financial and statistical information or data included
in the Final Offering Memorandum).
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
Dated as of October 8, 1998
by and among
NATIONAL VISION ASSOCIATES, LTD.,
THE GUARANTORS NAMED HEREIN
and
SCHRODER & CO. INC.,
NATIONSBANC MONTGOMERY SECURITIES LLC
and
FIRST UNION CAPITAL MARKETS
as Initial Purchasers
$125,000,000
12 3/4% Senior Notes due 2005<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . 11
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . 13
5. Registration Procedures . . . . . . . . . . . . . . . . . . . 15
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . 26
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 27
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . 32
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . 32
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) No Inconsistent Agreements . . . . . . . . . . . . . . . 33
(b) Adjustments Affecting Registrable Notes . . . . . . . . . 33
(c) Amendments and Waivers . . . . . . . . . . . . . . . . . 33
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Successors and Assigns . . . . . . . . . . . . . . . . . 34
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . 35
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . 35
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . 35
(i) Severability . . . . . . . . . . . . . . . . . . . . . . 35
(j) Securities Held by the Company or their
Affiliates . . . . . . . . . . . . . . . . . . . . . . 35
(k) Third Party Beneficiaries . . . . . . . . . . . . . . . . 36
(l) Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 36
(m) Entire Agreement . . . . . . . . . . . . . . . . . . . . 36
-i-<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is
dated as of October 8, 1998, by and among NATIONAL VISION ASSOCIATES,
LTD., a Georgia corporation (the "Company"), the subsidiaries of the
Company listed on the signature pages hereto as guarantors (the
"Guarantors") and together with the Company (the "Issuers"), and
SCHRODER & CO. INC., NATIONSBANC MONTGOMERY SECURITIES LLC and FIRST
UNION CAPITAL MARKETS, a division of Wheat First Securities (the
"Initial Purchasers").
This Agreement is entered into in connection with the
Purchase Agreement, dated as of October 5, 1998, among the Company,
the Guarantors and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchasers
of $125,000,000 aggregate principal amount of the Company's 12 3/4%
Senior Notes due 2005, guaranteed on a senior basis by the Guarantors
(the "Notes"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this Agreement for the benefit of the
Initial Purchasers and any subsequent holder or holders of the Notes.
The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
Section 1. Definitions
-----------
As used in this Agreement, the following terms shall have
the following meanings:
"ADDITIONAL INTEREST" shall have the meaning set forth in
Section 4(a) hereof.
"ADVICE" shall have the meaning set forth in Section 5
hereof.
"AGREEMENT" shall have the meaning set forth in the
introductory paragraphs hereto.
"APPLICABLE PERIOD" shall have the meaning set forth in
Section 2(b) hereof.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
<PAGE>
-2-
"COMPANY" shall have the meaning set forth in the preamble
of this Agreement and shall also include the Company's permitted
successors and assigns.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"EFFECTIVENESS DATE" shall mean, (i) with respect to the
Exchange Offer Registration Statement, the 180th day after the Issue
Date and (ii) with respect to any other Registration Statement, the
60th day after the Filing Date with respect thereto.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 3(a) hereof.
"EVENT DATE" shall have the meaning set forth in Section
4(b) hereof.
"EXCHANGE ACT" shall mean Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission
promulgated thereunder.
"EXCHANGE NOTES" shall have the meaning set forth in Section
2(a) hereof.
"EXCHANGE OFFER" shall have the meaning set forth in Section
2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall have the
meaning set forth in Section 2(a) hereof.
"FILING DATE" shall mean, (A) if no Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 120th
day after the Issue Date; provided, however, that if a Shelf Filing
Event shall have occurred within 10 days of the Filing Date, then the
Filing Date with respect to the Initial Shelf Registration shall be
the 30th calendar day after the occurrence of the Shelf Filing Event;
and (B) in each other case (which may be applicable notwithstanding
the consummation of the Exchange Offer), the 120th day after the
occurrence of the Shelf Filing Event.
"HOLDER" shall mean any holder of a Registrable Note or
Registrable Notes.
"INDEMNIFIED PERSON" shall have the meaning set forth in
Section 7(c) hereof.
"INDEMNIFYING PERSON" shall have the meaning set forth in
Section 7(c) hereof.
<PAGE>
-3-
"INDENTURE" shall mean the Indenture, dated as of October 8,
1998, by and among the Company, the Guarantors and State Street Bank
and Trust Company, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance
with the terms thereof.
"INITIAL PURCHASERS" shall have the meaning set forth in the
preamble hereof.
"INITIAL SHELF REGISTRATION" shall have the meaning set
forth in Section 3(a) hereof.
"INSPECTORS" shall have the meaning set forth in Section
5(n) hereof.
"ISSUE DATE" shall mean October 8, 1998, the date of
original issuance of the Notes.
"ISSUERS" shall have the meaning set forth in the preamble
hereof.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on
which banking institutions in New York, New York are required by law,
regulation or executive order to remain closed.
"NASD" shall have the meaning set forth in Section 5(s)
hereof.
"NOTES" shall have the meaning set forth in the preamble
hereof.
"PARTICIPANT" shall have the meaning set forth in Section
7(a) hereof.
"PARTICIPATING BROKER-DEALER" shall mean any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer or any other person with similar prospectus delivery
requirements for use in connection with any resale of Exchange Notes.
"PERSON" shall mean an individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association,
union, business association, firm, government or agency or political
subdivision thereofor other legal entity.
<PAGE>
-4-
"PRIVATE EXCHANGE" shall have the meaning set forth in
Section 2(b) hereof.
"PRIVATE EXCHANGE NOTES" shall have the meaning set forth in
Section 2(b) hereof.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement (including, without limitation, any prospectus
subject to completion and a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
introductory paragraphs hereof.
"RECORDS" shall have the meaning set forth in Section 5(n)
hereof.
"REGISTRABLE NOTES" shall mean each Note, upon original
issuance thereof and at all times subsequent thereto, each Exchange
Note as to which Section 2(c)(iv) hereof is applicable upon original
issuance and at all times subsequent thereto, and each Private
Exchange Note, upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Note, Exchange Note
or Private Exchange Note, as the case may be, the earliest to occur of
(i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other
than with respect to an Exchange Note as to which Section 2(c)(iv)
hereof applies) pursuant to the Exchange Offer, (ii) with respect to
Exchange Notes received by Participating Broker-Dealers in the
Exchange Offer, the earlier of (x) the date on which such Exchange
Note has been sold by such Participating Broker-Dealer by means of the
Prospectus contained in the Exchange Offer Registration Statement and
(y) the date on which the Exchange Offer Registration Statement has
been effective under the Securities Act for a period of 180 days after
the date that the Exchange Offer has been consummated, (iii) a Shelf
Registration covering such Note, Exchange Note or Private Exchange
Note has been declared effective by the Commission and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Shelf Registration,
(iv) the date on which such Note, Exchange Note or Private Exchange
Note, as the case may be, is eligible for distribution to the public
without volume or manner of sale restrictions pursuant to Rule 144(k)
or (v) the date on which such Note, Exchange Note or Private Exchange
Note, as the case may be, ceases to be outstanding for purposes of the
Indenture or any other indenture under which such Exchange Note or
Private Exchange Note was issued.
<PAGE>
-5-
"REGISTRATION STATEMENT" shall mean any appropriate
registration statement of the Company and/or the Guarantors covering
any of the Registrable Notes pursuant to the provisions of this
Agreement, including, but not limited to, the Exchange Offer
Registration Statement, filed with the Commission under the Securities
Act, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter adopted by
the Commission providing for offers and sales of securities made in
compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the
Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144) or regulation hereafter adopted by
the Commission.
"RULE 415" shall mean Rule 415 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"SHELF FILING EVENT" shall have the meaning set forth in
Section 2(c) hereof.
"SHELF REGISTRATION" shall have the meaning set forth in
Section 3(b) hereof.
<PAGE>
-6-
"SUBSEQUENT SHELF REGISTRATION" shall have the meaning set
forth in Section 3(b) hereof.
"TIA" shall mean the Trust Indenture Act of 1939, as
amended.
"TRUSTEE" shall mean the trustee under the Indenture and the
trustee (if any) under any indenture governing the Exchange Notes and
Private Exchange Notes.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" shall
mean a registration in which securities of the Issuers are sold to an
underwriter for reoffering to the public.
Section 2. Exchange Offer
--------------
(a) The Issuers shall file with the Commission, no later
than the Filing Date, a Registration Statement (the "EXCHANGE OFFER
REGISTRATION STATEMENT") on an appropriate registration form with
respect to a registered offer (the "EXCHANGE OFFER") to exchange any
and all of the Registrable Notes for a like aggregate principal amount
of notes, guaranteed on a senior basis by the Guarantors of the
Company (the "EXCHANGE NOTES"), that are identical in all material
respects to the Notes except that the Exchange Notes shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all
applicable tender offer rules and regulations under the Exchange Act
and other applicable law. The Issuers shall use their best efforts to
(x) cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or before the Effectiveness
Date; (y) keep the Exchange Offer open for at least 20 Business Days
(or longer if required by applicable law) after the date on which the
Exchange Offer Registration Statement is declared effective; and
(z) on or prior to the 30th day following the date on which the
Exchange Offer Registration Statement is declared effective by the
Commission, issue Exchange Notes for Notes tendered in the Exchange
Offer. If after the Exchange Offer Registration Statement is
initially declared effective by the Commission, the Exchange Offer or
the issuance of the Exchange Notes thereunder is interfered with by
any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become
effective for purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be
required to represent to the Issuers in writing (which may be
contained in the applicable letter of transmittal) that (i) any
Exchange Notes to be received by it will be acquired in the ordinary
course of its business, (ii) such Holder will have no arrangement or
understanding with any Person to participate in the distribution of
the Exchange Notes in violation of the provisions of the Securities
<PAGE>
-7-
Act, (iii) that such Holder is not an affiliate of any of the Issuers
within the meaning of the Securities Act or, if such Holder is such an
affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act applicable to it, (iv) if
such Holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, a distribution of Exchange Notes and (v)
if such Holder is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Notes that were acquired as a result
of market-making or other trading activities, that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to
apply, mutatis mutandis, solely with respect to Registrable Notes that
are Private Exchange Notes, Exchange Notes as to which Section
2(c)(iv) is applicable and Exchange Notes held by Participating
Broker-Dealers (as defined), and the Issuers shall have no further
obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which
clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be
included in the Exchange Offer Registration Statement.
(b) The Issuers and the Initial Purchasers acknowledge that
the staff of the Commission has taken the position that any broker-
dealer that elects to exchange Notes that were acquired by such
broker-dealer for its own account as a result of market-making or
other trading activities for Exchange Notes in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER") may be deemed to be an "underwriter"
within the meaning of the Securities Act and must deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold
allotment resulting from the original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that
it is the Commission staff's position that if the Prospectus contained
in the Exchange Offer Registration Statement includes a plan of
distribution containing a statement to the above effect and the means
by which Participating Broker-Dealers may resell the Exchange Notes,
without naming the Participating Broker-Dealers or specifying the
amount of Exchange Notes owned by them, such Prospectus may be
<PAGE>
-8-
delivered by Participating Broker-Dealers to satisfy their prospectus
delivery obligations under the Securities Act in connection with
resales of Exchange Notes for their own accounts, so long as the
Prospectus otherwise meets the requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer (a "REQUESTING PARTICIPATING BROKER-DEALER"), the
Issuers agree (w) to use their best efforts to keep the Exchange Offer
Registration Statement continuously effective for a period of up to
180 days after the date on which the Exchange Registration Statement
is declared effective, or such longer period if extended pursuant to
the last paragraph of Section 5 hereof (such period, the "APPLICABLE
PERIOD"), or such earlier date as all Requesting Participating Broker-
Dealers shall have notified the Issuers in writing that such
Requesting Participating Broker-Dealers have resold all Exchange Notes
acquired in the Exchange Offer, (x) to comply with the provisions of
Section 5 of this Agreement, as they relate to the Exchange Offer and
the Exchange Offer Registration Statement, (y) to deliver to such
Requesting Participating Broker-Dealer a "cold comfort" letter of the
independent public accountants of the Issuers and a legal opinion as
to matters reasonably requested by such Requesting Participating
Broker-Dealer relating to the Exchange Offer Registration Statement
and the related Prospectus and any amendments or supplements thereto,
and (z) include a plan of distribution in such Exchange Offer
Registration Statement that meets the requirements set forth in the
preceding paragraph. The Initial Purchasers shall have no liability
to any Requesting Participating Broker-Dealer with respect to any
request made pursuant to this Section 2(b).
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder entitled to participate in the
Exchange Offer a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
<PAGE>
-9-
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of
New York;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last
Business Day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
If, prior to consummation of the Exchange Offer, any Holder
(including the Initial Purchasers) holds any Notes acquired by it that
have, or that are reasonably likely to be determined to have, the
status of an unsold allotment in an initial distribution, or if any
Holder is not entitled to participate in the Exchange Offer, the
Issuers upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and
deliver to any such Holder, in exchange (the "PRIVATE EXCHANGE") for
such Notes held by any such Holder, a like principal amount of notes,
guaranteed on a senior basis by the Guarantors of the Company (the
"PRIVATE EXCHANGE NOTES"), that are identical in all material respects
to the Exchange Notes.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Notes or portions thereof
validly tendered and not validly withdrawn pursuant to the
Exchange Offer and the Private Exchange;
(2) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes so accepted for exchange; and
(3) issue, cause the Trustee to authenticate and deliver
promptly to each Holder of Notes, Exchange Notes or Private
Exchange Notes, as the case may be, equal in principal amount to
the Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or
Private Exchange, as the case may be, does not violate applicable law
or any applicable interpretation of the staff of the Commission,
(ii) no action or proceeding shall have been instituted or threatened
in any court or by any governmental agency which might materially
impair the ability of the Issuers to proceed with the Exchange Offer
<PAGE>
-10-
or the Private Exchange, and no material adverse development shall
have occurred in any existing action or proceeding with respect to the
Issuers and (iii) all governmental approvals shall have been obtained,
which approvals the Issuers deem necessary for the consummation of the
Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all
material respects to the Indenture (in either case, with such changes
as are necessary to comply with any requirements of the Commission to
effect or maintain the qualification thereof under the TIA) and which,
in either case, has been qualified under the TIA and shall provide
that the Exchange Notes shall not be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange
Notes and the Notes shall vote and consent together on all matters as
one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a
separate class on any matter. The Private Exchange Notes shall bear
the same CUSIP number as the Exchange Notes.
(c) If, (i) because of any applicable interpretations of
the staff of the Commission, the Issuers are not permitted to file the
Exchange Offer Registration Statement or to effect the Exchange Offer,
(ii) the Exchange Offer is not consummated within 210 days of the
Issue Date, (iii) the Initial Purchasers so request with respect to
Notes not eligible to be exchanged for Exchange Notes in the Exchange
Offer, (iv) any Holder of a Note notifies the Issuers that (A) due to
a change in law or policy it is not entitled to participate in the
Exchange Offer, (B) due to a change in law or policy it may not resell
Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available
for such resales by such holder or (C) it owns Notes (including the
Initial Purchasers if they hold Notes as part of an unsold allotment
from the original offering of the Notes) acquired directly from an
Issuer or an affiliate of an Issuer or (v) any holder of Private
Exchange Notes so requests after the consummation of the Private
Exchange (each such event referred to in clauses (i) through (v) of
this sentence, a "SHELF FILING EVENT"), then the Issuers (x) shall
<PAGE>
-11-
promptly deliver to the Holders and the Trustee written notice thereof
in the case of clause (i) or (ii) and (y) at their own expense shall
file a Shelf Registration pursuant to Section 3 hereof.
Section 3. Shelf Registration
------------------
If at any time a Shelf Filing Event shall occur, then:
(a) Shelf Registration. The Issuers shall file with the
------------------
Commission a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable
Notes not exchanged in the Exchange Offer, Private Exchange Notes and
Exchange Notes as to which Section 2(c)(iv) is applicable (the
"INITIAL SHELF REGISTRATION"). The Issuers shall use their best
efforts to file with the Commission the Initial Shelf Registration as
promptly as practicable. The Initial Shelf Registration shall be on
Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners
designated by them (including, without limitation, one or more
underwritten offerings). The Issuers shall not permit any securities
other than the Registrable Notes to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration (as defined below).
The Issuers shall use their best efforts to cause the
Initial Shelf Registration to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep the
Initial Shelf Registration continuously effective under the Securities
Act for the period ending on the date which is two years from the
Issue Date, subject to extension pursuant to the last paragraph of
Section 5 hereof (the "EFFECTIVENESS PERIOD"), or such shorter period
ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Notes covered by
and not sold under the Initial Shelf Registration or an earlier
<PAGE>
-12-
Subsequent Shelf Registration has been declared effective under the
Securities Act; provided, however, that the Effectiveness Period in
respect of the Initial Shelf Registration shall be extended to the
extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act
and as otherwise provided herein; provided, further, that the Issuers
may suspend the effectiveness of a Shelf Registration Statement by
written notice to the Holders for a period not to exceed 60 days in
any calendar year if, (i) an event occurs and is continuing as a
result of which the Shelf Registration Statement would, in the
Issuers' good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading and (ii) (a) the Issuers
determine in good faith that the disclosure of such event at such time
would have a material adverse effect on the business, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
(b) the disclosure otherwise relates to a previously undisclosed
pending material business transaction, the disclosure of which would
impede the Issuers' ability to consummate such transaction.
(b) Subsequent Shelf Registrations. If the Initial Shelf
------------------------------
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Issuers shall use their best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall as soon as practicable after such cessation
amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415
covering all of the Registrable Notes covered by and not sold under
the Initial Shelf Registration or an earlier Subsequent Shelf
Registration (each, a "SUBSEQUENT SHELF REGISTRATION"). If a
Subsequent Shelf Registration is filed, the Issuers shall use their
best efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such
filing and to keep such Registration Statement continuously effective
for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Initial Shelf
Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "SHELF REGISTRATION"
means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Issuers shall promptly
--------------------------
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used
for such Shelf Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement or by any underwriter of such Registrable Notes.
<PAGE>
-13-
Section 4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the
Holders will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly, the Issuers agree to pay, as liquidated damages,
additional interest on the Notes ("ADDITIONAL INTEREST") under the
circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration has been filed on or prior to
the applicable Filing Date or (B) notwithstanding that the Issuers
have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not filed on or prior to the Filing Date
applicable thereto, then, commencing on the day after any such
Filing Date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90
days immediately following each such Filing Date, and such
Additional Interest rate shall increase by an additional 0.25%
per annum at the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration is declared effective by the
Commission on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Issuers have consummated or will
consummate the Exchange Offer, the Issuers are required to file a
Shelf Registration and such Shelf Registration is not declared
effective by the Commission on or prior to the Effectiveness Date
in respect of such Shelf Registration, then, commencing on the
day after such Effectiveness Date, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.50%
per annum for the first 90 days immediately following the day
after such Effectiveness Date, and such Additional Interest rate
shall increase by an additional 0.25% per annum at the beginning
of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes
for all Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to the 210th day following the
Issue Date or (B) the Exchange Offer Registration Statement or
the Shelf Registration is declared effective but thereafter
<PAGE>
-14-
ceases to be effective at any time during the Effectiveness
Period (except as permitted by Section 10(a) hereof) for a period
of 15 consecutive days without being succeeded immediately by an
additional Exchange Offer Registration Statement or Shelf
Registration Statement, as the case may be, filed and declared
effective, then Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90
days commencing on the (x) 210th day after the Issue Date, in the
case of (A) above, or (y) the 16th day after such Exchange Offer
Registration Statement or Shelf Registration ceases to be
effective in the case of (B) above, and such Additional Interest
rate shall increase by an additional 0.25% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may
not exceed at any one time in the aggregate 1.0% per annum; provided,
further, however, that (1) upon the filing of the applicable Exchange
Offer Registration Statement or the applicable Shelf Registration as
required hereunder (in the case of clause (i) above of this
Section 4), (2) upon the effectiveness of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement
as required hereunder (in the case of clause (ii) of this Section 4),
or (3) upon the exchange of the applicable Exchange Notes for all
Notes tendered (in the case of clause (iii)(A) of this Section 4), or
upon the effectiveness of the applicable Exchange Offer Registration
Statement or Shelf Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this Section 4), Additional
Interest on the Notes in respect of which such events relate as a
result of such clause (or the relevant subclause thereof), as the case
may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one
Business Day after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an "EVENT
DATE"). Any amounts of Additional Interest due pursuant to (a)(i),
(a)(ii) or (a)(iii) of this Section 4 will be payable in cash
semi-annually on the interest payment dates specified in the Indenture
(to the holders of record as specified in the Indenture), commencing
with the first such interest payment date occurring after any such
Additional Interest commences to accrue. The amount of Additional
Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Registrable Notes,
multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
<PAGE>
-15-
Section 5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such
registrations to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof,
and pursuant thereto and in connection with any Registration Statement
filed by the Issuers hereunder the Issuers shall:
(a) Prepare and file with the Commission prior to the applicable
Filing Date, a Registration Statement or Registration Statements
as prescribed by Sections 2 or 3 hereof, and use their best
efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall furnish to and afford the
Holders of the Registrable Notes covered by such Registration
Statement or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed
(in each case at least five Business Days prior to such filing).
The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the
Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement, or any
such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably
object.
<PAGE>
-16-
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Shelf Registration Statement or
Exchange Offer Registration Statement, as the case may be, as may
be necessary to keep such Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period,
as the case may be; cause the related Prospectus to be
supplemented by any Prospectus supplement required by applicable
law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act applicable to each of them with respect
to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented
and with respect to the subsequent resale of any securities being
sold by a Participating Broker-Dealer covered by any such
Prospectus, in each case, in accordance with the intended methods
of distribution set forth in such Registration Statement or
Prospectus, as so amended. The Issuers shall be deemed not to
have used their best efforts to keep a Registration Statement
effective during the Effective Period or the Applicable Period,
as the case may be, relating thereto if the Issuers voluntarily
take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period
unless such action is required by applicable law.
(c) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period relating thereto, notify the selling
Holders of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, as promptly as possible, and, if requested
by any such Person, confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such
notice a written statement that any Holder may, upon request,
obtain, at the sole expense of the Issuers, one conformed copy of
such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of the
issuance by the Commission of any stop order suspending the
effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus or
the initiation of any proceedings for that purpose, (iii) if at
<PAGE>
-17-
any time when a prospectus is required by the Securities Act to
be delivered in connection with sales of the Registrable Notes or
resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Issuers contained in any
agreement (including any underwriting agreement) contemplated by
Section 5(m) hereof cease to be true and correct in all material
respects, (iv) of the receipt by the Issuers of any notification
with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known to
the Issuers that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the Issuers
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in the Exchange
Offer Registration Statement filed pursuant to Section 2 hereof
is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, use their best efforts to prevent
the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending
the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Notes or
the Exchange Notes to be sold by any Participating Broker-Dealer,
for sale in any jurisdiction, and, if any such order is issued,
to use their best efforts to obtain the withdrawal of any such
order at the earliest practicable moment.
<PAGE>
-18-
(e) If a Shelf Registration is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if
any), the Holders of a majority in aggregate principal amount
of the Registrable Notes being sold in connection with an
underwritten offering or any Participating Broker-Dealer,
(i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders or any
Participating Broker-Dealer (based upon advice of counsel)
determine is reasonably necessary to be included therein,
(ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the
Issuers have received notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment; provided, however, that the Issuers shall not be
required to take any action hereunder that would, in the written
opinion of counsel to the Issuers, violate applicable laws, and
(iii) supplement or make amendments to such Registration
Statement (based upon the reasonable advice of counsel).
(f) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if
any, at the sole expense of the Issuers, one conformed copy of
the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements
and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
<PAGE>
-19-
(g) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters,
if any, at the sole expense of the Issuers, as many copies of the
Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this
Section 5, the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes
covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Offer
Registration Statement by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, use
their best efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel
in connection with the registration or qualification (or
exemption from such registration or qualification) of, such
Registrable Notes for offer and sale under the securities or Blue
Sky laws of such jurisdictions within the United States as any
selling Holder, Participating Broker-Dealer, or the managing
underwriter or underwriters reasonably request; provided,
however, that where Exchange Notes held by Participating
<PAGE>
-20-
Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause the
Issuers counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to
this Section 5(h); keep each such registration or qualification
(or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do
any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the
Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration
Statement; provided, however, that none of the Issuers shall be
required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or (C) subject
itself to taxation in excess of a nominal dollar amount in any
such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes
and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Notes to be sold, which certificates
shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and
enable such Registrable Notes to be in such denominations and
registered in such names as the managing underwriter or
underwriters, if any, or Holders may request at least two
Business Days prior to any sale of such Registrable Notes.
(j) Use their best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be reasonably necessary to enable the seller or sellers
thereof or the underwriter or underwriters, if any, to consummate
the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling
Holder's business, in which case the Issuers will cooperate in
all reasonable respects with the efforts of such selling Holder
to secure such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
<PAGE>
-21-
during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file
with the Commission, at the sole expense of the Issuers, a
supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes
to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(l) Use its best efforts to cause the Registrable Notes
covered by a Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes
covered by such Registration Statement or the managing
underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the
Trustee with certificates for the Registrable Notes in a form
eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings
of debt securities similar to the Notes and take all such other
actions as are reasonably requested by the managing underwriter
or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Notes and, in
such connection, (i) make such representations and warranties to,
and covenants with, the underwriters with respect to the business
of the Company and its subsidiaries (including any acquired
business, properties or entity, if applicable) and the
Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein,
in each case, as are customarily made by issuers to underwriters
in underwritten offerings of debt securities similar to the
Notes, and confirm the same in writing if and when requested;
(ii) use their best efforts to obtain the written opinions of
counsel to the Issuers and written updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter
or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested
by the managing underwriter or underwriters; (iii) use their best
<PAGE>
-22-
efforts to obtain "cold comfort" letters and updates thereof in
form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by any of the Issuers for
which financial statements and financial data are, or are
required to be, included or incorporated by reference in the
Registration Statement), addressed to each of the underwriters,
such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection
with underwritten offerings; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth
in Section 7 hereof (or such other less favorable provisions and
procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at
each closing under such underwriting agreement, or as and to the
extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, make available for inspection by
any selling Holder of such Registrable Notes being sold, or each
such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively,
the "INSPECTORS"), at the offices where normally kept, during
reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Company and
its subsidiaries (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the officers, directors
and employees of the Company and its subsidiaries to supply all
information reasonably requested by any such Inspector in
<PAGE>
-23-
connection with such Registration Statement and Prospectus. Each
Inspector shall agree in writing that it will not disclose any
records that the Issuers determine, in good faith, to be
confidential and that it notifies the Inspectors in writing are
confidential unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or Prospectus, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, (iii) disclosure of such
information is necessary or advisable in connection with any
action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out
of, based upon, relating to, or involving this Agreement or the
Purchase Agreement, or any transactions contemplated hereby or
thereby or arising hereunder or thereunder, or (iv) the
information in such Records has been made generally available to
the public; provided, however, that such Inspector shall take
such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the
extent such action is otherwise not inconsistent with, an
impairment of or in derogation of the rights and interests of the
Holder or any Inspector.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture
or the trust indenture provided for in Section 2(a) hereof, as
the case may be, to be qualified under the TIA not later than the
effective date of the Exchange Offer or the first Registration
Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture
and the Holders of the Registrable Notes, to effect such changes
to such indenture as may be required for such indenture to be so
qualified in accordance with the terms of the TIA; and execute,
and use their best efforts to cause such trustee to execute, all
<PAGE>
-24-
documents as may be required to effect such changes, and all
other forms and documents required to be filed with the
Commission to enable such indenture to be so qualified in a
timely manner.
(q) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders
earnings statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after
the end of any 12-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said 12-month periods.
(r) Upon consummation of the Exchange Offer or a Private
Exchange, use their best efforts to obtain an opinion of counsel
to the Issuers, in a form customary for underwritten
transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer
or the Private Exchange, as the case may be, that the Exchange
Notes or Private Exchange Notes, as the case may be, and the
related indenture constitute legal, valid and binding obligations
of the Issuers, enforceable against each of the Issuers in
accordance with their respective terms, subject to customary
exceptions and qualifications.
(s) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to
the Company (or to such other Person as directed by the Company)
in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be, mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being cancelled
in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be; in no event shall such Registrable Notes be
marked as paid or otherwise satisfied.
<PAGE>
-25-
(t) Cooperate with each seller of Registrable Notes covered
by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and
their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers,
Inc. (the "NASD").
(u) Use their best efforts to take all other steps necessary or
advisable to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement
contemplated hereby.
The Issuers may require each seller of Registrable Notes as
to which any registration is being effected to furnish to the Issuers
such information regarding such seller and the distribution of such
Registrable Notes as the Issuers may, from time to time, reasonably
request. The Issuers may exclude from such registration the
Registrable Notes of any seller so long as such seller fails to
furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Issuers all information
required to be disclosed in order to make the information previously
furnished to the Issuers by such seller not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Issuers, then
such Holder shall have the right to require (i) the insertion therein
of language, in form and substance reasonably satisfactory to such
Holder, to the effect that the holding by such Holder of such
securities is not to be construed as a recommendation by such Holder
of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting
any future financial requirements of the Issuers, or (ii) in the event
that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in
force, the deletion of the reference to such Holder in any amendment
or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or
Exchange Notes to be sold by such Participating Broker-Dealer, as the
case may be, that, upon actual receipt of any notice from the Issuers
of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will
<PAGE>
-26-
forthwith discontinue disposition of such Registrable Notes covered by
such Registration Statement or Prospectus or Exchange Notes to be sold
by such Holder or Participating Broker-Dealer, as the case may be,
until such Holder's or Participating Broker-Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by
Section 5(k) hereof, or until it is advised in writing (the "ADVICE")
by the Issuers that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements
thereto. In the event that the Issuers shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including
the date of the giving of such notice to and including the date when
each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies
of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice.
Section 6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the
Issuers, whether or not the Exchange Offer Registration Statement or
any Shelf Registration is filed or becomes effective or the Exchange
Offer is consummated, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in
connection with an underwritten offering (but excluding fees directly
attributable to NASD review of underwriters' compensation) and
(B) fees and expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the
eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or
(y) as provided in Section 5(h) hereof, in the case of Registrable
Notes or Exchange Notes to be sold by a Participating Broker-Dealer
during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable
Notes or Exchange Notes in a form eligible for deposit with The
<PAGE>
-27-
Depository Trust Company and of printing prospectuses if the printing
of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be
sold by any Participating Broker-Dealer during the Applicable Period,
as the case may be, (iii) messenger, telephone and delivery expenses
of the Issuers, (iv) fees and disbursements of counsel for the Issuers
and reasonable fees and disbursements of one special counsel which
shall be reasonably satisfactory to the Company for all of the sellers
of Registrable Notes (exclusive of any counsel retained pursuant to
Section 7 hereof), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance),
(vi) Securities Act liability insurance, if the Issuers desire such
insurance, (vii) fees and expenses of all other Persons retained by
the Issuers, (viii) internal expenses of the Issuers (including,
without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties),
(ix) the expense of any annual or special audit, (x) the fees and
expenses incurred in connection with the listing of the securities to
be registered on any securities exchange, and the obtaining of a
rating of the securities, in each case, if applicable, (xi) the fees
and disbursements of underwriters, if any, customarily paid by issuers
or sellers of securities (but not including any underwriting discounts
or commissions or transfer taxes, if any, attributable to the sale by
or on behalf of the Holders of the Registrable Notes which discounts,
commissions or taxes shall be paid by Holders of such Registrable
Notes) and (xii) the expenses of the Issuers relating to printing,
word processing and distributing all Registration Statements,
underwriting agreements, indentures and any other documents necessary
in order to comply with this Agreement.
Section 7. Indemnification
---------------
(a) The Issuers agree, jointly and severally, to indemnify
and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such Person, and
each Person, if any, who controls any such Person within the meaning
of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "PARTICIPANT"), from and against any and all
losses, claims, damages and liabilities (including, without
limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any
claim asserted) caused by, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in
<PAGE>
-28-
any Registration Statement (or any amendment thereto) or Prospectus
(as amended or supplemented if the Issuers shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or
caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the case of
the Prospectus in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to
the Issuers in writing by or on behalf of such Participant expressly
for use therein; provided, however, that the foregoing indemnity with
respect to any preliminary prospectus shall not inure to the benefit
of any Participant from whom the Person asserting such losses, claims,
damages or liabilities purchased Registrable Notes if (x) it is
established in the related proceeding that such Participant failed to
send or give a copy of the Prospectus (as amended or supplemented if
such amendment or supplement was furnished to such Participant prior
to the written confirmation of such sale) to such Person with or prior
to the written confirmation of such sale, if required by applicable
law, and (y) the untrue statement or omission or alleged untrue
statement or omission was completely corrected in the Prospectus (as
amended or supplemented if amended or supplemented as aforesaid) and
such Prospectus does not contain any other untrue statement or
omission or alleged untrue statement or omission that was the subject
matter of the related proceeding.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, its directors, its officers
and each Person who controls any Issuer within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent (but on a several, and not joint, basis) as the
foregoing indemnity from the Issuers to each Participant, but only
with reference to information relating to such Participant furnished
to the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be
brought or asserted against any Person in respect of which indemnity
<PAGE>
-29-
may be sought pursuant to either of the two preceding paragraphs, such
Person (the "INDEMNIFIED PERSON") shall promptly notify the Persons
against whom such indemnity may be sought (the "INDEMNIFYING PERSONS")
in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any
others the Indemnifying Persons may reasonably designate in such
proceeding and shall pay the fees and expenses actually incurred by
such counsel related to such proceeding; provided, however, that the
failure to so notify the Indemnifying Persons shall not relieve any of
them of any obligation or liability which any of them may have
hereunder or otherwise. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary,
(ii) the Indemnifying Persons shall have failed within a reasonable
period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both any Indemnifying Person
and the Indemnified Person or any affiliate thereof and representation
of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is
understood that, unless there exists a conflict among Indemnified
Persons, the Indemnifying Persons shall not, in connection with any
one such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general
allegations, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed
promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants
and shall be reasonably acceptable to the Issuers and any such
separate firm for the Issuers, their respective directors, their
respective officers and such control Persons of any of the Issuers
shall be designated in writing by the Issuers and shall be reasonably
acceptable to the Holders. The Indemnifying Persons shall not be
<PAGE>
-30-
liable for any settlement of any proceeding effected without its prior
written consent (which consent shall not be unreasonably withheld or
delayed), but if settled with such consent or if there be a final
judgment for the plaintiff for which the Indemnified Person is
entitled to indemnification pursuant to this Agreement, each of the
Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of
such settlement or judgment. No Indemnifying Person shall, without
the prior written consent of the Indemnified Persons (which consent
shall not be unreasonably withheld or delayed), effect any settlement
or compromise of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement (A) includes an unconditional written release
of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or
failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to,
or insufficient to hold harmless, an Indemnified Person in respect of
any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Person thereunder and in order to
provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the
Indemnifying Person or Persons on the one hand and the Indemnified
Person or Persons on the other from the offering of the Notes or (ii)
if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or Persons on the one
hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the
one hand and the Participants on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (net of
discounts and commissions but before deducting expenses) of the Notes
received by the Issuers bears to the total proceeds received by such
<PAGE>
-31-
Participant from the sale of Registrable Notes or Exchange Notes, as
the case may be. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Issuers on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation (even if the Participants were treated as one
entity for such purpose) or by any other method of allocation that
does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute
any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes, as the
case may be, exceeds the amount of any damages that such Participant
has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses
for which an Indemnified Person is entitled to indemnification or
contribution under this Section 7 shall be paid by the Indemnifying
Person to the Indemnified Person as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 7 and the representations and
warranties of the Issuers set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who
controls a Holder, any of the Issuers, their respective directors or
officers or any person controlling any of the Issuers, and (ii) any
termination of this Agreement.
<PAGE>
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(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the
Indemnifying Persons may otherwise have to the Indemnified Persons
referred to above.
Section 8. Rules 144 and 144A
------------------
Each of the Issuers covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the Commission thereunder
in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time such Issuer is
not required to file such reports, it will, upon the request of any
Holder or beneficial owner of Registrable Notes, make available such
information necessary to permit sales pursuant to Rule 144A under the
Securities Act. Each of the Issuers further covenants that it will
take such further action as any Holder of Registrable Notes may
reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Notes without registration
under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as
such Rules may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the Commission. Notwithstanding
the foregoing, nothing in this Section 8 shall be deemed to require
any of the Issuers to register any of its securities pursuant to the
Exchange Act.
Section 9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that
will manage the offering will be selected by the Holders of a majority
in aggregate principal amount of such Registrable Notes included in
such offering and shall be reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to
sell such Holder's Registrable Notes on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder
to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements.
<PAGE>
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Section 10. Miscellaneous
-------------
(a) No Inconsistent Agreements. None of the Issuers has,
--------------------------
as of the date hereof, and none of the Issuers shall, after the date
of this Agreement, enter into any agreement with respect to any of its
securities that is inconsistent with the rights granted to the Holders
of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not
conflict with and are not inconsistent with, in any material respect,
the rights granted to the holders of any of the Issuers' other issued
and outstanding securities under any such agreements. None of the
Issuers has entered and will not enter into any agreement with respect
to any of its securities which will grant to any Person piggy-back
registration rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Notes. None of the
---------------------------------------
Issuers shall, directly or indirectly, take any action with respect to
the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such
Registrable Notes in a registration undertaken pursuant to this
Agreement.
(c) Amendments and Waivers. The provisions of this
----------------------
Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given
except pursuant to a written agreement duly signed and delivered by
(I) the Issuers and (II)(A) the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes
and (B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than
a majority in aggregate principal amount of the Exchange Notes held by
all Participating Broker-Dealers; provided, however, that Section 7
and this Section 10(c) may not be amended, modified or supplemented
except pursuant to a written agreement duly signed and delivered by
each Holder and each Participating Broker-Dealer (including any person
who was a Holder or Participating Broker-Dealer of Registrable Notes
or Exchange Notes, as the case may be, disposed of pursuant to any
Registration Statement) affected by any such amendment, modification
or supplement. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that
<PAGE>
-34-
relates exclusively to the rights of Holders of Registrable Notes
whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount
of the Registrable Notes being sold pursuant to such Registration
Statement.
(d) Notices. All notices and other communications
-------
(including, without limitation, any notices or other communications to
the Trustee) provided for or permitted hereunder shall be made in
writing by hand-delivery, registered first-class mail, next-day air
courier or telecopier:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture.
(ii) if to the Issuers, at the address as follows:
National Vision Associates, Ltd.
296 Grayson Highway
Lawrenceville, GA 30045
Facsimile No.: (770) 822-2027
Attention: Chief Executive Officer
(iii) if to the Initial Purchasers, as provided in the
Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered;
five Business Days after being deposited in the mail, postage prepaid,
if mailed; when receipt is acknowledged by the recipient's telecopier
machine, if telecopied; and on the next Business Day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee at the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to
----------------------
the benefit of and be binding upon the successors and assigns of each
of the parties hereto, the Holders and the Participating
Broker-Dealers; provided, however, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder
unless and to the extent such successor or assign holds Registrable
Notes.
<PAGE>
-35-
(f) Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(g) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE ISSUERS
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR
ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. Specified times of day refer to
New York City time.
(i) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) Securities Held by any of the Issuers or their
----------------------------------------------
Affiliates. Whenever the consent or approval of Holders of a
- ----------
specified percentage of Registrable Notes is required hereunder,
Registrable Notes held by any of the Issuers or any of its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
<PAGE>
-36-
(k) Third Party Beneficiaries. Holders and beneficial
-------------------------
owners of Registrable Notes and Participating Broker-Dealers are
intended third party beneficiaries of this Agreement, and this
Agreement may be enforced by such Persons.
(l) Attorneys' Fees. As between the parties to this
---------------
Agreement, in any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
(m) Entire Agreement. This Agreement, together with the
----------------
Purchase Agreement and the Indenture, is intended by the parties as a
final and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein
and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the
one hand and the Issuers on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter
hereof and thereof are merged herein and replaced hereby.
<PAGE>
-37-
IN WITNESS WHEREOF, the Company has executed this
Registration Rights Agreement as of the date first written above.
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Senior Vice President
IN WITNESS WHEREOF, each of the subsidiaries of the Company
specified below has executed this Registration Rights Agreement as a
Guarantor as of the date first written above:
MIDWEST VISION, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
NVAL HEALTHCARE SYSTEMS, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES, LTD.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
<PAGE>
-38-
FRAME-N-LENS OPTICAL, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
VISION ADMINISTRATORS, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES OF
CANADA LTD.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
INTERNATIONAL VISION ASSOCIATES OF
ONTARIO LTD.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
FAMILY VISION CENTERS, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
<PAGE>
-39-
NW ACQUISITION CORP.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title: Vice President
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
written above.
SCHRODER & CO. INC.
By: /s/ William T. Clay IV
Name: William T. Clay IV
Title: Director
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Bruce R. Thompson
Name: Bruce R. Thompson
Title: Managing Director
FIRST UNION CAPITAL MARKETS
By: /s/ Kevin A. Smith
Name: Kevin A. Smith
Title: Vice President
<PAGE>
-40-
IN WITNESS WHEREOF, each of the subsidiaries of the Company
specified below has executed this Registration Rights Agreement as a
Guarantor as of the date of such Agreement:
Dated: October 23, 1998
NEW WEST EYEWORKS, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
ALEXIS HOLDING COMPANY, INC.
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
VISTA EYECARE NETWORK, LLC
By: /s/ Mitchell Goodman
Name: Mitchell Goodman
Title:
Exhibit 8
KILPATRICK STOCKTON LLP
Attorneys at Law
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Telephone: 404.815.6500
Facsimile: 404.815.6555
Web site: www.kilstock.com
February 3, 1999
E-mail: [email protected]
Direct Dial: 404.815.6653
Vista Eyecare, Inc.
296 Grayson Highway
Lawrenceville, Georgia 30045
Gentlemen:
We have acted as counsel to Vista Eyecare, Inc., a Georgia corporation
("the Company"), in connection with the offer by the Company to exchange (the
"Exchange Offer") its 12 3/4% Senior Notes Due 2005, Series B (the "Exchange
Notes"), for all outstanding 12 3/4% Senior Notes Due 2005, Series A (the
"Outstanding Notes"). This letter will confirm that we have advised the
Company with respect to certain United States federal income tax consequences
of the Exchange Offer, as described in the discussion set forth under the
caption "Certain U.S. Federal Income Tax Consequences" in the Prospectus
included in the Registration Statement on Form S-4 (the "Registration
Statement"), filed on this date with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Act"). Unless
otherwise defined, capitalized terms used herein shall have the respective
meanings ascribed to them in the Registration Statement.
We have based our opinions set forth in this letter on the provisions
of the Internal Revenue Code of 1986, as presently amended (the "Code"),
existing Treasury regulations thereunder (the "Regulations"), published
rulings and practices of the Internal Revenue Service (the "Service") and
court decisions. It should be noted that the federal income tax consequences
discussed in this letter might be modified by legislative, judicial or
administrative action at any time, and such action might be applied
retroactively or otherwise in a manner that might alter such tax
consequences.
Based on the assumptions and subject to the qualifications and
limitations set forth therein, (i) we adopt the discussion set forth under
the caption "Certain U.S. Federal Income Tax Consequences" in the
Registration Statement as our opinion with respect to the material United
States federal income tax consequences of the Exchange Offer, and (ii) in our
opinion such discussion accurately describes the material United States
federal income tax consequences of the acquisition, ownership and disposition
of the Notes. Such discussion is limited to the material United States
federal income tax consequences, and it does not purport to discuss all
possible federal income tax consequences or any state, local or foreign tax
consequences, of the acquisition, ownership and disposition of the Notes.
Except as stated above, we express no opinion with respect to any other
matter. We are furnishing this opinion to you solely in connection with the
Exchange Offer, and this opinion is not to be relied upon, circulated,
quoted, or otherwise referred to for any other purpose.
We hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement, to the use of our name in the Registration
Statement and to the reference to us and this opinion letter in the
Registration Statement. By giving such consent, we do not thereby admit that
we are "experts" with respect to this letter, as that term is used in the
Act, or the rules and regulations of the SEC thereunder.
KILPATRICK STOCKTON LLP
By: /s/Lynn E. Fowler
Lynn E. Fowler, A Partner
Exhibit 10.58
CREDIT AGREEMENT
Dated as of October 8, 1998
among
NATIONAL VISION ASSOCIATES, LTD.,
BANK OF AMERICA, FSB
as Documentation Agent,
FIRST UNION NATIONAL BANK,
as Administrative Agent and Issuing Bank,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................................... 1
1.01 Certain Defined Terms............................................ 1
1.02 Other Interpretive Provisions.................................... 29
1.03 Accounting Principles............................................ 30
ARTICLE II THE CREDITS................................................... 30
2.01 The Revolving Credit............................................. 30
2.02 Loan Accounts.................................................... 31
2.03 Procedure for Borrowing.......................................... 31
2.04 Conversion and Continuation Elections............................ 32
2.05 Voluntary Termination or Reduction of Commitments................ 33
2.06 Optional Prepayments............................................. 34
2.07 Mandatory Prepayments of Loans................................... 34
2.08 Interest......................................................... 35
2.09 Fees............................................................. 36
2.10 Computation of Fees and Interest................................. 37
2.11 Payments by the Company.......................................... 38
<PAGE>
2.12 Payments by the Banks to the Administrative Agent................ 39
2.13 Sharing of Payments, Etc......................................... 39
2.14 Security......................................................... 40
2.15 Swingline Loans.................................................. 40
ARTICLE III THE LETTERS OF CREDIT........................................ 43
3.01 The Letter of Credit Subfacility................................. 43
3.02 Issuance, Amendment and Renewal of Letters of Credit............. 44
3.03 Risk Participations, Drawings and Reimbursements................. 46
3.04 Repayment of Participations...................................... 47
3.05 Role of the Issuing Bank......................................... 48
3.06 Obligations Absolute............................................. 49
3.07 Cash Collateral Pledge........................................... 50
3.08 Letter of Credit Fees............................................ 50
3.09 Uniform Customs and Practice..................................... 50
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY........................ 51
4.01 Taxes............................................................ 51
4.02 Illegality....................................................... 52
<PAGE>
4.03 Increased Costs and Reduction of Return.......................... 52
4.04 Funding Losses................................................... 53
4.05 Inability to Determine Rates..................................... 54
4.06 Certificates of Banks............................................ 54
4.07 Substitution of Banks............................................ 54
4.08 Survival......................................................... 55
ARTICLE V CONDITIONS PRECEDENT.......................................... 55
5.01 Conditions of Closing Loans...................................... 55
5.02 Conditions to Initial Loans...................................... 57
5.03 Conditions to All Borrowings..................................... 59
5.04 Conditions Subsequent............................................ 60
ARTICLE VI REPRESENTATIONS AND WARRANTIES................................. 61
6.01 Corporate Existence and Power.................................... 61
6.02 Corporate Authorization; No Contravention........................ 62
6.03 Governmental Authorization....................................... 62
6.04 Binding Effect................................................... 62
6.05 Litigation....................................................... 63
<PAGE>
6.06 No Default ...................................................... 63
6.07 ERISA Compliance................................................. 63
6.08 Use of Proceeds; Margin Regulations.............................. 64
6.09 Title to Properties.............................................. 64
6.10 Taxes............................................................ 64
6.11 Financial Condition ............................................. 65
6.12 Environmental Matters............................................ 65
6.13 Collateral Documents............................................. 66
6.14 Regulated Entities............................................... 67
6.15 No Burdensome Restrictions....................................... 67
6.16 Copyrights, Patents, Trademarks and Licenses, Etc................ 67
6.17 Subsidiaries..................................................... 68
6.18 Insurance........................................................ 68
6.19 Solvency......................................................... 68
6.20 Swap Obligations................................................. 68
6.21 Full Disclosure.................................................. 68
6.22 Accounts and Inventory........................................... 69
<PAGE>
6.23 Leases........................................................... 69
6.24 Compliance With Laws............................................. 70
6.25 Year 2000 Compatibility.......................................... 70
6.26 Material Contracts............................................... 70
ARTICLE VII AFFIRMATIVE COVENANTS........................................ 71
7.01 Financial Statements............................................. 71
7.02 Certificates; Other Information.................................. 72
7.03 Notices.......................................................... 73
7.04 Preservation of Corporate Existence, Etc......................... 75
7.05 Maintenance of Property.......................................... 75
7.06 Insurance........................................................ 76
7.07 Payment of Obligations........................................... 76
7.08 Compliance with Laws............................................. 77
7.09 Compliance with ERISA............................................ 77
7.10 Inspection of Property and Books and Records..................... 77
7.11 Environmental Laws............................................... 77
7.12 Use of Proceeds.................................................. 78
<PAGE>
7.13 Further Assurances............................................... 78
7.14 Bank Accounts.................................................... 78
7.15 Inventory in Transit............................................. 79
7.16 Year 2000 Compatibility.......................................... 79
7.17 Covenants Regarding Formation of Subsidiaries.................... 79
ARTICLE VIII NEGATIVE COVENANTS.......................................... 80
8.01 Limitation on Liens.............................................. 80
8.02 Disposition of Assets............................................ 82
8.03 Consolidations and Mergers....................................... 83
8.04 Loans and Investments............................................ 83
8.05 Limitation on Indebtedness....................................... 84
8.06 Transactions with Affiliates..................................... 85
8.07 Use of Proceeds.................................................. 85
8.08 Contingent Obligations........................................... 85
8.09 Joint Ventures................................................... 86
8.10 Restricted Payments.............................................. 86
8.11 ERISA............................................................ 86
<PAGE>
8.12 Change in Business............................................... 87
8.13 Accounting Changes............................................... 87
8.14. Financial Covenants.............................................. 87
8.15. Amendments....................................................... 88
8.16. Managed Care Contracts........................................... 88
8.17 No Other Negative Pledges........................................ 89
ARTICLE IX EVENTS OF DEFAULT.............................................. 89
9.01 Event of Default................................................. 89
9.02 Remedies......................................................... 92
9.03 Specified Swap Contract Remedies................................. 92
9.04 Rights Not Exclusive............................................. 92
9.05 Application of Payments.......................................... 93
ARTICLE X THE AGENTS..................................................... 93
10.01 Appointment and Authorization: Agents........................... 93
10.02 Delegation of Duties............................................ 94
10.03 Liability of Agents ............................................ 94
10.04 Reliance by Agents ............................................. 94
<PAGE>
10.05 Notice of Default............................................... 95
10.06 Credit Decision ................................................ 95
10.07 Indemnification of Agent ....................................... 96
10.08 Agents in Individual Capacity .................................. 96
10.09 Successor Agents................................................ 97
10.10 Withholding Tax................................................. 97
10.11 Collateral Matters.............................................. 99
ARTICLE XI MISCELLANEOUS ................................................ 100
11.01 Amendments and Waivers.......................................... 100
11.02 Notices ........................................................ 101
11.03 No Waiver; Cumulative Remedies.................................. 101
11.04 Costs and Expenses.............................................. 101
11.05 Company Indemnification......................................... 102
11.06 Marshaling; Payments Set Aside.................................. 103
11.07 Successors and Assigns.......................................... 104
11.08 Assignments, Participations, Etc................................ 104
11.09 Confidentiality ................................................ 106
<PAGE>
11.10 Set-off......................................................... 106
11.11 Automatic Debits of Fees........................................ 107
11.12 Notification of Addresses, Lending Offices, Etc................. 107
11.13 Counterparts ................................................... 107
11.14 Severability.................................................... 107
11.15 No Third Parties Benefitted .................................... 107
11.16 Governing Law and Jurisdiction.................................. 107
11.17 Waiver of Jury Trial ........................................... 108
11.18 Entire Agreement ............................................... 108
<PAGE>
SCHEDULES
Schedule C-1 Commitments
Schedule 6.05 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 6.26 Material Contracts
Schedule 7.14 Deposit and Investment Accounts
Schedule 8.01 Permitted Liens
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Assignment of Notes
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Promissory Note
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Conversion/Continuation
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Subsidiary Guaranty
Exhibit J Form of Subsidiary Pledge Agreement
Exhibit K Form of Subsidiary Security Agreement
Exhibit L Form of Landlord's Consent
Exhibit M Form of Credit Card Agreement
Exhibit N Form of Wal-Mart Lease
Exhibit O Form of Sam's Wholesale Club Lease
Exhibit P Form of Lease Agreement with Fred Meyer, Inc.
Exhibit Q Form of Assignment and Acceptance<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of October 8, 1998,
among National Vision Associates, Ltd., a Georgia corporation (the
"Company"), the several financial institutions from time to time party
to this Agreement (collectively, the "Banks"; individually, a "Bank"),
First Union National Bank, as issuing bank (the "Issuing Bank"), Bank
of America, FSB, as documentation agent for the Banks (the
"Documentation Agent") and First Union National Bank, as
administrative agent for the Banks (the "Administrative Agent").
WHEREAS, the Banks have agreed to make available to the Company
a secured revolving credit facility upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms.
The following terms have the following meanings:
"Account" means, with respect any Person, any account of
such Person and any other right of such Person to payment for
goods sold or leased or for services rendered, whether or not
evidenced by an instrument or chattel paper and whether or not
yet earned by performance.
"Account Debtor" shall mean any Person who is obligated
under an Account.
"Account Designation Letter" means a letter from the Company
to the Administrative Agent, duly completed and signed by a
Responsible Officer and in form and substance satisfactory to the
Administrative Agent, listing any one or more accounts to which
the Company may from time to time request the Administrative
Agent to forward the proceeds of any Loans made hereunder.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or
indirectly, in (a) the acquisition of all or substantially all of
the assets of a Person, or of any business or division of a
Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of
any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other
combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity. The term "Acquisition" shall not include the
formation by the Company of a new Subsidiary provided that its
Investment therein does not violate Section 8.04 hereof.
"Adjusted EBITDA" means, with respect to the Company on a
consolidated basis with its Subsidiaries for any period, the sum
of, without duplication, (a) EBITDA of the Company on a
consolidated basis with its Subsidiaries, (b) with respect to
any Person or substantially all of the assets of a Person
(including New West and Frame-n-Lens) that became a Subsidiary
of, or was merged with or consolidated into, the Company during
such period, the EBITDA of such Person or the EBITDA attributable
1<PAGE>
to such assets for such period, (c) at the option of the Banks,
any non-recurring financing charges that were deducted from Net
Income in determining EBITDA for such period, and (d) the non-
realized synergies (not otherwise included in the calculation of
EBITDA) for such period. For purposes of this definition, non-
realized synergies shall be deemed to be (i) $5,000,000 with
respect to the calculation of Adjusted EBITDA for the four fiscal
quarters ending closest to September 30, 1998, (ii) $5,000,000
with respect to the calculation of Adjusted EBITDA for the four
fiscal quarters ending closest to December 31, 1998, (iii)
$3,750,000 with respect to the calculation of Adjusted EBITDA for
the four fiscal quarter ending closest to March 31, 1999, (iv)
$2,500,000 with respect to the calculation of Adjusted EBITDA for
the four fiscal quarters ending closest to June 30, 1999, and (v)
$1,250,000 with respect to the calculation of Adjusted EBITDA for
the four fiscal quarters ending closest to September 30, 1999.
"Administrative Agent" means First Union in its capacity as
administrative agent for the Banks hereunder, and any successor
administrative agent arising under Section 10.09.
"Administrative Agent-Related Persons" means First Union and
any successor administrative agent arising under Section 10.09,
together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Administrative Agent's Payment Office" means the address
for payments set forth on Schedule 11.02 or such other address as
the Administrative Agent may from time to time specify.
"Affected Bank" has the meaning set forth in Section 4.07.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed
to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person,
whether through the ownership of voting securities, membership
interests, by contract, or otherwise.
"Agents" means the Administrative Agent and the
Documentation Agent.
"Aggregate Revolving Credit Obligations" shall mean, as of
any particular time, the sum of (a) the Effective Amount of all
Loans then outstanding, plus (b) the Effective Amount of all L/C
Obligations then outstanding.
"Aggregate Specified Swap Amount" means, at any time, the
sum of all Specified Swap Amounts owing to all Swap Providers.
2<PAGE>
"Agreement" means this Credit Agreement, as modified,
amended, restated or supplemented from time to time.
"Applicable Margin" means as of the Closing Date one and
three quarters of one percent (1.75%) with respect to Base Rate
Loans and three percent (3.00%) with respect to Offshore Rate
Loans, to be adjusted based upon the ratio of the Company's and
its Subsidiaries (on a consolidated basis) Indebtedness to
Adjusted EBITDA for the most recently ended four fiscal quarter
period as set forth in the table below:
<TABLE>
<CAPTION>
If the ratio of Indebtedness The Applicable Margin with The Applicable Margin with
to Adjusted EBITDA is: respect to Base Rate Loans is: respect to Offshore Rate Loans is:
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
greater than 4.5 to 1.0 2.00% 3.25%
- -------------------------------------------------------------------------------------------------------
less than or equal to 4.5 to 1.75% 3.00%
1.0 and greater than 4.0 to
1.0
- -------------------------------------------------------------------------------------------------------
less than or equal to 4.0 to 1.50% 2.75%
1.0 and greater than 3.5 to
1.0
- -------------------------------------------------------------------------------------------------------
less than or equal to 3.5 to 1.25% 2.50%
1.0 and greater than 3.0 to
1.0
- -------------------------------------------------------------------------------------------------------
less than or equal to 3.0 to 1.00% 2.25%
1.0 and greater than 2.5 to
1.0
- -------------------------------------------------------------------------------------------------------
less than or equal to 2.5 to 0.75% 2.00%
1.0 and greater than 2.0 to
1.0
- -------------------------------------------------------------------------------------------------------
less than or equal to 2.0 to 0.50% 1.75%
1.0
- -------------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Margin adjustment provided for in the table set
forth above shall be effective (a) with respect to an increase of
the Applicable Margin, as of the tenth (10th) Business Day after
the day on which financial statements are required to be
delivered to the Administrative Agent pursuant to Section 7.01
hereof, and (b) with respect to a decrease in the Applicable
Margin, as of the later of (1) the tenth (10th) Business Day
after which such financial statements are required to be
delivered to the Administrative Agent pursuant to Section 7.01,
and (2) the date on which such financial statements are actually
delivered to the Administrative Agent; provided, however, that,
notwithstanding the foregoing or anything else herein to the
contrary, if at any time the Company shall have failed to deliver
the financial statements and a Compliance Certificate as required
by Section 7.01(a) or Section 7.01(b), as the case may be, and
Section 7.02(b), or if at any time an Event of Default shall have
occurred and be continuing, then at the election of the Majority
Lenders, at all times from and including the date on which such
statements and Compliance Certificate are required to have been
delivered (or the date of the occurrence of such Event of
Default, as the case may be) to the date on which the same shall
3<PAGE>
have been delivered (or such Event of Default cured or waived, as
the case may be), each Applicable Margin shall be determined in
accordance with the above matrix as if the ratio of the Company's
Indebtedness to Adjusted EBITDA for the most recently ended four
fiscal quarter period were greater than or equal to 4.5 to 1.0
(notwithstanding the actual ratio).
"Appraisal" means a real estate appraisal conducted in
accordance with the Uniform Standards of Professional Appraisal
Practice (as promulgated by the Appraisal Standards Board of the
Appraisal Foundation) and all Requirements of Law applicable to
the Banks, and applicable internal policies of the Administrative
Agent, undertaken by an independent appraisal firm satisfactory
to the Administrative Agent and the Majority Banks, and providing
an assessment of fair market value of a parcel or property, and
taking into account any and all Estimated Remediation Costs.
"Arizona Property" means the real property of New West at
2104 West Southern Avenue, Tempe, Arizona.
"Assignee" has the meaning specified in subsection 11.08(a).
"Assignment of Notes" means that certain Assignment of Notes
between the Company and the Administrative Agent, and
acknowledged by Mexican Vision Associates Operadora S. de R.L. de
C.V., substantially in the form of Exhibit A.
"Attorney Costs" means and includes all actual and
reasonable fees and disbursements of any law firm or other
external counsel, the allocated actual and reasonable cost of
internal legal services and all reasonable disbursements of
internal counsel.
"Available Loan Commitment" shall mean, as of any particular
time, (a) the amount of the Commitment minus (b) the Aggregate
Revolving Credit Obligations then outstanding.
"Bank" means the institutions specified as such in the
introductory clause hereto. Unless the context otherwise clearly
requires, "Bank" includes any such institution in its capacity as
Swap Provider, Issuing Bank or Swingline Bank, as applicable.
Unless the context otherwise clearly requires, references to any
such institution as a "Bank" shall also include any of such
institution's Affiliates that may at any time of determination be
Swap Providers.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means the higher of (i) the per annum interest
rate publicly announced from time to time by First Union in
Charlotte, North Carolina, to be its prime rate (which may not
necessarily be its best lending rate), as adjusted to conform to
changes as of the opening of business on the date of any such
change in such prime rate, and (ii) the Federal Funds Rate plus
one half of one percent (0.5%) per annum, as adjusted to conform
to changes as of the opening of business on the date of any such
change in the Federal Funds Rate.
4
<PAGE>
"Base Rate Loan" means a Loan that bears interest based on
the Base Rate.
"Blocked Account Agreement" means that certain Blocked
Account Agreement of even date herewith among the Company, First
Union and the Administrative Agent, in form and substance
satisfactory to the Banks.
"BofA" means Bank of America, FSB.
"Borrowing" means a borrowing hereunder consisting of Loans
of the same Type made to the Company on the same day by the Banks
under Article II, and, other than in the case of Base Rate Loans,
having the same Interest Period.
"Borrowing Base" shall mean, at any particular time, the
remainder of --
(I) the lesser of:
(a) Seventy-Five Percent (75%) of Adjusted
EBITDA for the most recent twelve months for which financial
statements have been provided to the Banks pursuant to Section
7.01; and
(b) the sum of --
(i) eighty percent (80%) of the Eligible
Accounts; plus
(ii) fifty percent (50%) of the Value of
Eligible Inventory; minus,
(II) such reserves that the Majority Banks may
reasonably deem necessary or appropriate from time to time.
The Borrowing Base will be determined from time to time
within three Business Days after the Administrative Agent's
receipt of the documents referred to in Section 7.02(e), (f) and
(g) hereof. The Company acknowledges and agrees that unless and
until a Landlord Consent has been delivered to the Administrative
Agent for any laboratory site the value of Inventory located at
such site shall be excluded from the Borrowing Base or, at the
discretion of the Banks, a reserve shall be deducted from the
Borrowing Base in an amount reasonably determined by the
Administrative Agent as appropriate to cover any landlord Liens
which may be assessed against such Inventory.
"Borrowing Base Certificate" means a document substantially
in the form of Exhibit B hereto, with appropriate insertions, or
such other form as shall be acceptable to the Agents, as it may
be amended or modified from time to time.
"Borrowing Base Deficiency" shall mean any condition wherein
the Aggregate Revolving Credit Obligations exceed the Borrowing
Base as set forth on the most recent Borrowing Base Certificate
delivered to the Administrative Agent or as otherwise determined
by the Administrative Agent.
5<PAGE>
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in New York City, Atlanta,
Georgia or Charlotte, North Carolina are authorized or required
by law to close and, if the applicable Business Day relates to
any Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request
or directive of any central bank or other Governmental Authority,
or any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any
bank or of any corporation controlling a bank.
"Capitalized Lease Obligations" shall mean, with respect to
any Person, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease
obligations under GAAP, and for purposes of this definition, the
amount of such obligations at any date shall be the capitalized
amount of such obligations at such date as determined in
accordance with GAAP.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Administrative Agent, for the benefit of the
Administrative Agent, the Documentation Agent, the Issuing Bank
and the Banks, as additional collateral for the Obligations, cash
or deposit account balances pursuant to documentation in form and
substance satisfactory to the Agents and the Issuing Bank (which
documents are hereby consented to by the Banks). Derivatives of
such term shall have corresponding meaning. The Company hereby
grants the Administrative Agent, for the benefit of the
Administrative Agent, the Documentation Agent, the Issuing Bank
and the Banks, a security interest in all such cash and deposit
account balances. Cash collateral shall be maintained in
blocked, non-interest bearing deposit accounts at First Union.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws."
"Change of Control" means (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than thirty-five percent (35%) of the total
voting power of all classes of stock then outstanding of the
Company entitled to vote in the election of directors or (b)
during any period of twenty-four consecutive months, individuals
who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the
stockholders of the Company was approved by a majority of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of such Board of Directors then in office.
6<PAGE>
"Clean-Up Date" has the meaning set forth in Section 2.15(d)
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.01 are satisfied or waived by
all Banks (or, in the case of subsection 5.01(e), waived by the
Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Collateral" means all property and interests in property
and proceeds thereof now owned or hereafter acquired by the
Company or any Restricted Subsidiary in or upon which a Lien to
secure any or all of the Obligations now or hereafter exists in
favor of the Banks, or the Administrative Agent on behalf of the
Banks, pursuant to the Collateral Documents.
"Collateral Documents" means, collectively, (i) the Security
Agreement, any Mortgages, the Pledge Agreement, the Assignment of
Notes, the Subsidiary Guaranty, the Subsidiary Security
Agreement, they Blocked Account Agreement, the Credit Card
Agreements, and all other security agreements, mortgages, deeds
of trust, patent and trademark assignments, lease assignments,
guarantees and other similar agreements between the Company or
any Restricted Subsidiary and the Banks or the Administrative
Agents for the benefit of the Banks now or hereafter delivered to
the Banks or the Administrative Agent pursuant to or in
connection with the transactions contemplated hereby, and all
financing statements (or comparable documents now or hereafter
filed in accordance with the Uniform Commercial Code or
comparable law) against the Company or any Restricted Subsidiary
as debtor in favor of the Banks or the Administrative Agent for
the benefit of the Banks as secured party, and (ii) any
amendments, supplements, modifications, renewals, replacements,
consolidations, substitutions and extensions of any of the
foregoing.
"Collections" means all cash, checks, notes, instruments,
and other items of payment (including but not limited to
insurance proceeds, proceeds of cash sales, rental proceeds, and
tax refunds).
"Commitment" shall mean the several obligations of the Banks
to advance the aggregate amount of up to $25,000,000 to the
Company on or after the Agreement Date, in accordance with their
respective Pro Rata Shares, pursuant to the terms hereof, and as
such amount may be reduced from time to time, pursuant to the
terms hereof. As of the Closing Date, each Bank's several
Commitment is set forth on Schedule C-1.
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C.
"Concentration Account" means the account of the Company
maintained at First Union covered by the Blocked Account
Agreement.
"Contingent Obligation" means, as to any Person, any direct
or indirect liability of that Person, whether or not contingent,
with or without recourse, (a) with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
7
<PAGE>
including any obligation of that Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the
payment or discharge of any such primary obligation, or to
maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency or any balance
sheet item, level of income or financial condition of the primary
obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure
or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation");
(b) with respect to any Surety Instrument (other than any Letter
of Credit) issued for the account of that Person or as to which
that Person is otherwise liable for reimbursement of drawings or
payments; (c) to purchase any materials, supplies or other
property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is
ever made or tendered, or such services are ever performed or
tendered, or (d) in respect of any Swap Contract.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.04, the Company (a) converts Loans of one Type to
another Type, or (b) continues as Loans of the same Type, but
with a new Interest Period, Loans having Interest Periods
expiring on such date.
"Credit Card Agreement" means each letter agreement between
the Company and a credit card processor, substantially in the
form of Exhibit M.
"Credit Extension" means and includes (a) the making of any
Revolving Loans hereunder, and (b) the Issuance of any Letters of
Credit hereunder.
8<PAGE>
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured
or otherwise remedied during such time) constitute an Event of
Default.
"Disposition" means (i) the sale, lease, conveyance or other
disposition of property, other than sales or other dispositions
expressly permitted under subsection 8.02(a) or 8.02(b),
operating leases or subleases entered into in the ordinary course
of business or Investments permitted under Section 8.04 or Liens
permitted under Section 8.01, and (ii) the sale or transfer to
any Person (other than the Company or any Restricted Subsidiary)
by the Company or any Subsidiary of the Company of any equity
securities issued by any Subsidiary of the Company and held by
such transferor Person.
"Documentation Agent" means BofA in its capacity as document
ation agent for the Banks hereunder, and any successor
documentation agent arising under Section 10.09.
"Documentation Agent-Related Persons" means BofA and any
successor documentation agent arising under Section 10.09,
together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Dormant Subsidiaries" means International Vision Associates
of Ontario, Ltd., a Georgia corporation, and International Vision
Associates of Canada Ltd., a Georgia corporation.
"EBIRTDA" means, with respect to any Person on a
consolidated basis for any period, Adjusted EBITDA of such
Person, plus, to the extent deducted in computing Net Income for
such period, rent and other occupancy expenses paid on account of
all operating leases of any type (including equipment and real
estate) and license agreements. Unless the context clearly
provides otherwise, any reference to EBIRTDA in this Agreement
shall be to the EBIRTDA of the Company and its Subsidiaries on a
consolidated basis.
"EBITDA" means, with respect to the Company on a
consolidated basis with its Subsidiaries for any period, the Net
Income of such Person for such period, (a) plus, without
duplication and to the extent deducted in computing Net Income
for such period, the sum of (i) income taxes, (ii) Interest
Expense, (iii) depreciation and amortization expense, and (iv)
other non-cash charges reasonably acceptable to the Majority
Banks, (b) minus, to the extent included in Net Income for such
period, extraordinary gains; provided, however, that the EBITDA
with respect to any Person or substantially all of the assets of
a Person (including New West and Frame-n-Lens) that became a
Subsidiary of, or was merged with or consolidated into, the
Company during such period shall include the EBITDA of such
Person or the EBITDA attributable to such assets for such period.
"Effective Amount" means (i) with respect to any Loans on
any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or
repayments of Loans occurring on such date; and (ii) with respect
to any outstanding L/C Obligations on any date, the amount of
9<PAGE>
such L/C Obligations on such date after giving effect to any
Issuances of Letters of Credit occurring on such date and any
other changes in the aggregate amount of the L/C Obligations as
of such date, including as a result of any reimbursements of
outstanding unpaid drawings under any Letters of Credit or any
reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
"Eligible Account" means an Account owing to the Company or
a Restricted Subsidiary which meets the following requirements:
(a) (i) with respect to any Account owed by an
Account Debtor under a managed care contract,
such Account must not be unpaid on the date
that is one hundred twenty (120) days after its
due date, and with respect to any account owed
by any other Account Debtor, such Account must
not be unpaid on the date that is ninety (90)
days after its due date;
(b) it is not a credit card Account;
(c) it is genuine and in all respects what it
purports to be;
(d) it arises from the sale of goods or rendition
of services by the Company or a Restricted
Subsidiary; and (i) such goods or services
comply with such Account Debtor's specifi-
cations (if any) and have been shipped to, or
delivered to and accepted by, such Account
Debtor and (ii) the Company or the Restricted
Subsidiary, as applicable, has possession of,
or if requested by the Administrative Agent or
the Majority Banks, has delivered to the
Administrative Agent, shipping and delivery
receipts evidencing such shipment, delivery and
acceptance;
(e) it is payable in the United States and in
United States currency;
(f) it (a) is evidenced by an invoice rendered to
the Account Debtor with respect thereto which
(i) is dated not earlier than the date of
shipment or performance and (ii) has payment
terms which are acceptable to the Majority
Banks, which payment terms existing on and
disclosed to the Banks prior to the Agreement
Date are acceptable to the Majority Banks, and
(b) does not constitute service charges,
chargebacks, memo billings or ineligible credit
column balances;
(g) it is not subject to any assignment, claim or
Lien, other than a Lien in favor of the
Administrative Agent and any Permitted Liens
junior to the Liens in favor of the
Administrative Agent;
(h) it is a valid, legally enforceable and
unconditional obligation of the Account Debtor
with respect thereto, and is not subject to
setoff, counterclaim, credit or allowance or <PAGE>
adjustment by the Account Debtor with respect
10<PAGE>
thereto, or to any claim by such Account Debtor
denying liability thereunder in whole or in
part, and such Account Debtor has not refused
to accept any of the goods or services which
are the subject of such Account or offered or
attempted to return any of such goods (but only
to the extent of such setoff, counterclaim,
credit, allowance, adjustment, claim, refusal
or return);
(i) there are no proceedings or actions which are
then threatened or pending against the Account
Debtor with respect thereto or to which such
Account Debtor is a party which might result in
any material adverse change in such Account
Debtor's financial condition, or in its ability
to pay any Account in full when due;
(j) the Account Debtor with respect thereto is not
the Company or a Subsidiary of the Company or
an Affiliate or an employee or agent of any of
the foregoing;
(k) the Account Debtor with respect thereto is
located within the United States of America,
unless the sale of goods giving rise to the
Account is on letter of credit, banker's
acceptance or other credit support terms
satisfactory to the Majority Banks;
(l) it is not an Account arising from a "sale on
approval," "sale or return" or "consignment,"
or subject to any other repurchase or return
agreement;
(m) it is not an Account with respect to which
possession and/or control of the goods sold
giving rise thereto is held, maintained or
retained by the Company, any Subsidiary of the
Company, or any Affiliate of any of the fore-
going (or by any agent or custodian of any of
the foregoing) for the account of or subject to
further and/or future direction from the
Account Debtor thereof;
(n) it is not an Account which in any way fails to
meet or violates any warranty, representation
or covenant contained in this Agreement or any
Loan Document relating directly or indirectly
to the Company's and its Subsidiaries'
Accounts;
(o) the Account Debtor thereunder is not located in
West Virginia, New Jersey or Minnesota;
provided, however, that such restriction shall
not apply to an Account if at the time the
Account was created and at all times thereafter
(a) the Company or Restricted Subsidiary, as
applicable, had filed and has maintained
effective a current Notice of Business
Activities Report with the appropriate
office or agency of the State of West Virginia,
New Jersey or Minnesota, as applicable, or (b)
the Company or Restricted Subsidiary, as
applicable, was and has continued to be exempt<PAGE>
from the filing of such report and has provided
the Administrative Agent with satisfactory
evidence thereof;
(p) it arises in the ordinary course of Company's or a
Restricted Subsidiary's (as applicable) business;
(q) if the Account Debtor is the United States of
America or any department, agency or instru-
mentality thereof, the Company or Restricted
Subsidiary, as applicable, has assigned its
right to payment of such Account to the Adminis-
trative Agent pursuant to the Assignment of
Claims Act of 1940, as amended;
11<PAGE>
(r) such Account, together with all other Accounts
for which the Account Debtor is a state or local
government, or a department, agency or
instrumentality thereof unless (a) the Account
is subject to assignment under and pursuant to
a state or local law which is analogous to the
Federal Assignment of Claims Act of 1940, as
amended, and (b) Company has assigned its right
to payment of such Account pursuant to such
state or local law;
(s) it is not owed by an Account Debtor whose invoices
representing 50% or more of the unpaid net dollar
amount of all Accounts from such Account Debtor
are unpaid more than the number of days after the
date of such invoices set forth in subsection (a)
above for such Accounts;
(t) if the Majority Banks in their reasonable
discretion have established a credit limit for an
Account Debtor, the aggregate dollar amount of
Accounts due from such Account Debtor,including
such Account, does not exceed such credit limit;
and
(u) it is not evidenced by chattel paper or an
instrument.
An Account which is at any time an Eligible Account but which
subsequently fails to meet any of the foregoing requirements,
shall forthwith cease to be an Eligible Account. Further, with
respect to any Account, if the Majority Banks at any time
hereafter determine in their reasonable discretion that the
prospect of payment or performance by the Account Debtor with
respect thereto is or will be impaired for any reason whatsoever,
notwithstanding anything to the contrary contained above, such
Account shall forthwith cease to be an Eligible Account.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000;
(b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is
acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the
OECD; and (c) a Person that is primarily engaged in the business
of commercial banking and that is (i) a Subsidiary of a Bank,
(ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or
(iii) a Person of which a Bank is a Subsidiary.
"Eligible Inventory" means Inventory owned by the Company or
a Restricted Subsidiary which meets the following requirements:
(a) it is not subject to any assignment, claim or Lien,
other than a Lien in favor of the Administrative Agent
and any other Permitted Lien junior to the Liens in
favor of the Administrative Agent;
(b) it is (a) raw materials or finished goods Inventory
which is held for sale, (b) new and unused and (c) not
Inventory classified by the Company or a Restricted
Subsidiary, as applicable, on its general ledger,
prepared in a manner consistent with the Company's and
its Restrictive Subsidiaries' general ledgers disclosed
to the Administrative Agent and the Banks prior to the
Closing Date, as either "close out" or "discontinued"
12<PAGE>
Inventory and which "close out" or "discontinued"
Inventory has been owned by the Company or its
Restricted Subsidiary for an aggregate of more than 6
months after being so classified;
(c) it is in the possession and control of the Company, a
Restricted Subsidiary or any of their respective
agents, as applicable; provided, however, that if it is
stored on premises leased to the Company or a
Restricted Subsidiary, the Documentation Agent is in
possession of a Landlord's Consent duly executed by the
owner of such premises;
(d) if it is in the possession or control of a bailee,
warehouseman, consignee, processor or other Person
other than the Company or a Restricted Subsidiary, the
Documentation Agent is in possession of such
agreements, instruments and documents as the Agents may
require (each in form and content acceptable to the
Agents and duly executed, as appropriate, by the
bailee, warehouseman, consignee, processor or other
Person in possession or control of such
Inventory, as applicable) including but not limited to
warehouse receipts in the Administrative Agent's name
covering such Inventory and a Landlord's Consent or
other similar consent, as applicable;
(e) it is not Inventory which is dedicated to or,
identifiable with, or is otherwise specifically to be
used in the manufacture of, goods which are to be sold
to the United States of America or any department,
agency or instrumentality thereof and in respect of
which Inventory, Company shall have received any
progress or other advance payment which is or may be
credited or set off against any Account generated upon
the sale or lease of any such goods;
(f) it is not Inventory produced in violation of the Fair
Labor Standards Act and subject to the "hot goods"
provisions contained in Title 29 U.S.C. Section 215 or
any successor statute or section;
(g) it is not Inventory bearing a servicemark, trademark or
name of any Person other than the Company or a
Restricted Subsidiary, unless it is Inventory which is
sold to the Company or a Restricted Subsidiary in the
ordinary course of the Company's or a Restricted
Subsidiary's, as the case may be, business for
distribution and is not subject to any licensing,
patent, royalty, trademark, tradename or copyright
agreement between the Company or a Restricted
Subsidiary, as the case may be, and any other Person
which prohibits the Administrative Agent's sale or
other disposition of such Inventory pursuant to Loan
Documents;
(h) it is not (i) packaging, packing or shipping materials,
(ii) goods used in connection with maintenance or
repair of the Company's or a Restricted Subsidiary's
business, properties or assets, (iii) general supplies,
(iv) raw materials in the possession or control of a
processor or finisher or (v) work in process;
13<PAGE>
(i) it is not Inventory which in any way fails to meet or
violates any warranty, representation or covenant
contained in this Agreement or any Loan Document
relating directly or indirectly to the Company's or a
Restricted Subsidiary's Inventory;
(j) it is not excessively slow moving or otherwise
unacceptable due to age, type, category, quality and/or
quantity, as determined by the Majority Banks in their
reasonable discretion; and
(k) if it is Inventory purchased from a vendor outside of
the United States of America and the Company or a
Restricted Subsidiary has title to such Inventory, (a)
it is in transit from the vendor thereof ("In Transit
Inventory"), and not from another location outside of
the United States of any Inventory of the Company or a
Restricted Subsidiary, (b) it is properly insured (as
determined by the Administrative Agent in its
reasonable discretion) and covered by appropriate
shipping documents or other documents of title which
have been delivered to the Administrative Agent, and
(c) all of the requirements set forth in Section 7.15
with respect thereto have been satisfied.
Inventory which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements
shall forthwith cease to be Eligible Inventory.
"Eligible Letters of Credit" shall mean any outstanding
Letter of Credit issued by the Issuing Bank on behalf of the
Company in connection with Inventory purchased from a vendor
outside of the United States of America by the Company in the
ordinary course of business.
"Environmental Claims" means all claims, however asserted,
by any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental
Law, or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon the presence,
placement, discharge, emission or release (including intentional
and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental, placement, spills,
leaks, discharges, emissions or releases) of any Hazardous
Material at, in, or from Property, whether or not owned by the
Company or any Subsidiary.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
14<PAGE>
with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water
Pollution Control Act of 1972, the Solid Waste Disposal Act, the
Federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law,
the California Solid Waste Management, Resource, Recovery and
Recycling Act, the California Water Code and the California
Health and Safety Code.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d)
the filing of a notice of intent to terminate, the treatment of a
Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any
ERISA Affiliate.
"Estimated Remediation Costs" means all costs associated
with performing work to remediate contamination of real property
or groundwater, including engineering and other professional fees
and expenses, costs to remove, transport and dispose of
contaminated soil, costs to "cap" or otherwise contain
contaminated soil, and costs to pump and treat water and monitor
water quality.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Event of Loss" means, with respect to any property, any of
the following: (a) any loss, destruction or damage of such
property; (b) any pending or threatened institution of any
proceedings for the condemnation or seizure of such property or
for the exercise of any right of eminent domain with respect to
such property; or (c) any actual condemnation, seizure or taking,
15<PAGE>
by exercise of the power of eminent domain or otherwise, of such
property, or confiscation of such property or the requisition of
the use of such property.
"Exchange Act" means the Securities Exchange Act of 1934,
and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any period, a fluctuating
per annum interest rate (rounded upwards, if necessary, to the
nearest 1/100 of one percentage point) equal for each day during
such period to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York,
or if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by the
Administrative Agent.
"Fee Letters" has the meaning specified in subsection
2.09(a).
"First Union" means First Union National Bank.
"Foreign Subsidiary" means any Subsidiary of the Company
which is organized or incorporated under the laws of a
jurisdiction other than the United States or any state or
territory thereof.
"Frame-n-Lens" means Frame-n-Lens Optical, Inc., a
California corporation.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges (including, without limitation,
net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the
circumstances as of the Closing Date.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
16<PAGE>
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Hazardous Materials" means all those substances that are
regulated by, or which may form the basis of liability under, any
Environmental Law, including any substance identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance,
hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"In Transit Inventory" has the meaning ascribed to such term
in clause (k) of the definition of Eligible Inventory.
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property
or services(other than trade payables entered into and other
accrued liabilities arising in the ordinary course of business on
ordinary terms); (c) all non-contingent reimbursement or payment
obligations with respect to Surety Instruments (other than a
letter of credit relating to a trade payable that is not
considered Indebtedness hereunder); (d) all obligations evidenced
by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in
either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or
sale of such property); (f) all Capitalized Lease Obligations;
(g) all indebtedness referred to in clauses (a) through (f) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Lien upon or in property (including accounts and contracts
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness;
and (h) all Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a)
through (g) above. For all purposes of this Agreement, the
Indebtedness of any Person shall include (i) all recourse
Indebtedness of any partnership or joint venture or limited
liability company in which such Person is a general partner or a
joint venturer or a member; and (ii) to the extent not otherwise
included, all obligations of any Person under any Swap Contract.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Indemnified Person" has the meaning specified in Section
11.05.
"Indenture" means that certain Indenture dated as of October
8, 1998 among the Company, as issuer, the guarantors named
therein and State Street Bank and Trust company, as trustee, in
form and substance satisfactory to the Agents.
"Independent Auditor" has the meaning specified in
subsection 7.01(a).
"Insolvency Proceeding" means, with respect to any Person,
(a) any case, action or proceeding with respect to such Person
17<PAGE>
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or
(b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Expense" means, with respect to any Person on a
consolidated basis for any period, interest expense and loan fees
determined in accordance with GAAP, and including capitalized and
non-capitalized interest and the interest component of
Capitalized Lease Obligations. Unless the context clearly
provides otherwise, any reference to Interest Expense in this
Agreement shall be to the Interest Expense of the Company and its
Restricted Subsidiaries on a consolidated basis.
"Interest Payment Date" means (a) as to any Loan other than
a Base Rate Loan, the last day of each Interest Period applicable
to such Loan, and (b) as to any Base Rate Loan, the last Business
Day of each calendar quarter and each date such Loan is converted
into another Type of Loan; provided, however, that if any
Interest Period for a Offshore Rate Loan exceeds three months,
the date that falls three months after the beginning of such
Interest Period and after each Interest Payment Date thereafter
is also an Interest Payment Date.
"Interest Period" means the period commencing on the
Borrowing Date of such Loan or on the Conversion / Continuation
Date on which the Loan is converted into or continued as an
Offshore Rate Loan, and ending on the date one, two, three or six
months thereafter as selected by the Company in its Notice of
Borrowing or Notice of Conversion / Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless the
result of such extension would be to carry such
Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of
such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the
Revolving Termination Date.
"Inventory" means, with respect to any Person, any and all
such Person's goods (including, without limitation, goods in
transit), wheresoever located which are or may at any time be in
transit to such Person, leased by such Person to a lessee, held
for sale or lease, furnished under any contract of service, or
held as raw materials, work in process, or supplies or materials
used or consumed in such Person's business, or which are held for
use in connection with the manufacture, packaging, packing,
18<PAGE>
shipping, advertising, selling or finishing of such goods, and
all goods of such Person the sale or other disposition of which
has given rise to an Account, contract right, general intangible,
instrument or chattel paper which are returned to and/or
repossessed and/or stopped in transit by such Person or the
Administrative Agent or any Bank or any agent or bailee of any of
them, and all documents of title or other documents representing
the same.
"Investments" has the meaning specified in Section 8.04.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Issuance Date" has the meaning specified in subsection
3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
"Issuing Bank" means First Union in its capacity as issuer of
one or more Letters of Credit hereunder, together with any replacement
letter of credit issuer arising under subsection 10.01(b) or Section
10.09.
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal
arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any of
its Subsidiaries with another Person (other than the Company or one of
its Restricted Subsidiaries) in order to conduct a common venture or
enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for
amendment of outstanding letters of credit as shall at any time be in
use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of
letters of credit as shall at any time be in use at the Issuing Bank,
as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Loans under
subsection 3.03(c).
"L/C Commitment" means the commitment of the Issuing Bank to
issue, and the commitment of the Banks severally to participate in,
Letters of Credit from time to time Issued or outstanding under Article
III, in an aggregate amount not to exceed on any date the amount of
$10,000,000, as the same shall be reduced as a result of a reduction in
the L/C Commitment pursuant to Section 2.05; provided that the L/C
Commitment is apart of the combined Commitments of the Banks, rather
than a separate,independent commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
19<PAGE>
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Landlord's Consent" means a Landlord's Waiver and Consent
substantially in the form of Exhibit L, with appropriate insertions, or
such other form as shall be acceptable to the Agents, as it may be
amended or modified from time to time, pursuant to which any owner
or a premises at which Inventory is located acknowledges the existence
and priority of the Administrative Agent's Lien thereon.
"Lending Office" means, as to any Bank, the office or offices of
such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.02, or such other office or offices as the Bank may from time to
time notify the Company and the Administrative Agent.
"Letters of Credit" means any letters of credit (whether
standby letters of credit) Issued by the Issuing Bank pursuant to
Article III.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law) and
any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an operating lease or a
consignor under a true consignment agreement.
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of any Revolving Loan,
Swingline Loan or L/C Advance, and may be a Base Rate Loan or an
Offshore Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement, any Notes, the Collateral
Documents, the Fee Letters, any documents evidencing or relating to
Specified Swap Contracts, and all other documents delivered to the
Administrative Agent or any Bank in connection with the transactions
contemplated by this Agreement.
"Majority Banks" means at any time Banks then holding at least
66-2/3% of the then aggregate unpaid principal amount of the Loans, or,
if no such principal amount is then outstanding, Banks then having at
least 66-2/3% of the Commitments, or, if the Commitments have been
terminated and no Loans are then outstanding, Banks then owed a
Specified Swap Amount at least 66-2/3% of the Aggregate Specified Swap
Amount.
"Managed Care Subsidiary" shall mean (a) NVAL VisionCare Systems
of California, Inc., ProCare Eye Exam, Inc. and NVAL VisionCare
20<PAGE>
Systems of North Carolina, Inc. and (b) any other Subsidiary of the
Company formed or acquired after the Closing Date whose financial
condition or activities are regulated under the laws of any state in
connection with its provision of health or vision care products or
services (or related administrative services) and shall include, and
without limitation, a health maintenance organization (whether single
or multi service), third party administrator or any entity similar to
any of the foregoing.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the Company or any Restricted
Subsidiary to perform under any Loan Document and to avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality,
validity, binding effect or enforceability against the Company or any
Restricted Subsidiary of any Loan Document, or (ii) the perfection or
priority of any Lien granted under any of the Collateral Documents.
"Mortgage" means any deed of trust, mortgage, leasehold mortgage,
assignment of rents or other document executed and delivered after the
Closing Date creating a Lien on real property or any interest in real
property of the Company or any Restricted Subsidiary of the Company in
favor of the Administrative Agent.
"Mortgaged Property" means all property subject to a Lien
pursuant to a Mortgage.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Net Income" means, with respect to any Person on a consolidated
basis for any period, its net income (or deficit) determined in
accordance with GAAP. Unless the context clearly provides otherwise,
any reference to Net Income in this Agreement shall be to the Net
Income of the Company and its Restricted Subsidiaries on a consolidated
basis.
"Net Proceeds" means, as to any Disposition by a Person, proceeds
in cash, checks or other cash equivalent financial instruments as and
when received by such Person, net of: (a) the direct costs relating to
such Disposition excluding amounts payable to such Person or any
Affiliate of such Person, (b) income, sale, use or other transaction
taxes paid or payable by such Person as a direct result thereof, and
(c) amounts required to be applied to repay principal, interest and
prepayment premiums and penalties on Indebtedness secured by a Lien on
the asset which is the subject of such Disposition and (d) appropriate
amounts to be set aside by the Company or any Restricted Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such
21<PAGE>
Disposition and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Disposition, including
without limitation pension and other post-employment benefit
liabilities, liabilities related to environment matters and
liabilities under any indemnification obligations associated with
such Disposition. " Net Proceeds" shall also include proceeds
paid on account of any Event of Loss, net of (i) all money
actually applied to repair or reconstruct the damaged property or
property affected by the condemnation or taking, (ii) all of the
costs and expenses reasonably incurred in connection with the
collection of such proceeds, award or other payments, (iii) any
amounts retained by or paid to parties having superior rights to
such proceeds, awards or other payments and (iv) income taxes or
other taxes paid or payable as a direct result thereof.
"New West" means New West Eyeworks, Inc., a Delaware corporation.
"New West Purchase Agreement" means that certain Agreement and
Plan of Merger dated as of July 13 ,1998, as amended as of October 5,
1998, among New West, the Company and NW Acquisition Corp., a Delaware
corporation evidencing a purchase price by the Company in an amount not
more than $69,000,000, in form and substance satisfactory to the
Agents.
"New West Purchase Documents" means those certain documents
executed in connection with the transaction contemplated by the New
West Purchase Agreement, in form and substance satisfactory to the
Agents.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit D.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit E.
"Notice of Conversion / Continuation" means a notice in
substantially the form of Exhibit F.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the
Company to any Bank, the Administrative Agent, the Documentation Agent
or any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"Offshore Rate" means, with respect to each Offshore Rate Loan
comprising part of the same Borrowing for any Interest Period, an
interest rate per annum obtained by dividing (i) (y) the rate of
interest (rounded upward, if necessary, to the nearest 1/16 of one
percentage point) appearing on Telerate Page 3750 (or any successor
page) or (z) if no such rate is available, the rate of interest
determined by the Administrative Agent to be the rate or the arithmetic
mean of rates (rounded upward, if necessary, to the nearest 1/16 of one
percentage point) at which Dollar deposits in immediately available
funds are offered by First Union to first-tier banks in the London
interbank Eurodollar market, in each case under (y) and (z) above at
approximately 11:00 a.m., London time, two (2) Business Days prior to
the first day of such Interest Period for a period substantially equal
to
22<PAGE>
such Interest Period and in an amount substantially equal to the amount of
First Union's Offshore Rate Loan comprising part of such Borrowing, by (ii)
the amount equal to 1.00 minus the Reserve Requirement (expressed as a
decimal) for such Interest Period.
"Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions under
ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising under
Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such Person
in the ordinary course of business for the purpose of directly mitigating
risks associated with liabilities, commitments or assets held or reasonably
anticipated by such Person, or changes in the value of securities issued by
such Person in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a
"market view;" (b) such Swap Contracts do not contain (i) any provision
("walk-away" provision) exonerating the non-defaulting party from its
obligation to make payments on outstanding transactions to the defaulting
party, or (ii) with respect to any Swap Contract that is not a Specified
Swap Contract, any provision creating or permitting the declaration of an
event of default, termination event or similar event upon the occurrence of
an Event of Default hereunder (other than an Event of Default under
subsection 9.01(a)), and (c) a perfected security interest in such Person's
rights and interests to and in such Swap Contracts has been granted, and
exists, in favor of the Administrative Agent, for the benefit of the Banks,
as collateral for the Obligations.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
23<PAGE>
"Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pledge Agreement" means that certain Pledge Agreement of even
date herewith between the Company and the Administrative Agent,
together with any other pledge agreement executed and delivered after
the date hereof between the Company and the Administrative Agent, all
of such documents substantially in the form of Exhibit G.
"Pledged Collateral" has the meaning specified in the Pledge
Agreement.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place)
at such time of such Bank's Commitment (or Loans if the Commitment is
no longer in effect) divided by the combined Commitments (or Loans if
the Commitment is no longer in effect) of all Banks.
"Purchase Money Indebtedness " means any Indebtedness of the
Company or its Restricted Subsidiaries incurred for the purpose of
financing all or any part of the purchase price or the cost of
installation, construction or improvement of any property.
"Qualified Proceeds " means any of the following or any
combination of the following: (i) cash, (ii) cash equivalents, (iii)
assets that are used or usable in the business of the Company and its
Restricted Subsidiary as existing on the Closing Date or a business
reasonably related or complimentary thereto and (iv) capital stock of
any Person engaged primarily in the business of the Company and its
Restricted Subsidiaries as existing on the Closing Date or a business
reasonably related or complimentary thereto if, in connection with the
receipt by the Company or any Restricted Subsidiary of the Company of
such Stock: (A) such Person becomes a Restricted Subsidiary or (B) such
Person is merged with or into or transfers or conveys substantially all
or all of its assets to, or is liquidated into, the Company or any
Restricted Subsidiary of the Company.
"Reference Bank" means First Union.
"Replacement Bank" has the meaning specified in Section 4.07.
"Reportable Event" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Reserve Requirement" means, with respect to any Interest Period,
the reserve percentage (expressed as a decimal) in effect from time to
time during such Interest Period, as provided by the Federal Reserve
Board, applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and
emergency reserves) applicable to First Union under Regulation D with
respect to "Eurocurrency liabilities" within the meaning of Regulation
D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
24<PAGE>
"Responsible Officer" means the chief executive officer, the
chief financial officer or the president of the Company, or any other
officer having substantially the same authority and responsibility; or,
with respect to compliance with financial covenants, the chief financial
officer, the controller or the treasurer of the Company, or any other
officer having substantially the same authority and responsibility.
"Restricted Subsidiary" means any direct or indirect Subsidiary
of the Company other than an Unrestricted Subsidiary.
"Revolving Loan" has the meaning specified in Section 2.01.
"Revolving Termination Date" means the earlier to occur of:
(a) September 30, 2001; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Security Agreement" means that certain Security Agreement of
even date herewith between the Company and the Administrative Agent,
substantially in the form of Exhibit H.
"Senior Notes" means those certain senior unsecured notes due
2005 issued by the Company pursuant to the Indenture, which notes, among
other things, (i) may not accrue interest at a rate in excess of twelve
and three quarters of one percent (12.75%) per annum (ii) may not yield
to the holders thereof upon issuance a rate of return in excess of
thirteen percent (13%) per annum, (iii) must generate at least
$123,000,000 of proceeds to the Company (after deducting original issue
discount from the gross proceeds thereof) and (iv) must at all times be
unsecured obligations of the Company, in form and substance
satisfactory to the Agents.
"Solvent" means, as to any Person at any time, that (a) the fair
value of the property of such Person is greater than the amount of such
Person's liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(31) of the Bankruptcy Code; (b)
the present fair saleable value of the property of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its property and pay
its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of
business; (d) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability to pay
as such debts and liabilities mature; and (e) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute unreasonably small capital.
25<PAGE>
"Specified Swap Amount" means, at any time, in respect of
Specified Swap Contracts to which any Swap Provider is party, the Swap
Termination Value relating thereto; provided that for purposes of this
definition, any Swap Termination Value that is negative as to (i.e.,
owing by) any Swap Provider shall be deemed equal to zero (0).
"Specified Swap Contract" means any Swap Contract made or entered
into at any time, or in effect at any time (whether heretofore or
hereafter), whether directly or indirectly, and whether as a result
of assignment or transfer or otherwise, between the Company and any Swap
Provider which Swap Contract is or was intended by the Company to have
been entered into, in part or entirely, for purposes of mitigating
interest rate or currency exchange risk relating to any Loan (which
intent shall conclusively be deemed to exist if the Company so
represents to the Swap Provider in writing), and as to which the final
scheduled payment by the Company is not later than the Revolving
Termination Date.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Subsidiary Guaranty" means that certain Subsidiary Guaranty of
even date herewith executed and delivered by the Restricted
Subsidiaries in favor of the Administrative Agent, together with any
other subsidiary guaranty executed or delivered after the date hereof,
all of such documents substantially in the form of Exhibit I.
"Subsidiary Pledge Agreement" means that certain Subsidiary
Pledge Agreement of even date herewith between Frame-n-Lens and the
Administrative Agent, together with any other subsidiary pledge
agreement executed and delivered after the date hereof, all of such
documents substantially in the form of Exhibit J.
"Subsidiary Security Agreement" means that certain Subsidiary
Security Agreement of even date herewith among the Restricted
Subsidiaries and the Administrative Agent, together with any other
subsidiary security agreement executed and delivered after the date
hereof, all of such documents substantially in the form of Exhibit K.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement now existing or hereafter
entered into, whether or not in writing, relating to any transaction
that is a rate swap, basis swap, forward rate transaction, commodity
26
<PAGE>
swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange
transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other,
similar transaction (including any option to enter into any of the
foregoing) or any combination of the foregoing, and, unless the context
otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
"Swap Provider" means any Bank, or any Affiliate of any Bank,
that is at the time of determination party to a Swap Contract with the
Company.
"Swap Termination Value" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Swap Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include any Bank.)
"Swingline Bank" means First Union.
"Swingline Commitment" has the meaning specified in Section
2.15(a).
"Swingline Loan" has the meaning specified in Section 2.15(a).
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the
case of each Bank and the Administrative Agent, respectively, taxes
imposed on or measured by its net income by the jurisdiction (or any
political subdivision thereof) under the laws of which such Bank or the
Administrative Agent, as the case may be, is organized or maintains a
Lending Office.
"Tender Offer" means the cash tender offer commenced by the
Company on July 20, 1998 for all of the shares of common stock of New
West at a cash purchase price of $11.50 per share.
"Type" has the meaning specified in the definition of "Loan."
"UCC" means the Uniform Commercial Code as in effect in the
State of Georgia.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412 of
the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Unrestricted Subsidiaries" means the Foreign Subsidiaries, the
Managed Care Subsidiaries and each other direct or indirect Subsidiary
of the Company designated as an "Unrestricted Subsidiary" by the
Company and such designation is consented to by the Majority Banks;
provided, however, that each Managed Care Subsidiary existing on the
Closing Date shall use its reasonable efforts to obtain the approval of
27<PAGE>
the requisite regulatory entity for it to become a Restricted Subsidiary
as promptly as practicable after the Closing Date and each Person which
becomes a Managed Care Subsidiary after the Closing Date shall use its
reasonable efforts to obtain the requisite regulatory approval for it
to become a Restricted Subsidiary as promptly as applicable after it
becomes a Managed Care Subsidiary; provided further that with regard to
any domestic Subsidiary of the Company formed after the Closing Date
which is or seeks to become a Managed Care Subsidiary such Subsidiary's
obligations as a Restricted Subsidiary under a Subsidiary Guaranty,
Subsidiary Security Agreement and Subsidiary Pledge Agreement (if
applicable) to be issued pursuant to Section 7.17 of this Agreement
shall only become effective if (a) the approval of the requisite
regulatory entity is obtained (if such approval is required) and (b)
the granting of the Subsidiary Guaranty, Subsidiary Security Agreement
and Subsidiary Pledge Agreement (if applicable) by such Subsidiary
shall not have a material adverse effect upon the business, operations,
assets, condition (financial or otherwise) or prospects of such
Subsidiary (a "material adverse effect"); provided that if a Subsidiary
Guaranty, Subsidiary Security Agreement and Subsidiary Pledge Agreement
(if applicable) is not issued by such Subsidiary in reliance on the
provisions of this clause (b), the Company shall deliver an officers'
certificate to the Administrative Agent stating that the granting of
such Subsidiary Guaranty, Subsidiary Security Agreement and Subsidiary
Pledge Agreement (if applicable) would have a material adverse effect,
and provided, further that such obligation under the Subsidiary
Guaranty shall be limited to the maximum amount which such Subsidiary
would be permitted to declare or pay as a dividend in compliance with
the applicable rules or regulations of, or undertakings made to, any
regulatory entity having jurisdiction and authority over such
Subsidiary. No Subsidiary may be designated as an Unrestricted
Subsidiary hereunder if it is a "Guarantor" as defined in the Indenture
as in effect on the Closing Date.
"Value of the Eligible Inventory" shall mean, at any particular
date, the lower of the fair market value of the Eligible Inventory or
its cost, valued in accordance with the "First-In, First-Out" method of
accounting.
"Wholly-Owned Subsidiary" means any corporation in which (other
than directors' qualifying shares required by law, or other nominal
interests in the case of any Foreign Subsidiary) 100% of the capital
stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case,at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
Section 1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
28<PAGE>
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to
and including."
(iv) The term "property" includes any kind of
property or asset, real, personal or mixed, tangible or
intangible.
(d) Unless otherwise expressly provided herein,
(i) references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement
are for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may
use several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance
with their terms. Unless otherwise expressly provided, any reference
to any action of the Administrative Agent, Documentation Agent or the
Banks by way of consent, approval or waiver shall be deemed modified
by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents
are the result of negotiations among and have been reviewed by counsel
to the Administrative Agent, the Documentation Agent, the Company and
the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Banks, the Documentation Agent
or the Administrative Agent merely because of the Administrative
Agent's, the Documentation Agent's or Banks' involvement in their
preparation.
Section 1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires,
all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be
made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
29<PAGE>
ARTICLE II
THE CREDITS
Section 2.01 The Revolving Credit.
Each Bank severally agrees, on the terms and conditions set
forth herein, in accordance with its Pro Rata Share and not jointly,
to make loans to the Company (each such loan, a "Revolving Loan") from
time to time on any Business Day during the period from the Closing
Date to the Revolving Termination Date, in an aggregate amount not to
exceed at any time outstanding the lesser of (i) the Borrowing Base
and (ii) the Commitment; provided, however, that the aggregate amount
of the Loans advanced and Letters of Credit issued on the date of the
initial Borrowing shall not exceed $10,000,000. Within the limits of
each Bank's Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this section 2.01, prepay under
Section 2.06 and reborrow under this section 2.01.
Section 2.02 Loan Accounts.
(a) The Loans made by each Bank and the Swingline
Bank and Letters of Credit Issued by the Issuing Bank shall be
evidenced by one or more loan accounts or records maintained by such
Bank, Swingline Bank or the Issuing Bank in the ordinary course of
business. The accounts or records maintained by the Administrative
Agent, each Bank and the Swingline Bank shall be conclusive absent
manifest error of the amount of the Loans made by the Banks and the
Swingline Bank to the Company and the Letters of Credit issued for the
account of the Company, and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however,
limit or otherwise affect the obligation of the Company hereunder to
pay any amount owing with respect to the Loans or any Letter of
Credit.
(b) Upon the request of any Bank made through the
Administrative Agent, the Loans made by such Bank or the Swingline
Bank, as the case may be, may be evidenced by one or more Notes,
instead of or in addition to loan accounts. Each such Bank or the
Swingline Bank, as the case may be, shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made
by it and the amount of each payment of principal made by the Company
with respect thereto. Each such Bank or the Swingline Bank, as the
case may be, is irrevocably authorized by the Company to endorse its
Note(s) and each Bank's or Swingline Bank's, as the case may be,
record shall be conclusive absent manifest error; provided, however,
that the failure of a Bank or the Swingline Bank, to make, or an error
in making, a notation thereon with respect to any Loan shall not limit
or otherwise affect the obligations of the Company hereunder or under
any such Note to such Bank or the Swingline Bank.
Section 2.03 Procedure for Borrowing.
(a) Each Borrowing of Revolving Loans shall be made
upon the Company's irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Borrowing (which
notice must be received by the Administrative Agent prior to 11:00
a.m. (Charlotte, North Carolina time) (i) three Business Days prior to
the requested Borrowing Date, in the case of Offshore Rate Loans; and
(ii) one Business Day prior to the requested Borrowing Date, in the
case of Base Rate Loans, specifying:
30<PAGE>
(A) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $1,000,000 or any multiple of
$500,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing;
(D) that the Loans requested are Revolving Loans (rather
than Swingline Loans); and
(E) the duration of the Interest Period applicable to
such Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest Period
shall be one (1) month.
[provided, however, that with respect to the Borrowing to be made on
the Closing Date, the Notice of Borrowing shall be delivered to the
Administrative Agent not later than 11:00 a.m. (Charlotte, North
Carolina time) on the Closing Date and such Borrowing will consist of
Base Rate Loans only.
(b) The Administrative Agent will promptly notify
each Bank of its receipt of any Notice of Borrowing or Revolving Loans
and of the amount of such Bank's Pro Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata
Share of each Borrowing available to the Administrative Agent for the
account of the Company at the Administrative Agent's Payment Office by
11:00 a.m. (Charlotte, North Carolina time) on the Borrowing Date
requested by the Company in funds immediately available to the
Administrative Agent. The Company hereby authorizes the
Administrative Agent to disburse the proceeds of each Borrowing in
accordance with the terms of any written instructions from any of the
Responsible Officers, provided that the Administrative Agent shall not
be obligated under any circumstances to forward amounts to any account
not listed in an Account Designation Letter. The Company may at any
time deliver to the Administrative Agent an Account Designation Letter
listing any additional accounts or deleting any accounts listed in a
previous Account Designation Letter.
(d) After giving effect to any Borrowing, unless
the Administrative Agent shall otherwise consent, there may not be
more than five (5) different Interest Periods in effect.
Section 2.04 Conversion and Continuation Elections.
(a) The Company may, with respect to Revolving
Loans, upon irrevocable written notice to the Administrative Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable
31<PAGE>
Interest Period, in the case of any other Type of Revolving
Loans, to convert any such Revolving Loans (or any part
thereof in an amount not less than $1,000,000, or that is in
an integral multiple of $500,000 in excess thereof) into
Revolving Loans of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Revolving Loans having
Interest Periods expiring on such day (or any part thereof
in an amount not less than $1,000,000, or that is in an
integral multiple of $500,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate
Loans in respect of any Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be less than $1,000,000, such
Offshore Rate Loans shall automatically convert into Base Rate Loans,
and on and after such date the right of the Company to continue such
Revolving Loans as, and convert such Loans into, Offshore Rate Loans
shall terminate.
(b) The Company shall deliver a Notice of Conversion /
Continuation to be received by the Administrative Agent not later than
11:00 a.m. (Charlotte, North Carolina time) at least (i) three
Business Days in advance of the Conversion / Continuation Date, if the
Revolving Loans are to be converted into or continued as Offshore Rate
Loans; and (ii) one Business Day in advance of the Conversion /
Continuation Date, if the Revolving Loans are to be converted into
Base Rate Loans, specifying:
(A) the proposed Conversion / Continuation
Date;
(B) the aggregate amount of Revolving Loans
to be converted or continued;
(C) the Type of Revolving Loans resulting
from the proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest
Period applicable to Offshore Rate Loans, the Company has failed to
select timely a new Interest Period to be applicable to such Offshore
Rate Loans or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Offshore Rate
Loans into Base Rate Loans effective as of the expiration date of such
Interest Period.
(d) The Administrative Agent will promptly
notify each Bank of its receipt of a Notice of Conversion /
Continuation, or, if no timely notice is provided by the Company, the
Administrative Agent will promptly notify each Bank of the details of
any automatic conversion. All conversions and continuations shall be
made ratably according to the respective outstanding principal amounts
of the Revolving Loans with respect to which the notice was given held
by each Bank.
(e) Unless the Majority Banks otherwise consent,
32<PAGE>
during the existence of a Default or Event of Default, the Company may
not elect to have a Revolving Loan converted into or continued as an
Offshore Rate Loan.
(f) After giving effect to any conversion or
continuation of Loans, unless the Administrative Agent shall otherwise
consent, there may not be more than five (5) different Interest
Periods in effect.
Section 2.05 Voluntary Termination or Reduction of Commitments.
(a) The Company may, upon not less than five
Business Days' prior notice to the Administrative Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate
minimum amount of $1,000,000 or any multiple of $500,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of
Loans made on the effective date thereof, (a) the Effective Amount of
all Revolving Loans, Swingline Loans and L/C Obligations together
would exceed the amount of the combined Commitments then in effect, or
(b) the Effective Amount of all L/C Obligations then outstanding would
exceed the L/C Commitment. Once reduced in accordance with this
Section, the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro Rata
Share. If and to the extent specified by the Company in the notice to
the Administrative Agent, some or all of the reduction in the combined
Commitments of the Banks shall be applied to reduce the L/C
Commitment. All accrued commitment and letter of credit fees to, but
not including, the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such reduction or
termination.
(b) At no time shall the Swingline Commitment
exceed the Commitment, and any reduction of the Commitment which
reduces the Commitment below the then-current amount of the Swingline
Commitment shall result in an automatic corresponding reduction of the
Swingline Commitment to the amount of the Commitment, as so reduced,
without any action on the part of the Swingline Bank. At no time
shall the Swingline Commitment exceed the Swingline Bank's (in its
capacity as a Bank) Pro Rata Share of the Commitment, and any
reduction of the Commitment which reduces the Swingline Bank's (in its
capacity as a Bank) Pro Rata Share of the Commitment below the
then-current amount of the Swingline Commitment shall result in an
automatic corresponding reduction of the Swingline Commitment to the
amount of the Swingline Bank's (in its capacity as a Bank) Commitment,
as so reduced, without any action on the part of the Swingline Bank.
Section 2.06 Optional Prepayments.
Subject to Section 4.04, the Company may, at any time or from
time to time, upon not less than three Business Days' irrevocable
notice to the Administrative Agent, (a) ratably prepay the Revolving
Loans in whole or in part, in minimum amounts of $1,000,000 or any
multiple of $500,000 in excess thereof, and (b) prepay in whole or in
part Swingline Loans, in minimum amounts of $1,000,000 or any multiple
of $500,000 in excess thereof, or in other amounts with the consent of
33<PAGE>
the Swingline Bank. Such notice of prepayment shall specify the date
and amount of such prepayment and the Type(s) of Loans to be prepaid.
The Administrative Agent will promptly notify each Bank of its receipt
of any such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Company, the Company shall
make such prepayment and the payment amount specified in such notice
shall be due and payable on the date specified therein.
2.07 Mandatory Prepayments of Loans.
(a) The principal balance of all Loans then
outstanding shall be due and payable in full on the Revolving
Termination Date.
(i) Notwithstanding the foregoing,
however, in the event that at any time and
for any reason there shall exist a Borrowing Base
Deficiency, the Company shall immediately pay to
the Administrative Agent an amount equal to the
Borrowing Base Deficiency, which payment shall
constitute a mandatory payment of the Loans
hereunder.
(ii) If on any date the Effective Amount
of L/C Obligations exceeds the L/C Commitment,
the Company shall Cash Collateralize on such date the
outstanding Letters of Credit in an amount
equal to the excess of the maximum amount then
available to be drawn under the Letters of
Credit over the L/C Commitment. Subject to Section
4.04, if on any date after giving effect to any Cash
Collateralization made on such date pursuant to the
preceding sentence, the Effective Amount of all
Revolving Loans then outstanding, plus the Effective
Amount of all L/C Obligations, plus the
Effective Amount of all Swingline Loans exceeds the
combined Commitments of the Banks, the Company
shall immediately, and without notice or demand,
prepay the outstanding principal amount of the
Revolving Loans and L/C Advances by an amount equal
to the applicable excess.
(iii) Swingline Loans. The Company shall
be required to prepay Swingline Loans on each
Clean-Up Day as provided in subsection 2.15(d), and
if following any reduction of the Swingline
Commitment pursuant to subsection 2.05(b) the
aggregate outstanding principal amount of Swingline
Loans would exceed the Swingline Commitment as
reduced, the Company shall prepay on the reduction
date the outstanding principal amount of the
Swingline Loans, in an amount equal to the excess
(after giving effect to the scheduled Swingline
Commitment reduction) of the Swingline Loans over
the Swingline Commitment; together, in each case,
with all accrued and unpaid interest thereon.
(b) Any prepayments pursuant to this Section
2.07 shall be applied first to any Base Rate Loans then outstanding
and then to Offshore Rate Loans with the shortest Interest Periods
remaining; provided, however, that if the amount of Base Rate Loans
then outstanding is not sufficient to satisfy the entire prepayment
requirement, the Company may, at its option, place any amounts which
34<PAGE>
it would otherwise be required to use to prepay Offshore Rate Loans on
a day other than the last day of the Interest Period therefor in an
interest-bearing account pledged to the Administrative Agent for the
benefit of the Banks until the end of such Interest Period at which
time such pledged amounts will be applied to prepay such Offshore Rate
Loans.
(c) The principal balance of the Loans shall
also be repaid from Net Proceeds as provided in Section 8.02 (c)
hereof. Upon the making of any mandatory prepayment as provided in
Section 8.02 (c) except with respect to the Arizona Property, the
Commitment of each Bank shall automatically be reduced by an amount
equal to such Bank's Pro Rata Share of the aggregate of principal
repaid, effective as of the earlier of the date that such prepayment
is made or the date by which such prepayment is due and payable
hereunder.
Section 2.08 Interest.
(a) Each Revolving Loan shall bear interest on
the outstanding principal amount thereof from the applicable Borrowing
Date at a rate per annum equal to the Offshore Rate or the Base Rate,
as the case may be (and subject to the Company's right to convert to
other Types of Loans under Section 2.04 and subject to whether an
Event of Default exists and is continuing), plus the Applicable
Margin. Each Swingline Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing date at a rate
per annum equal to the Base Rate, plus the Applicable Margin.
(b) Interest on each Loan shall be paid in
arrears on each Interest Payment Date provided that, in the event that
the Loans are repaid or prepaid in full and all the Banks' Commitments
are terminated, then accrued interest in respect of all Loans shall be
payable together with such repayment or prepayment on the date
thereof; and provided further, that in the event all Offshore Rate
Loans made pursuant to a single Borrowing are repaid or prepaid in
full, then accrued interest in respect of such Offshore Rate Loan
shall be payable together with such repayment or prepayment on the
date thereof.
(c) Notwithstanding subsection (a) of this
Section, while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of judgment
thereon to the extent permitted by law) on the principal amount of all
outstanding Obligations, at a rate per annum which is determined by
adding two percent (2%) per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to
an Applicable Margin, at a rate per annum equal to the Base Rate plus
four percent (4%) and, upon the occurrence and during the continuance
of an Event of Default and request by the Majority Banks, the
Administrative Agent shall convert all outstanding Offshore Rate Loans
into Base Rate Loans.
(d) Anything herein to the contrary
notwithstanding, the obligations of the Company to any Bank hereunder
shall be subject to the limitation that payments of interest shall not
be required for any period for which interest is computed hereunder,
to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the
provisions of any law applicable to such Bank limiting the highest
rate of interest that may be lawfully contracted for, charged or
received by such Bank, and in such event the Company shall pay such
<PAGE>
Bank interest at the highest rate permitted by applicable law.
Section 2.09 Fees.
35<PAGE>
(a) Arrangement, Agency Fees. The Company shall
pay the fees provided for in that certain letter between the Company and
the Administrative Agent and that certain letter between the Company and the
Documentation Agent, each of even date herewith (collectively, the "Fee
Letters"). Such fees shall be fully earned when due and nonrefundable when
paid.
(b) Commitment Fees. The Company shall pay to
the Administrative Agent for the account of each Bank a commitment fee
on each such Bank's Pro Rata Share of the Available Loan Commitment,
computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon the daily average Available Loan
Commitment for that quarter as calculated by the Administrative Agent,
equal to .500% percent per annum, to be adjusted based upon the ratio
of the Company's and its Subsidiaries' (on a consolidated basis)
Indebtedness to Adjusted EBITDA for the most recently ended four fiscal
quarter period as set forth in the table below:
If the ratio of Indebtedness to The Commitment Fee shall be equal
Adjusted EBITDA is: to the following per annum rate:
greater than 4.0 to 1.0 0.500%
less than or equal to 4.0 to 1.0 0.375%
and greater than 2.5 to 1.0
less than or equal to 2.5 to 1.0 0.250%
The commitment fee adjustment provided for in the table above shall be
effective (i) with respect to an increase in such commitment fee, as of
the tenth (10th) Business Day after the day on which financial statements
are required to be delivered to the Administrative Agent pursuant to
Section 7.01 hereof, and (ii) with respect to any decrease in
such commitment fee, as of the later of (x) the tenth (10th) Business
Day after which such financial statements are required to be delivered
to the Administrative Agent pursuant to Section 7.01, and (y) the date on
which such financial statements are actually delivered to the Administrative
Agent provided, however, that, notwithstanding the foregoing or anything else
herein to the contrary, if at any time the Company shall have failed to deliver
the financial statements and a Compliance Certificate as required by
Section 7.01(a) or Section 7.01(b), as the case may be, and Section 7.02(b),
or if at any time an Event of Default shall have occurred and be continuing,
then at the election of the Majority Banks, at all times from and including
the date on which such statements and Compliance Certificate are required
to have been delivered (or the date of the occurrence of such Event of
Default, as the case may be) to the date on which the same shall have
been delivered (or such Event of Default is cured or waived, as the
case may be), each Applicable Margin shall be determined in accordance
with the above matrix as if the ratio of the Company's Indebtedness to
Adjusted EBITDA for the most recently ended four fiscal quarter period
were greater than or equal to 4.5 to 1.0 (notwithstanding the actual ratio).
Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter commencing on
December 31, 1998 through the Revolving Termination Date, with the final
payment to be made on the Revolving Termination Date. The commitment
fees provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which
one or more conditions in Article IV are not met.
36<PAGE>
Section 2.10 Computation of Fees and Interest.
(a) All computations of interest for Base Rate
Loans when the Base Rate is determined by First Union's "reference
rate" shall be made on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed. All other computations of fees
and interest shall be made on the basis of a 360-day year and actual
days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by
the Administrative Agent shall be conclusive and binding on the
Company and the Banks in the absence of manifest error. The
Administrative Agent will, at the request of the Company or any Bank,
deliver to the Company or the Bank, as the case may be, a statement
showing the quotations used by the Administrative Agent in determining
any interest rate and the resulting interest rate.
(c) If the Reference Bank's Commitment
terminates (other than on termination of all the Commitments), or for
any reason whatsoever the Reference Bank ceases to be a Bank
hereunder, the Reference Bank shall thereupon cease to be a Reference
Bank, and the Offshore Rate shall be determined on the basis of the
rates as notified by a new Reference Bank designated as such by the
Majority Banks.
Section 2.11 Payments by the Company.
(a) All payments to be made by the Company shall
be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall
be made to the Administrative Agent for the account of the Banks at
the Administrative Agent's Payment Office, and shall be made in
dollars and in immediately available funds, no later than 12:00 noon
(Charlotte, North Carolina time) on the date specified herein. The
Administrative Agent will promptly distribute to each Bank its Pro
Rata Share (or other applicable share as expressly provided herein) of
such payment in like funds as received. Any payment received by the
Administrative Agent later than 12:00 noon (Charlotte, North Carolina
time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) All payments (including prepayments) to be
made by the Company to the Swingline Bank on account of principal,
interest, fees and other amounts required hereunder with respect to
Swingline Loans shall be made without set-off or counterclaim and
shall be made to the Agent for the account of the Swingline Bank in
accordance with Section 2.15, and all payments to be made by the
Company to any Issuing Bank on account of drawings, interest, fees and
other amounts required hereunder with respect to any Letter of Credit
issued by it shall be made without set-off or counterclaim and shall
be made to the Agent for the account of such Issuing Bank in
accordance with Article III, except in each case to the extent that a
Bank is entitled to share in any such payment as a result of its
participation therein in accordance with the provisions of Section
2.13 or 3.03, as the case may be.
37<PAGE>
(c) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is due on
a day other than a Business Day, such payment shall be made on the
following Business Day, and such extension of time shall in such case
be included in the computation of interest or fees, as the case may
be.
(d) Unless the Administrative Agent receives
notice from the Company prior to the date on which any payment is due
to the Banks that the Company will not make such payment in full as
and when required, the Administrative Agent may assume that the
Company has made such payment in full to the Administrative Agent on
such date in immediately available funds and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption,
distribute to each Bank on such due date an amount equal to the amount
then due such Bank. If and to the extent the Company has not made
such payment in full to the Administrative Agent, each Bank shall
repay to the Administrative Agent on demand such amount distributed to
such Bank, together with interest thereon at the Federal Funds Rate
for each day from the date such amount is distributed to such Bank
until the date repaid.
Section 2.12 Payments by the Banks to the Administrative Agent.
(a) Unless the Administrative Agent receives
notice from a Bank on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one Business Day prior
to the date of such Borrowing, that such Bank will not make available
as and when required hereunder to the Administrative Agent for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Administrative Agent may assume that each Bank has made
such amount available to the Administrative Agent in immediately
available funds on the Borrowing Date and the Administrative Agent may
(but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and
to the extent any Bank shall not have made its full amount available
to the Administrative Agent in immediately available funds and the
Administrative Agent in such circumstances has made available to the
Company such amount, that Bank shall on the Business Day following
such Borrowing Date make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate for each day
during such period. A notice of the Administrative Agent submitted to
38<PAGE>
any Bank with respect to amounts owing under this subsection (a) shall
be conclusive, absent manifest error. If such amount is so made
available, such payment to the Administrative Agent shall constitute
such Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Administrative
Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Company of such failure to fund
and, upon demand by the Administrative Agent, the Company shall pay
such amount to the Administrative Agent for the Administrative Agent's
account, together with interest thereon for each day elapsed since the
date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on
any Borrowing Date shall not relieve any other Bank of any obligation
hereunder to make a Loan on such Borrowing Date, but no Bank shall be
responsible for the failure of any other Bank to make the Loan to be
made by such other Bank on any Borrowing Date.
Section 2.13 Sharing of Payments, Etc.
If, other than as expressly provided elsewhere herein, any
Bank shall obtain on account of the Obligations in its favor any
payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its ratable share (or
other share contemplated hereunder), such Bank shall immediately (a)
notify the Administrative Agent of such fact, and (b) purchase from
the other Banks such participations in the Loans made by them as shall
be necessary to cause such purchasing Bank to share the excess payment
pro rata with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and
each other Bank shall repay to the purchasing Bank the purchase price
paid therefor, together with an amount equal to such paying Bank's
ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered
from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so
recovered. The Company agrees that any Bank so purchasing a
participation from another Bank may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 11.10) with respect to such
participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Administrative Agent
will keep records (which shall be conclusive and binding in the
absence of manifest error) of participations purchased under this
Section and will in each case notify the Banks following any such
purchases or repayments.
Section 2.14 Security.
(a) All obligations of the Company and its
Restricted Subsidiaries under this Agreement, the Notes and all other
Loan Documents shall be secured in accordance with the Collateral
Documents.
(b) All obligations of the Company under this
Agreement, each of the Notes and all other Loan Documents shall be
unconditionally guaranteed by the Restricted Subsidiaries pursuant to
the Subsidiary Guaranty.
Section 2.15 Swingline Loan.
(a) Subject to the terms and conditions hereof,
the Swingline Bank agrees to make a portion of the Commitment available
to the Company by making swingline loans (individually, a "Swingline Loan";
39<PAGE>
collectively, the "Swingline Loans") to the Company on any Business
Day during the period from the Closing Date to the Revolving
Termination Date in accordance with the procedures set forth in this
Section 2.15 in an aggregate principal amount at any one time
outstanding not to exceed Three Million Dollars ($3,000,000),
notwithstanding the fact that such Swingline Loans, when aggregated
with the Swingline Bank's outstanding Revolving Loans and L/C
Advances, may exceed the Swingline Bank's Commitment (the amount of
such commitment of the Swingline Bank to make Swingline Loans to the
Company pursuant to this subsection 2.15(a), as the same shall be
reduced pursuant to subsection 2.05(b) or as a result of any
assignment pursuant to Section 11.07, the Swingline Bank's "Swingline
Commitment"); provided, that at no time shall (i) the sum of the
Effective Amount of all Swingline Loans plus the Effective Amount of
all Revolving Loans plus the Effective Amount of all L/C Obligations
exceed the Commitment, or (ii) the Effective Amount of all Swingline
Loans exceed the Swingline Commitment. Additionally, no more than
three Swingline Loans may be outstanding at any one time, and all
Swingline Loans shall at all times be Base Rate Loans. Within the
foregoing limits, and subject to the other terms and conditions
hereof, the Company may borrow under this subsection 2.15(a), prepay
pursuant to Section 2.06 and reborrow pursuant to this subsection
2.15(a).
(b) The Company shall provide the Administrative
Agent (with a copy to the Swingline Bank) irrevocable written notice
(including notice via facsimile confirmed immediately by a telephone
call) in the form of a Notice of Borrowing of any Swingline Loan
requested hereunder (which notice must be received by the Swingline
Bank and the Administrative Agent prior to 11.00 a.m. (Charlotte,
North Carolina time) on the requested Borrowing date) specifying (i)
the amount to be borrowed, and (ii) the requested Borrowing date,
which must be a Business Day. Upon receipt of the Notice of
Borrowing, the Swingline Bank will immediately confirm with the
Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of the Notice of Borrowing
from the Company and, if not, the Swingline Bank will provide the
Administrative Agent with a copy thereof. Unless the Swingline Bank
has received notice prior to 1:00 p.m. (Charlotte, North Carolina
time) on such Borrowing date from the Administrative Agent (including
at the request of any Bank) (A) directing the Swingline Bank not to
make the requested Swingline Loan as a result of the limitations set
forth in the proviso set forth in the first sentence of subsection
2.15(a); or (B) that one or more conditions specified in Article V are
not then satisfied; then, subject to the terms and conditions hereof,
the Swingline Bank will, not later than 1:00 p.m. (Charlotte, North
Carolina time) on the Borrowing date specified in such Notice of
Borrowing, make the amount of its Swingline Loan available to the
Administrative Agent for the account of the Company at the
Administrative Agent's Payment Office in funds immediately available
to the Administrative Agent. The proceeds of such Swingline Loan will
then be made available to the Company by the Administrative Agent
crediting the account of the Company on the books of the Swingline
Bank with the aggregate of the amounts made available to the
Administrative Agent by the Swingline Bank and in like funds as
received by the Administrative Agent. Each Borrowing pursuant to this
Section shall be in an aggregate principal amount equal to five
hundred thousand dollars ($500,000) or a multiple of one hundred
thousand dollars ($100,000) in excess thereof, unless otherwise agreed
by the Swingline Bank. The Administrative Agent will notify the Banks
on a weekly basis if any Swingline Loan Borrowings occurred during
such week.
40<PAGE>
(c) The Company shall repay to the Swingline
Bank in full on the Revolving Termination Date the aggregate principal
amount of the Swingline Loans outstanding on the Revolving Termination
Date.
(d) For one Business Day during each successive
seven Business Day period the aggregate principal amount of Swingline
Loans shall be $0 (a "Clean-Up Day"). The Company shall prepay the
outstanding principal amount of the Swingline Loans in whole to the
extent required so that a Clean-Up Day may occur in each such
seven Business Day period as provided in this subsection 2.15(d)
(which Swingline Loans may not be reborrowed until such Clean-Up Day
has ended.
(e) If:
(1) any Swingline Loans shall remain outstanding
at 9:00 a.m. (Charlotte, North Carolina time) on the Business Day
immediately prior to a Clean-Up Day and by such time on such
Business Day the Administrative Agent shall have received
neither:
(A) a Notice of Borrowing delivered
pursuant to Section 2.03 requesting that Revolving
Loans be made pursuant to subsection 2.01 on the
Clean-Up Day in an amount at least equal to the
aggregate principal amount of such Swingline Loans;
nor
(B) any other notice indicating the
Company's intent to repay such Swingline Loans with
funds obtained from other sources; or
(2) any Swingline Loans shall remain outstanding
during the existence of a Default or Event of Default and the
Swingline Bank shall in its sole discretion notify the
Administrative Agent that the Swingline Bank desires that such
Swingline Loans be converted into Revolving Loans;
then the Administrative Agent shall be deemed to have received a
Notice of Borrowing from the Company pursuant to Section 2.03
requesting that Base Rate Loans be made pursuant to subsection 2.01 on
such Clean-Up Day (in the case of the circumstances described in
clause (1) above) or on the first Business Day subsequent to the date
of such notice from the Swingline Bank (in the case of the
circumstances described in clause (2) above) in an amount equal to
the aggregate amount of such Swingline Loans, and the procedures set
forth in subsections 2.03(b) and 2.03(c) shall be followed in making
such Base Rate Loans; provided, that such Base Rate Loans shall be
made notwithstanding the Company's failure to comply with subsections
5.03(b) and 5.03(c); and provided, further, that if a Borrowing of
Revolving Loans becomes legally impracticable and if so required by
the Swingline Bank at the time such Revolving Loans are required to be
made by the Banks in accordance with this subsection 2.15(e), each
Bank agrees that in lieu of making Revolving Loans as described in
this subsection 2.15(e), such Bank shall purchase a participation from
the Swingline Bank in the applicable Swingline Loans in an amount
equal to such Bank's Pro Rata Share of such Swingline Loans, and the
procedures set forth in subsections 2.03(b) and 2.03(c) shall be
followed in connection with the purchases of such participations.
41<PAGE>
Upon such purchases of participations the prepayment requirements of
subsection 2.15(d) shall be deemed waived with respect to such
Swingline Loans. The proceeds of such Base Rate Loans, or
participations purchased, shall be applied to repay such Swingline
Loans. A copy of each notice given by the Administrative Agent to the
Banks pursuant to this subsection 2.15(e) with respect to the making
of Revolving Loans, or the purchases of participations, shall be
promptly delivered by the Administrative Agent to the Borrower. Each
Bank's obligation in accordance with this Agreement to make the
Revolving Loans, or purchase the participations, as contemplated by
this subsection 2.15(e), shall be absolute and unconditional and shall
not be affected by any circumstance, including (x) any set-off,
counterclaim, recoupment, defense or other right which such Bank may
have against the Swingline Bank, the Company or any other Person for
any reason whatsoever; (y) the occurrence or continuance of a Default,
an Event of Default or a Material Adverse Effect; or (z) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.
ARTICLE III
THE LETTERS OF CREDIT
Section 3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein
(i) the Issuing Bank agrees, (A) from time to time on any Business Day
during the period from the Closing Date to the Revolving Termination
Date to issue Letters of Credit for the account of the Company, and to
amend or renew Letters of Credit previously issued by it, in
accordance with subsections 3.02(c) and 3.02(d), and (B) to honor
drafts under the Letters of Credit; and (ii) the Banks severally agree
to participate in Letters of Credit Issued for the account of the
Company; provided, that the Issuing Bank shall not be obligated to
Issue, and no Bank shall be obligated to participate in, any Letter of
Credit if as of the date of Issuance of such Letter of Credit (the
"Issuance Date") (1) the Effective Amount of all L/C Obligations plus
the Effective Amount of all Revolving Loans plus the Effective Amount
of all Swingline Loans exceeds the combined Commitments of the Banks,
(2) the participation of any Bank in the Effective Amount of all L/C
Obligations plus the Effective Amount of the Revolving Loans of such
Bank plus such Bank's Pro Rata Share of the Effective Amount of all
Swingline Loans exceeds such Bank's Commitment, or (3) the Effective
Amount of L/C Obligations exceeds the L/C Commitment. Within the
foregoing limits, and subject to the other terms and conditions
hereof, the Company's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and
reimbursed.
(b) The Issuing Bank is under no obligation to
Issue any Letter of Credit if:
42<PAGE>
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport
to enjoin or restrain the Issuing Bank from Issuing such Letter
of Credit, or any Requirement of Law applicable to the Issuing
Bank or any request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over
the Issuing Bank shall prohibit, or request that the Issuing
Bank refrain from, the Issuance of letters of credit generally
or such Letter of Credit in particular or shall impose upon the
Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in
effect on the Closing Date, or shall impose upon the Issuing Bank
any unreimbursed loss, cost or expense which was not applicable
on the Closing Date and which the Issuing Bank in good faith
deems material to it;
(ii) the Issuing Bank has received
written notice from any Bank, the Administrative Agent, the
Documentation Agent or the Company, on or prior to the Business
Day prior to the requested date of Issuance of such Letter of
Credit, that one or more of the applicable conditions contained
in Article V is not then satisfied;
(iii) the expiry date of any requested
Letter of Credit is (A) more than 365 days after the date of
Issuance, unless the Majority Banks have approved such expiry
date in writing, or (B) after the Revolving Termination Date,
unless all of the Banks have approved such expiry date in
writing;
(iv) any requested Letter of Credit does
not provide for drafts, or is not otherwise in form and substance
acceptable to the Issuing Bank, or the Issuance of a Letter of
Credit shall violate any applicable policies of the Issuing Bank;
(v) any standby Letter of Credit is for
the purpose of supporting the issuance of any letter of credit by
any other Person; or
(vi) such Letter of Credit is in a face
amount less than $100,000 or denominated in a currency other than
Dollars.
Section 3.02 Issuance, Amendment and Renewal of Letters of
Credit.
(a) Each Letter of Credit shall be issued upon
the irrevocable written request of the Company received by the Issuing
Bank (with a copy sent by the Company to the Administrative Agent) at
least five days (or such shorter time as the Issuing Bank may agree in
a particular instance in its sole discretion) prior to the proposed
date of issuance. Each such request for issuance of a Letter of
Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in form
and detail satisfactory to the Issuing Bank: (i) the proposed date of
issuance of the Letter of Credit (which shall be a Business Day); (ii)
the face amount of the Letter of Credit; (iii) the expiry date of the
Letter of Credit; (iv) the name and address of the beneficiary
thereof; (v) the documents to be presented by the beneficiary of the
Letter of Credit in case of any drawing thereunder; (vi) the full text
43<PAGE>
of any certificate to be presented by the beneficiary in case of any
drawing thereunder; and (vii) such other matters as the Issuing Bank
may require.
(b) At least two Business Days prior to the
Issuance of any Letter of Credit, the Issuing Bank will confirm with
the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank
will provide the Administrative Agent with a copy thereof. Unless the
Issuing Bank has received notice on or before the Business Day
immediately preceding the date the Issuing Bank is to issue a
requested Letter of Credit from the Administrative Agent (A) directing
the Issuing Bank not to issue such Letter of Credit because such
issuance is not then permitted under subsection 3.01(a) as a result of
the limitations set forth in clauses (1) through (3) thereof or
subsection 3.01(b)(ii); or (B) that one or more conditions specified
in Article V are not then satisfied; then, subject to the terms and
conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance
with the Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit
is outstanding and prior to the Revolving Termination Date, the
Issuing Bank will, upon the written request of the Company received by
the Issuing Bank (with a copy sent by the Company to the
Administrative Agent) at least five days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter
of Credit issued by it. Each such request for amendment of a Letter
of Credit shall be made by facsimile, confirmed immediately in an
original writing, made in the form of an L/C Amendment Application and
shall specify in form and detail satisfactory to the Issuing Bank:
(i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day);
(iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be
under no obligation to amend any Letter of Credit if: (A) the Issuing
Bank would have no obligation at such time to issue such Letter of
Credit in its amended form under the terms of this Agreement; or (B)
the beneficiary of any such Letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Administrative Agent
will promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that,
while a Letter of Credit is outstanding and prior to the Revolving
Termination Date, at the option of the Company and upon the written
request of the Company received by the Issuing Bank (with a copy sent
by the Company to the Administrative Agent) at least five days (or
such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Bank shall be entitled to
authorize the automatic renewal of any Letter of Credit issued by it.
Each such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form
of an L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of the
Letter of Credit (which shall be a Business Day); (iii) the revised
expiry date of the Letter of Credit; and (iv) such other matters as
the Issuing Bank may require. The Issuing Bank shall be under no
44<PAGE>
obligation so to renew any Letter of Credit if: (A) the Issuing Bank
would have no obligation at such time to issue or amend such Letter of
Credit in its renewed form under the terms of this Agreement; or (B)
the beneficiary of any such Letter of Credit does not accept the
proposed renewal of the Letter of Credit. If any outstanding Letter
of Credit shall provide that it shall be automatically renewed unless
the beneficiary thereof receives notice from the Issuing Bank that
such Letter of Credit shall not be renewed, and if at the time of
renewal the Issuing Bank would be entitled to authorize the automatic
renewal of such Letter of Credit in accordance with this subsection
3.02(d) upon the request of the Company but the Issuing Bank shall not
have received any L/C Amendment Application from the Company with
respect to such renewal or other written direction by the Company with
respect thereto, the Issuing Bank shall nonetheless be permitted to
allow such Letter of Credit to renew, and the Company and the Banks
hereby authorize such renewal, and, accordingly, the Issuing Bank
shall be deemed to have received an L/C Amendment Application from the
Company requesting such renewal.
(e) The Issuing Bank may, at its election (or
as required by the Administrative Agent at the direction of the
Majority Banks), deliver any notices of termination or other
communications to any Letter of Credit beneficiary or transferee, and
take any other action as necessary or appropriate, at any time and
from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event
of any conflict with any L/C-Related Document (other than any Letter
of Credit).
(g) The Issuing Bank will also deliver to the
Administrative Agent, concurrently or promptly following its delivery
of a Letter of Credit, or amendment to or renewal of a Letter of
Credit, to an advising bank or a beneficiary, a true and complete copy
of each such Letter of Credit or amendment to or renewal of a Letter
of Credit.
Section 3.03 Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter
of Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a
participation in such Letter of Credit and each drawing thereunder in
an amount equal to the product of (i) the Pro Rata Share of such Bank,
times (ii) the maximum amount available to be drawn under such Letter
of Credit and the amount of such drawing, respectively. For purposes
of subsection 2.01, each Issuance of a Letter of Credit shall be
deemed to utilize the Commitment of each Bank by an amount equal to
the amount of such participation.
(b) In the event of any request for a drawing
under a Letter of Credit by the beneficiary or transferee thereof, the
Issuing Bank will promptly notify the Company. The Company shall
reimburse the Issuing Bank prior to 11:00 a.m. (Charlotte, North
Carolina time), on each date that any amount is paid by the Issuing
Bank under any Letter of Credit (each such date, an "Honor Date"), in
an amount equal to the amount so paid by the Issuing Bank.
45<PAGE>
In the event the Company fails to reimburse the Issuing Bank for the
full amount of any drawing under any Letter of Credit by 11:00 a.m.
(Charlotte, North Carolina time) on the Honor Date, the Issuing Bank
will promptly notify the Administrative Agent and the Administrative
Agent will promptly notify each Bank thereof, and the Company shall be
deemed to have requested that Base Rate Loans be made by the Banks to
be disbursed on the Honor Date under such Letter of Credit, subject to
the amount of the unutilized portion of the Revolving Commitment and
subject to the conditions set forth in Section 5.02. Any notice given
by the Issuing Bank or the Administrative Agent pursuant to this
subsection 3.03(b) may be oral if immediately confirmed in writing
(including by facsimile); provided that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of
such notice.
(c) Each Bank shall upon any notice pursuant to
subsection 3.03(b) make available to the Administrative Agent for the
account of the relevant Issuing Bank an amount in Dollars and in
immediately available funds equal to its Pro Rata Share of the amount
of the drawing, whereupon the participating Banks shall (subject to
subsection 3.03(d)) each be deemed to have made a Revolving Loan
consisting of a Base Rate Loan to the Company in that amount. If any
Bank so notified fails to make available to the Administrative Agent
for the account of the Issuing Bank the amount of such Bank's Pro Rata
Share of the amount of the drawing by no later than 12:00 noon
(Charlotte, North Carolina time) on the Honor Date, then interest
shall accrue on such Bank's obligation to make such payment, from the
Honor Date to the date such Bank makes such payment, at a rate per
annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give
notice of the occurrence of the Honor Date, but failure of the
Administrative Agent to give any such notice on the Honor Date or in
sufficient time to enable any Bank to effect such payment on such date
shall not relieve such Bank from its obligations under this Section
3.03.
(d) With respect to any unreimbursed drawing
that is not converted into Revolving Loans consisting of Base Rate
Loans to the Company in whole or in part, because of the Company's
failure to satisfy the conditions set forth in Section 5.02 or for any
other reason, the Company shall be deemed to have incurred from the
Issuing Bank an L/C Borrowing in the amount of such drawing, which L/C
Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at a rate per annum equal to the Base Rate
plus four percent (4%) per annum, and each Bank's payment to the
Issuing Bank pursuant to subsection 3.03(c) shall be deemed payment in
respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its
participation obligation under this Section 3.03.
(e) Each Bank's obligation in accordance with
this Agreement to make the Revolving Loans or L/C Advances, as
contemplated by this Section 3.03, as a result of a drawing under a
Letter of Credit, shall be absolute and unconditional and without
recourse to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Issuing
Bank, the Company or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a
Material Adverse Effect; or (iii) any other circumstance, happening or
46<PAGE>
event whatsoever, whether or not similar to any of the foregoing;
provided, however, that each Bank's obligation to make Revolving Loans
under this Section 3.03 is subject to the conditions set forth in
Section 5.02.
Section 3.04 Repayment of Participations.
(a) Upon (and only upon) receipt by the
Administrative Agent for the account of the Issuing Bank of
immediately available funds from the Company (i) in reimbursement of
any payment made by the Issuing Bank under the Letter of Credit with
respect to which any Bank has paid the Administrative Agent for the
account of the Issuing Bank for such Bank's participation in the
Letter of Credit pursuant to Section 3.03 or (ii) in payment of
interest thereon, the Administrative Agent will pay to each Bank, in
the same funds as those received by the Administrative Agent for the
account of the Issuing Bank, the amount of such Bank's Pro Rata Share
of such funds, and the Issuing Bank shall receive the amount of the
Pro Rata Share of such funds of any Bank that did not so pay the
Administrative Agent for the account of the Issuing Bank.
(b) If the Administrative Agent or the Issuing
Bank is required at any time to return to the Company, or to a
trustee, receiver, liquidator, custodian, or any official in any
Insolvency Proceeding, any portion of the payments made by the Company
to the Administrative Agent for the account of the Issuing Bank
pursuant to subsection 3.04(a) in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or the Issuing Bank the amount of its Pro Rata
Share of any amounts so returned by the Administrative Agent or the
Issuing Bank plus interest thereon from the date such demand is made
to the date such amounts are returned by such Bank to the
Administrative Agent or the Issuing Bank, at a rate per annum equal to
the Federal Funds Rate in effect from time to time.
Section 3.05 Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in
paying any drawing under a Letter of Credit, the Issuing Bank shall
not have any responsibility to obtain any document (other than any
sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or
delivering any such document.
(b) No Documentation Agent-Related Person nor
any of the respective correspondents, participants or assignees of the
Issuing Bank shall be liable to any Bank for: (i) any action taken or
omitted in connection herewith at the request or with the approval of
the Banks (including the Majority Banks, as applicable); (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the
acts or omissions of any beneficiary or transferee with respect to its
use of any Letter of Credit; provided, however, that this assumption
is not intended to, and shall not, preclude the Company's pursuing
such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. No Documentation
Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the Issuing Bank, shall be liable or
47<PAGE>
responsible for any of the matters described in clauses (i) through
(vii) of Section 3.06; provided, however, anything in such clauses to
the contrary notwithstanding, that the Company may have a claim
against the Issuing Bank, and the Issuing Bank may be liable to the
Company, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Company
which the Company proves were caused by the Issuing Bank's willful
misconduct or gross negligence or the Issuing Bank's willful failure
to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying
with the terms and conditions of a Letter of Credit. In furtherance
and not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be
responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason.
Section 3.06 Obligations Absolute.
The obligations of the Company under this Agreement and any
L/C-Related Document to reimburse the Issuing Bank for a drawing under
a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be
unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other
L/C-Related Document under all circumstances, including the following:
(i) any lack of validity or enforceability
of this Agreement or any L/C-Related Document;
(ii) any change in the time, manner or
place of payment of, or in any other term of, all
or any of the obligations of the Company in respect of any
Letter of Credit or any other amendment or waiver
of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off,
defense or other right that the Company may have at any time
against any beneficiary or any transferee of any Letter of
Credit (or any Person for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank or any
other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or
other document presented under any Letter of Credit proving
to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate
in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a
drawing under any Letter of Credit;
48<PAGE>
(v) any payment by the Issuing Bank under
any Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of
any Letter of Credit; or any payment made by the Issuing
Bank under any Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or
non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any
other guarantee, for all or any of the obligations of
the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a
discharge of, the Company or a guarantor.
Section 3.07 Cash Collateral Pledge.
Upon (i) the request of the Administrative Agent, (A) if the
Issuing Bank has honored any full or partial drawing request on any
Letter of Credit and such drawing has resulted in an L/C Borrowing
hereunder, or (B) if, as of the Revolving Termination Date, any
Letters of Credit may for any reason remain outstanding and partially
or wholly undrawn, or (ii) the occurrence of the circumstances
described in subsection 2.07(a) requiring the Company to Cash
Collateralize Letters of Credit, then, the Company shall immediately
Cash Collateralize the Obligations in an amount equal to the L/C
Obligations.
Section 3.08 Letter of Credit Fees.
(a) The Company shall pay to the Administrative
Agent for the account of each of the Banks a letter of credit fee with
respect to the Letters of Credit equal to the Applicable Margin for
Offshore Rate Loans applicable as of the date of determination
multiplied by the average daily maximum amount available to be drawn
of the outstanding Letters of Credit, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon
Letters of Credit outstanding for that quarter as calculated by the
Administrative Agent. Such letter of credit fees shall be due and
payable quarterly in arrears on the last Business Day of each calendar
quarter during which Letters of Credit are outstanding, commencing on
the first such quarterly date to occur after the Closing Date, through
the Revolving Termination Date (or such later date upon which the
outstanding Letters of Credit shall expire), with the final payment to
be made on the Revolving Termination Date (or such later expiration
date).
(b) The Company shall pay to the Issuing Bank a
letter of credit fronting fee for each Letter of Credit Issued by the
Issuing Bank equal to one quarter of one percent (0.25%) of the face
amount (or increased face amount, as the case may be) of such Letter
of Credit. Such Letter of Credit fronting fee shall be due and
payable on each date of Issuance of a Letter of Credit.
49
<PAGE>
(c) The Company shall pay to the Issuing
Bank from time to time on demand the normal issuance, presentation,
amendment and other processing fees, and other standard costs and
charges, of the Issuing Bank relating to letters of credit as from
time to time in effect.
Section 3.09 Uniform Customs and Practice.
The Uniform Customs and Practice for Documentary Credits as
published by International Chamber of Commerce most recently at the
time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of
Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
Section 4.01 Taxes.
(a) Any and all payments by the Company to each Bank or
each Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for, any
Taxes. In addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of
any sum payable hereunder to any Bank or any Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings
(including deductions and withholdings applicable to additional
sums payable under this Section), such Bank or such Agent, as the
case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or
withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or the
Administrative Agent for the account of such Bank, at the time
interest is paid, Further Taxes in the amount that the respective
Bank specifies as necessary to preserve the after-tax yield the
Bank would have received if such Taxes, Other Taxes or Further
Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each
Bank and each Agent for the full amount of (i) Taxes, (ii) Other
Taxes, and (iii) Further Taxes in the amount that the respective Bank
specifies as necessary to preserve the after-tax yield the Bank would
have received if such Taxes, Other Taxes or Further Taxes had not been
imposed, and any liability (including penalties, interest, additions
to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes, Other Taxes or Further Taxes were correctly
or legally asserted. Payment under this indemnification shall be made
within thirty (30) days after the date the Bank or the Agent makes
written demand therefor.
50<PAGE>
(d) Within thirty (30) days after the date of any payment
by the Company of Taxes, Other Taxes or Further Taxes, the Company
shall furnish to the applicable Bank or Agent the original or a
certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Bank or such Agent.
(e) If the Company is required to pay any amount to any
Bank or any Agent pursuant to subsection (b) or (c) of this Section,
then such Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending
Office so as to eliminate any such additional payment by the Company
which may thereafter accrue, if such change in the sole judgment of
such Bank is not otherwise disadvantageous to such Bank.
(f) Nothing contained in this Section 3.01 shall override
any term or provision of any Specified Swap Contract regarding
withholding taxes relating to Swap Contracts.
Section 4.02 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made
it unlawful, or that any central bank or other Governmental Authority
has asserted that it is unlawful, for any Bank or its applicable
Lending Office to make Offshore Rate Loans, then, on notice thereof by
the Bank to the Company through the Administrative Agent, any
obligation of that Bank to make Offshore Rate Loans shall be suspended
until the Bank notifies the Administrative Agent and the Company that
the circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Company shall, upon its receipt of notice
of such fact and demand from such Bank (with a copy to the
Administrative Agent), prepay in full such Offshore Rate Loans of that
Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.04, either on the last day of the
Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loan. If the
Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company shall borrow from the
affected Bank, in the amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company
may elect, by giving notice to the Bank through the Administrative
Agent that all Loans which would otherwise be made by the Bank as
Offshore Rate Loans shall be instead Base Rate Loans.
51<PAGE>
(d) Before giving any notice to the Administrative Agent
under this Section, the affected Bank shall designate a different
Lending Office with respect to its Offshore Rate Loans if such
designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of the Bank, be illegal or
otherwise disadvantageous to the Bank.
Section 4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of
imposition of or increase in reserve requirements included in the
calculation of the Offshore Rate or in respect of the assessment rate
payable by any Bank to the FDIC for insuring U.S. deposits) in or in
the interpretation of any law or regulation or (ii) the compliance by
that Bank with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans or
participating in Letters of Credit, or, in the case of the Issuing
Bank, any increase in the cost to the Issuing Bank of agreeing to
issue, issuing or maintaining any Letter of Credit or of agreeing to
make or making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Company shall be liable for, and shall from
time to time, within ten (10) days after demand (with a copy of such
demand to be sent to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank, additional amounts
as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in
any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by
any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the
Bank (or its Lending Office) or any corporation controlling the Bank
with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or
any corporation controlling the Bank and (taking into consideration
such Bank's or such corporation's policies with respect to capital
adequacy and such Bank's desired return on capital) determines that
the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then,
upon demand of such Bank to the Company through the Administrative
Agent, the Company shall pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to compensate the
Bank for such increase.
Section 4.04 Funding Losses.
The Company shall reimburse each Bank and hold each Bank harmless
from any loss or expense which the Bank may sustain or incur as a
consequence of:
52<PAGE>
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion / Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.07) or
other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest
Period; or
(e) the automatic conversion under Section 2.04 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate
Loans or from fees payable to terminate the deposits from which such
funds were obtained. For purposes of calculating amounts payable by
the Company to the Banks under this Section and under
subsection 4.03(a), each Offshore Rate Loan made by a Bank (and each
related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR used in
determining the Offshore Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar market
for a comparable amount and for a comparable period, whether or not
such Offshore Rate Loan is in fact so funded.
Section 4.05 Inability to Determine Rates.
If the Reference Bank determines that for any reason adequate and
reasonable means do not exist for determining the Offshore Rate for
any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to
subsection 2.08(a) for any requested Interest Period with respect to a
proposed Offshore Rate Loan does not adequately and fairly reflect the
cost to the Banks of funding such Loan, the Administrative Agent will
promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans, as
the case may be, hereunder shall be suspended until the Administrative
Agent upon the instruction of the Majority Banks revokes such notice
in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion / Continuation then
submitted by it. If the Company does not revoke such Notice, the
Banks shall make, convert or continue the Loans, as proposed by the
Company, in the amount specified in the applicable notice submitted by
the Company, but such Loans shall be made, converted or continued as
Base Rate Loans instead of Offshore Rate Loans.
Section 4.06 Certificates of Banks.
53<PAGE>
Any Bank claiming reimbursement or compensation under this
Article IV shall deliver to the Company (with a copy to the
Administrative Agent) a certificate setting forth in reasonable detail
the amount payable to the Bank hereunder and such certificate shall be
conclusive and binding on the Company in the absence of manifest
error.
Section 4.07 Substitution of Banks.
Upon receipt by the Company from any Bank (an "Affected Bank") of
a claim for compensation under Section 4.03, the Company may: (i)
request the Affected Bank to use its best efforts to obtain a
replacement bank or financial institution satisfactory to the Company
and to the Administrative Agent (a "Replacement Bank") to acquire and
assume all or a ratable part of all or such Affected Bank's Loans and
Commitment, and if such Affected Bank or any Affiliate thereof is a
Swap Provider, all Specified Swap Contracts of such Affected Bank and
Affiliate; (ii) request one or more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Commitment; or
(iii) designate a Replacement Bank. Any such designation of a
Replacement Bank under clause (i) or (iii) shall be subject to the
prior written consent of the Administrative Agent (which consent shall
not be unreasonably withheld. Notwithstanding anything herein to the
contrary, the Company shall not have the right to remove the Bank that
is the Issuing Bank or the Swingline Bank at such time unless such
Issuing Bank shall also simultaneously be replaced as "Issuing Bank"
or "Swingline Bank" hereunder (as the case may be) pursuant to
documentation in form and substance reasonably satisfactory to such
Issuing Bank or Swingline Bank.
Section 4.08 Survival.
The agreements and obligations of the Company in this Article IV
shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01 Conditions of Closing Loans
The obligation of each Bank to execute and deliver the Loan
Documents is subject to the condition that the Documentation Agent
shall have received on or before the Closing Date all of the
following, in form and substance satisfactory to the Agents and each
Bank, and in sufficient copies for each Bank:
(a) Credit Agreement, Notes and Fee Letters. This
Agreement, the Notes and the Fee Letters executed by each party
thereto;
(b) Resolutions; Incumbency.
54<PAGE>
(i) Copies of the resolutions of the board of
directors of the Company and each Restricted Subsidiary
authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant
Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, and each Restricted Subsidiary
certifying the names and true signatures of the officers of
the Company or such Restricted Subsidiary authorized to
execute, deliver and perform, as applicable, this Agreement,
and all other Loan Documents to be delivered by it
hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation and
the bylaws of the Company and each Restricted Subsidiary as
in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of the Company or such Restricted
Subsidiary as of the Closing Date; and
(ii) a good standing certificate for the Company and
each Restricted Subsidiary from the Secretary of State (or
similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company or such
Restricted Subsidiary is required to be qualified to do
business as a foreign corporation as of a recent date
(except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect),
certified by the Secretary or Assistant Secretary of the
Company or such Restricted Subsidiary as of the Closing
Date;
(d) Legal Opinions. An opinion of Kilpatrick Stockton LLP,
counsel to the Company and addressed to the Agents and the Banks, in
form and substance satisfactory to the Agents;
(e) Payment of Fees. Evidence of payment by the Company of
all accrued and unpaid fees, costs and expenses to the extent then due
and payable by the Company to the Banks or any Agent on the Closing
Date, together with Attorney Costs of the Agents to the extent
invoiced prior to or on the Closing Date, plus such additional amounts
of Attorney Costs as shall constitute the Agents' reasonable estimate
of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude
final settling of accounts between the Company and the Agents);
including any such costs, fees and expenses arising under or
referenced in Sections 2.09 and 11.04;
(f) Collateral Documents. The Collateral Documents (other
than the Credit Card Agreements to be provided under Section 7.14 (a)
hereof), executed by the Company, in appropriate form for recording,
where necessary, together with:
(i) original UCC-l financing statements to be filed,
registered or recorded to perfect the security interests of
the Administrative Agent for the benefit of itself, the
Banks and the Documentation Agent, together with such other
55<PAGE>
documents or instruments necessary and advisable to perfect
the Liens of the Administrative Agent for the benefit of
itself, the Banks and the Documentation Agent in accordance
with applicable law;
(ii) all certificates and instruments representing the
Pledged Collateral, stock transfer powers executed in blank
with signatures guaranteed as the Agents or the Banks may
specify, except for NW Acquisition Corp., Frame-n-Lens,
Family Vision Centers, Inc., and Vision Administrators,
Inc., which shall be provided under Section 5.02 hereof;
(iii) evidence that the Administrative Agent has
been named as loss payee under all policies of casualty
insurance, and as additional insured under all policies of
liability insurance;
(g) Senior Notes. Receipt of documentation satisfactory to
the Agents evidencing the closing of the Senior Notes offering and
receipt by the Company of gross proceeds (after deduction of original
issue discount) therefrom in an amount not less than $123,000,000;
(h) Projections. Receipt of projections for the Company
and its Restricted Subsidiaries on a consolidated and consolidating
basis for each of the twelve (12) months immediately following the
Closing Date, demonstrating pro-forma compliance with the financial
covenants set forth in Sections 8.14, in form and substance
satisfactory to the Agents;
(i) Representations and Warranties. The representations and
warranties shall be true and correct on the Closing Date.
(j) Other Documents. Such other approvals, opinions,
documents or materials as the Agents or any Bank may reasonably
request.
Section 5.02 Conditions to Initial Loans.
In addition to the conditions precedent set forth in
Section 5.01, the obligation of each Bank to make the initial Loan
hereunder is subject to the following conditions:
(a) the Closing Date shall have occurred;
(b) the Documentation Agent shall have received on or before the
date of the initial Borrowing of the following in form and substance
satisfactory to the Agents and the each Bank, and in sufficient copies
for each Bank:
(i) a certificate of a senior officer of the Company
certifying that the Company has purchased at least
fifty-one (51) percent of the outstanding Common Stock
of New West as contemplated by the New West Purchase
Agreement;
(ii) such Collateral Documents as are required by Section
7.17 upon the consummation of the New West Purchase
Agreement;
56<PAGE>
(iii) a pay off letter from Wachovia Bank, N.A. as agent
in form and substance satisfactory to the Agents,
together with evidence satisfactory to the Agents that
such Indebtedness has been paid;
(iv) a flow of funds statement executed by the Company
evidencing the flow of funds with respect to the Senior
Notes and the initial Borrowings;
(v) an opinion, if any, of New West's counsel delivered to
the Company in connection with the acquisition
contemplated by the New West Purchase Agreement,
together with a reliance letter in favor of the Agents
and the Banks, in form and substance satisfactory to
the Agents;
(vi) The Banks shall have received opinions of counsel to
the Company or other evidence reasonably acceptable to
the Banks that, upon completion of the Tender Offer and
acquisition by the Company of shares of New West
representing at least fifty-one (51%) of the
outstanding shares of Common Stock of New West, the
Company shall have full power and authority to (i)
cause New West, immediately upon completion of the
Tender Offer, to execute, deliver, and perform the
Subsidiary Guaranty; (ii) cause New West, immediately
after completion of the Tender Offer, to grant to, or
for the benefit of, the Lenders, a first-priority
(subject to Permitted Liens), perfected security
interest in the assets of New West to secure New West's
obligations under the Subsidiary Guaranty; and (iii)
complete the Company's acquisition, for cash, of the
remaining outstanding shares of Common Stock of New
West in accordance with the New West Purchase
Documents;
(vii) written lien search results and judgment searches
as the Agents shall have requested, and such
termination statements or other documents as may be
necessary to confirm that the Collateral is subject to
no other Liens in favor of any Persons (other than
Permitted Liens);
(viii) evidence that all other actions necessary or, in
the opinion of the Agents or the Banks, desirable to
perfect and protect the first priority security
interest created by the Collateral Documents have been
taken;
(ix) funds sufficient to pay any filing or recording tax or
fee in connection with any and all UCC-1 financing
statements;
(x) Landlord Consents with respect to all retail stores of
the Company and its Restricted Subsidiaries located at
stores operated by (x) Wal-Mart Stores, Inc. (y) Sam's
Wholesale Club and (z) Fred Meyer, Inc.;
(xi) evidence that all other actions necessary or, in the
opinion of the Agents or the Banks, desirable to
perfect and protect the first priority Lien created by
the Collateral Documents, and to enhance the
57<PAGE>
Administrative Agent's ability to preserve and protect
its interests in and access to the Collateral, have
been taken;
(xii) standard lenders' payable endorsements with
respect to the insurance policies or other instruments
or documents evidencing insurance coverage on the
properties of the Company in accordance with
Section 7.06;
(xiii) a certificate signed by a Responsible Officer,
dated as of the date of the initial Loan hereunder,
stating that:
(A) the representations and warranties contained in
Article VI are true and correct on and as of such date, as
though made on and as of such date;
(B) no Default or Event of Default exists or would
result from the initial Borrowing; and
(C) there has occurred since December 31, 1997, no
event or circumstance that has resulted or could reasonably
be expected to result in a Material Adverse Effect;
(xiv) receipt of an executed copy of the New West
Purchase Agreement, together with all exhibits and
schedules thereto and an executed copy of each of the
other New West Purchase Documents;
(xv) receipt of the Company's consolidated and consolidating
financial statements for the months ended July 31, 1998
and August 31, 1998, together with a Borrowing Base
Certificate dated as of the Closing Date;
(xvi) receipt of Account Designation Letter;
(xvii) opinions of counsel for the Company acceptable to
the Banks for the States of Arizona, Texas, Oregon,
Washington, North Carolina, California and Minnesota,
in form and substance reasonably satisfactory to the
Agents; and
(xviii) all certificates and instruments representing the
Pledged Collateral for NW Acquisition Corp., Frame-n-
Lens, Family Vision Centers, Inc., and Vision
Administrators, Inc., stock transfer powers executed in
blank with signatures guaranteed as the agents or the
Banks may specify; and
(xix) such other approvals, opinions, documents or
materials as the Agent or any Bank may reasonably
request.
Section 5.03 Conditions to All Borrowings.
The obligation of each Bank to make any Loan to be made by it
(including its initial Loan) or to continue or convert any Loan under
Section 2.04 and the obligation of the Issuing Bank to Issue any
Letter of Credit (including the initial Letter of Credit) is subject
to the satisfaction of the following conditions precedent on the
relevant Borrowing Date, Conversion / Continuation Date or Issuance
Date:
58<PAGE>
(a) Notice of Borrowing or Conversion / Continuation. The
Administrative Agent shall have received (with, in the case of the
initial Loan only, a copy for each Bank) a Notice of Borrowing or a
Notice of Conversion / Continuation, as applicable, or in the case of
any Issuance of any Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received an L/C Application or L/C
Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct
on and as of such Borrowing Date, Conversion / Continuation Date or
Issuance Date with the same effect as if made on and as of such
Borrowing Date, or Conversion / Continuation Date or Issuance Date
(except to the extent such representations and warranties expressly
refer to an earlier date, in which case they shall be true and correct
as of such earlier date);
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing, or continuation or
conversion or Issuance; and
(d) No Future Advance Notice. Neither any Agent nor any
Bank shall have received from the Company any notice that any
Collateral Document will no longer secure on a first priority basis
(subject to Permitted Liens, if any, that are not subordinated to the
Liens of the Administrative Agent under the Collateral Documents)
future advances or future Loans to be made or extended under this
Agreement.
Each Notice of Borrowing, Notice of Conversion / Continuation and L/C
Application or LC Amendment Application submitted by the Company
hereunder shall constitute a representation and warranty by the
Company hereunder, as of the date of each such notice and as of each
Borrowing Date, Conversion / Continuation Date, or Issuance Date, as
applicable, that the conditions in this Section 5.03 are satisfied.
Section 5.04 Conditions Subsequent.
As a condition subsequent to the initial closing hereunder, the
Company shall perform or cause to be performed the following (failure
by the Company to so perform or cause to be performed constituting an
Event of Default):
(a) On or before the date sixty (60) days following the
Closing Date, deliver to the Documentation Agent:
(i) a duly executed Mortgage in form and substance
satisfactory to the Agents granting a Lien on the
real estate owned by New West;
(ii) with respect to such Mortgaged Property, an
A.L.T.A. Form B (or other form acceptable to the
Agents and the Banks mortgagee policy of title
insurance or a binder issued by a title insurance
company satisfactory to the Agents and the Banks
insuring (or undertaking to insure, in the case of
a binder) that the Mortgage creates and
constitutes a valid first Lien against the
Mortgaged Property in favor of the Administrative
Agent, subject only to exceptions acceptable to
the Agents and the Banks, with such endorsements
and affirmative insurance as the Agents or any
Bank may reasonably request;
59<PAGE>
(iii) copies of any ALTA surveys and surveyor's
certification as made available to the Company by
New West;
(iv) proof of payment of all title insurance premiums,
documentary stamp or intangible taxes, recording
fees and mortgage taxes payable in connection with
the recording of any Mortgage or the issuance of
the title insurance policies (whether due on the
Closing Date or in the future) including sums due
in connection with any future advances; and
(v) A copy of the environmental site assessment
obtained by the Company from National Assessment
Corporation with respect to the real property
acquired from New West as to which the
Administrative Agent is granted a Lien for the
benefit of the Banks, dated as of a recent date
prior to the date of execution and delivery of the
Mortgage referred to in subsection (i) above,
together with a letter addressed to the
Administrative Agent by National Assessment
Corporation authorizing the Administrative Agent
on behalf of the Banks to rely thereon as if such
report had been addressed to the Administrative
Agent.
(b) On or before the date sixty (60) days following the
Closing Date, deliver to the Administrative Agent (i) Landlord
Consents with respect to at least sixty percent (60%) of all retail
stores of the Company and its Restricted Subsidiaries (including such
Landlord Consents as had been obtained prior to the date of the
initial Borrowing hereunder), and (ii) with respect to other locations
on which Collateral is located, such other consents, estoppels,
subordination agreements and other documents and instruments executed
by landlords, tenants and other Persons party to material contracts
relating to any Collateral as to which the Administrative Agent shall
be granted a Lien for the benefit of the Banks, as requested by the
Agents or any Bank.
(c) The Company shall diligently pursue consummation of the
merger of NW Acquisition Corp. into New West pursuant to the New West
Purchase Agreement (i) in the event that the Tender Offer succeeds in
receiving at least ninety percent (90%) of the outstanding shares of
common stock of New West, then such merger shall be consummated on or
before the third Business Day after the funding of the initial
Borrowing and (ii) in the event that the Tender Offer succeeds in
receiving at least fifty-one percent (51%) but not ninety percent
(90%) or more of the outstanding shares of common stock of New West,
then such merger shall be consummated as soon as reasonably
practicable after the date of the initial Borrowing but in no event
later than forty-five (45) days after the date on which the Company
receives clearance from the SEC with respect to its proxy materials
for the meeting of New West stockholders at which such merger will be
considered.
60<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Agent and each Bank
that:
Section 6.01 Corporate Existence and Power.
The Company and each of its Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets,
carry on its business and, as applicable, to execute, deliver, and
perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of
its business requires such qualification or license and where the
failure to be so qualified or licensed could reasonably be expected to
have a Material Adverse Effect; and
(d) is in compliance in all material respects with all
Requirements of Law;
Section 6.02 Corporate Authorization; No Contravention.
The execution, delivery and performance by the Company and its
Restricted Subsidiaries of this Agreement and each other Loan Document
to which such Person is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's
Organization Documents;
(b) conflict with or result in any breach or contravention
of, or the creation of any Lien under, any document evidencing any
Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such
Person or its property is subject; or
61<PAGE>
(c) violate any Requirement of Law.
Section 6.03 Governmental Authorization.
No approval, consent, exemption, authorization, or other action
by, or notice to, or filing with, any Governmental Authority (except
for recordings or filings in connection with the Liens granted to the
Administrative Agent under the Collateral Documents) is necessary or
required in connection with the execution, delivery or performance by,
or enforcement against, the Company or any of its Restricted
Subsidiaries of the Agreement or any other Loan Document.
Section 6.04 Binding Effect.
This Agreement and each other Loan Document to which the Company
or any of its Restricted Subsidiaries is a party constitute the legal,
valid and binding obligations of the Company and any of its Restricted
Subsidiaries to the extent it is a party thereto, enforceable against
such Person in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally
or by equitable principles relating to enforceability.
Section 6.05 Litigation.
Except as specifically disclosed in Schedule 6.05, there are no
actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against
the Company, or its Subsidiaries or any of their respective
properties. None of the items disclosed on Schedule 6.05:
(a) purport to affect this Agreement or any other Loan
Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, could reasonably be expected to have a Material Adverse
Effect.
No injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Loan Document, or directing
that the transactions provided for herein or therein not be
consummated as herein or therein provided.
Section 6.06 No Default.
No Default or Event of Default exists or would result from the
incurring of any Obligations by the Company or from the grant or
perfection of the Liens of the Administrative Agent and the Banks on
the Collateral. As of the Closing Date, neither the Company nor any
Subsidiary is in default under or with respect to any Contractual
Obligation in any respect which, individually or together with all
such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing
Date, create an Event of Default under subsection 9.01(e).
62<PAGE>
Section 6.07 ERISA Compliance.
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination
letter from the IRS and to the best knowledge of the Company, nothing
has occurred which would cause the loss of such qualification. The
Company and each ERISA Affiliate has made all required contributions
to any Plan subject to Section 412 of the Code, and no application for
a funding waiver or an extension of any amortization period pursuant
to Section 412 of the Code has been made with respect to any Plan;
(b) There are no pending or, to the best knowledge of the
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect.
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect;
and
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV
of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iv) neither the Company
nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Company nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA, which in the case of any occurrence described in any of clauses
(i) through (v) above has resulted in or could reasonably be expected
to result in a liability of the Company and its Subsidiaries in excess
of $500,000.
Section 6.08 Use of Proceeds; Margin Regulations.
The proceeds of the Loans are to be used solely for the purposes
set forth in and permitted by Section 7.12 and Section 8.07. Neither
the Company nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose
of purchasing or carrying Margin Stock.
Section 6.09 Title to Properties.
63<PAGE>
The Company and each Subsidiary have good record and marketable
title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As
of the Closing Date, the property of the Company and its Restricted
Subsidiaries is subject to no Liens, other than Permitted Liens.
Section 6.10 Taxes.
The Company and its Subsidiaries have filed all Federal and other
material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP. There is
no proposed tax assessment against the Company or any Subsidiary that
would, if made, have a Material Adverse Effect.
Section 6.11 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated January 3, 1998, and the related
consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal year ended on that date, and the
unaudited consolidated financial statements of the Company and its
Subsidiaries dated July 4, 1998, and the related consolidated
statements of income or operations, shareholder's equity and cash
flows for the fiscal quarter ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as
otherwise expressly noted therein, and, in the case of the
quarterly statements dated July 4, 1998, subject to ordinary,
good faith year end audit adjustments;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results
of operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule
6.11, show all material indebtedness and other liabilities,
direct or contingent, of the Company and its consolidated
Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Contingent Obligations.
(b) Since January 3, 1998 there has been no Material
Adverse Effect.
(c) The Company's and its Subsidiaries' fiscal year end is
a 52/53 week retail calendar year ending on the Saturday closest to
December 31st (except that certain of the Managed Care Subsidiaries
and the Foreign Subsidiaries may have a calendar year end).
Section 6.12 Environmental Matters.
(a) Except as specifically disclosed in Schedule 6.12, the
on-going operations of the Company and each of its Subsidiaries comply
in all respects with all Environmental Laws, except such non-
compliance which would not (if enforced in accordance with applicable
law) result in liability in excess of $500,000 in the aggregate.
(b) Except as specifically disclosed in Schedule 6.12, the
Company and each of its Subsidiaries have obtained all material
licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for their
respective ordinary course operations, all such Environmental Permits
are in good standing, and the Company and each of its Subsidiaries are
in compliance with all material terms and conditions of such
Environmental Permits.
(c) Except as specifically disclosed in Schedule 6.12, none
of the Company, any of its Subsidiaries or any of their respective
present property or operations, is subject to any outstanding written
order from or agreement with any Governmental Authority, nor subject
to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material, which
would reasonably be expected to give rise to Environmental Claims with
potential liability of the Company and its Subsidiaries in excess of
$500,000 in the aggregate.
(d) Except as specifically disclosed in Schedule 6.12,
there are no Hazardous Materials or other conditions or circumstances
existing with respect to any property of the Company or any
Subsidiary, or arising from operations prior to the Closing Date, of
the Company or any of its Subsidiaries that would reasonably be
expected to give rise to Environmental Claims with a potential
liability of the Company and its Subsidiaries in excess of $500,000 in
the aggregate for any such condition, circumstance or property. In
addition, (i) neither the Company nor any Subsidiary has any
underground storage tanks (x) that are not properly registered or
permitted under applicable Environmental Laws, or (y) that are leaking
or disposing of Hazardous Materials off-site, and which in the case of
any occurrence described in clause (x) or (y) could reasonably be
expected to give rise to Environment Claims with potential liability
of the Company and its Subsidiaries in excess of $500,000 in the
aggregate, and (ii) the Company and its Subsidiaries have notified all
of their employees of the existence, if any, of any health hazard
arising from the conditions of their employment and have met all
notification requirements under Title III of CERCLA and all other
Environmental Laws.
Section 6.13 Collateral Documents.
(a) The provisions of each of the Collateral Documents are
effective to create in favor of the Administrative Agent for the
benefit of the Banks, a legal, valid and enforceable first priority
security interest in all right, title and interest of the Company and
its Subsidiaries in the collateral described therein, subject to
Permitted Liens, if any, which are not subordinated to the Liens under
the Collateral Documents; and financing statements have been filed in
the offices in all of the jurisdictions listed in the schedule to the
Security Agreement and the Subsidiary Security Agreement. Each of the
applicable patent security agreements, trademark security agreements
and copyright security agreements attached to the Security Agreement
and the Subsidiary Security Agreement as Exhibits has been filed in
the U.S. Patent and Trademark Office and the U.S. Copyright Office.
65<PAGE>
(b) Each Mortgage when delivered will be effective to grant
to the Administrative Agent for the benefit of the Banks a legal,
valid and enforceable deed of trust or mortgage lien, as the case may
be, on all the right, title and interest of the mortgagor under such
Mortgage in the mortgaged property described therein. When each such
Mortgage is duly recorded in the offices listed on the schedule to
such Mortgage and the mortgage recording fees and taxes in respect
thereof are paid and compliance is otherwise had with the formal
requirements of state law applicable to the recording of real estate
mortgages generally, each such mortgaged property, subject to the
encumbrances and exceptions to title set forth therein and other
Permitted Liens, if any, which are not subordinated to the Liens under
the Collateral Documents and except as noted in the title policies
delivered to the Administrative Agent pursuant to Section 5.01, is
subject to a legal, valid, enforceable and perfected first priority
deed of trust; and when financing statements have been filed in the
offices specified in such Mortgage, such Mortgage also creates a
legal, valid, enforceable and perfected first lien on, and security
interest in, all right, title and interest of the Company or such
Restricted Subsidiary under such Mortgage in all personal property and
fixtures which is covered by such Mortgage, subject to no other Liens,
except the encumbrances and exceptions to title set forth therein and
other Permitted Liens, if any, which are not subordinated to the Liens
under the Collateral Documents and except as noted in the title
policies delivered to the Administrative Agent pursuant to
Section 5.01, and Permitted Liens.
(c) All representations and warranties of the Company and
any of its Restricted Subsidiaries party thereto contained in the
Collateral Documents are true and correct.
Section 6.14 Regulated Entities.
None of the Company, any Person controlling the Company, or any
Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
Section 6.15 No Burdensome Restrictions.
Neither the Company nor any Subsidiary is a party to or bound by
any Contractual Obligation, or subject to any restriction in any
Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
66<PAGE>
Section 6.16 Copyrights, Patents, Trademarks and Licenses, Etc.
The Company or its Subsidiaries own or are licensed or otherwise
have the right to use all of the material patents, trademarks, service
marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of
their respective businesses, without conflict with the rights of any
other Person. To the best knowledge of the Company, no slogan or
other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by
the Company or any Subsidiary infringes upon any rights held by any
other Person which could reasonably be expected to result in a claim
by any other Person in excess of $500,000. Except as specifically
disclosed in Schedule 6.05, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention,
device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have
a Material Adverse Effect.
Section 6.17 Subsidiaries.
The Company has no Subsidiaries other than those specifically
disclosed in part (a) of Schedule 6.17 hereto (which Schedule
designates whether each Subsidiary is a Restricted Subsidiary or an
Unrestricted Subsidiary as of the Closing Date) and has no equity
investments in any other corporation or entity other than those
specifically disclosed in part (b) of Schedule 6.17. The Dormant
Subsidiaries have no material assets or operations.
Section 6.18 Insurance.
Except as specifically disclosed in Schedule 6.18, the properties
of the Company and its Subsidiaries are insured with financially sound
and reputable insurance companies not Affiliates of the Company, in
such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Company or such
Subsidiary operates.
Section 6.19 Solvency.
The Company and each of its Subsidiaries are Solvent.
Section 6.20 Swap Obligations.
(a) Neither the Company nor any of its Subsidiaries has
incurred any outstanding obligations under any Swap Contracts, other
than Permitted Swap Obligations. The Company has undertaken its own
independent assessment of its consolidated assets, liabilities and
commitments and has considered appropriate means of mitigating and
managing risks associated with such matters and has not relied on any
Swap Provider or any Affiliate of any Swap Provider in determining
whether to enter into any Swap Contract.
67<PAGE>
(b) Neither the Company nor any of its Subsidiaries has
entered into any master agreement relating to Swap Contracts and under
which termination values resulting from Swap contracts that are
Specified Swap Contracts are nettable against termination values
resulting from Swap Contracts that are not Specified Swap Contracts,
unless only Specified Swap Contracts are outstanding under such master
agreement.
Section 6.21 Full Disclosure.
None of the representations or warranties made by the Company or
any Restricted Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of
the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company or any Restricted
Subsidiary in connection with the Loan Documents (including the
offering and disclosure materials delivered by or on behalf of the
Company to the Banks prior to the Closing Date), contains any untrue
statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they are made, not misleading
as of the time when made or delivered.
Section 6.22 Accounts and Inventory.
(a) (i) All of the Company's and each Restricted Subsidiary's
Accounts which are identified or included on any Schedule, Borrowing
Base Certificate or other report as Eligible Accounts are and will
continue to be bona fide existing obligations created by the sale of
goods, the rendering of services, or the furnishing of other good and
sufficient consideration to its Account Debtors in the regular course
of business; (ii) all shipping and delivery receipts and other
documents furnished or to be furnished to the Administrative Agent in
connection therewith are and will be genuine; and (iii) none of the
Accounts identified or included on any schedule, Borrowing Base
Certificate or report as Eligible Accounts will, to the Company's
knowledge, fail at the time so identified or included to satisfy any
of the requirements for eligibility set forth in the definition of
Eligible Accounts.
(b) As to each schedule of Inventory delivered to the
Administrative Agent or any Bank, to the Company's knowledge:
(1) the descriptions, origins, sizes, qualities,
quantities, weights, and markings of all goods stated thereon, or
on any attachment thereto, are true and correct in all material
respects; and
(2) none of the goods are defective, of second quality,
used, or goods returned after shipment, except where described as
such.
68<PAGE>
Section 6.23 Leases.
(a) Each of the supplements to the master lease between Wal-
Mart Stores, Inc. and the Company with respect to retail locations of
the Company or any Subsidiary of the Company located in a Wal-Mart
retail store is substantially in the form of Exhibit N;
(b) Each of the leases between Wal-Mart Stores, Inc. and the
Company with respect to retail locations of the Company or any
Subsidiary of the Company located in a Sam's Wholesale Club retail
store is substantially in the form of Exhibit O; and
(c) Each of the leases between Fred Meyer, Inc. and the Company
is substantially in the form of Exhibit P; and
Section 6.24 Compliance With Laws.
Each of the Company and its Subsidiaries has timely filed all
material reports, documents and other materials required to be filed
by it under all applicable Requirements of Law with any Governmental
Authority, has retained all material records and documents required to
be retained by it under all applicable Requirements of Law, and is
otherwise in compliance with all applicable Requirements of Law in
respect of the conduct of its business and the ownership and operation
of its properties, except for such Requirements of Law the failure to
comply with which, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.
Section 6.25 Year 2000 Compatibility.
Any reprogramming by or on behalf of the Company or any of its
Subsidiaries, required to permit the proper functioning, before, on
and after January 1, 2000, of the Company's and its Subsidiaries' (i)
computer-based systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with
which the Company's or any of its Subsidiaries' systems interface),
and the testing of all such systems and equipment, as so reprogrammed,
will be completed by June 30, 1999. The cost to the Company and its
Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of the year 2000 to the Company and its
Subsidiaries (including, without limitation, reprogramming errors and
the failure of others' systems or equipment) will not result in a
Default or Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the
Company and its Subsidiaries are and, with ordinary course upgrading
and maintenance will continue for the term of this Agreement to be,
sufficient to permit the Company and its Subsidiaries to conduct their
respective businesses without a Material Adverse Effect.
69<PAGE>
Section 6.26 Material Contracts.
Schedule 6.26 lists, as of the Closing Date, each "material
contract" (within the meaning of Item 601(b)(10) of Regulation S-K
under the Exchange Act) to which the Company or any of its
Subsidiaries is a party, by which any of them or their respective
properties is bound or to which any of them is subject (collectively,
"Material Contracts"). As of the Closing Date, (i) each Material
Contract is in full force and effect and is enforceable in all
material respects by the Company or the Subsidiary that is a party
thereto in accordance with its terms, and (ii) neither the Company nor
any of its Subsidiaries (nor, to the knowledge of the Company, any
other party thereto) is in breach of or default under any Material
Contract in any material respect or has given notice of termination or
cancellation of any Material Contract.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any
Loan or other Obligation shall remain unpaid or unsatisfied or any
Letter of Credit shall remain outstanding, unless the Majority Banks
waive compliance in writing:
Section 7.01 Financial Statements.
The Company shall deliver to the Administrative Agent, in form
and detail satisfactory to the Agents and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than ninety (90)
days after the end of each fiscal year, a copy of the audited
consolidated and unaudited consolidating balance sheet of the Company
and its Subsidiaries as at the end of such year and the related
audited consolidated and unaudited consolidating statements of income
or operations, shareholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, and accompanied by the opinion of a nationally-
recognized independent public accounting firm ("Independent Auditor")
which report shall state that such consolidated and consolidating
financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis
consistent with prior fiscal years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by
the Independent Auditor of any material portion of the Company's or
any Subsidiary's records and shall be delivered to the Administrative
Agent;
(b) as soon as available, but not later than forty-five
(45) days after the end of each of the first three fiscal quarters of
70<PAGE>
each fiscal year (commencing with the fiscal quarter ended closest to
September 30, 1998, a copy of the unaudited consolidated and
consolidating balance sheet of the Company and its Subsidiaries (and
separate balance sheet for each Unrestricted Subsidiary), as of the
end of such quarter and the related unaudited consolidated and
consolidating statements of income, shareholders' equity and cash
flows for the period commencing on the first day and ending on the
last day of such quarter, and certified by a Responsible Officer as
fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the
results of operations of each of the Company and each of its
Subsidiaries (and separate statements for each Unrestricted
Subsidiary);
(c) as soon as available, but not later than thirty (30)
days after the end of each month (commencing with the month ended
September 30, 1998), a copy of the unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries and
the related consolidating statements of income, shareholders' equity
and cash flows for such month, all certified by a Responsible Officer
as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the financial position and the
results of operations of each of the Company and each of its
Subsidiaries.
Section 7.02 Certificates; Other Information.
The Company shall furnish to the Administrative Agent, with
sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.01(a), a certificate of the
Independent Auditor stating that in making the examination necessary
therefor no knowledge was obtained of any Default or Event of Default
under Section 8.14, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), a Compliance
Certificate executed by a Responsible Officer;
(c) concurrently with the delivery of the financial
statements referred to in subsections 7.01(b), a certificate executed
by a Responsible Officer setting forth dividends and other
distributions from Unrestricted Subsidiaries to the Company or any
Restricted Subsidiary for the immediately preceding fiscal quarter;
(d) a monthly budget for each upcoming fiscal year on or
before the date thirty (30) days prior to the first day of such
upcoming fiscal year;
71<PAGE>
(e) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of all
financial statements and regular, periodical or special reports
(including Forms 10K, 10Q and 8K) that the Company or any Subsidiary
may make to, or file with, the SEC;
(f) promptly upon receipt, a copy of any "management
letter" received by it that has been prepared by its internal or
outside accountants;
(g) within thirty (30) days after the end of each month,
and at such other times as the Administrative Agent, or any Bank
requesting through the Administrative Agent, may request, a Borrowing
Base Certificate, executed and certified as accurate by a Responsible
Officer;
(h) within thirty (30) days after the end of each month, an
aging of all Accounts of the Company and each Restricted Subsidiary as
of the end of such month, in form and content acceptable to the
Administrative Agent;
(i) within thirty (30) days after the end of each month, a
certification report with respect to the Inventory of the Company and
each Restricted Subsidiary as of the end of the month for all
locations thereof, in form and content acceptable to the
Administrative Agent;
(j) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Administrative Agent, at the request of any Bank,
may from time to time reasonably request;
Section 7.03 Notices.
The Company shall promptly notify the Agents and each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of (i) any breach or non-performance of, or any default
under, any Contractual Obligation of the Company or any of its
Subsidiaries which could reasonably be expected to result in a
Material Adverse Effect; and (ii) any dispute, litigation,
investigation, proceeding or suspension which may exist at any time
between the Company or any of its Subsidiaries and any Governmental
Authority which could reasonably be expected to result in a Material
Adverse Effect;
(c) of the commencement of, or any material development in,
any litigation or proceeding affecting the Company or any Subsidiary
(i) in which the amount of damages claimed is $500,000 (or its
equivalent in another currency or currencies) or more, (ii) in which
injunctive or similar relief is sought and which, if adversely
determined, would reasonably be expected to have a Material Adverse
Effect, or (iii) in which the relief sought is an injunction or other
stay of the performance of this Agreement or any Loan Document;
(d) upon, but in no event later than ten (10) days after,
becoming aware of (i) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or
threatened against the Company or any Subsidiary or any of their
respective properties pursuant to any applicable Environmental Laws,
(ii) all other Environmental Claims, and (iii) any environmental or
similar condition on any real property adjoining or in the vicinity of
72<PAGE>
the property of the Company or any Subsidiary that could reasonably be
anticipated to cause such property or any part thereof to be subject
to any restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws, and which in the
case of any event described in clause (i), (ii) or (iii) above has
resulted or could reasonably be expected to result in liability of the
Company and its Subsidiaries in excess of $500,000 in the aggregate;
(e) of any other litigation or proceeding affecting the
Company or any of its Subsidiaries which the Company would be required
to report to the SEC pursuant to the Exchange Act, within four (4)
days after reporting the same to the SEC;
(f) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate which has resulted or
could reasonably be expected to result in liability of the Company and
its Subsidiaries in excess of $500,000 in the aggregate (but in no
event more than ten (10) days after such event), and deliver to the
Agents and each Bank a copy of any notice with respect to such event
that is filed with a Governmental Authority and any notice delivered
by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by
the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
Section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability.
(g) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries;
(h) of the entry by the Company into any Specified Swap
Contract, together with the details thereof;
(i) of the occurrence of any default, event of default,
termination event or other event under any Specified Swap Contract
that after the giving of notice, passage of time or both, would permit
either counter party to such Specified Swap Contract to terminate
early any or all trades relating to such contract;
(j) at least thirty (30) days prior thereto, that the
Company or any Subsidiary intends to change its name or address from
that disclosed to the Banks as of the Closing Date, together with
disclosures of such new name or address; and
73<PAGE>
(k) upon the request from time to time of the
Administrative Agent, the Swap Termination Values, together with a
description of the method by which such amounts were determined,
relating to any then-outstanding Swap Contracts to which the Company
or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of
the occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect
thereto and at what time. Each notice under subsection 7.03(a) shall
describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been (or foreseeably will
be) breached or violated.
Section 7.04 Preservation of Corporate Existence, Etc.
The Company shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation; provided, however, that the Dormant
Subsidiaries shall be dissolved on or before December 31, 1998 and
notwithstanding anything herein to the contrary, the Company shall not
and shall not permit any Subsidiary to, transfer any assets to such
Dormant Subsidiaries.
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its
business except in connection with transactions permitted by
Section 8.03 and sales of assets permitted by Section 8.02;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse Effect.
Nothing in this Section 7.04 shall prohibit the liquidation or
dissolution of any Subsidiary into the Company or another Subsidiary
of the Company (but if the liquidating or dissolving Subsidiary is a
Restricted Subsidiary, it must liquidate or dissolve in the Company or
another Restricted Subsidiary).
Section 7.05 Maintenance of Property.
The Company shall maintain, and shall cause each Subsidiary to
maintain, and preserve all its property which is used or useful in its
business in good working order and condition, ordinary wear and tear
excepted, except as permitted by Section 8.02. The Company and each
Subsidiary shall use the standard of care typical in the industry in
the operation and maintenance of its facilities; provided, however,
74<PAGE>
that nothing in this Section shall prevent the Company or any of its
Subsidiaries from discontinuing the use, operation or maintenance of
any of its properties, or disposing of any of them, if such
discontinuance or disposal is, in the judgment of the Board of
Directors of the Company or of the Board of Directors of the
Subsidiary concerned, or of an officer (or other agent employed by the
Company or any of its Subsidiaries) of the Company or such Subsidiary
having managerial responsibility for such property, desirable in the
conduct of the business of the Company or such Subsidiary; provided
further, however, that any disposal of any property pursuant to the
immediately preceding proviso shall be subject to the terms and
conditions of Article VIII of this Agreement.
Section 7.06 Insurance.
In addition to insurance requirements set forth in the Collateral
Documents, the Company shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar
circumstances by such other Persons; including workers' compensation
insurance, public liability and property and casualty insurance which
amount shall not be reduced by the Company in the absence of thirty
(30) days' prior notice to the Administrative Agent. All such
insurance shall name the Administrative Agent as loss payee/mortgagee
and as additional insured, for the benefit of the Banks, as their
interests may appear. All casualty and key man insurance maintained
by the Company shall name the Administrative Agent as loss payee and
all liability insurance shall name the Administrative Agent as
additional insured for the benefit of the Banks, as their interests
may appear. Upon request of the Administrative Agent or any Bank, the
Company shall furnish the Administrative Agent, with sufficient copies
for each Bank, at reasonable intervals (but not more than once per
fiscal year) a certificate of a Responsible Officer of the Company
(and, if requested by the Administrative Agent, any insurance broker
of the Company) setting forth the nature and extent of all insurance
maintained by the Company and its Subsidiaries in accordance with this
Section or any Collateral Documents (and which, in the case of a
certificate of a broker, were placed through such broker).
Section 7.07 Payment of Obligations.
The Company shall, and shall cause each Subsidiary to, pay and
discharge as the same shall become due and payable, all of the
following obligations and liabilities:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same
are being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained by the
Company or such Subsidiary; and
75<PAGE>
(b) all lawful claims which, if unpaid, would by law become
a Lien upon its property.
Section 7.08 Compliance with Laws.
The Company shall comply, and shall cause each Subsidiary to
comply, in all material respects with all Requirements of Law of any
Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may
be contested in good faith or as to which a bona fide dispute may
exist.
Section 7.09 Compliance with ERISA.
The Company shall, and shall cause each of its ERISA Affiliates
to: (a) maintain each Plan in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a)
of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code, except
where the Company's failure to comply with the requirements of (a),
(b) and (c) hereof has not resulted or could not reasonably be
expected to result in liability of the Company and the Subsidiaries in
excess of $500,000 in the aggregate.
Section 7.10 Inspection of Property and Books and Records..
The Company shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true and
correct entries in conformity with GAAP consistently applied shall be
made of all financial transactions and matters involving the assets
and business of the Company and such Subsidiary. The Company shall
permit, and shall cause each Subsidiary to permit, representatives and
independent contractors of any Agent or any Bank to visit and inspect
any of their respective properties, to examine their respective
corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective directors, officers, and
independent public accountants, all at the expense of the Company and
at such reasonable times during normal business hours and as often as
may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists any Agent
or any Bank may do any of the foregoing at the expense of the Company
at any time during normal business hours and without advance notice.
Section 7.11 Environmental Laws.
(a) The Company shall, and shall cause each Subsidiary to,
conduct its operations and keep and maintain its property in
compliance in all material respects with all Environmental Laws.
(b) Upon the written request of any Agent or any Bank, the
Company shall submit and cause each of its Subsidiaries to submit, to
the Administrative Agent with sufficient copies for each Bank, at the
Company's sole cost and expense, at reasonable intervals, a report
76<PAGE>
providing an update of the status of any environmental, health or
safety compliance, hazard or liability issue identified in any notice
or report required pursuant to subsection 7.03(d), that could,
individually or in the aggregate, result in liability in excess of
$500,000.
Section 7.12 Use of Proceeds.
The Company shall use the proceeds of the Loans for working
capital and other general corporate purposes including to finance the
acquisition of New West not in contravention of any Requirement of Law
or of any Loan Document.
Section 7.13 Further Assurances.
(a) The Company shall ensure that all written information,
exhibits and reports furnished to any Agent or the Banks do not and
will not contain any untrue statement of a material fact and do not
and will not omit to state any material fact or any fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and will promptly disclose to the Agents
and the Banks and correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgment or
recordation thereof.
(b) Promptly upon request by any Agent or the Majority
Banks, the Company shall (and shall cause any of its Subsidiaries to)
do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers,
certificates, assurances and other instruments any Agent or such
Banks, as the case may be, may reasonably require from time to time in
order (i) to carry out more effectively the purposes of this Agreement
or any other Loan Document, (ii) to subject to the Liens created by
any of the Collateral Documents any of the properties, rights or
interests covered by any of the Collateral Documents, (iii) to perfect
and maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created thereby, and
(iv) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm to the Agents and Banks the rights granted or now
or hereafter intended to be granted to the Banks under any Loan
Document or under any other document executed in connection therewith.
Section 7.14 Bank Accounts.
(a) Within 180 days of the Closing Date, the Company shall, and
shall cause each Subsidiary to, cause (i) each Credit Card Agreement
to be executed and delivered to the Administrative Agent, and (ii) all
Collections and other amounts received by the Company or a Restricted
Subsidiary from any Account Debtor or any other source immediately
upon receipt to be deposited into any account with respect to which
the Company, or a Restricted Subsidiary of the Company, as the case
may be, has provided irrevocable directions in writing, in form and
substance satisfactory to the Agents, to each of such banks into
77<PAGE>
which such Collections are at any time deposited to send all funds
deposited in such accounts by wire transfer on a daily basis to the
Concentration Account and such banks shall agree in writing to do so.
Such authorization and direction shall not be rescinded, revoked or
modified without the prior written consent of the Agents.
(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, open or maintain any deposit or investment account with
any bank or other financial institution other than the accounts
described on Schedule 7.14 as supplemented on a quarterly basis by
notice of the Administrative Agent. The Company shall maintain the
Concentration Account and the account into which proceeds of the Loans
are disbursed in accounts maintained with the Administrative Agent or
Documentation Agent.
Section 7.15 Inventory in Transit.
In order for any Inventory of the Company or a Restricted
Subsidiary constituting inventory in transit to the Company or a
Restricted Subsidiary to constitute Eligible Inventory, the Company or
such Restricted Subsidiary shall (i) prior to each shipment from a
supplier, provide the Administrative Agent with a description of such
Inventory, the place of shipment, the place of origin of the shipment,
the name, address and telephone number of the shipper, the destination
of such Inventory and such other information as the Administrative
Agent shall request, (ii) endorse and deliver to the Administrative
Agent the originals of any negotiable bill of lading or other shipping
document or document of title concerning the shipment of such
Inventory, and (iii) execute and deliver to Administrative Agent such
UCC financing statements and other documents as the Administrative
Agent may require to enable the Administrative Agent to perfect or
maintain the perfection of the Administrative Agent's Lien on such
Inventory.
Section 7.16 Year 2000 Compatibility.
The Company will, and will cause each of its Subsidiaries to,
take all action necessary to ensure that its computer-based systems
are able to operate and effectively process data including dates on
and after January 1, 2000, except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect. At the
request of the Administrative Agent or the Majority Banks, the Company
will provide reasonable assurance of its year 2000 compatibility.
Section 7.17 Covenants Regarding Formation of Subsidiaries.
At any time of (a) the formation of any new Subsidiary by the
Company or any Subsidiary of the Company whether pursuant to a
permitted Acquisition or otherwise or (b) any Unrestricted Subsidiary
becoming a Restricted Subsidiary hereunder, the Company will, and will
cause any such Restricted Subsidiaries (a) to provide to the
78<PAGE>
Documentation Agent an executed Subsidiary Guaranty and Subsidiary
Security Agreement by such new Restricted Subsidiary, together with
appropriate UCC-1 financing statements and appropriate attachments,
all in form and substance satisfactory to the Agents, and (b) to
provide to the Documentation Agent a Pledge Agreement or Subsidiary
Pledge Agreement, as appropriate, together with such other
documentation as is, in the reasonable opinion of the Bank,
appropriate to give effect to the pledge of the shares of such
Restricted Subsidiary, in form and substance satisfactory to the
Agents. In addition to the foregoing, the Company shall provide to
the Documentation Agent such opinions and other documentation as shall
be reasonably requested by the Agents. Each document, agreement or
instrument executed or issued pursuant to this Section 7.15 shall be a
"Collateral Document" for purposes of this Credit Agreement.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any
Loan or other Obligation shall remain unpaid or unsatisfied, or any
Letter of Credit shall remain outstanding, unless the Majority Banks
waive compliance in writing:
Section 8.01 Limitation on Liens.
The Company shall not, and shall not suffer or permit any
Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its
property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien (other than a Lien on the Collateral) existing
on property of the Company or any Subsidiary on the Closing Date and
set forth in Schedule 8.01 securing Indebtedness outstanding on such
date or any extension, renewal or refinancing thereof so long as the
Indebtedness secured by such Lien is not increased and the terms of
such extension, renewal or refinancing are not more onerous on the
Company and its Subsidiaries than the Indebtedness so extended,
renewed or refinanced;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, or to the extent that non-payment thereof is
permitted by Section 7.07, provided that no notice of lien has been
filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;
79<PAGE>
(e) Liens (other than any Lien imposed by ERISA and other
than on the Collateral) consisting of pledges or deposits required in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or its Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations,
(ii) contingent obligations on surety and appeal bonds, and
(iii) other non-delinquent obligations of a like nature; in each case,
incurred in the ordinary course of business, provided all such Liens
in the aggregate would not (even if enforced) cause a Material Adverse
Effect;
(g) Liens consisting of judgment or judicial attachment
liens that do not constitute Events of Default under Section 9.01(i);
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the
businesses of the Company and its Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however, that
such Liens existed at the time the respective corporations became
Subsidiaries and were not created in anticipation thereof, and the
Indebtedness secured thereby shall be permitted under Section 8.05(e);
(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries securing
Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any
such Lien attaches to such property concurrently with or within 45
days after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction, (iii) the principal
amount of the debt secured thereby does not exceed 100% of the cost of
such property, and (iv) the Purchase Money Indebtedness secured by any
and all such purchase money security interests shall be permitted
under Section 8.05(e);
(k) Liens securing Capitalized Lease Obligations on assets
subject to such leases, provided that the Indebtedness secured thereby
shall be permitted under Section 8.05(e);
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; provided that
(i) such deposit account is not a dedicated cash collateral account
and is not subject to restrictions against access by the Company in
excess of those set forth by regulations promulgated by the FRB, and
(ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
80<PAGE>
(m) Liens consisting of pledges of cash collateral or
government securities not constituting Collateral to secure on a mark-
to-market basis Permitted Swap Obligations only, provided that (i) the
counter party to any Swap Contract relating to any such Permitted Swap
Obligation is under a similar requirement to deliver similar
collateral from time to time to the Company or the Subsidiary party
thereto on a mark-to-market basis; and (ii) the aggregate value of
such collateral so pledged by the Company and the Subsidiaries
together in favor of any counter party does not at any time exceed
$500,000;
(n) Liens on any Managed Care Subsidiary pursuant to the
applicable rules and regulations of, or undertakings made to, any
regulatory entity having jurisdiction and authority over such Managed
Care Subsidiary; and
(o) Liens on intercompany Indebtedness permitted under
Section 8.05(c) hereof.
Section 8.02 Disposition of Assets.
The Company shall not, and shall not suffer or permit any
Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably
promptly applied to the purchase price of such replacement equipment;
(c) Disposition of any real property which is subject to a
Mortgage and other Dispositions not otherwise permitted hereunder
which are made for fair market value; provided, that (i) at the time
of any disposition, no Event of Default shall exist or shall result
from such Disposition, (ii) the aggregate sales price from such
disposition shall be paid in Qualified Proceeds, (iii) the aggregate
value of all assets (other than the Arizona Property) so sold by the
Company and its Subsidiaries, together, shall not exceed $500,000 in
the aggregate and (iv) the cash portion of Net Proceeds relating to
any such Disposition promptly shall be used to make a prepayment of
the Loans and the non-cash portion of any such Net Proceeds promptly
shall be pledged to the Administrative Agent to secure the Obligations
pursuant to documentation reasonably acceptable to the Agents;
provided, that no such repayment shall be required in any Disposition
so long as the aggregate Net Proceeds from such Disposition together
with the Net Proceeds from all other Dispositions made during such
fiscal year are less than $50,000 in the aggregate; and
81<PAGE>
(d) subleases of real property and equipment in the
ordinary course of business to independent eye care professionals.
Section 8.03 Consolidations and Mergers.
The Company shall not, and shall not suffer or permit any
Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a
series of transactions all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or
with any one or more Restricted Subsidiaries, provided that if any
transaction shall be between an Unrestricted Subsidiary and a
Restricted Subsidiary, the Restricted Subsidiary shall be the
continuing or surviving corporation, and any Unrestricted Subsidiary
may merge with another Unrestricted Subsidiary; and
(b) any Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to the Company or a
Restricted Subsidiary, and any Unrestricted Subsidiary may sell all or
substantially all of its assets (upon voluntary liquidation or
otherwise) to another Unrestricted Subsidiary.
Section 8.04 Loans and Investments.
The Company shall not purchase or acquire, or suffer or permit
any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit
to make any Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment
in, any Person including any Affiliate of the Company (together,
"Investments"), except for:
(a) Investments held by the Company or any Subsidiary in
the form of cash equivalents;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business;
(c) Investments by the Company in any of its Restricted
Subsidiaries or by any of its Restricted Subsidiaries in another of
its Restricted Subsidiaries;
(d) Investments incurred in order to consummate
Acquisitions; provided that (i) the Majority Banks consent to such
Acquisitions in writing, (ii) such Acquisitions are undertaken in
accordance with all applicable Requirements of Law; and (iii) the
Documentation Agent shall have received such additional collateral
documentation required by the Agents, in form and substance
satisfactory to the Agents;
82<PAGE>
(e) Investments incurred in order to consummate the
Acquisition of the assets of Rx Optical, Inc., which operates retail
vision centers in stores owned by Meijers, Inc., so long as such
Investments do not exceed $ 800,000 in the aggregate;
(f) Investments made on or after the Closing Date by the
Company or any Restricted Subsidiary in Unrestricted Subsidiaries not
to exceed $2,000,000 in the aggregate;
(g) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(h) Loans to employees of the Company or its Subsidiaries
not to exceed $200,000 at any time outstanding; and
(i) Investments made in New West pursuant to the New West
Purchase Documents in an aggregate amount of not more than
$69,000,000.
Section 8.05 Limitation on Indebtedness.
The Company shall not, and shall not suffer or permit any
Subsidiary to, create, incur, assume, suffer to exist, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 8.08;
(c) Intercompany Indebtedness issued to the Company by its
Restricted Subsidiaries and, to the extent permitted by Section
8.04(f), intercompany Indebtedness issued to the Company by
Unrestricted Subsidiaries provided that, within thirty (30) days after
the Closing Date, any and all of such Indebtedness shall be evidenced
by a promissory note or notes which shall be assigned and delivered to
the Administrative Agent for the benefit of the Banks pursuant to the
Security Agreement;
(d) Indebtedness existing on the Closing Date and set forth
in Schedule 8.05;
(e) Indebtedness in an aggregate amount not to exceed
$2,000,000 at any time secured by Liens otherwise permitted by
subsection 8.01(i), (j), (k) and (m); and
(f) Any extension, renewal or refinancing of any of the
foregoing Indebtedness so long as the principal amount thereof is not
increased as a result thereof and the terms thereof are no more
adverse to the Company and its Subsidiaries or the Banks than the
Indebtedness so extended, renewed or refinanced.
83<PAGE>
Section 8.06 Transactions with Affiliates.
The Company shall not, and shall not suffer or permit any
Subsidiary to, enter into any transaction with any Affiliate of the
Company, except upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company
or such Subsidiary.
Section 8.07 Use of Proceeds.
The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) to purchase or carry Margin Stock,
(ii) to repay or otherwise refinance indebtedness of the Company or
others incurred to purchase or carry Margin Stock, (iii) to extend
credit for the purpose of purchasing or carrying any Margin Stock, or
(iv) to acquire any security in any transaction that is subject to
Section 13 or 14 of the Exchange Act, except in compliance with such
Sections.
Section 8.08 Contingent Obligations.
The Company shall not, and shall not suffer or permit any
Subsidiary to, create, incur, assume or suffer to exist any Contingent
Obligations except:
(a) endorsements for collection or deposit in the ordinary
course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule
8.08; and
(d) Contingent Obligations with respect to Surety
Instruments incurred to provide security for workers' compensation
claims, payment obligations in connection with self-insurance or
similar requirements, in each case incurred in the ordinary course of
business and securing obligations not constituting Indebtedness; and
(e) Contingent Obligations with respect to Surety
Instruments incurred in respect of trade letters of credit, standby
letters of credit or performance, surety or appeal bonds, in each case
incurred in the ordinary course of business and securing obligations
not constituting Indebtedness and not exceeding at any time $250,000
in the aggregate in respect of the Company and its Subsidiaries
together.
Section 8.09 Joint Ventures.
The Company shall not, and shall not suffer or permit any
Subsidiary to enter into any Joint Venture, except that the Company
84<PAGE>
and its Subsidiaries may enter into alliances with other retailers or
managed care companies to solicit and perform managed care contracts
which agreements must be reasonably acceptable to the Majority Banks.
Section 8.10 Restricted Payments.
The Company shall not, and shall not suffer or permit any
Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock,
or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such
shares, now or hereafter outstanding (all such dividends,
distributions, purchases, redemptions or acquisitions are herein
referred to as "Restricted Payments"); except that the Company and any
Restricted Subsidiary may:
(a) declare and make dividend payments or other
distributions payable solely in its common stock;
(b) make repurchases of the common stock of the Company
from employees of the Company or any of its Subsidiaries or their
authorized representatives or successors upon the death, disability or
termination of employment of such employees in an aggregate amount not
to exceed $500,000 in any calendar year as long as no Default or Event
of Default shall have occurred and be continuing or result therefrom;
and
(c) make repurchases of the common stock of the Company
pursuant to the terms of the Put Option Agreement, dated October 1,
1997, by and between the Company and Myrel Neumann, O.D., as such
agreement is in effect in all material respects on the Closing Date,
as long as no Default or Event of Default shall have occurred and be
continuing or result therefrom, in amounts not to exceed $700,000
during the period from January 1, 1999 until February 1, 1999, or to
the extent the put rights thereunder have not been exercised by Myrel
Neumann in the prior period, $900,000 during the period from January 1,
2000 until February 1, 2000.
Section 8.11 ERISA.
The Company shall not, and shall not suffer or permit any of its
ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any
Plan which has resulted or could reasonably expected to result in
liability of the Company in an aggregate amount in excess of $500,000;
or (b) engage in a transaction that could be subject to Section 4069
or 4212(c) of ERISA which has resulted or could reasonably be expected
to result in liability by the Company in an aggregate amount in excess
of $500,000.
Section 8.12 Change in Business.
The Company shall not, and shall not suffer or permit any
Subsidiary to, engage in any material line of business which is not
reasonably related or complimentary to those lines of business carried
on by the Company and its Subsidiaries on the date hereof.
Section 8.13 Accounting Changes.
The Company shall not, and shall not suffer or permit any
Subsidiary to, make any significant change in accounting treatment or
85<PAGE>
reporting practices, except as required by GAAP, or change the fiscal
year of the Company or of any Subsidiary.
Section 8.14. Financial Covenants.
(a) Leverage Ratio. The Company shall not permit as of the last
day of the fiscal quarter ending closest to December 31, 1998, and as
of the last day of each fiscal quarter thereafter, the ratio of the
Company's and its Subsidiaries' (on a consolidated basis) Indebtedness
to Adjusted EBITDA for the four fiscal quarters then ending to be
greater than the amount set forth in the table below for such period:
As of the four fiscal quarter The ratio of Indebtedness
period ending closest to: to Adjusted EBITDA
shall not exceed:
-------------------------------------------------------------
December 31, 1998 and each 4.75 to 1.00
fiscal quarter thereafter until
December 31,1999 and each 4.25 to 1.00
fiscal quarter thereafter until
December 31, 2000 and each 4.00 to 1.00
fiscal quarter thereafter until
September 30, 2001 3.50 to 1.00
(b) Coverage Ratio. The Company shall not permit as of the last
day of the fiscal quarter ending closest to December 31, 1998, and as
of the last day of each fiscal quarter thereafter, the ratio of the
Company's and its Subsidiaries' (on a consolidated basis) (i) EBIRTDA
for the immediately preceding four fiscal quarters to (ii) the sum of
(x) (A) for the December 31, 1998 calculation date, the Interest
Expense for the fiscal quarter ending closest to December 31, 1998
times four, (B) for the March 31, 1999 calculation date, the Interest
Expense for the two fiscal quarter period ending closest to March 31,
1999 times two, (C) for the June 30, 1999 calculation date, the
Interest Expense for the three fiscal quarter period ending closest to
June 30, 1999 times four/thirds (4/3), and (D) for the fiscal quarter
ended closest to September 30, 1999 calculation date and each
calculation date thereafter, the Interest Expense for the four fiscal
quarter period ended on such calculation date, plus (y) rent and other
occupancy expenses paid on account of all operating leases of any type
(including equipment and real estate) and license agreements during
the four fiscal quarters ended on such calculation date to be less
than 1.25 to 1.00.
86<PAGE>
(c) Minimum EBITDA. The Company shall not permit as of the last
day of the fiscal quarter ending closest to September 30, 1998, and as
of the last day of each fiscal quarter thereafter, the Company's and
its Subsidiaries' (on a consolidated basis) EBITDA for the immediately
preceding four quarters to be less than the amount set forth in the
table below for such period:
As of the four fiscal quarter EBITDA shall not be
period ending closest to: less than:
--------------------------------------------------------
September 30, 1998 and each $27 Million
fiscal quarter thereafter until
December 31, 1999 and each $35 Million
fiscal quarter thereafter until
December 31, 2000 and each $40 Million
fiscal quarter thereafter
(d) Capital Expenditures. The Company shall not, and shall not
permit any Restricted Subsidiary to, make capital expenditures in
excess of $11,000,000 in the aggregate for the fiscal year ended
January 2, 1999 and $12,000,000 in the aggregate for each fiscal year
ended thereafter.
Section 8.15. Amendments.
The Company shall not, and shall not permit any Subsidiary to,
permit or suffer any material amendments, modifications, supplements,
or restatements of (a) its certificate of incorporation, by-laws, or
other governing documents, as applicable, or (b) in any manner adverse
to the Banks, the Senior Notes, the Indenture, any leases referred to
in Section 6.23 or any of its other material contracts or any
Indebtedness permitted under Section 8.05.
Section 8.16. Managed Care Contracts.
Notwithstanding anything herein which may be construed to the
contrary, the Company shall not, and shall not permit any Subsidiary
to, incur or permit to exist any Deficiency (as defined below) under
any managed care contract in excess of $5,000,000 in the aggregate
with respect to the Company and its Subsidiaries taken as a whole.
For purposes of this Section 8.16, a "Deficiency" shall mean, with
respect to a managed care contract, that payments made by the Company
or a Subsidiary to healthcare providers are greater than $5,000,000
more than capitation revenues received by the Company or such
Subsidiary on a cumulative basis from and after the Closing Date.
87<PAGE>
Section 8.17 No Other Negative Pledges.
The Company will not, and will not permit or cause any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist
any agreement or restriction that prohibits or conditions the
creation, incurrence or assumption of any Lien upon or with respect to
any part of its property or assets, whether now owned or hereafter
acquired, or agree to do any of the foregoing, other than as set forth
in (i) this Agreement, the Collateral Documents or the Indenture,
(ii) any agreement or instrument creating a Permitted Lien (but only
to the extent such agreement or restriction applies to the assets
subject to such Permitted Lien), and (iii) operating leases of real or
personal property entered into by the Company or any of its
Subsidiaries as lessee in the ordinary course of business.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Event of Default.
Any of the following shall constitute an "Event of Default":
(a) Non-Payment. The Company fails to make, (i) when and
as required to be made herein, payments of any amount of principal of
any Loan or of any L/C Obligation; or (ii) within two (2) Business
Days after the same becomes due, payment of any interest, fee or any
other amount payable hereunder or under any other Loan Document (other
than a Specified Swap Contract); or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made herein
(other than in Section 6.21), in any other Loan Document other than a
Specified Swap Contract, or which is contained in any certificate,
document or financial or other statement by the Company, any
Subsidiary, or any Responsible Officer, furnished at any time under
this Agreement, or in or under any other Loan Document, is incorrect
in any material respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in any of
Section 7.01, 7.02, 7.03 or 7.09 or in Article VIII; or
(d) Other Defaults. The Company or any Subsidiary party
thereto fails to perform or observe any other term or covenant
contained in this Agreement or any other Loan Document, and such
default shall continue unremedied for a period of ten (10) Business
Days after the date upon which a Responsible Officer knew or
reasonably should have known of such failure; or
(e) Cross-Default. (i) The Company or any Subsidiary
(A) fails to make any payment in respect of any Indebtedness or
Contingent Obligation, having an aggregate principal amount (including
88<PAGE>
undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of
more than $500,000 when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise); or (B) fails to
perform or observe any other condition or covenant, or any other event
shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, if the
effect of such failure, event or condition is to cause, or to permit
the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to
pay, or admits in writing its inability to pay, its debts as they
become due, subject to applicable grace periods, if any, whether at
stated maturity or otherwise; (ii) voluntarily ceases to conduct its
business in the ordinary course; (iii) commences any Insolvency
Proceeding with respect to itself; or (iv) takes any action to
effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of the
Company's or any Subsidiary's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released,
vacated or fully bonded within sixty (60) days after commencement,
filing or levy; (ii) the Company or any Subsidiary admits the material
allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered
in any Insolvency Proceeding; or (iii) the Company or any Subsidiary
acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to
a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of the Company under
Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC
in an aggregate amount in excess of $500,000; or (ii) the aggregate
amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $500,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $500,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is
entered against the Company or any Subsidiary involving in the
aggregate a liability (to the extent not covered by independent third-
party insurance as to which the insurer does not dispute coverage) as
to any single or related series of transactions, incidents or
conditions, of $500,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of
twenty (20) days after the entry thereof; or
89<PAGE>
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which
does or would reasonably be expected to have a Material Adverse
Effect, and there shall be any period of twenty (20) consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; or
(k) Change of Control. There occurs any Change of Control;
or
(l) Loss of Licenses. Any other Governmental Authority
revokes or fails to renew any material license, permit or franchise of
the Company or any Subsidiary, or the Company or any Subsidiary for
any reason loses any material license, permit or franchise, or the
Company or any Subsidiary suffers the imposition of any restraining
order, escrow, suspension or impound of funds in connection with any
proceeding (judicial or administrative) with respect to any material
license, permit or franchise, provided that such event results in or
could reasonably be expected to result in a loss of annual revenue or
potential revenue of at least the lesser of (i) $3,000,000 or (ii) one
percent (1%) of the gross revenues of the Company (on a consolidated
basis with its Subsidiaries) for the most recently ended twelve-month
period; or
(m) Adverse Change. There occurs a Material Adverse
Effect; or
(n) Collateral.
(i) any material provision of any Collateral Document
shall for any reason cease to be valid and binding on or
enforceable against the Company or any Subsidiary party thereto
or the Company or any Subsidiary shall so state in writing or
bring an action to limit its obligations or liabilities
thereunder; or
(ii) any Collateral Document shall for any reason
(other than pursuant to the terms thereof) cease to create a
valid security interest in the Collateral purported to be covered
thereby or such security interest shall for any reason cease to
be a perfected and first priority security interest subject only
to Permitted Liens;
(o) There shall occur a default or event of default under
the Senior Notes;
(p) James Krause shall cease to be the chairman and chief
executive officer of the Company and Barry Feld shall cease to be the
chief operating officer of the Borrower and such officer shall not
have been replaced by a new officer reasonably acceptable to the Banks
within ninety (90) days; or
(q) The Company or any of its Subsidiaries shall at any
time disavow any of its obligations under, or shall assert the
invalidity or enforceablity of, any of the Collateral Documents.
Section 9.02 Remedies.
90<PAGE>
If any Event of Default occurs, the Administrative Agent shall,
at the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank and Swingline Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters
of Credit to be terminated, whereupon such commitments and obligations
shall be terminated;
(b) declare that the Obligations be Cash Collateralized by
an amount equal to the maximum aggregate amount that is or at any time
thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or
other documents required to draw under such Letters of Credit) to be
immediately due and payable, and declare the unpaid principal amount
of all outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other Loan
Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.01 (in the case of clause (i) of
subsection (g) upon the expiration of the sixty (60) day period
mentioned therein), the obligation of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit shall
automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of the
Administrative Agent, the Issuing Bank or any Bank.
Section 9.03 Specified Swap Contract Remedies.
Notwithstanding any other provision of this Article IX, each Swap
Provider shall have the right, with prior notice to the Administrative
Agent, but without the approval or consent of the Administrative Agent
or the other Banks, with respect to any Specified Swap Contract of
such Swap Provider, (a) to declare an event of default, termination
event or other similar event thereunder and to create an Early
Termination Date, (b) to determine net termination amounts in
accordance with the terms of such Specified Swap Contracts and to set-
off amounts between Specified Swap Contracts, and (c) to prosecute any
legal action against the Company to enforce net amounts owing to such
Swap Provider.
Section 9.04 Rights Not Exclusive.
The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter
arising.
Section 9.05 Application of Payments.
Subsequent to the acceleration of the Obligations under Section
9.02 hereof, payments and prepayments with respect to the Obligations
made to any Agent, the Banks, the Issuing Bank or otherwise received
91<PAGE>
by any Agent, any Bank, the Issuing Bank (from realization on
Collateral or otherwise) shall be distributed in the following order
of priority: FIRST, to the costs and expenses (including actual and
reasonable attorneys' fees and expenses), if any, incurred by any
Agent, any Bank, any Issuing Bank in the collection of such amounts
under this Agreement or of the Loan Documents, including, without
limitation, any reasonable costs incurred in connection with the sale
or disposition of any Collateral; SECOND, to any fees then due and
payable to the Agents, the Banks and the Issuing Bank under this
Agreement or any other Loan Document; THIRD, to the payment of
interest then due and payable on the Loans; FOURTH, to the extent
there are any unreimbursed drawings under any Letter of Credit, to the
Issuing Bank in respect of such unreimbursed drawings then
outstanding; FIFTH, to the payment of principal then due and payable
on the Loans; SIXTH, to any other Obligations not otherwise referred
to in this Section 9.03; SEVENTH, to damages incurred by any Agent,
the Issuing Bank or any Bank by reason of any breach hereof or of any
other Loan Document; and EIGHTH, upon satisfaction in full of all
Obligations to the Company or as otherwise required by law.
ARTICLE X
THE AGENTS
Section 10.01 Appointment and Authorization: Agents.
(a) Each Bank hereby irrevocably (subject to Section 10.09)
appoints, designates and authorizes the Agents to take such action on
its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, no Agent
shall have any duties or responsibilities, except those expressly set
forth herein, nor shall any Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise
exist against any Agent. Without limiting the generality of the
foregoing sentence, the use of the term "Administrative Agent",
"Documentation Agent" and "Agents" in this Agreement with reference to
the Administrative Agent, the Documentation Agent or the Agents, as
the case may be, is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents
associated therewith until such time and except for so long as the
Agent may agree at the request of the Majority Lenders to act for such
Issuing Bank with respect thereto; provided, however, that the Issuing
Bank shall have all of the benefits and immunities (i) provided to the
Agents in this Article X with respect to any acts taken or omissions
suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit
as fully as if the term "Agent", as used in this Article X, included
the Issuing Bank with respect to such acts or omissions, and (ii) as
additionally provided in this Agreement with respect to the Issuing
Bank.
92<PAGE>
Section 10.02 Delegation of Duties.
Each Agent may execute any of its duties under this Agreement or
any other Loan Document by or through agents, employees or attorneys-
in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that
it selects with reasonable care.
Section 10.03 Liability of Agents.
None of the Administrative Agent-Related Persons nor the
Documentation Agent - Related Persons shall (i) be liable for any
action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence
or willful misconduct), or (ii) be responsible in any manner to any of
the Banks for any recital, statement, representation or warranty made
by the Company or any Subsidiary or Affiliate of the Company, or any
officer thereof, contained in this Agreement or in any other Loan
Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative
Agent or the Documentation Agent, as the case may be, under or in
connection with, this Agreement or any other Loan Document, or for the
value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any
other Loan Document, or for any failure of the Company or any other
party to any Loan Document to perform its obligations hereunder or
thereunder. No Administrative Agent-Related Person nor any
Documentation Agent - Related Person shall be under any obligation to
any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of,
this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
Section 10.04 Reliance by Agents.
(a) Each Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to the Company),
independent accountants and other experts selected by such Agent. Each
Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it
deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking
or continuing to take any such action. Each Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or
consent of the Majority Banks and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the
Banks.
93<PAGE>
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Bank that has executed this
Agreement shall be deemed to have consented to, approved or accepted
or to be satisfied with, each document or other matter either sent by
any Agent to such Bank for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by
or acceptable or satisfactory to the Bank.
Section 10.05 Notice of Default.
Neither Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to
defaults in the payment of principal, interest and fees required to be
paid to such Agent for the account of the Banks, unless such Agent
shall have received written notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". Each
Agent will notify the Banks of its receipt of any such notice. Each
Agent shall take such action with respect to such Default or Event of
Default as may be requested by the Majority Banks in accordance with
Article IX; provided, however, that unless and until the
Administrative Agent has received any such request, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the
Banks.
Section 10.06 Credit Decision.
Each Bank acknowledges that none of the Administrative Agent-
Related Persons or Documentation Agent - Related Persons has made any
representation or warranty to it, and that no act by any Agent
hereinafter taken, including any review of the affairs of the Company
and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Administrative Agent-Related Person or
Documentation Agent-Related Person, as the case may be, to any Bank.
Each Bank represents to the Agents that it has, independently and
without reliance upon any Administrative Agent-Related Person or
Documentation Agent-Related Person, as the case may be, and based on
such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, the value of and
title to any Collateral, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own
decision to enter into this Agreement and to extend credit to the
Company hereunder. Each Bank also represents that it will,
independently and without reliance upon any Administrative Agent-
Related Person or Documentation Agent-Related Person, as the case may
be, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished
to the Banks by the any Agent, no Agent shall have any duty or
responsibility to provide any Bank with any credit or other
information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which
may come into the possession of any of the Administrative Agent-
Related Persons or Documentation Agent-Related Person, as the case may
be.
94<PAGE>
Section 10.07 Indemnification of Agent.
Whether or not the transactions contemplated hereby are
consummated, the Banks shall indemnify upon demand the Administrative
Agent-Related Persons and the Documentation Agent-Related Persons (to
the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that
no Bank shall be liable for the payment to the Administrative Agent-
Related Persons or Documentation Agent-Related Person, as the case may
be, of any portion of such Indemnified Liabilities resulting solely
from such Person's gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank shall reimburse each Agent upon
demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by such Agent in connection with
the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that
such Agent is not reimbursed for such expenses by or on behalf of the
Company. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the
Administrative Agent or the Documentation Agent, as the case may be.
Section 10.08 Agents in Individual Capacity.
Each of First Union and BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business
with the Company and its Subsidiaries and Affiliates as though First
Union or BofA were not an Agent or, in the case of BofA, the Issuing
Bank hereunder and without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, First Union or
BofA or their respective Affiliates may receive information regarding
the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agents shall be under no
obligation to provide such information to them. With respect to its
Loans, each of First Union and BofA shall have the same rights and
powers under this Agreement as any other Bank and may exercise the
same as though it were not an Agent or, in the case of BofA, the
Issuing Bank, and the terms "Bank" and "Banks" include each of First
Union and BofA in its individual capacity.
Section 10.09 Successor Agents.
95<PAGE>
Each Agent may, and at the request of the Majority Banks shall,
resign as an Agent upon thirty (30) days' notice to the Banks and the
Company. If any Agent resigns under this Agreement, the Majority
Banks shall appoint from among the Banks a successor Administrative
Agent or Documentation Agent, as the case may be, for the Banks. If
no successor Administrative Agent or Documentation Agent, as the case
may be, is appointed prior to the effective date of the resignation of
the Administrative Agent or Documentation Agent, the Administrative
Agent or Documentation Agent, as the case may be, may appoint, after
consulting with the Banks and the Company, a successor Agent from
among the Banks. Upon the acceptance of its appointment as successor
Agent hereunder, such successor Agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent or
Documentation Agent, as the case may be, and the term "Administrative
Agent" or "Documentation Agent", as the case may be, shall mean such
successor Agent and the Agent's appointment, powers and duties as
Administrative Agent or Documentation Agent, as the case may be, shall
be terminated. After any retiring Agent's resignation hereunder as
Administrative Agent or Documentation Agent, as the case may be, the
provisions of this Article X and Sections 11.04 and 11.05 shall inure
to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. If no successor agent has
accepted appointment as Administrative Agent or Documentation Agent,
as the case may be, by the date which is thirty (30) days following a
retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the
Banks shall perform all of the duties of the Administrative Agent or
Documentation Agent, as the case may be, hereunder until such time, if
any, as the Majority Banks appoint a successor Administrative Agent or
Documentation Agent, as the case may be, as provided for above.
Notwithstanding the foregoing, however, First Union may not be removed
as the Administrative Agent at the request of the Majority Banks
unless First Union shall also simultaneously be replaced as "Issuing
Bank" hereunder pursuant to documentation in form and substance
reasonably satisfactory to First Union.
Section 10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Bank claims exemption
from, or a reduction of, U.S. withholding tax under Sections 1441
or 1442 of the Code, such Bank agrees with and in favor of the
Administrative Agent, to deliver to the Administrative Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
two properly completed and executed copies of IRS Form 1001
before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business
of such Bank, two properly completed and executed copies of IRS
Form 4224 before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of
96<PAGE>
such Bank during which interest may be paid under this Agreement;
and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition
to exemption from, or reduction of, United States withholding
tax.
Such Bank agrees to promptly notify the Administrative Agent of any
change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Bank sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Company to
such Bank, such Bank agrees to notify the Administrative Agent of the
percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such
percentage amount, the Administrative Agent will treat such Bank's IRS
Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent
sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank
agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the
Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Administrative Agent may withhold from
any interest payment to such Bank an amount equivalent to the
applicable withholding tax after taking into account such reduction.
However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative
Agent, then the Administrative Agent may withhold from any interest
payment to such Bank not providing such forms or other documentation
an amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the
Administrative Agent did not properly withhold tax from amounts paid
to or for the account of any Bank (because the appropriate form was
not delivered or was not properly executed, or because such Bank
failed to notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Bank shall indemnify the
Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Administrative Agent under
this Section, together with all costs and expenses (including Attorney
Costs). The obligation of the Banks under this subsection shall
survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
97<PAGE>
Section 10.11 Collateral Matters.
(a) Each Agent is authorized on behalf of all the Banks,
without the necessity of any notice to or further consent from the
Banks, from time to time to take any action with respect to any
Collateral or the Collateral Documents which may be necessary to
perfect and maintain perfected the security interest in and Liens upon
the Collateral granted pursuant to the Collateral Documents.
(b) The Banks irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Lien
granted to or held by the Administrative Agent upon any Collateral
(i) upon termination of the Commitments and payment in full of all
Loans and all other Obligations known to the Administrative Agent and
payable under this Agreement or any other Loan Document;
(ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder;
(iii) constituting property in which the Company or any Subsidiary
owned no interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to the Company or any
Subsidiary under a lease which has expired or been terminated in a
transaction permitted under this Agreement or is about to expire and
which has not been, and is not intended by the Company or such
Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness
evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by the Majority Banks or all the
Banks, as the case may be, as provided in subsection 11.01(f). Upon
request by the Administrative Agent at any time, the Banks will
confirm in writing the Administrative Agent's authority to release
particular types or items of Collateral pursuant to this
subsection 10.11(b), provided that the absence of any such
confirmation for whatever reason shall not affect the Administrative
Agent's rights under this Section 10.11.
(c) Each Bank agrees with and in favor of each other (which
agreement shall not be for the benefit of the Company or any
Subsidiary) that the Company's obligation to such Bank under this
Agreement and the other Loan Documents is not and shall not be secured
by any real property collateral now or hereafter acquired by such Bank
other than any real property described in the Mortgages.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Amendments and Waivers.
No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by
the Company or any applicable Restricted Subsidiary therefrom, shall
be effective unless the same shall be in writing and signed by the
Majority Banks (or by the Administrative Agent or Documentation Agent,
as the case may be, at the written request of the Majority Banks) and
the Company and acknowledged by the Administrative Agent or
Documentation Agent, as the case may be, and then any such waiver or
98<PAGE>
consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by
all the Banks and the Company and acknowledged by the Administrative
Agent or Documentation Agent, as the case may be, do any of the
following:
(a) increase or extend the Commitment of any Bank or
Swingline Commitment of the Swingline Bank (or reinstate any
Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees
or other amounts due to the Banks (or any of them) hereunder or under
any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) below) any
fees or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for
the Banks or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks; or
(f) discharge any Restricted Subsidiary, or release any
portion of the Collateral except as otherwise may be provided in the
Collateral Document or except where the consent of the Majority Banks
only is specifically provided for or except with respect to Collateral
sold in compliance with Section 8.02;
and, provided further, that (i) no amendment, waiver or consent shall,
unless in writing and signed by the Issuing Bank in addition to the
Majority Banks or all the Banks, as the case may be, affect the rights
or duties of the Issuing Bank under this Agreement or any L/C-Related
Document relating to any Letter of Credit Issued or to be Issued by
it, (ii) no amendment, waiver or consent shall, unless in writing and
signed by the Swingline Bank in addition to the Majority Banks or all
of the Banks, as the case may be, affect the rights or duties of the
Swingline Bank under this Agreement, (iii) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative
Agent in addition to the Majority Banks or all the Banks, as the case
may be, affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document, (iv) no amendment, waiver
or consent shall, unless in writing and signed by the Documentation
Agent in addition to the Majority Banks or all the Banks, as the case
may be, affect the rights and duties of the Documentation Agent under
this Agreement or any other Loan Document, and (v) the Fee Letters and
documents evidencing Specified Swap Contracts may be amended, or
rights or privileges thereunder waived, in a writing executed by the
parties thereto.
Section 11.02 Notices.
99<PAGE>
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the
context expressly otherwise provides, by facsimile transmission,
provided that any matter transmitted by the Company by facsimile
(i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule 11.02, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number
specified for notices on Schedule 11.02; or, as directed to the
Company or the Administrative Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Company and the
Administrative Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible
form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices pursuant to Article II
or X to any Agent shall not be effective until actually received by
such Agent.
(c) Any agreement of the Agents and the Banks herein to
receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Agents and the
Banks shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such
notice and the Agents and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not
taken by the Agents or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans
shall not be affected in any way or to any extent by any failure by
the Agents and the Banks to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agents and the
Banks of a confirmation which is at variance with the terms understood
by the Agents and the Banks to be contained in the telephonic or
facsimile notice.
Section 11.03 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of
any Agent or any Bank, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
Section 11.04 Costs and Expenses.
The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agents and each Bank within five (5)
Business Days after demand (subject to subsection 5.01(e)) for all
actual and reasonable costs and expenses incurred by the Agents and
each Bank in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this
100<PAGE>
Agreement, any Loan Document and any other documents prepared in
connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including actual and
reasonable Attorney Costs incurred by the Agents and any Bank with
respect thereto; and
(b) pay or reimburse the Agents, and each Bank within five
(5) Business Days after demand (subject to subsection 4.01(e)) for all
actual and reasonable costs and expenses (including actual and
reasonable Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate
proceeding); and
(c) pay or reimburse the Agents within five (5) Business
Days after demand (subject to subsection 5.01(e)) for all reasonable
appraisal (including the allocated cost of internal appraisal
services), audit, environmental inspection and review (including the
allocated cost of such internal services), search and filing costs,
fees and expenses, incurred or sustained by the Agents in connection
with the matters referred to under subsections (a) and (b) of this
Section.
Section 11.05 Company Indemnification.
(a) Whether or not the transactions contemplated hereby are
consummated, the Company shall indemnify, defend and hold the
Administrative Agent-Related Persons and Documentation Agent-Related
Persons, and each Bank and each of its respective officers, directors,
employees, counsel, Agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements
(including actual and reasonable Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following
repayment of the Loans and termination of all Specified Swap Contracts
and the termination, resignation or replacement of the Administrative
Agent or Documentation Agent or replacement of any Bank) be imposed
on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person
under or in connection with any of the foregoing, including with
respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or arising
out of this Agreement or the Specified Swap Contracts or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person
is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified
Liabilities to the extent resulting from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this
Section shall survive payment of all other Obligations.
(b) (i) The Company shall indemnify, defend and hold
harmless each Indemnified Person, from and against any and all
101<PAGE>
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses or disbursements (including
actual and reasonable Attorney Costs and the allocated cost of
internal environmental audit or review services), which may be
incurred by or asserted against such Indemnified Person in connection
with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with
respect to any Environmental Claim arising out of or related to any
property subject to a Mortgage in favor of the Administrative Agent or
any Bank; provided that the Company shall have no obligation hereunder
to any Indemnified Person with respect to any of the foregoing items
to the extent such obligation results from such Indemnified Person's
gross negligence or willful misconduct. No action taken by legal
counsel chosen by any Agent or any Bank in defending against any such
investigation, litigation or proceeding or requested remedial, removal
or response action shall vitiate or any way impair the Company's
obligation and duty hereunder to indemnify and hold harmless each
Agent and each Bank.
(ii) In no event shall any site visit, observation, or
testing by any Agent or any Bank (or any contractee of any Agent
or any Bank) be deemed a representation or warranty that
Hazardous Materials are or are not present in, on, or under, the
site, or that there has been or shall be compliance with any
Environmental Law. Neither the Company nor any other Person is
entitled to rely on any site visit, observation, or testing by
any Agent or any Bank. Neither any Agent nor any Bank owes any
duty of care to protect the Company or any other Person against,
or to inform the Company or any other party of, any Hazardous
Materials or any other adverse condition affecting any site or
property. Neither any Agent nor any Bank shall be obligated to
disclose to the Company or any other Person any report or
findings made as a result of, or in connection with, any site
visit, observation, or testing by any Agent or any Bank.
(c) Survival; Defense. The obligations in this Section
shall survive payment of all other Obligations. At the election of
any Indemnified Person, the Company shall defend such Indemnified
Person using legal counsel satisfactory to such Indemnified Person in
such Person's sole discretion, at the sole cost and expense of the
Company. All amounts owing under this Section shall be paid within
thirty (30) days after demand.
Section 11.06 Marshaling; Payments Set Aside.
Neither the Agents nor the Banks shall be under any obligation to
marshall any assets in favor of the Company or any other Person or
against or in payment of any or all of the Obligations. To the extent
that the Company makes a payment to the Agents or the Banks, or the
Agents or the Banks exercise their right of set-off, and such payment
or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by such
Agent or such Bank in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall
be revived and continued in full force and effect as if such payment
had not been made or such set-off had not occurred, and (b) each Bank
severally agrees to pay to any Agent upon demand its pro rata share of
any amount so recovered from or repaid by any Agent.
Section 11.07 Successors and Assigns.07 Successors and Assigns.
102<PAGE>
The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer any of
its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent, the Documentation Agent
and each Bank.
Section 11.08 Assignments, Participations, Etc.
(a) Any Bank may, with the written consent of the Company
at all times other than during the existence of an Event of Default
and the Agent, which consents shall not be unreasonably withheld, at
any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company or the Administrative
Agent shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate of
such Bank) (each an "Assignee") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations of
such Bank hereunder, in a minimum amount of $4,000,000; provided,
however, that (i) the Company and the Administrative Agent may
continue to deal solely and directly with such Bank in connection with
the interest so assigned to an Assignee until (A) written notice of
such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been
given to the Company and the Administrative Agent by such Bank and the
Assignee; (B) such Bank and its Assignee shall have delivered to the
Company and the Administrative Agent an Assignment and Acceptance in
the form of Exhibit Q ("Assignment and Acceptance") together with any
Note or Notes subject to such assignment and (C) the assignor Bank or
Assignee has paid to the Administrative Agent a processing fee in the
amount of $3,000; and (ii) if the assignor Bank or any of its
Affiliates is a Swap Provider with respect to any Specified Swap
Contract, such Bank shall not assign all of its interest in the Loans
and the Commitments to an Assignee unless such Assignee, or an
Affiliate of such Assignee, shall also assume all obligations of such
assignor Bank or Affiliate with respect to such Specified Swap
Contracts, with the consent of the Company. In connection with any
assignment by First Union, its Swingline Commitment may be in whole or
in part included as part of the assignment transaction, and the
Assignment and Acceptance may be appropriately modified to include an
assignment and delegation of its Swingline Commitment and any
outstanding Swingline Loans.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received (and provided its
consent with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to
the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
103<PAGE>
(c) Within five Business Days after its receipt of notice
by the Administrative Agent that it has received an executed
Assignment and Acceptance and payment of the processing fee, (and
provided that it consents to such assignment in accordance with
subsection 11.08(a)), the Company shall execute and deliver to the
Administrative Agent, new Notes evidencing such Assignee's assigned
Loans and Commitment and, if the assignor Bank has retained a portion
of its Loans and its Commitment, replacement Notes in the principal
amount of the Loans retained by the assignor Bank (such Notes to be in
exchange for, but not in payment of, the Notes held by such Bank).
Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each
Assignee shall reduce such Commitments of the assigning Bank pro
tanto.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Loans, the Commitment of that Bank and
the other interests of that Bank (the "originating Bank") hereunder
and under the other Loan Documents; provided, however, that (i) the
originating Bank's obligations under this Agreement shall remain
unchanged, (ii) the originating Bank shall remain solely responsible
for the performance of such obligations, (iii) the Company and the
Administrative Agent shall continue to deal solely and directly with
the originating Bank in connection with the originating Bank's rights
and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under
which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would
require unanimous consent of the Banks as described in the first
proviso to Section 11.01. In the case of any such participation, the
Participant shall be entitled to the benefit of Sections 4.01, 4.03
and 11.05 as though it were also a Bank hereunder (but no Participant
shall be entitled to any greater payment under Section 4.01 or 4.03
than the Bank which sold such Participant its participating interest
in the Loans and the Commitments), and shall not have any other rights
under this Agreement, or any of the other Loan Documents, and all
amounts payable by the Company hereunder shall be determined as if
such Bank had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement.
(e) Notwithstanding any other provision in this Agreement,
any Bank may at any time create a security interest in, or pledge, all
or any portion of its rights under and interest in this Agreement
(other than Swingline Loans) and the Note held by it in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or
U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted
under applicable law.
104<PAGE>
Section 11.09 Confidentiality.
Each Bank agrees to take and to cause its Affiliates to take
normal and reasonable precautions and exercise due care to maintain
the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any
Subsidiary, or by any Agent on the Company's or such Subsidiary's
behalf, under this Agreement or any other Loan Document, and neither
it nor any of its Affiliates shall use any such information other than
in connection with or in enforcement of this Agreement and the other
Loan Documents or in connection with other business now or hereafter
existing or contemplated with the Company or any Subsidiary; except to
the extent such information (i) was or becomes generally available to
the public other than as a result of disclosure by the Bank, or
(ii) was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound
by a confidentiality agreement with the Company known to the Bank;
provided, however, that any Bank may disclose such information (A) at
the request or pursuant to any requirement of any Governmental
Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to
subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law;
(D) to the extent reasonably required in connection with any
litigation or proceeding to which any Agent, any Bank or their
respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to such Bank's independent auditors
and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to
keep such information confidential to the same extent required of the
Banks hereunder; (H) as to any Bank or its Affiliate, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is
deemed party with such Bank or such Affiliate; and (I) to its
Affiliates, provided such Affiliate is bound by the provisions of this
Section 11.09.
Section 11.10 Set-off.
In addition to any rights and remedies of the Banks provided by
law, if an Event of Default exists or the Loans have been accelerated,
each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the
Company to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional
or final) at any time held by, and other indebtedness at any time
owing by, such Bank to or for the credit or the account of the Company
against any and all Obligations owing to such Bank, now or hereafter
existing, irrespective of whether or not any Agent or such Bank shall
have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank
agrees promptly to notify the Company and each Agent after any such
set-off and application made by such Bank; provided, however, that the
failure to give such notice shall not affect the validity of such set-
off and application.
105<PAGE>
Section 11.11 Automatic Debits of Fees.
With respect to any commitment fee, arrangement fee, or other
fee, or any other cost or expense (including Attorney Costs) due and
payable to any Agent under the Loan Documents, the Company hereby
irrevocably authorizes First Union to debit any deposit account of the
Company with First Union in an amount such that the aggregate amount
debited from all such deposit accounts does not exceed such fee or
other cost or expense. If there are insufficient funds in such
deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part,
in First Union's sole discretion) and such amount not debited shall be
deemed to be unpaid. No such debit under this Section shall be deemed
a set-off.
Section 11.12 Notification of Addresses, Lending Offices, Etc.
Each Bank shall notify the Administrative Agent in writing of any
changes in the address to which notices to the Bank should be
directed, of addresses of any Lending Office, of payment instructions
in respect of all payments to be made to it hereunder and of such
other administrative information as the Administrative Agent shall
reasonably request.
Section 11.13 Counterparts.
This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument. Delivery of a
counterpart hereof via facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
Section 11.14 Severability.
The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not
in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement
required hereunder.
Section 11.15 No Third Parties Benefitted.
This Agreement is made and entered into for the sole protection
and legal benefit of the Company, the Banks, the Agents and the
Administrative Agent-Related Persons and the Documentation Agent-
Related Persons, and their permitted successors and assigns, and no
other Person shall be a direct or indirect legal beneficiary of, or
have any direct or indirect cause of action or claim in connection
with, this Agreement or any of the other Loan Documents.
Section 11.16 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF GEORGIA;
PROVIDED THAT THE AGENTS AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
106<PAGE>
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF GEORGIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT
OF GEORGIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
THE COMPANY, THE AGENTS AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. EACH OF THE COMPANY, THE AGENTS AND THE BANKS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO. THE COMPANY, THE AGENTS AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY GEORGIA LAW.
(c) Nothing contained in this Section shall override any
contrary provision contained in any Specified Swap Contract.
Section 11.17 Waiver of Jury Trial.
THE COMPANY, THE BANKS AND THE AGENTS EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF
THE PARTIES AGAINST ANY OTHER PARTY OR ANY ADMINISTRATIVE AGENT-
RELATED PERSON OR ANY DOCUMENTATION AGENT-RELATED PERSON, PARTICIPANT
OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE COMPANY, THE BANKS AND THE AGENTS EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT
A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION
OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 11.18 Entire Agreement
This Agreement, together with the other Loan Documents, embodies
the entire agreement and understanding among the Company, the Banks,
the Administrative Agent and the Documentation Agent, and supersedes
all prior or contemporaneous agreements and understandings of such
107<PAGE>
Persons, verbal or written, relating to the subject matter hereof and
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in Atlanta, Georgia by their proper
and duly authorized officers as of the day and year first above
written.
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ Mitchell Goodman
Title: Senior Vice President
BANK OF AMERICA, FSB, as Documentation
Agent and a Bank
By: /s/ Howard Kim
Title: VP
FIRST UNION NATIONAL BANK, as
Administrative Agent, Issuing Bank,
Swingline Bank and a Bank
By: /s/ William A. Luther
Title: SVP
<PAGE>
SCHEDULES
Schedule C-1 Commitments
Schedule 6.05 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.17 Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 6.26 Material Contracts
Schedule 7.14 Deposit and Investment Accounts
Schedule 8.01 Permitted Liens
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Assignment of Notes
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Promissory Note
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Conversion/Continuation
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Subsidiary Guaranty
Exhibit J Form of Subsidiary Pledge Agreement
Exhibit K Form of Subsidiary Security Agreement
Exhibit L Form of Landlord's Consent
Exhibit M Form of Credit Card Agreement
Exhibit N Form of Wal-Mart Lease
Exhibit O Form of Sam's Wholesale Club Lease
Exhibit P Form of Lease Agreement with Fred Meyer, Inc.
Exhibit Q Form of Assignment and Acceptance
Exhibit 21
Company Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
International Vision Associates, Ltd. Georgia
Mexican Vision Associates, S.A. de C.V. Mexico
Mexican Vision Associates Operadora, S. Mexico
de R.L. de C.V.
Mexican Vision Associates Servicios, S. Mexico
de R.L. de C.V.
Midwest Vision, Inc. Minnesota
NVAL Healthcare Systems, Inc. Georgia
NVAL Visioncare Systems of California, California
Inc.
NVAL Visioncare Systems of North North Carolina
Carolina, Inc.
Frame-n-Lens Optical, Inc. California
Vision Administrators, Inc. California
ProCare Eye Exam, Inc. California
Family Vision Centers, Inc. Delaware
New West Eyeworks, Inc. Delaware
Alexis Holdings, Inc. Arizona
Vista Eyecare Network, LLC Delaware
National Vision Associates of Canada Canada
Ltd.
International Vision Associates Netherlands
(Netherlands) B.V.
CECIVA B.V. Netherlands
Czech Vision Associates s.r.o. Czech Republic
Slovak Vision Associates s.r.o. Slovakia
Exhibit 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
of our report (and to all references to our Firm) included in or
made a part of this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 2, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement of Vista Eyecare, Inc. (formerly National Vision
Associates, Ltd.) of our report dated March 6, 1998 relating to the
consolidated financial statements of New West Eyeworks, Inc., which
appears in such Prospectus.
/s/ Pricewaterhouse CoopersLLP
PricewaterhouseCoopers LLP
Phoenix, Arizona
February 3, 1999
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 20,
1998, except for Note 10 as to which the date is July 25,
1998, with respect to the consolidated financial statements
of Frame-n-Lens Optical, Inc., for the year ended December 28,
1997, included in the Registration Statement (Form S-4) and
related Prospectus of Vista Eyecare,Inc., for the registration
of $125,000,000 of 12 3/4% Senior Notes due 2005, Series B.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
February 2, 1999
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
Vista Eyecare, Inc.
(Exact name of obligor as specified in its charter)
GEORGIA 58-1910859
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
296 Grayson Highway
Lawrenceville, GA 30045
(Address of principal executive offices) (Zip Code)
12 3/4% Senior Notes due 2005
(Title of indenture securities)<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY
TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW
IN EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN
THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR
INSTRUMENTS CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of
Eastern Edison Company (File No. 33-37823) and is incorporated
herein by reference thereto.
1<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES
REQUIRED BY SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which
relates to matters peculiarly within the knowledge of the obligor or
any underwriter for the obligor, the trustee has relied upon
information furnished to it by the obligor and the underwriters, and
the trustee disclaims responsibility for the accuracy or completeness
of such information.
The answer furnished to Item 2. of this statement will be
amended, if necessary, to reflect any facts which differ from those
stated and which would have been required to be stated if known at the
date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a
corporation organized and existing under the laws of The Commonwealth
of Massachusetts, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized,
all in the City of Boston and The Commonwealth of Massachusetts, on the
27th day of January, 1999.
STATE STREET BANK AND TRUST COMPANY
By: ________________________________
NAME Kathy A. Larimore
TITLE Assistant Vice President
2<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed
issuance by VISTA EYECARE, INC. of its 12 3/4% Senior Notes due
2005, we hereby consent that reports of examination by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request
therefor.
STATE STREET BANK AND TRUST COMPANY
By: _____________________________________
NAME Kathy A. Larimore
TITLE Assistant Vice President
Dated: January 27, 1999
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust
Company, Massachusetts and foreign and domestic subsidiaries, a state
banking institution organized and operating under the banking laws of
this commonwealth and a member of the Federal Reserve System, at the
close of business June 30, 1998, published in accordance with a call
made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act and in accordance with a call
made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ....................... 1,553,703
Interest-bearing balances ................................................ 12,440,716
Securities ........................................................................ 9,436,138
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ...................................... 8,785,353
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,633,608
Allowance for loan and lease losses ................. 92,999
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances .................. 6,540,609
Assets held in trading accounts ................................................... 1,267,679
Premises and fixed assets ......................................................... 491,928
Other real estate owned ........................................................... 100
Investments in unconsolidated subsidiaries ........................................ 1,278
Customers' liability to this bank on acceptances outstanding ...................... 68,312
Intangible assets ................................................................. 231,294
Other assets....................................................................... 1,667,282
------------
Total assets ...................................................................... 42,484,392
============
LIABILITIES
Deposits:
In domestic offices ....................................................... 12,553,371
Noninterest-bearing ....................... 10,204,405
Interest-bearing .......................... 2,348,966
In foreign offices and Edge subsidiary .................................... 16,961,571
Noninterest-bearing ....................... 154,792
Interest-bearing .......................... 16,806,779
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ....................................... 8,182,794
Demand notes issued to the U.S. Treasury and Trading Liabilities ................... 0
Trading liabilities ................................................................ 883,096
Other borrowed money ............................................................... 361,141
Subordinated notes and debentures .................................................. 0
Bank's liability on acceptances executed and outstanding ........................... 68,289
Other liabilities .................................................................. 1,017,284
Total liabilities .................................................................. 40,027,546
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................... 0
Common stock ....................................................................... 29,931
Surplus ............................................................................ 455,288
Undivided profits and capital reserves/Net unrealized holding gains (losses) ....... 1,964,924
Net unrealized holding gains (losses) on available-for-sale securities ............. 15,557
Cumulative foreign currency translation adjustments ............................... (8,854)
Total equity capital ............................................................... 2,456,846
------------
Total liabilities and equity capital ............................................... 42,484,392
------------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best of my
knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to
the best of our knowledge and belief has been prepared in conformance
with the instructions issued by the Board of Governors of the Federal
Reserve System and is true and correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
<PAGE>
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES
REQUIRED BY SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which
relates to matters peculiarly within the knowledge of the obligor or
any underwriter of the obligor, the trustee has relied upon the
information furnished to it by the obligor and the underwriters, and
the trustee disclaims responsibility for the accuracy or completeness
of such information.
The answer to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and
which would have been required to be stated if known at the date
hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, State Street Bank and Trust Company, a
corporation duly organized and existing under the laws of The
Commonwealth of Massachusetts, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on the 27th day of January, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
NAME Kathy A. Larimore
TITLE Assistant Vice President
2
EXHIBIT 6
<PAGE>
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed
issuance by Vista Eyecare, Inc. of its 12 3/4% Senior Notes due 2005
we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request
therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Kathy A. Larimore
NAME Kathy A. Larimore
TITLE Assistant Vice President
Dated: January 27, 1999
3
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 12 3/4% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
12 3/4% SENIOR NOTES DUE 2005, SERIES B
NATIONAL VISION ASSOCIATES, LTD.
(n/k/a VISTA EYECARE, INC.)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON
________ ___, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
Deliver To The Exchange Agent: State Street Bank & Trust Company
<TABLE>
<CAPTION>
<S> <S> <C>
By Hand/Overnight Courier: By Mail: By Facsimile:
Corporate Trust Dept. Corporate Trust Dept. 1-617-664-5290
Attn: Kellie Mullen Attn: Kellie Mullen (For Eligible Institutions Only)
Two International Place Two International Place Confirm by Telephone: 1-617-664-5587
Boston, MA 02110 Boston, MA 02110
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the
Prospectus dated ________ __, 1999 (the "Prospectus") of National
Vision Associates, Ltd. (now known as Vista Eyecare, Inc.) (the
"Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 12 3/4% Senior Notes due 2005,
Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which the Prospectus is a part, for a like
principal amount of its issued and outstanding 12 3/4% Senior Notes
due 2005, Series A (the "Outstanding Notes"). Capitalized terms used
but not defined herein have the respective meaning given to them in
the Prospectus.
The Company reserves the right, at any time and from time to
time, to extend the Exchange Offer at its discretion, in which event
the term "Expiration Date" shall mean the latest time and date to
which the Exchange Offer is extended. The Exchange Offer will no
event, however, be extended to a date beyond ________ __, 1999. The
Company shall notify the holders of the Outstanding Notes of any
extension by oral or written notice prior to 9:00 A.M., eastern
standard time, on the next Business Day after the previously scheduled
Expiration Date.
This Letter of Transmittal is to be used by a Holder of
Outstanding Notes either if original Outstanding Notes are to be
forwarded herewith or if delivery of Outstanding Notes, if available,
is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer Book-Entry Transfer."
Holders of Outstanding Notes whose Outstanding Notes are not<PAGE>
immediately available, or who are unable to deliver their Outstanding
Notes and all other documents required by this Letter of Transmittal
to the Exchange Agent on or prior to the Expiration Date, or who are
unable to complete the procedure for book-entry transfer on a timely
basis, must tender their Outstanding Notes according to the guaranteed
delivery procedures set
-1-
<PAGE>
forth in the Prospectus under the caption "The Exchange Offer-Guaranteed
Delivery Procedures." See Instruction 2. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The term "Holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of
the Company or any other person who has obtained a properly completed
bond power from the registered Holder. The undersigned has completed,
executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange
Offer. Holders who wish to tender their Outstanding Notes must
complete this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE
DIRECTED TO THE EXCHANGE AGENT.
List below the Outstanding Notes to which this Letter of
Transmittal relates. If the space below is inadequate, list the
registered numbers and principal amounts on a separate signed schedule
and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
| DESCRIPTION OF OUTSTANDING NOTES TENDERED |
|-----------------------------------------------------------------------------------------------------|
| | Aggregate** | Registered |
|Name(s) and Address(es) of Registered Holder(s) | Principal Amount | Numbers* |
|-----------------------------------------------------------------------------------|-----------------|
|<S> | <C> | <C> |
| |-------------------|-----------------|
| | | |
| |-------------------|-----------------|
| | | |
| |-------------------|-----------------|
| | | |
| |-------------------|-----------------|
| | | |
| |-------------------|-----------------|
| | | |
| |-------------------|-----------------|
|-----------------------------------------------------------------------------------------------------
Attach separate schedule if necessary
* Need not be completed by book-entry Holders.
**Unless otherwise indicated, any tendering Holder of Outstanding
Notes will be deemed to have tendered the entire aggregate principal
amount represented by such Outstanding Notes. All tenders must be
in integral multiples of $1,000.
</TABLE>
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.
-2-
<PAGE>
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED
BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:_________________________________________
Account Number:________________________________________________________
Transaction Code Number:_______________________________________________
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Outstanding Notes:__________________________
Date of Execution of Notice of Guaranteed Delivery:____________________________
Window Ticket Number (if available):___________________________________________
Name of Eligible Institution that Guaranteed Delivery:_________________________
Account Number (if delivered by book-entry transfer):__________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO:
Name:_________________________________________
Address:______________________________________
_______________________________________
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a broker-
dealer that will receive Exchange Notes for its own account in
exchange for Outstanding Notes, it acknowledges that the Outstanding
Notes were acquired as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities
Act.
SIGNATURES MUST BE PROVIDED BELOW;
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal
amount of Outstanding Notes indicated above. Subject to and effective
upon the acceptance for exchange of the principal amount of
Outstanding Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Outstanding
Notes tendered for exchange hereby. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the agent and
attorney-in-fact of the undersigned (with full knowledge that the
Exchange Agent also acts as the agent of the Company in connection
with the Exchange Offer) with respect to the tendered Outstanding
Notes with full power of substitution to (i) deliver such Outstanding
Notes, or transfer ownership of such Outstanding Notes on the account
books maintained by the Book-Entry Transfer Facility, to the Company
and deliver all accompanying evidences of transfer and authenticity,
and (ii) present such Outstanding Notes for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights<PAGE>
of beneficial ownership of such Outstanding Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with
an interest.
-3-
<PAGE>
The undersigned hereby represents and warrants that the
undersigned has full power and authority to tender, exchange, assign
and transfer the Outstanding Notes tendered hereby and to acquire the
Exchange Notes issuable upon the exchange of such tendered Outstanding
Notes, and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being
made in reliance upon interpretations contained in no-action letters
issued to third parties by the staff of the Securities and Exchange
Commission (the "Commission"), that the Exchange Notes issued in
exchange for the Outstanding Notes pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by Holders
thereof (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holders' business and such
Holders are not engaging in and do not intend to engage in a
distribution of the Exchange Notes and have no arrangement or
understanding with any person to participate in a distribution of such
Exchange Notes. The undersigned hereby further represent(s) to the
Company that (i) any Exchange Notes acquired in exchange for
Outstanding Notes tendered hereby are being acquired in the ordinary
course of business of the person receiving such Exchange Notes,
whether or not the undersigned is such person, (ii) neither the
undersigned nor any such other person is engaging in or intends to
engage in a distribution of the Exchange Notes, (iii) neither the
undersigned nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such Exchange Notes, and (iv) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company or, if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities
Act to the extent applicable.
If the undersigned or the person receiving the Exchange Notes is
a broker-dealer that is receiving Exchange Notes for its own account
in exchange for Outstanding Notes that were acquired as a result of
market-making activities or other trading activities, the undersigned
acknowledges that it or such other person will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not
be deemed to admit that the undersigned or such other person is an
"underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in
the Exchange Offer for the purpose of distributing the Exchange Notes
(i) the undersigned cannot rely on the position of the staff of the
Commission in certain no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes, in which case the
registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (ii) failure to comply with such
requirements in such instance could result in the undersigned
incurring liability under the Securities Act for which the undersigned
is not indemnified by the Company.
If the undersigned or the person receiving the Exchange Notes is
an "affiliate" (as defined in Rule 405 under the Securities Act), the
undersigned represents to the Company that the undersigned understands
and acknowledges that the Exchange Notes may not be offered for<PAGE>
resale, resold or otherwise transferred by the undersigned or such
other person without registration under the Securities Act or an
exemption therefrom.
The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, assignment and
transfer of the Outstanding Notes tendered hereby, including the
transfer of such Outstanding Notes on the account books maintained by
the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed
to have accepted for exchange validly tendered Outstanding Notes when,
as and if the Company gives oral or written notice thereof to the
Exchange Agent. Any tendered Outstanding Notes that are not accepted
for exchange pursuant to the Exchange Offer for any reason will be
returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
-4-
<PAGE>
All authority conferred or agreed to be conferred by this Letter
of Transmittal shall survive the death, incapacity or dissolution of
the undersigned, and every obligation of the undersigned under this
Letter of Transmittal shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of
properly tendered Outstanding Notes pursuant to the procedures
described under the caption "The Exchange Offer Procedures for
Tendering" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company
upon the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the Exchange Notes issued in exchange for the Outstanding
Notes accepted for exchange and return any Outstanding Notes not
tendered or not exchanged, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Outstanding Notes accepted for exchange and any
Outstanding Notes not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special
Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the Exchange Notes issued in exchange for the
Outstanding Notes accepted for exchange in the name(s) of, and return
any Outstanding Notes not tendered or not exchanged to, the person(s)
so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" and
"Special Delivery Instructions" to transfer any Outstanding Notes from
the name of the registered holder(s) thereof if the Company does not
accept for exchange any of the Outstanding Notes so tendered for
exchange.
-5-
<PAGE>
|----------------------------------------------------------------------|
| SIGN HERE |
| (Complete Substitute Form W-9 on Reverse) |
| . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| |
| . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
| Signature(s) of Owner(s) |
| (See Guarantee Requirement Below) |
| Date: . . . . . |
| |
| (Must be signed by the registered Holder(s) exactly as name(s) |
|appear(s) on Outstanding Notes or on a security position listing or |
|by person(s) authorized to become registered Holder(s) by a properly |
|completed bond power from the registered Holder(s), a copy of which |
|must be transmitted with this Letter of Transmittal. If Outstanding |
|Notes to which this Letter of Transmittal relate are held of record by|
|two or more joint Holders, then all such Holders must sign this Letter|
|of Transmittal. If signing is by an executor, administrator, trustee,|
|guardian, attorney-in-fact, agent or other person acting in a |
|fiduciary or representative capacity, please provide the following |
|information. See Instruction 6.) |
| |
| Name(s)......................................................... |
| ................................................................ |
| (Please Print) |
| Capacity (full title).......................................... |
| |
| Address......................................................... |
| ................................................................ |
| (Print Address, Including Zip Code) |
| |
| Area Code and Telephone Number................................. |
| |
| Tax Identification or Social Security No....................... |
| (Complete Substitute Form W-9 on Reverse) |
---------------------------------------------------------------------
--------------------------------------------------------------------------
| |
| MEDALLION SIGNATURE GUARANTEE |
| (IF REQUIRED BY INSTRUCTION 5) |
| |
| Certain signatures must be Guaranteed by an Eligible Institution: |
| |
| Signature(s) Guaranteed by an Eligible Institution:.................. |
|------------------------------------------------------------------------ |
| (Authorized Signature) |
| |
| ................................................................... |
| (Title) |
| |
| .................................................................... |
| (Name of Firm) |
| |
| .................................................................... |
| (Address, Include Zip Code) |
| |
| .................................................................... |
| (Area Code and Telephone Number) |
| |
| Dated: .................................... ,1999 |
| |
--------------------------------------------------------------------------
-6-<PAGE>
<TABLE>
<CAPTION>
SPECIAL INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
<S> <C>
--------------------------------------------------- ----------------------------------------------------
| Box A: SPECIAL ISSUANCE | | Box B: SPECIAL DELIVERY |
| INSTRUCTIONS | | INSTRUCTIONS |
| | | |
| To be completed ONLY (i) if Outstanding Notes | | To be completed ONLY if Outstanding |
|in a principal amount not tendered, or Exchange | | Notes in a principal amount not tendered, or |
|Notes issued in exchange for Outstanding Notes | | Exchange Notes issued in exchange for |
|accepted for exchange, are to be issued in the name| | Outstanding Notes accepted for exchange, are to |
|of someone other than the undersigned, or (ii) if | | be mailed or delivered to someone other than the|
|Outstanding Notes tendered by book-entry transfer | | undersigned, or to the undersigned at an address|
|which are not exchanged are to be returned by | | other than that shown below the undersigned's |
|credit to an account maintained by at the Book- | | signature |
|Entry Transfer Facility. | | |
| | | |
|Issue Exchange Notes and/or Outstanding Notes to: | | Mail To: |
| | | |
|Name: . . . . . . . . . . . . . . . . . . . . . | | Name: . . . . . . . . . . . . . . . . . . . . |
| (Print Name) | | (Print Name) |
|Address: . . . . . . . . . . . . . . . . . . | | Address: . . . . . . . . . . . . . . . . . . |
|. . . . . . . . . . . . . . . . . . . . . . . | | . . . . . . . . . . . . . . . . . . . . . . . |
| (Print Address, Including Zip Code) | | (Print Address, Including Zip Code) |
| | | |
| | | / / Check ONLY if the address above is a new |
| | | permanent address. |
|. . . . . . . . . . . . . . . . . . . . . . . . | | |
| (Tax Identification or Social Security Number) | | |
| | | |
| (Complete Substitute Form W-9) | | (Attach Separate Signed Schedule if Necessary) |
| | | |
| (Attach Separate Signed Schedule if Necessary) | | |
--------------------------------------------------- ----------------------------------------------------
</TABLE>
[ ] Credit unexchanged Outstanding Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility set forth below:
_________________________________________________
(Book-Entry Transfer Facility Account Number, if applicable)
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER.
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES
OR BOOK-ENTRY CONFIRMATIONS. All physically delivered Outstanding
Notes or any confirmation of a book-entry transfer to the Exchange
Agent's account at the Book-Entry Transfer Facility of Outstanding
Notes tendered by book-entry transfer (a "Book-Entry Confirmation"),
as well as a properly completed and duly executed copy of this Letter
of Transmittal or facsimile hereof, and any other documents required
by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein prior to 5:00 p.m., eastern standard
time, on the Expiration Date. The method of delivery of the tendered
Outstanding Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent is at the election and risk of the
Holder and, except as otherwise provided below, the delivery will be
deemed made only when actually received or confirmed by the Exchange
Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure delivery to the Exchange Agent before
the Expiration Date. No Letter of Transmittal or Outstanding Notes
should be sent to the Company.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender
their Outstanding Notes and (a) whose Outstanding Notes are not
immediately available, or (b) who cannot deliver their Outstanding
Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date, or (c) who
are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Outstanding Notes according to the
guaranteed delivery procedures set forth in the Prospectus. Pursuant
to such procedures: (i) such tender must be made by or through a firm
which is a member of a registered national securities exchange or of
-7-<PAGE>
the National Association of Securities Dealers Inc. or a commercial
bank or a trust company having an office or correspondent in the
United States (an "Eligible Institution"); (ii) prior to the
Expiration Date, the Exchange Agent must have received from the
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Outstanding
Notes, the registration number(s) of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three (3)
Nasdaq National Market System ("NASDAQ") trading days after the
Expiration Date, this Letter of Transmittal (or facsimile hereof)
together with the Outstanding Notes (or a Book-Entry Confirmation) in
proper form for transfer, will be received by the Exchange Agent; and
(iii) the certificates for all physically tendered shares of
Outstanding Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by
this Letter must be received by the Exchange Agent within three (3)
NASDAQ trading days after the date of execution of the Notice of
Guaranteed Delivery.
Any Holder of Outstanding Notes who wishes to tender Outstanding
Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 p.m., eastern standard time, on the Expiration
Date. Upon request of the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Outstanding
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a Holder of Outstanding Notes may
tender such Outstanding Notes in the Exchange Offer. Any beneficial
Holder of Outstanding Notes who is not the registered Holder and who
wishes to tender should arrange with the registered Holder to execute
and deliver this Letter of Transmittal on his behalf or must, prior to
completing and executing this Letter of Transmittal and delivering his
Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such Holder's name or obtain a
properly completed bond power from the registered Holder.
4. PARTIAL TENDERS. Tenders of Outstanding Notes will be
accepted only in integral multiples of $1,000. If less than the
entire principal amount of any Outstanding Notes is tendered, the
tendering Holder should fill in the principal amount tendered in the
second column of the box entitled "Description of Outstanding Notes
Tendered" above. The entire principal amount of Outstanding Notes
delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all
Outstanding Notes is not tendered, then Outstanding Notes for the
principal amount of Outstanding Notes not tendered and Exchange Notes
issued in exchange for any Outstanding Notes accepted will be sent to
the Holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of
Transmittal, promptly after the Outstanding Notes are accepted for
exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of
Transmittal (or facsimile hereof) is signed by the record Holder(s) of
the Outstanding Notes tendered hereby, the signature must correspond
with the name(s) as written on the face of the Outstanding Notes
without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal is signed by a participant in the Book-Entry
Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the Holder of the
Outstanding Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by
the registered Holder or Holders of Outstanding Notes listed and
tendered hereby and the Exchange Note(s) issued in exchange therefor
are to be issued (or any untendered principal amount of Outstanding
Notes is to be reissued) to the registered Holder, the said Holder
need not and should not endorse any tendered Outstanding Notes, nor
provide a separate bond power. In any other case, such Holder must
either properly endorse the Outstanding Notes tendered or transmit a
properly completed separate bond power with this Letter of
Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
-8-<PAGE>
If this Letter of Transmittal (or facsimile hereof) is signed by
a person other than the registered Holder or Holders of any
Outstanding Notes listed, such Outstanding Notes must be endorsed or
accompanied by appropriate bond powers, in each case signed as the
name of the registered Holder or Holders appears on the Outstanding
Notes.
If this Letter of Transmittal (or facsimile hereof) or any
Outstanding Notes or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, or officers of
corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless
waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Outstanding Notes or signatures on bond powers
required by this Instruction 5 must be guaranteed by an Eligible
Institution.
No signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Outstanding
Notes tendered herewith (or by a participant in the Book-Entry
Transfer Facility whose name appears on a security position listing as
the owner of the tendered Outstanding Notes) and the issuance of
Exchange Notes (and any Outstanding Notes not tendered or not
accepted) are to be issued directly to such registered holder(s) (or,
if signed by a participant in the Book-Entry Transfer Facility, any
Exchange Notes or Outstanding Notes not tendered or not accepted are
to be deposited to such participant's account at such Book-Entry
Transfer Facility) and neither the box entitled "Special Delivery
Instructions" nor the box entitled "Special Registration Instructions"
has been completed, or (ii) such Outstanding Notes are tendered for
the account of an Eligible Institution. In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering
holders should indicate, in the applicable box or boxes, the name and
address (or account at the Book-Entry Transfer Facility) to which
Exchange Notes or substitute Outstanding Notes for principal amounts
not tendered or not accepted for exchange are to be issued or sent, if
different from the name and address of the person signing this Letter
of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named
must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if
any, applicable to the exchange of Outstanding Notes pursuant to the
Exchange Offer. If, however, Exchange Notes or Outstanding Notes for
principal amounts not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any
person other than the registered Holder of the Outstanding Notes
tendered hereby, or if tendered Outstanding Notes are registered in
the name of any person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Outstanding Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes
or exemption therefrom is not submitted with this Letter of
Transmittal, the amount of such transfer taxes will be billed directly
to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE
NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE OUTSTANDING
NOTES LISTED IN THIS LETTER OF TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires
that a holder of any Outstanding Notes which are accepted for exchange
must provide the Company (as payor) with its correct taxpayer
identification number ("TIN"), which, in the case of a holder who is
an individual, is his or her social security number. If the Company
is not provided with the correct TIN, the Holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding
results in an over-payment of taxes, a refund may be obtained.)
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-
9" for additional instructions.
-9-<PAGE>
To prevent backup withholding, each tendering holder must provide
such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that
such holder is awaiting a TIN), and that (i) the holder has not been
notified by the Internal Revenue Service that such holder is subject
to backup withholding as a result of failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified the holder
that such holder is no longer subject to backup withholding. If the
Outstanding Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for
Certification of Taxpayer Identification Number of Substitute Form W-
9" for information on which TIN to report.
The Company reserves the right in its sole discretion to take
whatever steps are necessary to comply with the Company's obligation
regarding backup withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered
Outstanding Notes will be determined by the Company, in its sole
discretion, which determination will be final and binding. The
Company reserves the right to reject any and all Outstanding Notes not
validly tendered or any Outstanding Notes, the Company's acceptance of
which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the right to waive any conditions
of the Exchange Offer or defects or irregularities in tenders of
Outstanding Notes as to any ineligibility of any holder who seeks to
tender Outstanding Notes in the Exchange Offer. The interpretation of
the terms and conditions of the Exchange Offer (which includes this
Letter of Transmittal and the instructions hereto) by the Company
shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Outstanding Notes must
be cured within such time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Outstanding Notes, but shall
not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute
right to waive, in whole or part, any of the conditions to the
Exchange Offer set forth in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional,
irregular or contingent tender of Outstanding Notes on transmittal of
this Letter of Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OUTSTANDING NOTES.
Any Holder whose Outstanding Notes have been mutilated, lost, stolen,
or destroyed should contact the Exchange Agent at the address
indicated above for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address or
telephone number set forth on the cover page of this Letter of
Transmittal. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF
EXCHANGE NOTES; RETURN OF OUTSTANDING NOTES. Subject to the terms and
conditions of the Exchange Offer, the Company will accept for exchange
all validly tendered Outstanding Notes as soon as practicable after
the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted tendered Outstanding Notes
when, as and if the Company has given written and oral notice thereof
to the Exchange Agent. If any tendered Outstanding Notes are not
exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Outstanding Notes will be returned, without expense, to
the undersigned at the address shown above (or credited to the
undersigned's account at the Book-Entry Transfer Facility designated
above) or at a different address as may be indicated under the box
entitled "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
limited withdrawal rights set forth in the Prospectus under the
caption "The Exchange Offer Withdrawal of Tenders."
-10-
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED
FACSIMILE HEREOF (TOGETHER WITH THE OUTSTANDING NOTES WHICH MUST BE
DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 12:00 MIDNIGHT ON THE EXPIRATION DATE.
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
<TABLE>
<CAPTION>
<S> <S> <C>
|--------------------------------------------------------------------------------------------------------------------|
| PAYER'S NAME: VISTA EYECARE, INC. |
|--------------------------------------------------------------------------------------------------------------------|
| | Part 1 - PLEASE PROVIDE YOUR TIN IN | Social security number |
| | THE BOX AT RIGHT AND CERTIFY BY | |
| | SIGNING AND DATING BELOW. | OR _______________________________ |
| SUBSTITUTE | | Employer Identification Number |
| | ---------------------------------------------------------------------------------- |
| | Part 2 - Check the box if you are NOT subject to backup withholding under the |
| | provisions of Section 3406(a)(i)(C) of the Internal Revenue Code because (1) |
| | you have not been notified that you are subject to backup withholding as a |
| Form W-9 | result of failure to report all interest or dividends, or (2) the Internal |
| Department of the Treasury| Revenue Service has notified you that you are no longer subject to backup |
| Internal revenue Service | withholding. => / / |
| Payer's Request for | ----------------------------------------------------------------------------------- |
| Taxpayer Identification | CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I | Part 3- |
| Number ("TIN") | CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS | |
| | TRUE, CORRECT AND COMPLETE | Awaiting TIN => / / |
| | SIGNATURE . . . . . . . . . . . . . . . DATE . . . . | |
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Part 1 - Taxpayer Identification No. - For All Accounts. Enter your
taxpayer identification number in the appropriate box. For most
individuals and sole proprietors, this is your social security number.
For other entities, it is your Employer Identification Number. If you
do not have a number, see How to Obtain a TIN in the enclosed
Guidelines. Note: If the account is in more than one name, see the
chart on page 2 of the enclosed Guidelines to determine what number to
enter.
Part 2 - For Payees Exempt from Backup Withholding (see enclosed
Guidelines).
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO
THE EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<PAGE>
- --------------------------------------------------------------------------
| CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER |
| |
| I certify under penalties of perjury that a taxpayer identification |
|number has not been issued to me, and either (a) I have mailed or |
|delivered an application to receive a taxpayer identification number |
|to the appropriate Internal Revenue Service Center or Social Security |
|Administration Office, or (b) I intend to mail or deliver an |
|application in the near future. I understand that if I do not provide |
|a taxpayer identification number within sixty (60) days, 31% of all |
|reportable payments made to me thereafter will be withheld until I |
|provide a number. |
| |
|SIGNATURE . . . . . . . . . . . . . . . .DATE . . . . . . . . . |
- -------------------------------------------------------------------------
-11-
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF 12 3/4% SENIOR NOTES DUE 2005, SERIES A
IN EXCHANGE FOR
12 3/4% SENIOR NOTES DUE 2005, SERIES B
NATIONAL VISION ASSOCIATES, LTD.
(n/k/a VISTA EYECARE, INC.)
This form or one substantially equivalent hereto must be used by
a holder to accept the Exchange Offer of Vista Eyecare, Inc., a
Georgia corporation (the "Company"), who wishes to tender 12 3/4%
Senior Notes due 2005, Series A (the "Outstanding Notes") to the
Exchange Agent pursuant to the guaranteed delivery procedures
described in "The Exchange Offer Guaranteed Delivery Procedures" of
the Company's Prospectus, dated _________ __, 1999 (the "Prospectus")
and in Instruction 2 to the related Letter of Transmittal. Any holder
who wishes to tender Outstanding Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery and a duly executed Letter of
Transmittal prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have
the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON ________ __, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is: State Street Bank &
Trust Company
<TABLE>
<CAPTION>
By Hand/Overnight Courier: By Mail: By Facsimile:
------------------------- ------- ------------
<S> <C> <C>
Corporate Trust Dept. Corporate Trust Dept. 1-617-664-5290
Attn: Kellie Mullen Attn: Kellie Mullen Confirm by Telephone: 1-617-664-5587
Two International Place Two International Place (For Eligible Institutions Only)
Boston, MA 02110 Boston, MA 02110
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA
FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO
BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS
THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE
PROVIDED ON THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related
Letter of Transmittal, receipt of which is hereby acknowledged, the
principal amount of Outstanding Notes set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus and in
Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Outstanding Notes listed
below:
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------|
DESCRIPTION OF OUTSTANDING NOTES TENDERED |
- -----------------------------------------------------------------------------------------------------|
| Aggregate | Certificate |
Name(s) and Address(es) of Registered Holder(s) | Principal Amount | Numbers |
- -----------------------------------------------------------------------------------|-----------------|
| | |
|-------------------|-----------------|
| | |
|-------------------|-----------------|
| | |
|-------------------|-----------------|
| | |
|-------------------|-----------------|
| | |
|-------------------|-----------------|
| | |
|-------------------|-----------------|
- -----------------------------------------------------------------------------------------------------|
Attach separate schedule if necessary |
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PLEASE SIGN AND COMPLETE
<S> <C>
Date:___________
Signature(s) of Registered Holder(s) or Authorized Signatory: Name(s) of Registered Holder(s):
___________________________________________ __________________________________
___________________________________________ __________________________________
___________________________________________ __________________________________
Address:
___________________________________________
___________________________________________ Area Code and Telephone No:
___________________________________________ ________________________
(Include Zip Code)
/TABLE
<PAGE>
This Notice of Guaranteed Delivery must be signed by the
Holder(s) exactly as their name(s) appear on certificates for
Outstanding Notes or on a security position listing as the owner of
Outstanding Notes, or by a person(s) authorized to become a Holder(s)
by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must
provide the following information.
Names(s): Capacity:
____________________________________ ________________________________________
____________________________________ ________________________________________
____________________________________ ________________________________________
(Please print name(s) and address(es))
Address(es):
_________________________________________
_________________________________________
_________________________________________
(Include Zip Code)
-2-<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc., or is a commercial bank or trust company
having an office or correspondent in the United States, or is
otherwise an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, guarantees
deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Outstanding Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry
transfer of such Outstanding Notes) into the Exchange Agent's account
at the Book-Entry Transfer Facility described in the Prospectus under
the caption "The Exchange Offer Guaranteed Delivery Procedures" and in
the Letter of Transmittal and any other required documents, all by
5:00 p.m., eastern standard time, within three (3) Nasdaq National
Market System trading day following the Expiration Date.
Name of Firm: ________________________________________
Authorized Signature:___________________________________
Name:____________________________________________
Title: _________________________________________
(Please type or print)
Address: _______________________________________
_______________________________________
_______________________________________
(Include Zip Code)
Area Code and Telephone Number:__________________
Date: __________________, 1999
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER
OF OUTSTANDING NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery
and any other documents required by this Notice of Guaranteed Delivery
must be received by the Exchange Agent at its address set forth herein
prior to the Expiration Date. The method of delivery of this Notice
of Guaranteed Delivery and any other required documents to the
Exchange Agent is at the election and sole risk of the Holder, and the
delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an
alternative to delivery by mail, the Holders may wish to consider
using an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedures, see Instruction 2 of the Letter
of Transmittal.
-3-
<PAGE>
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this
Notice of Guaranteed Delivery is signed by the registered Holder(s) of
the Outstanding Notes referred to herein, the signature must
correspond with the name(s) written on the face of the Outstanding
Notes without alteration, enlargement, or any change whatsoever. If
this Notice of Guaranteed Delivery is signed by a participant of the
Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Outstanding Notes, the signature must
correspond with the name shown on the security position listing as the
owner of the Outstanding Notes. If this Notice of Guaranteed Delivery
is signed by a person other than the registered Holder(s) of any
Outstanding Notes listed or a participant of the Book-Entry Transfer
Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered
Holder(s) appears on the Outstanding Notes or signed as the name of
the participant shown on the Book-Entry Transfer Facility's security
position listing. If this Notice of Guaranteed Delivery is signed by
a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation, or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing
and submit with the Letter of Transmittal evidence satisfactory to the
Company of such person's authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the
Prospectus may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker,
dealer, commercial bank, trust company, or other nominee for
assistance concerning the Exchange Offer.
-4-
